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The Day The Flood Began

August 10, 2011 by  

The flood of “funny money” — that is, the Federal Reserve creating billions of dollars and then trillions of dollars in new currency, unbacked by even an ounce of silver or gold — can be traced back to Aug. 11, 1987. That is the day when Alan Greenspan replaced Paul Volcker as the head of the Federal Reserve.

In the prior five years, Volcker had slammed on the brakes at the Fed, easing the Discount Rate seven times in six months in 1982. The effect on interest rates was dramatic.

The stock market loved the idea of Alan Greenspan taking over. On Aug. 11, 1987 the Dow opened at 2635.84 and closed at 2691.96. That doesn’t sound like much now, but it is 248 percent above the bear market low in 1982, when it dropped to 772.13.

Of course, two months later, on Oct. 19, 1987 the Dow lost 508 points — 22.6 percent — which surpassed the crash of Oct. 29, 1929 that is now known as Black Tuesday.

Yes, times sure were different back then. Anyone want to go back?

–Chip Wood


Chip Wood

is the geopolitical editor of He is the founder of Soundview Publications, in Atlanta, where he was also the host of an award-winning radio talk show for many years. He was the publisher of several bestselling books, including Crisis Investing by Doug Casey, None Dare Call It Conspiracy by Gary Allen and Larry Abraham and The War on Gold by Anthony Sutton. Chip is well known on the investment conference circuit where he has served as Master of Ceremonies for FreedomFest, The New Orleans Investment Conference, Sovereign Society, and The Atlanta Investment Conference.

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  • dan

    I’d like to go back to when Nixon tried to save the dollar by debasing/taking it off the gold standard. The flood of foreign
    money being redeemed for our gold reserve need a good tariff of
    100% rather than compromising our Constitution.But , then , Wasn’t
    it LBJ,after his coup , in ’64 that took our silver away and started the Great Society/socialist welfare state. Ah,those were the days of unintended consequence…or were they?

    • EddieW

      LBJ didn’t do so terribly great after he had Kennedy killed! but he did really screw us in one way, he took Social Security monies, that the Senate was borrowing huindreds of Billions from, and put it in the General fund, so they could spend it faster!!! It had about 1 TRILLION dollars, if it’s in trouble now, just pay back the hundreds of billions they BORROWED!!! Problem solved!

    • Rick

      President Richard Nixon announced that the United States would no longer redeem currency for gold or any other precious metal, forming the final step in abandoning the gold and silver standards.

      so you can thank “Tricky Dick” for creation of FIAT currency

  • Terry

    Unlike many, I like history. But one needs to use lessons from it carefully, as conditions then may be much different than now. So, the same solution to the same problem may not work as well, if at all today. Example: I like what Pres. Reagan did when he lowered tax rates and enjoyed an expanding economy and a large federal revenue stream. Some say it will work again. Maybe. Are conditions the same now as they were then? No, they are not. We’ve been globalized since then. I would think that many have noticed this: What isn’t made in China these days? If our goal was to stimulate manufacturing in China as a result in increased consumer spending here, then fine. Go ahead and repeat the ‘Regan fix’ again. But if we want a return to a prosperous America, then we need to reestablish the same conditions under which the ‘Regan fix’ worked before. (If this escapes you, then pause to reflect on who benefited from the ‘Cash for Clunkers” program and further remind yourself of who paid for it: Got it?) So, what to do? Easy-reestablish the broad manufacturing base that our economy has enjoyed up till the late Reagan years. We have been spinning downhill since we embraced becoming a service economy. There is a very slim chance that the Government could engineer this transition. There is a very good chance that industry could do it. If industry can make more money making ‘it’ here than there, they will. The solution to our economic problems is primarily in the tax code and the trade agreements. First – The first fix is to abolish all income taxes-both corporate and individual. Replacement of income tax as a revenue for the Government is a Federal Sales tax. Reason: Smart minds and crooked souls have perverted our tax system beyond repair, so kill it. A simple surcharge at the register is very hard to beat. You want it, buy it and pay the tax right then and there. The IRS will become much smaller. Everyone will pay their share. Even the rich will pay their share, as they spend a lot more than the average worker.
    Second – The second fix is to abolish all free trade agreements and institute ‘fair trade’ agreements, where adjustable tariffs are levied when uneven conditions exist. Example: China pollutes, we don’t and it costs us extra, so the solution is an import tariff on Chinese goods, until they operate their EPA just like we do, then that portion of the tariff is removed. That’s ‘fair trade’. They know it and have been laughing at us for 30 years now, but that’s OK because we deserved it. Time to get a level playing field built.
    I believe that America is exceptional and it is therefore inapplicable for us to try to be like others. We are different and the world accepts that more than we do, which is really kind of weird. Once we decide to stand up and excel, we will again lead the world. I see the next step as acquiring devoted, patriotic leadership. Looks like we will have to wait for Nov. 2012 to get started.

