A Must See Movie: 'Zeitgeist Addendum' Explains the Fiat Money System

Watch the brilliant movie Zeitgeist Addendum in order to understand the process of fiat money creation. I am confident it will make you think that any discussion about a new world currency order will come to the conclusion that only a gold/silver standard can protect savers from inflation, which destroys their savings. Don't shy away because it is a 2-hour movie. After all it's a Sunday today and the issue of fiat money is covered in the first half hour. But I'm guessing you will be so enamored by then, and decide it is worth viewing the whole movie (click button on bottom right to view in full screen mode).

In this context read Alan Greenspan's essay from 1967, "Gold and Economic Freedom," when he wrote, "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation." Also read this earlier post "Greenspan Bends Truth On Stabilizing Effect Of Gold Standard."

Greenspan also pondered a return to the gold standard in a Wall Street Journal article from September 1, 1981.

Greenspan also once answered Congressman Ron Paul's question why the USA should not sell its gold reserves if everybody deemed them unnecessary in a fiat money system, saying that in times of international crisis gold is the only accepted international currency.

Comments

[Jasper M:]

For all of Greenspan's errors, he was not a complete goof. Especially when compared to his replacement.
Though that sort of statement can get a pretty negative response 'round here . . .

May 10 07:27 AM

[fxmaven:]

Greenspan was actually quite astute for a Central Banker. Like the Wall Streeters he created phoney value, and made sure to leave office before the souffle collapsed, leaving to pocket large speaking fees.

He was simply the conductor of the great asset bubble symphony. As opposed to ensuring stable economic growth and price stability (which was his job).

May 10 08:38 AM

[andypandy:]

two hours - its too long for even a sunday.

Greenspan is a goldbug! Wonder what happened.

www.constitution.org/m...

He has never retracted anything from this essay.

May 10 09:13 AM

[andypandy:]

Ok I was wrong, it's a great video so far - first 20 min actually helped me understand me something new... Where does the money come from to pay interest to the federal reserve if they are the ones who make the money? Ha, have I not asked that question before?

May 10 09:42 AM

[Prudent Inv...:]

Andypandy,
I will follow up this week with some links that explain this fundamental problem - which you sense very correctly - of a fiat money system.
One book I recommend to everybody interested in the subject is "Secrets of the Temple" by William Greider which is by far the best (of the very few) book about the Federal Reserve. Greider is a Washington Post veteran who has moved to the left of the political sphere since he wrote this master piece that is both informative and brilliantly written.


On May 10 09:42 AM andypandy wrote:

> Ok I was wrong, it's a great video so far - first 20 min actually
> helped me understand me something new... Where does the money come
> from to pay interest to the federal reserve if they are the ones
> who make the money? Ha, have I not asked that question before?

May 10 10:51 AM

[Ohhyeeah:]

First part of Zeitgteist Addendum regarding the FED was most excellent...but the "hit man" part by John Perkins thereafter, I agree, was pure marxist tripe, very one-sided and much too pat. Collectivists are collectivists (central planners) by any name whether they are marxists, progressives or corporatist elites, and they all suck equally. Money represents units of work...period, and I just want to be paid fairly and keep what I earn. All that's required is to destroy the fraud monetary system, and resurrect freedom and free enterprise based on honest values and principles. To defeat the elitist crooks and establishment black nobility however, will require a great world war.
www.freedom-force.org/...

May 10 12:14 PM

[andypandy:]

I got heavy into Austrian thinking, it is basically perfect logic. I have read a few books by Rothbard, Mises, and Ron Paul's book. I think the best books are the ones that take historical examples like "Fiat Money Inflation in France," and "40 Centuries of Wage and Price Control." For some reason I just don't want to believe this conspiracy type stuff. I have a sort of inner struggle deciding whether the government is full of people who are completely incompetent, or whether it is really a bunch of people who know exactly what they are doing. I tend to believe that they are incompetent.


On May 10 10:51 AM Prudent Investor wrote:

> Andypandy,
> I will follow up this week with some links that explain this fundamental
> problem - which you sense very correctly - of a fiat money system.
>
> One book I recommend to everybody interested in the subject is "Secrets
> of the Temple" by William Greider which is by far the best (of the
> very few) book about the Federal Reserve. Greider is a Washington
> Post veteran who has moved to the left of the political sphere since
> he wrote this master piece that is both informative and brilliantly
> written.
>
>
> On May 10 09:42 AM andypandy wrote:

May 10 02:33 PM

[mikebrah:]

Prudent and Andy,

"The Case Against the Fed" by Murray Rothbard is also an excellent book about the reality of our money system. Check it out if you haven't already.

