Out of convenience came certificates:

It seems that carrying around too much coin got to be bothersome to the people, it was heavy to tote around enough coins to make a large purchase. To help solve that problem, many nations, including the United States, issued paper notes as a convenience and just a convenience. The gold and silver certificates were merely "claim checks" for the equivalent weight of gold or silver held in the treasury, metal that had to be produced on demand when the certificate was presented. But in the end, the lawful dollar of the United States was 371.25 grains of silver, or 24.75 grains of gold.

The problem with standard precious metal backed system from the point of view of the government or the banks is that it limited the amount of money they can work with. When the bank ran out of silver or gold (or the equivalent certificates) it could no longer lend any more money with which to earn interest. When the government runs out of gold or silver (or the equivalent certificates) it could no longer spend money (just like the rest of us).

Bretton Woods:

In the aftermath of World War II, the relatively stable-valued US dollar was the only major currency in which international exchange could freely take place. The dollar's role was formalized under the Bretton Woods monetary agreement of 1944. Other nations set official exchange rates against the dollar, while the US agreed to exchange dollars for gold at a fixed price on demand by central banks.


This system functioned well for a brief period. However by about 1958 the initial worldwide dollar shortage had turned into an overabundance. (Why that happened is another subject although very much related to today?)

With the too rapid growth of dollar credits around the world, gold backing of the dollar proved unsustainable, if the eyes of the greedy money lenders and parties seeking to dominate finance and currency at all costs.

The Bretton Woods agreement collapsed in 1973, but it enthroned the USA dollar as the international medium of exchange.

The rapid growth of the industrialized economies after World War II created a growing demand for dollar balances around the world. The more of its own currency a central bank issued the more dollars it wanted as underpinning for its currency.

During the Bretton Woods period, the US ran large current account surpluses. That would have drained dollars from abroad, but long-term capital outflows in the form of grants and direct investments by the US were greater than its current surpluses. The result was a build up of dollar assets by foreign firms and central banks. In effect, the US was lending long more than it was borrowing short, thereby satisfying the world’s growing demand for dollar liquidity, even while it remained a net creditor.

The immediate effect of ending the gold standard was that with the paper dollar no longer legally dependent on 371.25 grains of silver or 24.75 grains of gold, more paper dollars (now called "Federal Reserve Notes") could be printed, their actual worth no longer under the control of the citizens but under the control of the issuing central bank, based on the total number of dollars printed (or created as credit lines) divided by the estimated worth of the nation's assets. The more dollars which are created out of thin air, the less each one is worth.

The swindle of the system is simple. The Federal Reserve Bank hires the US Treasury to print up some money. The Federal Reserve only actually pays the treasury for the cost of the printing, they do NOT pay $1 for each 1$ printed. But the Federal Reserve turns around and loans out that money (or credit line) to banks at full face value, those banks which have exhausted their deposits then loan that Federal Reserve fiat money to you, and you must repay it in the full dollar value (plus interest) in work product, even though the Federal Reserve printed that money for pennies, or created it out of thin air in a computer.

As the Federal Reserve overprints more money, the money supply inflates, and too much money starts chasing too few goods and services, which mean prices, go up. But contrary to the charade put on by the Federal Reserve, inflation doesn't just come and go due to some arcane sorcery. The Federal Reserve can halt inflation any time it wants to by simply shutting down those printing presses. It therefore follows that both inflation and recession are fully under the control of the Federal Reserve. This means the cycle of inflation and recession is an intentional one; a gigantic heartbeat that pumps paper certificates out to the working class, while pumping real wealth in to the owners of the banks.

Over time, that excess of printing has destroyed the value of that dollar you think you have. If you want to know by just how much, go out and try to purchase 371.25 grains of silver right now. Usually, the deterioration is gradual. Sometimes, it has to be obvious, such as the 1985 devaluation (done to halt the trade imbalance) which triggered the Japanese real-estate grab in the USA.

Today over half of all dollar notes in circulation are held outside the borders of the US. About half of US Treasury securities are owned by foreigners, mainly held as reserves by foreign central banks. The dollar is the main currency in international capital flows, as well as the currency of invoice for commodities and for many manufactured goods and services. All countries that trade directly with the US invoice both imports and exports in US dollars. Eurodollars often trade without any involvement by US participants.

With the dollar as the world standard, the US is free to conduct its monetary policy independent of exchange rate fluctuations. In this respect, other countries operate at a disadvantage. They are reluctant to see their own currencies depreciate against the dollar because of the domestic inflationary threat that presents. They are also reluctant to allow a substantial appreciation of their currency against the dollar for fear of losing competitiveness in world markets. Consequently they sometimes subordinate their domestic monetary policies in order to stabilize their currencies against the dollar.

The international dollar is analogous to the fiat money that a central bank issues within its own monetary domain. Central banks do so by purchasing assets from those who want to hold their currency as a store of value or for use in trade. There is little or no need for a central bank to concern itself with redeeming its own currency.

Likewise the US can issue dollar-denominated claims to the rest of the world which may never have to be redeemed so long as it maintains the domestic purchasing power of the dollar. While this gives the US A unique advantage in terms of borrowing in its own currency, the existence of a safe reserve asset (USA Dollar) was thought to be a great convenience to other countries. Providing domestic output made the Dollar retain value, however this argument is now week at best.

What would be a prison offense for a normal citizen was rendered legal for the government by the Federal Reserve Act. This was not a popular piece of legislation. In fact the Democrats had campaigned in 1912 on a platform of rejection of the creation of a private bank in charge of a fiat money system. Nevertheless, on December 23, 1913, taking advantage of the absence of congressmen opposed to the creation of a fiat monetary system during the Christmas break, the Federal Reserve Act was passed.

Years later, during the great depression, Congressman Louis T. McFadden (who served twelve years as Chairman of the Committee on Banking and Currency) asked for congressional investigations of criminal conspiracy to establish the privately owned 'Federal Reserve System'. He requested impeachment of Federal officers who had violated oaths of office both in establishing and directing the Federal Reserve -- imploring Congress to investigate an incredible scope of overt criminal acts by the Federal Reserve Board and Federal Reserve Banks. McFadden even suggested that the Federal Reserve deliberately triggered the great stock market crash of 1929, in order to eventually force the passage of the Emergency Banking Act of March 9, 1933, which suspended the gold standard.

In describing the FED, McFadden remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932:
"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a Government Board, has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through the misadministration of that law by which the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it".

Web References:

COMMERCE STANDARDS (COMMON WEIGHTS & MEASURES FOR TRAFFIC)
LEATHER SEALER RORY ELY COLE LEATHER SEALER'S OFFICE TOWN OF LONDONDERRY COMMONWEALTH OF VERMONT UNITED STATES OF AMERICA SATURDAY, APRIL 8TH 1826
http://www.weights-and-measures.com/xdollarwt.html

The United States Is In Deep Doodoo!
Michael Rivero – What Really Happened
http://whatreallyhappened.com/WRHARTICLES/ARTICLE2/doodoo.html?q=ARTICLE2/doodoo.html

Money - What it is – How it Works
The International Dollar Standard
http://wfhummel.cnchost.com/dollarstandard.html