If you want to know why Gold is anathema to bankers and financial authorities, take a a good close look at these Notes. The history of the move away from Gold in the 20th century is printed right on them.

“Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless” Ludwig von Mises. For the ultimate illustration of the truth of this statement, we give you the German Reichsmark of the early 1920s

REAL Paper Money

1913: $50 Gold Certificate
The last of the true Gold Certificates – the Federal Reserve was instituted in December 1913. This is a completely honest and upright money. It says so right on the certificate:

What you are looking at here is a money substitute. Any holder of this certificate held title to 2.41896 troy oz of Gold (at $US20.67 per troy oz.) which could be redeemed at any bank or from the U.S. Treasury itself at any time.

Enter The Federal Reserve

1914: $1 Federal Reserve Bank Note
At the time this was issued, a “note” was well understood to be a promise of payment. Accordingly, this is prominently labelled as a “Federal Reserve Bank Note“.

And what is this Note redeemable in? Here’s what it says: “Secured By United States Certificates Of Indebtedness Or One-Year Gold Notes, Deposited With The Treasurer Of The United States Of America”. The Note was directly redeemable in Treasury debt, but it was not directly redeemable in Gold.

It’s Money Because We Say It Is

1928: $100 Gold Certificate
The last of the U.S. Gold Certificates. This certificate was discontinued in 1934 – the same year as the U.S. ceased to issue Gold coinage and made it illegal for Americans to own Gold.

While the statement that the certificate is redeemable in Gold coin still appears, there is this ominous addition imprinted on the “Gold Certificate” stamp.

“This Certificate Is A Legal Tender In The Amount Thereof In Payment Of All Debts And Owen Public And Private”. “Owen” is an archaic form of the verb “owe”, meaning “to be in debt”.

Redeemable In What?

1934: $1000 Federal Reserve Note
As it says right on the note, “The United States Of America Will Pay To The Bearer On Demand One Thousand Dollars”. But what is it redeemable in? “Lawful Money”.

It says so right on the note: “This Note Is Legal Tender For All Debts Public And Private And Is Redeemable In Lawful Money At The United States Treasury Or At Any Federal Reserve Bank”.

In 1934, Gold was no longer “lawful money”. In fact, this note was “redeemable” in another note just like it, or 10 “$100s”, or 50 “$20s”, or 1000 “$1s” – you get the picture.

Remember These?

1963: $1 Federal Reserve Note
The U.S. probably printed more of these than any other note in its history. When they first came out, you could buy quite a lot with one. Now, the U.S. $1 Dollar bill is being phased out.

The recognition of what a “note” is is no more. There is no statement about what this note can be redeemed in anywhere on it. Nor does the Fed bother to point out that the note is “lawful money” – just try and spend anything else! The Note simply states: “This Note Is Legal Tender For All Debts Public And Private”. That’s it.

The New U.S. Paper Money

1997: $50 Federal Reserve Note
Here is a specimen of the new “counterfeit proof” U.S. paper currency (the “$100s” came out in 1996). As far as what is written on the note, there is not much to distinguish it from the $1 note above. The only discernible difference is the markedly inferior engraving.

But look at the portrait of Ulysses S. Grant, and then scroll up to the first example on this page. Same man, radically different “money”. This is counterfeiting of a much more blatant kind than the mere copying of what is already just a piece of paper.

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Series 1905 $20 bill
$620 in twenty-dollar bills1861: A demand note with Lady Liberty holding a sword and shield on the front, and an abstract design on the back. The back is printed in green.

1862: A note that is very similar, the first $20 United States note. The back is different, with several small variations extant.

1863: A gold certificate $20 note with an Eagle vignette on the face. The reverse has a $20 gold coin and various abstract elements. The back is orange.

1865: A national bank note with “The Battle of Lexington” and “Columbia Leading a Procession” on either side of the face and obligation text conspicuously in the middle. The reverse features “The Baptism of Pocahontas” in black, and a green border.

