When you think of, for instance, a hundred dollar bill you probably think of money. This would be wrong thinking. The dollar is currency but it is not money. This is so important to understand and most people, including our politicians, do not get it.
A currency, such as the dollar, yen or euro, is a medium of exchange that you can use to purchase something that has value, what is called an asset. Currency is derived from the word current so this means a currency must keep flowing to stay alive. Saving a currency is not a good plan.
A currency does not have actual value itself. Consider again the hundred dollar bill. Do you think the paper that bill is printed on is really worth a hundred dollars. Nope, it is worth nothing. It is not money. Money must have actual value and throughout history the only things that have ever been money are gold and silver.
The reason this is so important to understand is that a government can manipulate a currency and this has been happening throughout history and is certainly happening now. Our dollars were once backed up by gold so you could take a hundred dollar bill in to the bank and expect to get an equal value in actual gold. This is no longer true and the dollar is now considered a fiat currency.
Fiat currency is one that derives its value through a simple decree or order by some person, group or body with the authority to enforce it. All currencies in the world today are fiat currencies which means none of the have any actual value other than what the governments say they are worth.
I hope you are with me so far because understanding fiat currency helps you understand the concept of inflation. Inflation is a unseen tax that steals your wealth by lowering the “value” of the currency you hold in savings or checking accounts. Here is what happens.
The government spends more dollars than it has coming into the treasury so it prints more dollars to cover government spending and debt. When the government prints the dollar it has full face value but as soon as it is spent it goes into the general pool of currency in circulation and dilutes the value of each dollar, including your hard earned ones.
With more dollars now in circulation now chasing the same level of goods to be purchased the price of all things goes up to meet the additional demand. For instance, you want to buy a new truck. When few people have dollars but there are lots of trucks you get a good deal but when everyone has lots of dollars but there are the same number of trucks you are competing with others who also want a new truck. Now the truck seller can raise the price and sell his trucks to the highest bidder.
Right now our government is printing money like crazy so inflation is coming at some point as people start to feel they have enough dollars. If you understand how those dollars have lost value you will not fall for this false sense of security. You need to have your savings in something that has actual value. Those who want money will need to own gold or silver.
Other non money valuables include food, energy or real estate. Except for the barter system, these items do not act as a currency but they do have value. Another less tangible item of value is your health. Even if it stretches your budget, quality nutritional supplements have value. When you purchase through a network marketing company and develop a network of customers like yourself you have not only created the value of better health but you also have an income stream to invest in the purchase of money or other assets of real value.
Please do not take my word for this. Read everything you can by Robert Kiyosaki and study what experts in the monetary system, such as Ron Paul, are saying. Pray for guidance. Knowledge is power but faith turns your knowledge into wisdom. Madalyn