There is a big difference between currency and money. Money is something solid, unmoving, and recognized by everyone involved in exchange as having an intrinsic value. Currency is something someone in authority (usually governments, but today a collusion between governments and private banks) declares to have value. In other words, currency "has value" simply because the power elite say it has value. Further, it has the value they tell us it has.
Sort of.
This is where the term debasement comes in.
Throughout history, governments and monarchs have been unable to resist the temptation to make "free money" by tampering with actual money. At first, coins themselves were valuable because of the base metals in their composition. They were stamped according to that amount. It wasn't long before some king or dictator discovered that old ones could be melted down and formed into new ones containing slightly less of the precious metal and more of cheaper metal fillers. This is called debasement. It is when the power in charge says the currency has X value, even though some of that value has been taken out. "Coin clipping" was also done, in which the edges of coins were cut off, the metal being melted and used elsewhere, while the coin itself was still supposed to be traded as if it were whole.
Today, currency debasement happens because the American Dollar (the standard currency used the world over for global commerce), is tied to nothing of intrinsic value whatsoever. It is simply a piece of paper the strongest government in the world proclaims as "money." It has value because they say it has value. The only problem is that, because it is tied to nothing solid and unmoving, such as gold or silver, it can be easily debased. This doesn't occur today by coin clipping or changing coin alloys, but rather by the issuing of more currency on top of the currency already in circulation. Sometimes this occurs by actually "printing" more money. But usually it simply happens in computers as more credit is issued in terms of lending. A collusion between the Federal Reserve (a privately held, protected banking cartel) and the US government, is responsible for "controlling" this "money supply." What that means is they are the sole gate keeper on the stream of US currency flooding out into the world.
What does this mean?
It means that as this gate keeper releases more "money" into society, the currency you and I already have is worth less as a result. In a ridiculous illustration of this concept, imagine that every US citizen were given a million dollars today at noon. In a short amount of time, merchants everywhere would realize this and begin raising prices to match the new spending power of the people. We wouldn't have more money, just more currency, as the prices of everything would rise in direct proportion to the increase in currency in circulation. This, my friends, is called inflation. Inflation is sometimes referred to as rising prices, and is often sold to us as though it were inevitable and natural. Nothing could be further from the truth. Inflation is not natural, and it is not the raising of prices, but rather the increase of the currency supply which has the automatic result of raising prices. It is only inevitable if the currency supply is expanded by the "printing" (or electronic issuing) of more.
Whenever you hear about "government bailouts" or government "deficit" spending, all they are talking about is the US government issuing more currency. And every time they do that, the currency you already have, because it is suddenly surrounded by more currency, has less spending power. This is called inflation; it is the debasement of the currency. The piece of paper may have "One dollar" written on its face, but it is not the same dollar in terms of spending power that it used to be. In fact, since 1933 when the US dollar was pulled off the gold standard, it has shrunk in purchasing power to 4 cents (in 1933 terms)! Another way to look at this is to imagine that you were give a One Dollar bill in 1933. Today, 96 cents of it has been taken away by the government that issued it. Do you see why many call inflation the "silent and invisible tax"?
Government stability has historically had a lot to do with the stability of its currency. The more the currency of the realm has matched actual money, the more stable the regime. This can be seen in Lydia in the seventh century BC, in ancient Athens under the rule of Solon and all the way down through its democracy, throughout the reign of Alexander the Great, the early Roman Republic, the dictatorship under Julius Caesar, again under Augustus, the industrial age United States, Napoleonic France, Lenin ending Russia's hyperinflation, Mao Tse-Tung in China, and Japan after World War II. Strong currency, strong regime. And a strong currency came from prevention of or abstinence from debasement.
The reason there is so much discussion today about economics and the Great Recession we are currently enjoying is because there are those who understand how severely our currency has been debased. Of course, this is extremely uncomfortable for those involved in the "taking of the 96 cents." Further, the situation is compounded by the interwoven world "monetary system" which is entirely on free-floated, not-tied-to-anything-of-intrinsic-value US dollars. For the first time in history, the entire world is on free-floating currency.
It was a great party while it lasted. But the game can only be played for so long. At some point, the "currency" approaches worthlessness, and the people who discover the "missing 96 cents" begin wising up to the theft they've experienced. At that point, the powers-that-be must use force, or theft. They can either confiscate and proclaim "illegal" anything being used as money instead of their paper currency (as President Franklin Roosevelt did when he declared gold, an inert, natural, harmless element found in the very earth to be illegal under United States law!), or cast away the old currency and come out with a new one.
The danger to the US economy, and in essence, to the world's economy since the US dollar is used as the world's reserve currency, is that more and more nations will object to the "missing 96 cents." They may demand the establishment of a new international currency or a return to a gold standard (China has been buying millions of ounces of gold as secretly as possible), both of which will all but kill the remaining value of the US dollar. When one of these alternatives, or some other such solution, is finally and inevitably put in place, the United States economy will be racked as a result.
This is nothing new. History is replete with examples of governments debasing their currency at the expense of their people. At some point in the progression, as the currency approaches valuelessness, panic and a lack of confidence in the government result. As author Nathan Lewis wrote, "No government can act at the citizenry's expense indefinitely and remain in power." These tumultuous events in human financial history almost always were followed by a major change in their governments. After all, the people can only handle so much.
Before he became complicit in the Federal Reserve's debasement schemes as its long-time chairman, economist Alan Greenspan wrote in 1966, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. Gold stands as the protector of property rights. If one grasps this, one has no difficulty understanding the statists' antagonism toward the gold standard."
