To understand money and credit you have to go back in history a bit. Traditionally money was always gold and silver, infact the silver content of British money was 92.5% silver until 1920 and the last silver content was taken out in 1947.
Why gold and silver? Well gold and silver has stood the test of time as a store of monetary value. Both are rare metals and very durable and the both cannot be increased in supply meaningfully. Gold and silver have been in use for money for thousands of years. Very early civilisations used grain and cattle, but would you want to store money as something that went moldy and died?
As civilisations became more advanced it became common practice to issue notes and coins that could be redeemed for gold or silver. In this way you could carry about a handful of easy to carry notes that had an equivilent value in gold. At any time you could go to the bank and redeem your money for gold or silver. Infact the Great British pound was valued a 3.5lbs of silver.
This system was called the Gold standard and as a result of it the monetary system was stable for many years.
Unfortunately due to man being a silly sod, goverments decided in 1931 to lose the gold standard. Why?
Well with the gold standard goverments could not mess about with money to their advantage. History had shown that governments can never be trusted with money. In Roman times for example the leaders would clip the edges of gold coins to create more money. This is the reason that coins traditionally now have bevilled edges.
So inorder to pay for marvelous things like wars and benefit programs, the US and the UK abandoned the gold standard in 1931. Then after the money became known as FIAT currency, which essentially means faith currency. Faith is pretty much all that is backing it!
Its not hard to predict the result of this move. The US and UK goverments were then free to print as much money as they saw fit, giving them what they call financial flexibility.
From 1931 to present the British Pound has lost 98% of its purchaseing power.
So when people talk about property going up in value, what they really mean is the loss in purchaseing power of the pound! Its an illusion caused by central bank manipulation of the money supply.
So what does this all mean to us the average citizen?
Well it means inflation and lots of it.
Ask the average man in the street what he thinks is the definition of inflation and he will probably say riseing prices. Infact he would be totaly wrong. The correct definition of inflation is "increases in the money supply above the corresponding rise in goods and services".
Riseing prices are infact the result or symptoms of inflation, not the cause of it. THE CAUSE OF INFLATION IS ALL DOWN TO CENTRAL BANKS INCREASING THE MONEY SUPPLY to their own advantage and our disadvantage.
If you have say 1000pounds in the building society or bank, then every year your money is being stolen from you, silently and secretly by inflation. The level of increase in money supply in the UK is measured by M3 a gov. statistic which is currently around 13%. So every year that goes by your 1000pounds is being stolen from you at a rate of around 13% a year.
This helps explain why most families have to have both husband and wife working when formally just one would be fine. Why pensioners can no longer afford to pay their rent or heating bills in winter and why the younger generation cannot afford a home. Also why we all seem to have to work harder and harder just to stand still.
Whats the lesson? The rich and powerful have always manipulated money to their own advantage and to the disadvantage of the working and middle classes. The only difference today is that they have to use more subtle tools.
If anyone is interested when I have some more time I can explain what this all means to us and how we can protect ourselves.