MM

May 10 02:41 PM

[Market Sniper:]

Andypandy

Understand your reluctance to accept conspiracy theories. I have found this line of reasoning helpful: 1) How are societies and organizations structured? As a pyramid; 2) what is at the top of a pyramid? A point consisting of an individual or very small group; 3) there are numerous pyramids; 4) do you think it is possible that the top of one pyramid may talk and even act with the top of another pyramid when it is mutually beneficial? and 5) Conclusion: Of Course they do!...Hope that helps.

May 10 04:15 PM

[Living4Divi...:]

Thanks for the reminder about the movie. I recently wrote an article in SA on this very subject titled "The Dollar Is Doomed" Every saver needs to understand the process of fiat money creation and how that destroys his savings.

May 10 06:59 PM

[Market Sniper:]

Living4Dividends..ever read Nathan Lewis' book, Gold: the Once and Future Money? Best treatise on the subject of Gold vs. Fiat I have read. Highly recommend it to anyone to clear up misunderstandings about exactly we are dealing with here.

May 10 07:20 PM

[D. McHattie:]

Not gonna lie to ya: I fell asleep part-way through this video.

By the time I woke up they were making some wild utopian claims that I just couldn't buy into.

First, it's not patents on battery technology that makes electric cars prohibitively expensive.

Second, the producers also make some misleading statements about the size of renewable energy without addressing the cost of collecting solar, wind, tidal and geothermal energy.

Conclusion: the message of this video is seriously compromised by weak and unscientific underlying assumptions.

May 10 08:52 PM

[AJB7:]

I'm afraid my positive comment rating is going to take a dive with this note, but I found the first 15 minutes of this film so full of distortions and errors that (with all due respect) it began to remind me of some sort of propaganda film and I stopped watching.

I'm not going to go into a lot of detail here, since you either understand what I am going to say or you don't, but let's start with how the film introduces money creation. The film says that if the government needs money it creates a bond which it sells to the Fed which prints the money and sends over to congress. That is certainly one possibility, and if that explanation were the whole story as it is portrayed in the film, you would have a country pretty much like Zambia with trillion dollar notes buying an apple. In fact, which the film does not show, the sale of US bonds is primarily to the private primary dealer market and other investors, and only as a last resort to the FED if no other buyers can be found. After all, that's how China has ended up with a trillion dollars of US bonds and notes isn't it?

To take another example of distorted portrayal here, the film says in context of the commercial banking systems creation of money through loans, that this new money "steals value" from existing money because new money is created irrespective of demand for goods and services. But contrary to the film's statement, this is only a possibility not a given fact, and in fact, the more usual outcome is that loans through productive investment produce new goods and services, thereby creating new aggregate wealth, which in turn does not "steal value" from existing money. And that's why the economy keeps growing.

As a last note, the film states that only 1% of the population in the US owns 40% of the wealth, and then adds "we know something is very wrong here". The fact is correct, but not the conclusion. In fact, in much of the world, and in almost all of human history, about 1% of the population owns or owned about 90% of the wealth of society. To have this 1% percent own only 40% shows that the wealth ownership in the US has been more widely spread than in much of the world or in history. I would think that's a good thing. If you think that it's "very wrong", then I suggest you join a socialist party or something.

I am certainly not denying that hyperinflation can and sometimes does present a danger to society. Indeed I am currently overweighted in precious metals and natural resources, but this is not an absolute buy and hold strategy. I will certainly be glad when the time comes to dump this stuff there is someone always willing to overpay for it. Anyway, if you think the world works the way its portrayed in this film, good luck in your investments

May 10 11:23 PM

[ETF STER:]

The "Venus Project" is still another attempt for a utopia. While it is admirable in it's idea, it is also an "ISM"....................

It sounds very similar to Communism.

If your Venus Project society were to succeed, it also must control the population. While man will continue to strive to achieve utopia, Communism & Socialism have proven to be abject failures. Capitalism, however flawed, is still the most successful system yet devised by man to raise the standard of living for the people in the capitalist society.

