The Value of an Honest Buck

Okay...now for a quick history lesson. I pose one question to my audience...What makes our money valuable? What backs our money for its value? Gold? Silver? If you don't know, then you are not worthy of it so send it all to me :-) However, to answer my own question, OUR FAITH in the dollar makes it valuable. If one day we all lost faith in our currency denomination it would be worthless. Am I a liar? Just look at how Russia and Germany needed literally a barrel of their currency in order to buy a loaf of bread during World War II. What had caused such a drastic measure? The value of their currency had decreased due to inflation and the careless over printing of money to fund the war. Could it happen to the United States of America? Let me explain further. Before 1934 our government was on the gold and silver standard. That means for any dollar value you could exchange its worth into its equal amount in gold or silver redeemable at any local bank. Why a standard? We had the gold standard to prevent government over-expenditures, to fight inflation, and not to mention to retain the value of the dollar. Remember Fort Knox? Fort Knox was where the government stored all of its Gold and Silver. Therefore, the government could only print as much money as it had in Gold or Silver. No more currency than the Gold's worth. Government could, however, get money from bonds and by other means from private citizens, but the government must pay interest just as any American would have if one took out a loan (not like today where they just take it from you in their behind-the-scene schemes). How could we have inflation if the government had such a standard and limitation to abide by? Inflation would be hard to come by on the Gold Standard. So how does the Federal Reserve come into play? Come back tomorrow to find out how the Federal Reserve came about in my last installment of this series.