1869: A new United States note design with Alexander Hamilton on the left side of the front and Victory holding a shield and sword. The back design is green.

1875: As above, except with a different reverse.

1878: A silver certificate $20 note with a portrait of Stephen Decatur on the right side of the face. The back design is black.

1882: A new gold certificate with a portrait of James Garfield on the right of the face. The back is orange and features an eagle.

1882: A new national bank note. The front is similar, but the back is different and printed in brown.

1886: A new silver certificate $20 note with Daniel Manning on the center of the face.

1890: A treasury (coin) note with John Marshall on the left of the face. Two different backs exist: both with abstract designs.

1902: A new national bank note. The front design features Hugh McCulloch, and the back has a vignette of an allegorical America.

1905: A new gold certificate $20 note with George Washington on the center of the face. The back design is orange.

1918: A federal reserve bank note with Grover Cleveland on the front, and a back design similar to the 1914 Federal Reserve Note.

[edit] Federal Reserve history

Series 1914 $20 bill

Series 1929 $20 bill

Series 1995 $20 billImage:US $20 Series 2001 obverse.jpg

Obverse of the Series 2001 $20 billImage:US $20 Series 2001 reverse.jpg
Reverse of the Series 2001 $20 billJackson first appeared on the twenty dollar bill in 1928. It is not clear the reason the bill was switched from Grover Cleveland to Andrew Jackson. According to the U.S. Treasury, “Treasury Department records do not reveal the reason that portraits of these particular statesmen were chosen in preference to those of other persons of equal importance and prominence.” [1].

1914: Began as a large-sized note with a portrait of Grover Cleveland on the face, and, on the back, a steam locomotive approaching from the left, and a steamship approaching from the right

1928: Switched to a small-sized note with a portrait of Andrew Jackson on the face and the south view of the White House on the reverse. The banknote is redeemable in gold or silver (at the bearer’s discretion) at any Federal Reserve Bank.

1934: The obligation is changed. The bill is no longer redeemable in gold, but rather in “lawful currency”. This is due to the U.S. being taken off of the gold standard. “Lawful currency” in this case ends up meaning silver.

1943: A special emergency series, with brown serial numbers and “HAWAII” overprinted on both the front and the back, is issued. These notes are designed to circulate on the islands, and be deemed invalid in the event of a Japanese invasion.

1948: The White House picture was updated to reflect renovations to the building itself as well as the passage of time. Most notably, the trees are larger.

1950: Design elements like the serial numbers are reduced in size and moved around subtly, presumably for aesthetic reasons.

1963: “Redeemable in Lawful Money” is replaced by “In God We Trust”. The two acts (one taking U.S. currency off silver backing, and the other authorising the national motto) are coincidental, even if their combined result is implemented in one redesign. There is a subtle irony to be found, especially to those that oppose fiat currency. Also, several design elements are rearranged, less perceptibly than the change in 1950, mostly to make room for the slightly rearranged obligations.

1969: The new treasury seal appears on all denominations, including the $20.

1977: A new type of serial-number press results in a slightly different font. The old presses are gradually retired, and old-style serial numbers appear as late as 1981 for this denomination.

1990: Anti-counterfeiting features are added: microprinting around the portrait, and a plastic strip embedded in the paper.

September 24, 1998: Received a completely new appearance to further deter counterfeiting; the picture of the White House was changed to the north side view. A larger, off-center portrait of Jackson was used on front, and several anti-counterfeiting features were added, including color-shifting ink, microprinting, and a watermark.

October 9, 2003: Still another new appearance with light background shading in green and yellow, and no oval around Andrew Jackson’s portrait (background images of eagles, etc. were also added to the front); the back is the same view of the White House, but without the oval around it.
Many tiny, faint “20″s are scattered on the back in yellow as a “EURion constellation” to prevent photocopying. The series date is 2004.

