- A country starts with good money, either gold or silver, or backed by gold or silver.
- As it develops economically and socially it begins to take on more and more economic burden adding layer upon layer of public works.
- As its economic affluence, it increases expenditures to fund a massive military.
- Eventually, it puts its military to use and expenditure explore.
- To fund the war it steals the wealth of its people by debasing their coinage with base metals or by replacing their money with the currency that can be created in unlimited quantities.
- The population sensed the loss of purchasing power of the expanded currency supply and the financial marks triggered a loss of faith in the currency.
- A mass movement out of currency into precious metals and other tangible assets takes place. The currency collapse and gold and silver rise in price as they account for the huge quantity of currency that was created.
$100 Backed by $100 Gold (100% Reserved) till 1913 {WW1}
$100 Backed by $40 Gold (40% reserved) till 1945 {WW2} by the end of WW@ the US 2/3 of the world’s Gold
Bretton Woods Agreement and System from the mid-1940s to the early 1970s
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement.
In 1971 Dollar standard started with (0% Reserved)
Richerd Nixon shock 1971
history of money to a currency
- Sound Money
- Layers of public works
- Massive Military
- WAR
- Currency Debasement
- Loss of faith
- Currency Crisis
Gold Standard System Versus Fiat System
The Gold Standard: A History 5,000 Years
The Fall of the Gold Standard
Gold and silver have been the predominant currencies for about five thousand years but it wasn’t until somewhere between 680 BC and 630 BC that they became money when they were melted in the coin of equal weights somewhere in Lydia. Where each coin was the same size and have the same weight. This made them interchangeable. It’s called fungible. At that point, they became useful as a unit of account and a measurement. You could price a good or service in those gold or silver coins in a certain number of them. And it was always the same for anybody whenever they were buying that good or service but it wasn’t until they made their way to the world’s first free-market society. The prototype of democracy, the cradle of civilization: Athens, that they exploded in use. Suddenly money found its natural home: the free markets.
Athens was the first society to have a working tax system and free markets. This enabled them to rise to the pinnacle of civilization. Their prosperity allowed them to create great works of art and achieve a level of architecture and engineering that the world had not yet seen. Here we are 2,500 years later, and people are still in awe of their achievements. it was truly a fantastic period in human history and the Athens star shone brightly for many years.
What went wrong? How did such a great and powerful civilization fall?
The answer lies in the same pattern that we see throughout history: too much greed and too much war. It was when the Athenians got involved in the Peloponnesian wars but war with Sparta that their monetary problems began. First, they lost access to their gold and silver mines. They were also paying armies that were on foot and they were miles and miles away from Athens. So as they paid their armies to buy goods and services from the local populations, a deflation occurs in Athens because they were sending all of their coinage out of the city. Then they started debasing their coinage to pay for the war.
Deficit Spending
If you take in a thousand coins in taxes and then you melt those down those gold coins and you mix 50% copper into your gold now you can mint 2000 coins. so if you take in only a thousand coins but you spend two thousand coins, this is called Deficit Spending.
Athens began to do that during this war with Sparta. They also had these great public works which were very expensive. And they finished the temple of Athena Nike during the truce in the middle. There was a six-year truce in the middle of this 27-year war. So they didn’t stop their great public works and allow their market economy to heal from the expense of this war. As they debase their coinage, people would take the new debased coins at face value at first until there was a whole bunch of those and there’s something called Gresham’s law where people tend to save, to keep the rare thing and they spend the thing that’s common into circulation first. So all of the gold and silver coins started to disappear from circulation and become quite rare and it was just these copper coins. suddenly it took a whole bunch of copper coins to buy a gold or silver coin one of those old gold or silver coins. This is the first time that gold or silver ever had a price. Before that, everything was measured in a weight of gold and silver. So a large factor in Athens’s downfall was the expense of war, the expansion of the Empire, the debasement of their currency, the eventual inflation that was caused. You know, they minted these coins until they became nothing but flecks of copper. This was the world’s first hyperinflation and what it did was financially debilitate Athens to the point wherein 404 BC they surrendered to Sparta and eventually, they became nothing but a satellite of Rome.
The thing that amazes me is how history just keeps on repeating and repeating and repeating and we never learn from all of our stupid mistakes. We just repeat the same stupid mistakes over and over and over again. Today we are doing the same thing that the Athenians did that caused the loss of their great culture. We’re doing the same currency debasement, we’re doing the same deficit spending, and it’s for the same reasons: it’s for war and it’s for great public works.
