Most people never even noticed it happening. The label said gold standard, but the real question is what kind of gold standard were we on? The public was told nothing major had changed. But underneath the system was moving away from gold toward pure debt-based paper money.
So, Bill 457S9s asked a very important question and one that I've actually been wanting to answer for a really long time and have so told you I'm going to answer it. So, now I am. And here's Bill's question. But during the depression, we were on the gold standard. So, I believe what he's talking about is the big dip. and let's just take a look at what comes next because a lot of people say but during the Great Depression we were on the gold standard and that sounds really simple and and technically we were but the real question is what kind of gold standard were we on because just because something has the same name does not necessarily mean it is the same thing and we've talked about that regard art in confiscation quite a bit. All different names mean the same thing, but even the same names can mean completely different things. And that is why this story matters to you because the same thing has happened to our money over and over and over again. real money, sound money, was slowly replaced with paper promises, then debt, then digital debt, and most people never even noticed it happening. But frankly, you feel the result every day. You feel it when groceries cost more, when saving money feels harder, when your dollars buy less and less, and even though you've worked just as hard or even harder.
So today, I want to walk you through a simple fable, the ship of Thesus. This was a famous ship that was kept in harbor for many, many years. Over time, one old wooden board rots, so it was replaced with the new board. Later, another board is replaced, then another, and eventually every single part of the ship has been replaced. The bonds, the sails, the mast, everything.
And so the question is, if every part of a ship is replaced one piece at a time, is it still the same ship?
And if every part of money is replaced one piece at a time, is it still the same money?
And that is what we are going to answer. And I'm going to show you how they did it because they're doing it again. So having this recollection will help you understand what's really happening. So again, Bill asked, "But during the depression, we were on the gold standard." And I'm thinking it's because the US dollar lost purchasing power even while we're on the gold standard. That is the statement we're going to examine, not with options, not with politics, but by looking at what money actually was, how it changed, and what happened to its purchasing power. because the label said gold standard but the question again was it the same ship or had key parts already been replaced?
Now before we can answer that we need to know what real money is supposed to do. Sound money has four key jobs. First it is a unit of account and that means we can use it to price things and value things. Second, it is a medium of exchange, which means we use it to buy and sell or barter. Third, it is a standard of payment, which means it can settle debts fairly and you are fairly paid for your labor. And fourth, it is a store of value so that no matter when you use that money, you are always paid fairly for the labor that created it to begin with.
Now, gold and silver have served these roles for thousands and thousands of years. Proof of concept because they are not someone else's debt. They run no counterparty risk. They don't need a promise from a bank. They do not need a government guarantee. They are money in and of themselves because they have the broadest base of functionality and the broadest base of demand. It's why it overwhelms the systems ability to manipulate it. That, my friends, is the foundation of sound money. Now, let's look at what happened when that foundation began to change. So, look at this chart. In 1914, the consumer dollar had full purchasing power. So, $1 bought 100 cents worth of goods. But by 1933, that purchasing power had already fallen by over 50%.
So before gold was taken from the people in 1933, the dollar had already lost a large portion of its purchasing power. And I'm going to show you why in a moment because that is a very, very important clue. If we were truly on a strong, honest, sound gold standard, why was the dollar already losing so much purchasing power? Now, this is where this ship of Thesius story begins. Because the outside still looked familiar. People still they still used dollars, didn't they? People still talked about gold. It was part of our system. And people still thought the system was safe. But inside the system, parts were already being replaced. So now let's bring in the fable. The ship of Thesius asks a simple question. If you have a ship and you replace one wooden board, it still seems like the same ship. Then you replace another board, then another, then the sail, then the mass, then the steering wheel. At what point is it no longer the same ship?
That is what happened to money. Gold money was not replaced all at once. It was replaced one piece at a time. First, people used actual gold and silver coins. Then they used these paper certificates that that I mean these represented gold. You see this little gold image right there? Then they use Federal Reserve notes and those notes are debt instruments and the Federal Reserve is a private corporation. We'll come back to this. But in the end, the system was no longer sound money. And each step looked small, but it changed the money entirely. It was debt wearing the costume, the costume of money. Now, let's look at one of the first big pieces that were actually replaced because this slide shows a key phrase, elasticity in note issues. That's key because what that means at that the system wanted the ability to stretch and grow the money supply.