    • Bob G

      Wow, Terry, you are brilliant! Absolutely brilliant!! The reason I think so is because that is exactly what I’ve been saying for years. But, who am I? No one. I think the only candidate out there this time around (ugh!) is Ron Paul. He, solely among them all, believes in a smaller government, he believes that the government needs to get out of peoples’ affairs and stay out, he believes that businesses should determine what happens in the marketplace, etc. And I think he’s brilliant, too, because I also agree with him.

      It just doesn’t get any better than that!

      Vote Ron Paul in ’12.

      And, everyone, find out what a Libertarian stands for. You’ll be surprised.

  • esbuck

    It is interesting how little sense of history politicians have. They get fixated on some ideological solution to a problem without looking at what worked or didn’t work in the past.

    Example 1: Hoover and Roosevelt failed to stop the Great Depression, yet politicians still copy their discredited methods. In contrast, when Harding was inaugurated in 1921, unemployment was at about 15% (statistics are suspect). Nine months later, unemployment was down to about 2.4%, a record Obama should note. How? Harding cut the size of government, cut taxes, and balanced the budget. Why do we do the opposite now?

    Example 2: Official policy is that “everyone knows” that burning fossil fuels causes global warming. Therefore, we must reduce fossil fuel usage to save the world. Fortunately, that experiment was performed, but the results do not support the theory. During the Great Depresssion, factories and steel mills closed, and fossil fuel use dropped by about 30%. Consequently, the 1930′s were a period of greatest warming on record! Why do the fools want to repeat the experiemtn? Insanity is doing the same thing and expecting a different result.

  • Isaac Davis

    The only jobs that this marxist regime wist to bestow upon America are gov’t job that are paid for by the taxpayer–but, the game is up on that scheme, because we know that the “benevolence” and theft that the gov’t purports is incapable of being paid for in the taxation levied upon our combined incomes. Talk about Identity Theft! The zerobamatuer continues to talk about gov’t creating an environment that would be fertile for businesses, but then the very policies and regulations that they support, and continue to fashion into “the color of law” do nothing except curtail further business investment whether in capital assets or in manpower. The sad and funny truth is that you can tell when the zerobama is lying because his lips will be moving. There is no incentive for investors to subject their money to further depreciation while it’s up in stocks, and there is no incentive for business to grown and reward the stockholders–it is all coming to a halt. QE3 will further degrade the buying power of dollars. And, this marxist regime will continue to mandate that it can spend it’s way out of debt–and this is not by a failure to understand the market, this is the intended consequence. The unintended consequences have yet to get upon their feet.

  • Albert Maslar

    8/10/2011 — Alan “Greenspam” lived up to his name with his handy dandy printing presses spewing out monopoly money because as fast as his FED printed money, the faster the Dollar declined in value. That is outright stealing and profits of the FED should be confiscated into the U.S. Treasury FED profits might very well equal the entire U.S. National Debt.

    And maybe some of FED offenses are criminal and someone should be indicted and prosecuted. How about it, Mr. Timothy Geithner, Secretary of the Treasury. As former head of the New York Federal Reserve, he should have first hand knowledge of FED internal operations, and he knowingly cheated on his own personal tax returns for YEARS, then had the gall to blame the RECURRING ERROR on TurboTax software…Nice try Timothy. But that’s why President Obama hired Geithner who was proficient at being devious, an important element of Obama’s political world..

    And I’d like to know how the Fed “makes” its money, and are they not a quasi government agency and therefore shouldn’t their profits flow through to the U.S. Treasury? The FED prints money and gets to keep an unaudited undetermined portion of it, so who do they answer to besides themselves and their banker cronies?

    It is possible that profits of the FED may very well equal the entire U.S. National Debt meaning that the U.S. could very well be debt free by merely confiscating criminal profits, which is basically the law of the land, settled law.

    Albert Maslar

    • Bob G

      Mr. Maslar,

      these are all excellent questions that should have been answered many years ago. Ron Paul has stated that if he becomes President he will audit and open up the Fed, with an eye toward abolishing it. The time has come.

      Thanks for your comments.

      • s c

        Bob G, think what you’re saying. If I went to an MD who had your perspective, it would be like having a death wish. It would be like wanting to live with a cancer instead of getting RID of the damned thing. THINK.
        Auditing the Fed (it’s a PRIVATE CORPORATION) is no more than playing with yourself mentally. It might feel good, but it changes NOTHING. Get RID of the Fed. Kill it. Abort it. Do to it what progressives want to do to us.
        Can I assume that you know that the head of the Fed tells a prez what he can and can’t do? That bearded little boob (Bernanke) supposedly knows more about the Depression than anyone else alive. BFD! It hasn’t helped him do anything for this country.
        Please, BobG, the only way to deal with a problem is to GET RID of it. To live with a probem is like going to bed with it so you can compromise or ‘understand’ or tolerate or be ‘sensitive’ to its needs. BARF! GET RID OF IT!


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