The Seven Stages of Empire
It’s a long-term cycle that echoes throughout history right to this very day ****and is basically a societal pendulum that swings from quality money to quantity currency and back again to quality money. It always plays out in seven stages. It always ends with gold delivering a knockout blow to debased currencies and it goes like this…
history of money to a currency
- Sound Money
- Layers of public works
- Massive Military
- WAR:
- Currency Debasement
- Loss of faith
- Currency Crisis
Stage One A country starts with good money which is either gold or silver or it’s backed by gold or silver.
Stage Two As it develops economically and socially it begins to take on more and more economic burdens adding layer upon layer of public works.
Stage Three As its economic affluence grows so does its political influence and it increases expenditures to fund a massive military.
Stage Four Eventually it puts its military to use and expenditures explode.
Stage Five To fund the war it steals the wealth of its people by debasing their coinage with base metals or replacing their money with the currency that can be created in unlimited quantities.
Stage Six The loss in purchasing power of the expanded currency supply is sensed by the population in the financial markets triggering a loss of faith in the currency.
Stage Seven A mass movement out of currency into precious metals and other tangible assets takes place. The currency collapses and gold and silver rise in price as they account for the huge quantity of currency that was created.
world monetary systems
From 1873 when Germany went on the Classical Gold Standard where each unit of currency is backed up by an equivalent amount of gold in the Treasury in the United States. $20 bill – $20 gold piece in the vaults. Go into any bank, slap down your currency which was a receipt for money, a claim check on money ask for your money (gold and silver) and they would give it to you. So this shows this is currency, this is money. Otherwise, there was no reason for any government to store gold in their vaults and then print this currency that was backed by gold. This is what gives confidence in that. And it gives governments the ability to start this scam in the first place where they print these receipts for gold and then they can print more of them than gold that exists. And that happened when we got to World War I. And all the combatants stopped redemption rights? You could no longer go to the bank and trade your pounds, lira, marks, francs no longer redeemable in gold. And they lit up the printing presses and started printing like crazy. Then between the wars, they went on something called the Gold Exchange Standard.
Dollar Exchange Standard
where every currency on the planet except just a few, would be backed by the US dollar and the US dollar would then be backed by gold at $35 per ounce. This gave confidence to all currencies. so this gave the world stability and it pegged all the world’s currencies to each other through the dollar to gold. So there was no such thing as the forex. Currencies didn’t float, the exchange rates were fixed year after year. And this helped to make the world trade boom. Then the Dollar Standard starts because we kept on printing dollars. Under the Bretton Woods system, there was no reserve ratio established where the US had to have a certain amount of gold for how many dollars we created. So the US had done a bunch of deficit spending for Korea, for Vietnam, for Johnson’s Great Society, and expanded the currency supply, the number of paper dollars in circulation, and exported them all over the world. And then in the 1960s, Charles DeGaulle, President of France, realizes that we don’t have the gold to back up the dollars.
Nixon Shock
the US lost 50% of its gold from 1959 to 1971 but we still had in 1971 about 12 times more dollars than we had created than there was gold and this run on the bank. The US now is the bank. This is a giant worldwide bank run because the US for the second time had committed fraud and created more receipts for gold than there was gold. it’s that simple. On August 15th, 1971, all the world’s currencies became fiat currency we started this experiment where all the world’s currencies would be fiat currencies simultaneously in 1971.
History of world monetary system
International Monetary Systems
The era of bimetallism
Gold standard
Gold exchange standard
Dollar standard
Flexible exchange rate regime
30 to 40 years different monetary system,
30 years,
28 years,
39 years plus.
What’s next?
The world is going to have a new monetary system in this decade that we’re in. We’re going to experience this huge deflationary crash around the world. the world will probably end up on some sort of new monetary system after governments try and print their way to hyperinflations and cause hyperinflations of all the currencies. And people will just lose confidence in the currency. And what do they always go back to throughout history time after time for the last 5000 years? They always go back to gold and silver. In a world of floating currencies and that’s what all national currencies are today, they bob up and down relative to each other but they’re all syncing relative to gold, which includes the Dollar as well as the Euro and the British Pound and all the others. They’re going to continue to lose value, continue to lose answers.