But sound money is not supposed to stretch just because banks or governments want more money. Gold and silver are disciplined. They cannot be created with the stroke of a pen or a push of a button. They cannot be printed or magically created into existence. But paper notes, I mean, that's easy. They can be expanded. So, when the system allowed more flexible note creation, it opened the door to inflation. This was one of those replaced boards in the ship. The name gold standard may still have been there, but the discipline of sound money was already being weakened. They destroyed the constitution at that moment in time.
Next, we see how people were made to think that nothing had changed. But I got news for you. This is one of the most important slides that I can show you because here, what do we see? We see a gold coin, a gold certificate, and a Federal Reserve note. To the average person, these may have felt the same because they were all used in circulation at the same time. They could all buy the same level of stated value. They were all $20. And they were all treated alike, like sound money. But they were not the same thing. A gold coin, this is money. A gold certificate is just a paper claim on real money. And a Federal Reserve note. Well, I got news for you. A Federal Reserve note is a debtbased instrument. That, my friends, is a huge difference. It's like replacing the solid wood boards of the ship with painted cardboard. From far away, it may look the same, but it is not the same.
And now we can see the whole transition a lot more clearly. And frankly this slide makes the point plainly because the note a note it's a debt instrument and that matters because gold is not debt silver is not debt but a note this thing it just represents a promise nothing more and promises can be broken promises can be changed and promises can be inflated away.
So here is another replaced piece of the ship. Money used to be an asset. Then it became a claim on an asset. Then it became a debt instrument. That is not a small change. That is the heart of the story. The system that we still call money. But it was no longer sound money in the same way. Now, let's see what happened when this new debt money system expanded because this is the piece that I have been dying to show you since Kelly created it. Now, I'm going to come back to that whole chart that you just saw, but this chart from the Federal Reserve shows the transition from a goldbased system into a paperbased system. And notice it did in the beginning happen in one dramatic moment, but then they backed off and it happened more gradually and that's why most people missed it. The ship still had the same name. The money still had familiar symbols. The public was told nothing major had changed, but underneath the system was moving away from gold toward pure debt-based paper money. And this is why saying we were on the gold standard during the depression is way too simple because we were transitioning off of it. The better question is, were we really on a true gold standard or were we on a weakened system where the gold had already been crowded out by paper claims on debt? And the answer becomes clearer when we look at what a Federal Reserve note really is. Like I showed you, the Federal Reserve is a private corporation and the note is a debt instrument. And I just want you to notice that little bit of gold on the bottom. Well, there's your 10 to one. That fractional reserve system because all that gray area did that's private corporate shortterm commercial debt. And that, my friends, was now turned into this Federal Reserve note. You and I and everybody everywhere in the world are working for debt, corporate debt. Why in the world is that okay with you? I'm coming back to the larger slide here in just a minute. But you can see that kickoff because this is where you saw that massive loss of purchasing power. This is the purchasing power and it shows the 1920s were not just a time of prosperity. They were also a time of credit expansion because once the government oops wish that happened to them but once the government prints all this money into existence. It's in the system. It goes someplace. And that's why the 1920s were so seemed so prosperous. And I also want to point out this 48% loss of purchasing power right out of the shoot when the Federal Reserve instead of 20th of an ounce supporting $1 in that note that I just showed you that 20th of an ounce now supported $2.40. This is not rocket science. They just printed almost two and a half times the amount of money into existence than they could before with the same amount of gold inside of the system. That's why we lost that 48% level of purchasing power. Can you see it? And you see that little blip up to 60 cents worth of purchasing power. We've talked about this before. When inflation heats up and pushes your price into the sky, if they pull back just a little bit, you go, "Oh, look it. Things are under control. Things are more normal." Even when that's just covering up the lie. So, it was all of that money creation that created the roaring 20s. And for the first time, the middle class could get credit. What an amazing thing. Yay. It could keep that whole game going because an inflated money supply means that things look in terms of of numbers that they're going up and up and up, but in reality, what they're doing is they're destroying your purchasing power. And when more debt money is created, it can push up those asset prices and create bubbles. And me, I mean, honestly, people feel richer. for a while. But there is a cost and that is the purchasing power falls. The dollar buys less. So the roaring 20s were not just built on real savings and sound money. They were built on pushed up credit. And credit can feel good on the way up. Look at this. I can buy so much more stuff. Happy days are here again. buddy, can you spare a dime?
