America’s Rigged Systems
Just as humans have evolved, money has evolved. “Money” was originally in the form of barter, such as chickens or milk, then shells and beads, then gold, silver, and copper coins. They were physical objects that were deemed to have tangible value and thus were traded for other items of similar value. Today, most money is paper money, an IOU from a government, also known as a fiat currency. Paper money is worthless in and of itself. It is simply a derivative of the value of something else. In the past, the dollar was a derivative of gold; now it is a derivative of debt, an IOU from taxpayers of a country.
Today, money is no longer a tangible object like chickens, gold, or silver. Today, modern money is simply an idea backed by the faith and trust of a government. The more trustworthy the country, the more valuable the money, and vice versa. This evolution of money from a tangible object into an idea is one reason why the subject of money is so confusing. It is difficult to understand something we can no longer see, touch, or feel.
Below is a brief look into the history that has shaped how America’s financial system has changed:
In 1903, John D. Rockefeller created the General Education Board. There was much controversy about why he created this organization but some people say he created it to improve education. Others say he did so to hijack the educational system of the United States so he could decide what kids would learn in school.
Around the same time, another of the robber barons, Andrew Carnegie, promoted his Foundation for the Advancement of Teaching. It seems both Rockefeller and Carnegie were working to influence the American educational agenda to direct what students were taught in school.
This put the influence of education in the hands of the ultra-rich, and the subject of money was not taught in school. Today, looking back on those reports with decades of hindsight, there does seem to be some validity to their concerns. Those most critical of Rockefeller and Carnegie accused them of wanting to break the American spirit—and using the education system to do so.
Americans are individuals who left their countries of birth for freedom from oppression and for the opportunity of a better life—a shot at the American Dream. This made the DNA of Americans too strong, too independent, and too ambitious to be subservient to the rich and powerful.
Those critical of Carnegie and Rockefeller believed that before the rich and powerful—people like Rockefeller and Carnegie—could gain further control over Americans and the wealth of America, the American spirit had to first be weakened, that Americans had to be made dependent upon the government for financial support.
Federal Reserve System
In 1913, the creation of the Federal Reserve System granted the very rich of the world the power to control the money supply of the United States and fulfilled the spirit of Rothschild’s sentiments. It is said that Mayer Amschel Rothschild, founder of one of the most powerful banking families of Europe, once observed, “Give me control of a nation’s money supply and I care not who makes the laws.”
Many people don’t know or understand that the Federal Reserve System is not a government institution or a bank, nor does it have any reserves. Rather, it is a banking cartel run by some of the most powerful men in the financial world. The creation of the Fed was basically a license to print money.
Another reason the Federal Reserve System was created was to protect the biggest banks from failing by providing liquidity to those banks when they were in financial trouble, which protected the wealth of the rich, not of the taxpayers.
It is important to understand that these forces of taxes, debt, inflation, and retirement are kept alive by the Federal Reserve System’s license to print money. Prior to the Federal Reserve, Americans paid very little in taxes, there was neither national debt nor much personal debt, there was very little inflation, and people did not worry about retirement because money and savings retained their value.
America was relatively tax-free in its early days. In 1862 the first income tax was levied to pay for the Civil War.
In 1895, the U.S. Supreme Court ruled that an income tax was unconstitutional.
In 1913, however, the same year the Federal Reserve System was created, the 16th Amendment was passed, making an income tax permanent. The reason for the reinstatement of the income tax was to capitalize the U.S. Treasury and Federal Reserve. Now the rich could put their hands in our pockets via taxes permanently.
During World War II, the U.S. government passed the Current Tax Payment Act of 1943 because of the need for money to fight the war. Before that, it had to wait for people to pay their taxes, so the Act solved that problem.
This allowed the government to get paid before workers did. It also allowed the rich to put their hands directly into workers’ pockets. Today, it’s a giant, ongoing cash heist that gets bigger and bigger as the government gets needier and the rich get greedier.
Remember, the entitlement mentality did not start with the poor. The entitlement mentality started at the top—with Rockefeller and Carnegie, and their plan to heist our wealth through the banks, the government, and taxes.
The 1943 Current Tax Payment Act gave rise to the military-industrial complex. With tax dollars now pouring into the government on a monthly basis, the military-industrial complex could declare war forever.
The Cold War began and trillions of tax dollars went into producing weapons of mass destruction.
When the “rich” get taxed higher, it is not the ultra-rich. It is the rich employees and the rich small businessmen. It is the CEOs and officers of a company. It is the doctors and lawyers. It is NOT the ultra-rich who own nearly everything. They often pay little to no taxes. And they do so legally.
Bretton Woods System
The Bretton Woods Agreement was made in 1944. This international currency agreement created the World Bank and the International Monetary Fund (IMF). The agreement replicated the Federal Reserve System globally and, in effect, installed the U.S. dollar as the reserve currency of the world. Basically, while the world was involved in a world war, the world’s bankers were hard at work changing the world. This meant that all currencies worldwide were now essentially backed by the U.S. dollar, which was pegged to gold. As long as the U.S. dollar was backed by gold, the world economy would be stable.
This is until 1971 when Nixon took the dollar off the gold standard.
When this happened, the U.S. dollar became a derivative of debt—not of gold. After 1971, the U.S. economy could only increase by increasing debt, and that’s when the bailouts started. In the 1980s, the bailouts were in the millions; in the 1990s, they were in the billions; and today they are in the trillions and growing. This change in the rules of money, one of the biggest financial events in world history, allowed the United States to print money at will by creating more and more debt, known as U.S. bonds. Never in the history of the world had all the world’s money been backed by one nation’s debt, an IOU from U.S. taxpayers.
While Nixon’s actions did not formally abolish the existing Bretton Woods system of international financial exchange, the suspension of one of its key components effectively rendered the Bretton Woods system inoperative. While Nixon publicly stated his intention to resume direct convertibility of the dollar after reforms to the Bretton Woods system had been implemented, all attempts at reform proved unsuccessful. By 1973, the Bretton Woods system was replaced de facto by the current regime based on freely floating fiat currencies.
Again, history sheds some light on what is happening today. The U.S. Congress passed the Employee Retirement Income Security Act (ERISA), which is now known in the United States as a 401(k). Prior to 1974, most employees had what is known as a defined benefit (DB) pension plan. A company’s DB pension plan provided employees a paycheck for life. After 1974, employees were moved into defined contribution (DC) pension plans. This meant they had to save money for their retirement. The amount an employee received at retirement depended upon how much was contributed to his or her pension. If the pension ran out of money or was wiped out due to a stock market crash, the retiree was out of luck and on his own.
This change from DB to DC pension plans forced millions of workers into the uncertainty of the stock market. The problem is that most employees lacked, and still do lack, the financial education needed to invest their money for retirement wisely.
Today, millions of workers throughout the world are faced with insufficient funds to retire on.
Without financial education, millions go back to the same institutions—the savings banks and stock market, the very institutions that caused much of today’s financial crisis—and attempt to save enough money to enjoy a secure retirement.
Remember this rule: it’s not the government that has the power, it’s the Fed and the ultra-rich. The boom and bust cycle will continue as it always has since Nixon took the dollar off the gold standard in 1971 which is why I say it’s pointless to fight the system. Instead, you need to learn to play by the rules of the rich—learn to use their same system and use debt to invest.
You cannot expect the government to take care of you. They only watch out for powerful banks and corporations—using your money to do it. Counting on the government and regulations to save you and the country sets you up for disappointment and failure.
One way to win is by educating yourself about money, by taking control of your financial future, and by learning to invest with debt. Only then will you be able to prosper.
Editor, Rich Dad Poor Dad Daily