Federal Reserve Conspiracy Myths     This Page is Under Construction The bulk of this page, like most of the others, is devoted to providing "quick answers" to federal reserve conspiracy myths.  It is not designed to give exhaustive answers to these issues.  For that, your best bet is to look at Dr. Flaherty's Federal Reserve FAQ page.  There is also an excellent set of essays at Gerry Rough's "In Pursuit of Reason" page.  I will, however, attempt to touch on a few areas which Dr. Flaherty does not (namely, the gold standard and "constitutional money") in the second part of this page.

Part I: Short Answers to Common Myths

Note to the Reader: Remember, this part is not intended to give exhaustive analysis of these issues; for that type of analysis,
you'll need to refer to Dr. Flaherty's Federal Reserve FAQ.  This part is only intended to give a "quick answer" to common myths.
 

 
Coming Soon!

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Part II: The Gold Standard and Constitutional Money
 

Gold and silver are the only "real" money.

This myth usually comes from a misunderstanding of what money is.  Any currency -- be it paper dollars, gold, or Indian beads -- depends upon public consensus.  People who are hung up on the gold standard see it as being more "real" than paper currency based on the value of goods and services in the economy.  In a way, this view is understandable.  Gold can be seen, felt, and heard (if it is dropped, for instance).  I suppose it could even be tasted and smelled, if one were so inclined.  However, it is not these tangible things that makes gold valuable.  Gold is only valuable because people perceive it to be valuable.  Since people accept that gold is valuable, and take it in exchange for goods and services, it is an acceptable currency.

This is no different, fundamentally, than paper currency backed by the overall value of goods and services in the economy.  So long as people recognize that a Federal Reserve Note has value, and accept it in exchange for goods and services, it is viable as a currency.  A FRN depends on perception for its value -- but so does gold, and so does any currency.

(A brief aside: a paper-based currency, such as FRN's, tries to match the number of dollars in circulation to the value of goods and services available in the economy; the gold standard, by contrast, ties the maximum number of dollars available to the amount of gold in a country's gold reserves, using an artificial value set by that country's government as the price of gold.)

If you have difficulty believing this, put yourself in the position of a post-apocalyptic world in which the economy has completely collapsed (a world often predicted to be imminent by gold-standard fed conspiracy theorists).  In this world, merely surviving is a day-to-day challenge, and no one is excepted from this misery.  I would propose that in such a world, gold would have no value whatsoever, because no one would be willing to give up their other resources which have suddenly become far more precious for something that is merely ornamental.  In such a world, the economy will probably revert to some kind of barter system.  Granted, in such a world FRN's are valueless, too, but that just illustrates the point: all currency is dependent on perception for its value.  It does not matter if that currency is a FRN, gold, or something else.

One final example: in virtually every prison movie, we're treated to the way prisoners use cigarettes to buy goods and services from their fellow inmates.  Inside prison walls, cigarettes act as a real and viable currency.  It's no less a currency than gold or silver or FRN's.  So long as people accept cigarettes as a medium of exchange for goods and services, it is a viable currency.

You may ask, why a system of paper currency rather than the gold standard?  Well, to be honest there are pros and cons for both systems.  The gold standard tends to be inflexible and rigid, and has difficulty in keeping up with the number of goods and services in the economy.  On the other hand, the dollar has a better chance of retaining or increasing its value under the gold standard (this may or may not be a good thing, depending on circumstances).  A paper currency standard, while being very flexible and capable of being expanded and contracted to match the number of goods and services available in the economy very easily, can subject the economy to inflationary pressure if not managed carefully.  Most economists tend to agree that the shift to a goods-and-services-based monetary standard has been an overall benefit to the economy in the long term.
 
 

International (or Jewish) bankers want the United States off of the gold standard.

Nothing could be further from the truth.  Bankers love the gold standard.  Possibly the most damaging thing ever done from the point of view of the bankers' self-interest, is the move off of the gold standard.

Why do bankers love the gold standard so much?  Because the gold standard prevents inflation, and can in fact cause deflation.  Inflation is good for debtors and bad for creditors (i.e., banks, who make their money off of interest from loans made to the public).

(More detail coming soon)
 

The federal government can constitutionally make only make gold or silver legal currency

Coming Soon!  (Short answer: compare Art. 1, s. 9 and Art. 1, s.10 of the U.S. Constitution)

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