It is also very curious that the solutions presented in the 2 hour "movie" also requires "MONEY"

The greatest threat against our system is the suspension of critical thinking by our society and the education system, that allows people to believe there can be a utopia. Maybe someday,......but not in the near future.

Good Luck with that.

May 11 11:17 AM

[alajac:]

I watched the video previously and my feeling was that good info was being used to promote another very bad idea. Electric cars will be viable when they are (relatively) cheap enough ON THEIR OWN to make a compelling sales pitch unnecessary. "CO-caused global warming" is BS: what warming there is is due to undersea volcanic activity (which we can't dso squat about), and, anyway, solar activity is far more important a factor regarding whether the earth becomes an ice berg or a hothouse (and we can't do anything about that either).

Regarding fiat money, we have it because money tied in a fixed relationship to a metal has ALWAYS led to deflation and depressions.The problem is not the fiatness, it's the fact that that value of the money gets drained off due to the interest costs. The solution is to cut the middleman (the Federal Reserve) out: we can create and distribute our own fiat currency without charging oursleves anything at all. We've got the technology today to distribute all new money via equal-dollar disbursements to every legal U.S. resident. That is the least we should be doing to get things back on track.

There's a whole plan that will "fix the system" (way better than the Zeitgeist guy's fascist agenda) on the "alajac" page at u4prez.com.

May 11 12:58 PM

[guymar:]

I think the movie depicts only part of the story ... huge personal debt managed by banks is a rather new phenomenon. Mainly created after Banks realized that a debt transfer from a nation to an individual has got huge advantages on the level of "management" and debt collection. When wealth creation is done by government (which acts as centralized borrower / wealth redistributor) as it happened in a number of socialist / welfare state inspired countries in the 70ies, recuperating defaults is hugely difficult. This changes when everything is "privatized" and the main borrower is the individual. Default can be managed vuury easily, and a very effective wealth re-distribution system can be put in place, where inflation of certain asset classes (preferably the stock exchange) can be used to install a flow from the poor to the rich with the asset bubble playing an essential role.

May 11 01:53 PM

[Max Well:]

The movie is certainly not about the money but much more about the power behind it and that's why it talks first about the dollar.
Now I must precise two relevant facts, first that I am French (sorry for the vocabulary) and second that I live in Venezuela for the last 15 years (you will understand why).
So lets get back to 1789 during the French Revolution, the monarchy was corrupt, inefficient, useless and bankrupt, the real money was made by the merchants, yet they did not have the power they deserved, so they made their case to the people by pointing the defects of the old system every times it fits their purposes of establishing a new one.
When people tends to consider that a system has reached the limits of the benefits they can expect from it, they are more willing to listen to an alternative.
So the King is dead long live the capitalism!
Of course they had to give back something to the good people who believed in their model. To make it short let says that one of these benefits was education.
With education came a new class: the intellectuals, at one point they too considered that they were the real pillars of society yet underestimated and underpaid by the ruling merchants.
So they came with another "brilliant" idea: communism.
Once again they looked (only) at the defects of the system ( inequality mainly and capital) that fit their view and as we will see their interests.
Why? Because in order to reach equality, a centralized system was required and who better prepared to design and organize the annual plan than the intellectuals.
Unfortunately for them their system required so much arbitrary decisions that the only group able to impose and therefore benefit from it was the military apparatus.
The result of this monster, resentful intellectuals ideas run by a corrupt army, was a disaster on all aspect of society.
So we moved on, in a way, and the new major benefit we got of the surviving system, to make it shot is now: technology!
And guess who wants (again) its share of the pie with yet another beautiful project of society: the scientists!
And they too are good at pointing the defects of the system, actually of all the systems, capitalism, communism, religion, even the army!
These people have all for them, they are smart, efficient, spiritual, good and most of all they care for us!!!!
So brothers I think it is time to get run by a machine, you might think that I am joking or that I am cynical , but be honest, monarchy is not an option, communism even less, religion? ask your wife if she wants to live in the dark, and capitalism is running out of gas, so? The good part is that they won' t ask us to get rid of our ipod or our blackberry, we might even be able to clone ourselves.
There is only one question remaining: "who amongst us deserves eternity?"

May 11 06:27 PM