But it can be painful when the bill comes due. And that brings us to the next image because people were being asked to trust those paper promises and that inflation was a good thing. This image of that period of time, Roosevelt reminds me and reminds all of us really that the public was being asked to trust the system and the system was based upon inflation. But trust is not the same as sound money. And a promise is not the same as payment. And a paper claim in your hand is not the same as gold in your hand.
This is another part of the fable because the ship may still be floating but if enough strong parts were replaced with weak parts eventually that ship cannot protect the passengers. And in a monetary system, we all of us, we're the passengers. Our savings are on that ship. Our retirement is on that ship. Our purchasing power is on that ship. Our future and our children's future is on that ship.
And this chart shows the growth of debt currency and checking accounts. compared to gold and silver. And you see that all the way on the bottom. The important point is this. The paper and debt claims grew much faster than the sound money foundation. And that means more and more claims were built on top of a smaller and smaller base.
So you can look at that and they withheld all of that debt that they created until they were ready to unleash it on the public. And when did that happen? Oh yeah, after they confiscated and took gold away from the public. That my friends is when they unleashed it. When you and I have no other options, we are fully tied to the system. Can you see why it is so critically important for you to have that shortity in food, water, energy, security, barter abability, wealth preservation, community, and shelter because this is what I think we're going to see with stable coins. And by the way, we saw it again after the 70s in the 1980s kickoff. This is always what happens. always and they really tell us that it's a all for our best interest but I don't know with this K-shaped recovery exactly whose best interest do you think this is really in because all of that is simply inflation and devaluation and the strong wood is replaced by weaker materials. The ship may still look fine for a while, but the strength is gone. That is what happens when a monetary system builds too many promises on too little real money. That's why you have to be your own central bank because eventually the promises become too large and the system needs inflation to keep it going. And that is why the debt money system creates a loop.
I'd like you to notice on the bottom the amount of gold that we held in deep storage storage for foreign governments. And in the 60s they were taking and pulling the gold out of our system. So by the time Nixon closed that gold window, which was really a confiscation from foreign governments of their gold, why they allowed it, I don't understand, but they did. That was the most current overt confiscation of gold and very significant. We had no choice. Had we not closed that gold window when we did, we would have less gold or who even knows how much gold we have in deep storage today. But that is something to really pay attention to. This is a very complicated slide. I'd like you to feel free to talk to your strategy specialists about it to make sure that you really understand it. And it's critical that you do because this is what we have going on right now as they transition us from this paper system into the next system which I hope we have a say in because there are six stages to the debt money doom loop and we're just going to do that simply put because the higher the debt the lower the interest rates need to be so that they could take on more debt and service it. This slide shows that debt money doom loop. Here's the simple version. When the system needs more money, it creates more debt. When more debt is created, interest rates often need to be pushed lower so that you could take on and service that debt. When rates are too low for too long, lots more borrowing happens. That creates more inflation pressure. Then confidence in the currency weakens. Then the same system needs even more debt to keep going. That is the loop. Debt money does not solve the problem. It feeds the problem and makes it bigger and bigger and bigger.