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Series 1928 was the first issue of small-size currency printed and released by the U.S. government. These notes were the first standardized notes in terms of design and characteristics, featuring similar portraits and other facets. These notes were also the first to measure 2.51″ by 6.14″, quite a bit smaller than the large-sized predecessors of Series 1923 and earlier.

[edit] Federal Reserve Notes

A $5 Federal Reserve Note, Series of 1928A.First issued in 1913, in accordance with the Congressional act of the same name, Federal Reserve Notes featured a green seal starting in 1928. This was the only type of currency that, at first, featured the Treasury seal over the large engraved word to the right of the portrait.

These notes also carried a seal bearing the identity of the Federal Reserve Bank of issuance. The bank was noted in the black, circular seal to the left of the portrait. This can be seen in the picture at the upper right, with a “2″ in the seal. The Federal Reserve Bank of New York, therefore, issued this note. This design facet is unique to Federal Reserve Notes, because almost all other types of notes were issued directly by the U.S. Treasury.

All denominations of Feds, $5 to $100, were redeemable as per the legend in the upper left corner of the note. It read:

Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank.

While these notes were issued by the Federal Reserve Banks, they were still obligations of the U.S. Government, as stated:

The United States of America will pay to the bearer on demand [so many] dollars.

[edit] How They Began
Series 1928 Feds, or FRNs (”ferns”), were first released to the public on July 10, 1929. However, by this time only $5, $10, and $20 Federal Reserve Notes had been produced in large quantities, so there were no fifties and hundreds, at first. The Series of 1928 $50 and $100 FRNs were released in 1930.

[edit] Artistic Changes
Small changes were made for the issues of the Series of 1928A and 1928B, C, and D.

Series 1928A for the $5, $10, and $20 denominations resulted from a simple signature change. The design remained intact.

This same series, however, brought some minor changes to the faces of $50 and $100 Federal Reserve Notes. These were produced later than 1928A $5, $10, and $20 bills. The obligation and legend remained the same, because the gold backing did not change. However, the Federal Reserve Seal now contained a letter instead of a number. The four corner numbers were aligned vertically, as well, causing a shift in plate position letters on certain denominations. Treasury Seal color was also changed; it was made slightly darker, but a number of light and dark varieties exist.

Series 1928B only included $5, $10, and $20 FRNs. This series included the same changes made to the fifties and hundreds, previously.

Series 1928C also included only fives, tens, and twenties. This series of notes saw very low printing figures, as only certain districts issued notes. This series is also known for its specific light green Treasury Seal variety.

Series 1928D included only fives, and all notes were issued by the Federal Reserve Bank of Atlanta, Georgia. These notes are among the rarest small-size notes in existence today. No design changes were made, however, to those done in earlier series.

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by Robert Kiyosaki

Posted on Monday, June 25, 2007, 12:00AM
During the height of the real estate bubble, I wrote a column saying that the crash was coming and suggested selling any piece of real estate that was overpriced, questionable, or non-performing. As expected, I received angry replies.

Today, I’m predicting the next crash, what I believe will cause it, and why it’ll be a severe blow to the global economy. The signs are already here.

Busts Beat Booms

First of all, it’s no big deal to predict booms and busts. All markets boom and bust. It’s just easier to predict a bust because the signs are so obvious — like excess euphoria, easy access to money, huge profits, and scores of happy amateurs entering the market.

Booms are harder to predict. They start silently, like oak acorns buried in the ground — you don’t notice them until they’re towering trees. For example, few people recognized Microsoft or Google for the giants they were until after they’d become major players and the big profits had been made.

Paradoxically, that means busts are better because we can see them coming. This gives us time to prepare, and makes it easier to capitalize on them.

The Year the Dollar Died

The coming bust started in 1971. That was the year Richard Nixon took the United States off the gold standard, thus converting the U.S. dollar from money to currency — that is, from an asset to a liability, and an instrument of debt. That was the year the dollar died.

