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Many are becoming increasingly alarmed by the way western governments are currently managing fiat currencies. A growing number of analysts and media pundits have
been highlighting the debasement
of currencies via quantitative easing
and other massive money creation
schemes worldwide. This Keynesianism on Steroids approach to global economic recovery is fast
tracking all nations to ever-increasing
rates of inflation. This said, monetary
debasement is not a new
or recent phenomenon; in fact it is
the natural life cycle of money.
There are seven stages in the life cycle of money that every dominant civilization has followed for
the past 5000 years of recorded history:
A
Free Market Emerges
Societies organize and begin to function with a basic barter system for trading goods. Incipient barter is a direct exchange of goods
for goods. Goods are defined as wealth, and wealth is produced
when humans apply labor to extract natural resources from the earth. As the civilization
progresses, services become valued
and are bartered. Other than hard assets, real estate, and sundries, many necessary items are highly perishable, so there is
limited savings and investment. In this case, the goods and services that a person barters and the perceived value of those particular entities in the community represents the
productive capacity of individuals,
groups, and family wealth.
Free
Market Money Emerges
After a barter / exchange
economy is well-established, a society progress
to the concept of free market money and a currency system emerges. Having a recognizable, reliable, and uniform unit of monetary exchange makes it simpler to conduct commerce, business, and trade
within and between communities and societies. Traditionally, these monetary systems have been based on hard assets that were highly
valuable, scarce, easily commoditized, durable,
and easily transportable. Because
of this, the primary currencies of choice, for the past 5000 have been gold and silver.
Many civilizations have selected precious metals as their natural monetary foundation based on common sense and reason, in many cases independently of each other. Aristotle laid out the following criteria for the perfect money nearly 2500 years ago: It must be durable, portable, divisible and consistent, and have intrinsic value. As such, gold
has been determined, over human
history to be the best
store of value because of its
relative scarcity; it can be minted
in uniform pieces; it is small
enough to transport great
distances; it does not tarnish or corrode; and it is easily stored.
Although not as immutable or scarce
as gold, silver often has
served as the primary
instrument of monetary trade
and exchange, often functioning
as the poor man’s gold. .
Government Emerges and
Regulates the Free Market
Communal order is needed in a functional society
and therefore, some type
of government is formed. As societies become increasingly complex, industrial and populous, the government naturally seeks to expand their influence and control
over business, commerce, and the market. Laws, rules, and regulations are instituted to regulate and control trade through tariffs, taxes, quotas,
and penalties. Taxes are imposed to support the government agenda and as a means
to control of wealth. Society is
moved away from a free market
and operates in a growing
regime of regulation of
the marketplace and money supply.
Government Monopolizes Money Supply
The government takes
control of the money supply and sets up a currency system by issuing official
coinage from a central mint. It controls the size,
design, weight, and purity
of the coinage. The government
may issue paper promissory notes redeemable in coinage and decrees these notes are exchangeable
for goods or services. This money is called a "fiat" currency, meaning "by decree". Backed by law, the government owns the money and allows its citizens to use it as a medium of exchange. Citizens
and banks are forbidden
to compete with the government by creating or issuing private money..
Government Debases the Money
Government must increase
taxes to support its continuing
growth and the citizens object to increased taxation
and seizure of their wealth. In order to fund itself and to soften dissent from higher taxes, the government finds itself in a position that in order to maintain social spending, it begins to debase the value of money. Historically
governments have shaven
off pieces of coins, issued
smaller coins, or made coins with
less gold and silver
content. Eventually it removes all precious metals from the coinage. Ultimately it declares that
its promissory notes are
no longer redeemable in precious
metals. At this point, there is no hard asset backing or basis to the monetary
system.
Issuing more money with
no precious metals backing allows the government to create money at will for its
own purposes. No longer
able to support runaway spending,
the military / industrial
complex, and welfare
state entitlements, through
taxes, governments print
more money into existence and continue to spend. When the money in
circulation increases but the availability
of goods and services remain
the same, the prices for
the goods and services increase.
The increased money supply
results in dilution of the purchasing
power of the currency, which
is the true nature of
inflation, robbing citizens
of wealth and savings through decrease in purchasing power. The hidden
secret of inflation is that
it is really
just another tax. If the government can’t raise taxes due to popular resistance, it simply prints
money, and passes along the cost
of running the state and all its sucklings to the people through
inflation.
Non-Confidence
and Collapse of Money
Inflation, debt, and deficit
increase and citizens realize that the fiat money representing their labor, savings and wealth is rapidly
losing its value and purchasing power. By-products
of poor money management such
as food inflation and shortages,
personal debt, and civil
and political unrest begin to accelerate. This leads
to a confidence crisis and currency
collapse.
The
Re-Emergence of Gold and Silver
as Money
Citizens desire to return
to a monetary system more secure
and less inflationary. They realize that gold and silver offer safe haven
for preservation of value and wealth
and an insurance policy against current and future currency debasement. People demand more gold and silver and
accumulate the metals as a key component of their overall wealth within the society.
By observing the history
of past states and accurately
recognizing our current position within the
cycle of money, we can make informed decisions and position ourselves
to mitigate the risk and maximize the opportunities that come with currency collapse.
Throughout history, even though it
is through government intervention and mismanagement
of the monetary system that
causes the money to enter a cycle that leads to its ruin, the burden of dealing with the negative outcome always rests on the shoulders of the
people.
Western governments have debased
money without gold and silver
backing for the past forty years. Banks are failing or are being bailed out by governments issuing more money. Repeated currency crises, food
inflation, rioting, and the overthrow
of oppressive governments are on-going. Clearly we have entered Stage 6 of the
Life Cycle of Money: Non-Confidence and Collapse.
We now have an opportunity to acquire physical gold and silver at relatively low prices. Gold and silver supplies are limited. As
more and more citizens flock
to gold and silver to protect
their wealth, prices will soar.
For that reason, I urge you to consider making physical gold and silver an integral part of your net asset portfolio sooner rather than later.
Kirsty Hogg
Gold Wars
“Explore the Worlds” Premium Range Gold and Silver. Buy 9999 Fine Privately Minted
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