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In past Daily
Digs we have been observing the Life Cycle of Money, a cycle that has played
out time and time again throughout most of the history of man walking the
earth.
Stage 1) A Free
Market naturally develops as men and women apply their labour to the natural
resources around them.
Stage 2) Next,
money that represents fairly the stored value of man's past labour naturally
develops in the free market, what we like to call 'Free Market Money'.
Stage 3) Soon
governments and rulers emerge and eventually become deeply involved in the
free market, regulating trade and imposing taxes.
Stage 4) In our
last Daily Dig on this theme, we observed that the cycle moves quickly to the
next stage where government monopolizes money supply. In history, they
have achieved this by taking control of the sources of issuance, the mints
and private treasuries of the goldsmiths.
They begin to dictate what is now to be acceptable as money in the market
place, its weight and measures, and appearance and look (emperors and kings
have always enjoyed seeing their faces appear on the money of the realm). (1)
By the time this
society has reached the conclusion of Stage 4, it no-longer lives in a free
market as it once did. While its citizens may continue to apply their labour
to natural resources to create wealth as they once did, some fundamental and
significant changes are now in place. Once the free market dictated the
rules of trade instinctively through the natural laws such as supply and
demand, loss and profit, abundance and shortage, greed and fear, risk and
reward, and labour and wealth (2). Now the government controls and
regulates the market and its money. The Government now polices the market and
dictate the terms of trade; what can and can't be bought and sold, the
profitability of trade, levels of taxation and the money that should and
shouldn't be used. Admittedly, some rulers and regimes are better for the
markets than others, but regardless of how hard it labours, the quality of
its natural resources, or the
ingenuity of its people, the economic fate of this society now rests solely
in the hands of the government and their economic advisors and monetary
magicians.
But this is not
the end of it all. There are far greater dangers ahead for this economy
as further stages in the Life Cycle of Money are yet to be played out.
(1) http://www.anglofareast.com/images/LCM4.jpg
(2) These are just some of a long list of
natural laws of the free market.
In a true free market environment, these laws are all deeply interrelated and
work together to provide market balance, natural rule, efficiency and
functionality
Philip Judge
Anglo
Far-East Company
Also
by Philip Judge
Philip Judge is the 3rd generation of a family that has had
substantial involvement in the Precious Metals markets. He has researched,
written and spoken on the gold, silver and commodities markets for over a
decade. Philip works in the marketing and operations department of The
Anglo Far-East Bullion Company, an internationally based Bullion Banking,
Investment Management and Financial Services Company
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