After Nixon was forced out of office, the U.S. economy went into a slump under presidents Ford and Carter. We had high inflation and low growth, otherwise known as “stagflation,” before Ronald Reagan and his dedication to supply-side economics — Reganonomics — came along.

Reagan cut taxes and started borrowing money, increasing the national debt. As a nation and as a people, we began borrowing and spending to spur the economy. And the economy boomed until 2000.

A World of Debt

It began to sink after 9/11. We lowered interest rates and began printing more money. In 2003 and 2004, the Bank of Japan created 35 trillion yen to save the dollar and their economy. It was like a loan of $320 billion to the United States, and probably prevented a run on the dollar.

This loan kept interest rates low, which prolonged the boom with easy money from cheap debt. The problem is that interest rates are now beginning to rise, and the mountains of debt will have to be paid back. If interest rates rise and the economy slows, a severe crash could occur — a crash caused by years of accumulating debt in order to spur the economy.

The world has never been in this position before — and the whole world is involved. That’s because Nixon’s actions in 1971 made the United States into a virtual empire. As an empire, we began dictating the terms of world trade: If you wanted to do business with us, you had to accept our new dollar as gold. Unfortunately, the world complied.

The New Money

Today, China ships us products and we ship them dollars. The problem is that the Chinese can’t spend those dollars. If they do, the price of their currency, the yuan, would go up. Why? It’s simply a matter of supply and demand.

So instead of spending their U.S. dollars in China, the Chinese buy our assets, especially U.S. bonds, with them. Because they buy our bonds, interest rates in the U.S. remain low, and low interest rates encourage Americans to borrow more money. This causes bubbles in real estate and the stock market.

The problem is almost as bad in China. The Chinese are using U.S. debt as collateral in borrowing yuan to finance projects within their country. With the Chinese economy booming and in preparation for the 2008 Olympics, the Chinese have gone shopping — they want to look good for the world.

Using Chinese debt collateralized by U.S. debt, they’ve been buying natural resources from all over the world. Consequently, countries that are rich in natural resources — such as Canada and Australia — are booming. Real estate and stock markets in those countries are hot.

But the global boom is clearly built on a mountain of debt.

A Familiar Cycle

This type of boom has happened before. In 1971, Japan was finally emerging from the effects of World War II and becoming a world economic power. The Japanese were exporting cars and televisions to the United States, and because we were importing more than we exported, the Japanese took payment in U.S. gold. In fact, one of the reasons President Nixon converted the dollar from money to a currency was to stop this hemorrhage of gold.

In the 1980s, instead of using gold to finance their economy, the Japanese used U.S. debt as collateral for Japanese debt. This caused the Japanese economy to boom just as the Chinese economy is booming today, and it made the Japanese look like geniuses. Business books and magazines trumpeted the magic of Japanese business management.

Then, in the early 1990s, the Japanese boom busted. Their stock market crashed and the most expensive real estate in the world became cheap. Today, the Japanese economy continues to struggle.

China Isn’t Japan

China’s advantage is that it learned from Japan’s mistakes. That’s why the Chinese stubbornly refuse to revalue their currency — they don’t want to make it more expensive the way the Japanese did theirs.

Currently, the Chinese yuan is pegged at 7.6 yuan to one U.S. dollar. This makes the United States accuse China of being unfair; we’d like to see the yuan float the way the Japanese let the yen float. This would make it easier for us to reduce our balance of trade, as well as pay back our debt with cheaper dollars.

The problem is that the Chinese know from the Japanese experience that we can talk tough but not act tough — they simply hold too much of our debt for us to take measures. And if the Chinese started dumping U.S dollars and bonds on the world market, the world economy might well crumble, just as the Japanese economy crashed nearly 20 years ago.

Time for a New Standard

While it’s tough to predict the future, one thing is for certain: The U.S. dollar will continue to go down in value, and savers will be losers. With people all over the world piling debt upon debt and spending like fools, it might be best to follow the Chinese.

They’ve never trusted banks, but have always trusted gold. Maybe it’s time we started doing the same.

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