Sound money, physical gold, physical silver creates discipline in the system. Debt money demands expansion. And that is why your purchasing power keeps getting drained over time. They just want it to happen slowly enough that you don't make any changes. Now, let's move from history to where we are today because this chart shows federal debt rising from hundreds of billions to tens of trillions. This is not just a government problem. It affects every person who earns, save, invest or retires in do dollars or any other fiat money because debt at some point it has to be dealt with. It can be paid honestly. It can be defaulted on. It can be rolled over or it can be inflated away. And inflated away is what they've always depended on. Historically, governments often choose inflation because it is less obvious. It does not look like a tax bill, but it is. And it acts like one. Your dollars buy less and less. Your savings stretch less and less. Your labor has to work harder and harder just to stay in the same place, if you even can. And that brings us to the purchasing power of the modern dollar. Because this chart shows the long fall in the purchasing power of that dollar. This is the result of the replacement story. When money becomes debt and debt must keep growing, purchasing power is always sac it's always sacrificed. That's that K-shaped recovery. For most, it's sacrificed. For the few, it's better. That is why prices do not really go up in isolation. What is really happening is that the dollar is going down.
The measuring stick is shrinking. Imagine measuring your child's height with the ruler that gets shorter every year. It would look like your child is growing faster than they really are. That is what inflation does. It makes prices look like they're rising, but much of the time currency is just the currency losing value.
Now, let's compare that shrinking dollar to spot gold and spot silver. Because this slide brings the story home. Look at the difference between the cost of a basic food basket and spot silver and spot gold over time. I even happened to do it almost a year ago. So I thought I would leave that in there from last year because I thought it was really interesting in 613. So not quite but almost a year ago while the food basket had gone up a little bit more than 2300%. Spot silver had gone up over 3600% and spot gold glowing closer to 16.600,000 600,000%. But look what happened this year when I just ran those numbers the other day. Well, that basket had gone up a little bit to over 2400%. So, almost a full 100 percentage point. Spot silver basically more than doubled during that same period of time. And spot gold rather than the 16.6,000% 6,000% it went up almost 22,000%.
They are monetary assets that have always for thousands of years survived governments, currencies, wars, reset and debt cycles. They do not depend on someone else's promise to pay. This is why they matter. So the question is not whether or not gold and silver move up and down dayto day. Paper currencies come and they go. Debt systems expand and then they fall. But sound money sound money remains on task to protect your purchasing power over time. So now we come back to the fable and the final lesson.
Money was not replaced overnight. You'd notice it. It was replaced one piece at a time over time. First gold and silver coin were replaced by paper claims. There's that paper claim. Then that paper claim were replaced by these notes. And those notes then debt instruments. And then debt became the costume of money. And when debt wears the same costume of money, most people do not notice right away. They still see dollars. I mean, I can pull out a $20 today. They still see dollars. They still see bank balances. They still see numbers on a screen and the stock markets going up. But the substance has changed. The ship has changed. The money has changed. And the people who do not understand that are the ones most exposed and vulnerable when the system changes again.
That's why this story matters. It's not just history. It's a warning. And it is also an opportunity because sound money was never destroyed. Gold and silver. Look at they're still here from thousands and thousands of years. They are not promises, not debt, and not someone else's liability. They are the monetary foundation that outlasts every single paper system that has ever been in existence.
So, here's the question I want to leave you with today. If the monetary ship has been rebuilt with debt, paper, and promises, what part of your wealth is still anchored to sound money?
This is exactly why we do what we do here at Zang International. And it all has to start with your goals. We help people build a sound money strategy using physical gold and silver so that they are not depending only on a debt-based system that is designed to lose your purchasing power over time. If this story made any sense to you, don't wait until the next crisis to prepare. Call us and schedule a sound money strategy session because the best time to understand the ship is before it starts taking on water. And the best time to own sound money is before everyone else realizes why they need it. And it's too late to get it.
And without a doubt, while we need that local community, we need a global community to demand sound money, create that discipline in the next monetary system that we're transitioning into. And frankly, I know without a doubt that together we can do anything. Remember the dimes? If you're a client, you get the first one free and then the rest of them at our cost cuz you're the army. Let's get sound money back in the system again. Don't we have an obligation to do so? And until next we meet, please, wherever you are in the world, be safe out there. Bye-bye.
