Spend Less

Before we get into spending… we must understand money.

Money has been around for thousands of years, but its exact origins are a bit of a mystery. The first known use of money dates back to ancient Mesopotamia in the form of coins made from silver and gold. From there, money was used by many different cultures, such as the Greeks, Romans, and Chinese, in various forms such as coins, paper bills, and even commodities like salt and grain.

The use of money and financial systems continued to evolve as the centuries went on. During the Middle Ages, the use of coins and paper bills spread throughout Europe and by the 1700s, the first central banks were created to regulate the economies of Europe.

The United States was founded on the use of the dollar as a currency, and the dollar quickly became the world's reserve currency. This status was solidified in the Bretton Woods agreement in 1944, and the U.S. dollar has been the world reserve currency ever since.

Enter the Federal Reserve

The federal reserve bank is the central bank of the United States and is responsible for regulating the money supply and setting interest rates. As part of this responsibility, the Federal Reserve Bank creates money through a process called debt monetization. This involves creating money out of thin air to buy government bonds, which in turn helps finance government spending. This money circulates through the economy and stimulates economic activity.

The cycle of debt and spending in the U.S. economy is an important part of how the Federal Reserve Bank works. In this cycle, consumers borrow money to buy goods and services, which then stimulate economic activity. This economic activity generates tax revenue for the government, which in turn is used to pay back the debt incurred by consumers. This cycle of borrowing and spending helps to keep the U.S. economy growing…until it doesn’t.

What is the Gold Standard?

The gold standard is an economic system in which the value of a country's currency is tied directly to the amount of gold it has in reserve. By removing the United States from the gold standard in 1971, Richard Nixon, was able to increase the money supply and help spur economic growth…but if you understand basic economics, you understand that when supply increases, value decreases…the same goes for our money.

The removal of the gold standard allowed the U.S. to increase the money supply without having to mine and buy gold. This allowed the government to create more money, which in turn allowed them to fund more government programs, such as Social Security and Medicare. The government was also able to lower interest rates, making it easier for the average person to access credit and borrow money.

I would argue that this removal from the gold standard caused a psychological shift in the way that money is managed. No longer tied to a physical commodity, money became a more abstract concept, and its value was determined by the supply and demand of a particular currency. This allowed countries to manage their own currencies independently and more effectively than before.

The removal of the gold standard has had a lasting impact on the global economy. It has allowed countries to increase the money supply, lower interest rates, and manage their own currencies independently. While the gold standard was an important part of the world economy for centuries, its removal has allowed for more flexible economic policies and greater economic growth. As we move forward, it will be interesting to see how the global economy continues to evolve and how the removal of the gold standard affects the future of money and the US economy.

Conversely there is a school of thought that says the cycle of a fiat currency system, must come to an end. As it cannot sustain itself under the weight of the debt. This could potentially trigger the dreaded everything crash…sparked by the fall of the world reserve currency, the US dollar.

Are you freaked out yet?

If so, I apologize, as I didn’t mean to take you out of your peaceful feeling about money… that is totally not a vibe. Im just an economics and finance nerd and I am here to present information, I encourage you to do research on global economics if you are interested in this topic.

Meanwhile, you should always be preparing for an economic downturn as everything is cyclical and even the best markets must correct. And if you remember the last crash of 2008…who doesn’t… you can easily do the math and realize that was over a decade ago and we are ahem…due.

One of the best ways to prepare for an economic recession, or even worse, Depression is to reduce your expenses, the best and easiest way to do this is to eliminate debt and be a private investigator with your spending…