Is The Battle Of Ages About To End?

By Mudasir Sheikh

The recorded monetary history has always witnessed a fierce battle for survival between money and currency but the currency has always failed and money has emerged as a winner. Money (Gold and Silver), unlike currency, is immune to inflation thereby preserving the wealth of its owners even under worst economic scenarios. This vicious cycle of the battle between money and currency has always followed a specific pattern and all this starts when rulers start to replace money(gold and silver) with currency (paper notes, debased coins, shells etc.) and through propaganda and sometimes by force general public starts to embrace it. The claim checks like paper currency are just certificates of deposits for real money stored in the vault. In the second stage of this battle government prints more claim checks than the actual metal into the vault for feeding deficit spending from wars, emergency situation, and developmental work. Now when the currency has started to lose value through inflation the general public tries to redeem their claim checks for real money, but the government quickly suspends the redemption rights as they don’t have enough gold and silver to cover all the claim checks. Thus at this stage money is completely converted into fiat currency. The people having only the pieces of paper lose almost everything to inflation and turn poorer and poorer and those with real money find themselves wealthier by hundreds of folds. This is not a conspiracy theory but a documented fact from Athens in 407 B.C. Romans in A.D. 301, Germany in 1923, the US in 1933 and Zimbabwe in 2008.

Athens was the world’s first democracy with a free market and a working tax system. So why such a great civilization has fallen apart, the reason is same which almost every civilization has repeated, that is too much greed leading too much war. With unmatched financial and military power of the time, Athens became involved in a war that turned out to be much longer and far more costly than they have anticipated. After 22 years of the war they have almost spent their entire money, but in order to sustain themselves in the battle, they started to debase their money. If they collect 1000 coins of gold as tax revenue, later they mix 50% copper with the gold in order to convert 1000 coins into 2000 coins. In modern financial terminology, it is referred to as deficit spending and our governments are doing it every second of every day. This is the first incident of the recorded history when an empire has moved from real money to worthless currency and resulted in its collapse. Through this practice of debasement Athens were able to feed their war monster for some time but as the free market started to balance the value of gold against currency through “Gresham’s law” their economic system collapsed and they lost the war and became a province of next great power, Rome. In this way, money registers its first victory against the currency.

During the 750 years of the Roman Empire, the rulers inflated the currency by debasing the coinage to pay for the war and thus it caused a staggering inflation. At first, the Romans started to mint smaller coins with the face value of existing larger coins. Secondly, the coins collected as tax revenue were clipped of on their edges and later the clipped metal was used to mint new coins. Finally, they indulged in the subtle art of revaluation as they started to mint the coins with much higher face value than the actual gold or silver in them. When Diocletian ascended the throne in A.D. 284 the Roman coins were nothing more than tin-plated copper or bronze and inflation was raging. Later in A.D. 301, Diocletian ceased the free market operations by artificially fixing the prices of goods and services and anyone found guilty of violation was sentenced to death. At the start of A.D. 301, a pound of gold was worth 50,000 Denari but touched 2.12 billion Denari by the mid of the century that is the price of gold rose by 42,400 times in fifty years or so. These events are documented in Diocletian Edict of prices (a very well preserved copy of which was unearthed in 1970). All this resulted in the currency-based trade of the civilization to come to stand still and their economic system reverted to the barter system. Romans perceived themselves as immune to the laws of economics but that was not the case as their transition from money to currency resulted in their collapse, but once again the money(gold and silver) emerged as a winner with 42,400 times increase in its value against the rival currency (debased coinage).

At the onset of World War 1 Germany went off from the gold standard and like all other wars, printing press was used to feed the war machine of World War 1. German Government started to infuse tons of newly issued currency into the economic system. As the government is printing more and more currency but the general public preferred saving over spending during the uncertain situation of the war. Thus during the middle of the war, the exchange rate of mark to gold was about 100 marks per ounce of gold and as the newly printed currency started to inflate the system, the exchange rate in 1920 reached about 2,000 marks per ounce of gold and the retail prices went up by 10 to 20 times. But a constant infusion of new currency into the system caused the prices to soar by another 700% during the summer of 1922.

On realizing the decreasing purchasing power of their savings, the German public started to lose their confidence in the economy and currency. According to a report of New York Times on February 9, 1923, there were thirty-three printing plants in Germany that were printing about 45 billion marks on a daily basis and by November 1923 it reached 500 quadrillion marks a day. But the confidence of the German public was falling much faster than their government is printing the new currency. By November 1923 a pair of shoes in Germany cost about 30 trillion marks whose earlier price was 12 marks and an egg went from 0.08 marks to 80 billion marks. Real money (gold and silver) has survived this hyperinflation by protecting the wealth of its holders. The price of gold went from 100 marks to 87 trillion marks per ounce, an 87 trillion percent increase in its price. But it is not the price but value that matters and thus purchasing power of gold and silver has witnessed an exponential increase. November 15, 1923, saw an end to this hyperinflation but the German currency had dropped by 97.7% against gold thereby registering another victory of money over currency into the history books of the world.

So talking about 21st century we have reached to the level of the inflated currency system. So in order to avoid the collapse of this debt based fiat currency system, the oligarchs have advocated for a carbon-based currency system. It is a monetary system where energy allocation is used to replace the price. It is not an ultra-modern concept but dates back to the 1930s when people started to embrace the technocracy irrespective of its dreaded consequence’s as beautifully described by George Orwell in “1984”,  Huxley’s “scientific dictatorship ” in Brave new world and H.G. Wells “the shape of things to come”. During the 1930s an obscure group of engineers and scientists proposed a solution to end the great depression through energy-based accounting system. Since then vast number of publications have advocated for carbon currency like in 1995, Judith Hanna wrote in New Scientist “Towards a single carbon currency” , in 2004 Harvard International Review  published “A New Currency”, in 2007 New York Times published “When Carbon Is Currency” and on November 9, 2009, the Telegraph presented an article “Everyone in Britain could be given a personal carbon allowance”.

But as we know currency is merely a means to an end and in the case of fiat currency, deficit spending has proved to be consequential in its collapse. Granting carbon credits to nations may be beneficial for the environment but how it will sustain the military industrial complex which has started endless wars all across the globe. The answer is simple whether it is paper or carbon currency both are created out of thin air and their supply will be boosted when the war machine is in need of it. Once again it will lead to inflation and finally its collapse. So in nutshell fiat currency in any form is not going to defeat the real money as we have experienced from the past.

(The writer is an independent researcher and can be reached at: [email protected])