A monetary horror story

Many people don’t realise that without money our current economic structure would quite literally crumble.  Money is the oil in the engine and if it disappeared the engine would seize and then implode.

Of all inventions, money is easily one of the most important.  It has probably unlocked more real value than anything else in history.  Our entire division of labour, our system of individual and corporate specialisation in production, has enabled the massive strides in productivity and prosperity we have seen over the centuries.  Without money we all have to grow our own food, build our own houses, and live lives of subsistence.  That is the reality we face again if our money dies.

Civilisations that adopted sound money rocketed ahead of those that didn’t, and countries that were lulled by the temptation to inflate their currency found their economy gradually grinding to a halt.  Indeed, in some cases such as Weimar Germany and Gono-Mugabe Zimbabwe, money was brutally murdered to the utter ruin of those economies.

Yes countries recover from monetary destruction, but not before real wealth is obliterated and all you’re left with are the people, stripped of their dignity and forced to start it all over again from the basics.  Germany back in the 1920’s was a skilled and industrious nation with a lot of generational wealth stored up in its people.  Call it good institutional memory.  It was also bordered by rich neighbours who could lend a helping hand and some capital.  Zimbabweans unfortunately lack too many of those same characteristics and the extent of the destruction has been so vast in the African state that the recovery will be long and difficult.

In Weimar Germany the monetary destruction led to desperation and this led to Hitler…and the rest is, well, history.

At least money is no longer dead in Zimbabwe.  The rand and the pula and the US dollar are the new monetary standards, and while all those are on the slow death train to Extinctville, they are by comparison veritable bastions of stability compared with the bad joke that became the Zimbabwe Dollar.  However, before better money replaced the corpse of the Zim dollar, the damage was done.

If people fully appreciated the importance of sound money they might wonder more about the credibility and stability of our current fiat paper money system and whether the custodians of our money, central banks, actually have a good track record or not in ensuring our money does not ‘die’.  The largest central bank in the world has destroyed 96% of the value of the US dollar in the past 97 years.  The South African central bank has achived a similar feat in a much shorter space of time.  The death may feel slow, but the money is dying nonetheless.

Perhaps never before has the world been so ignorant of the deficiencies of the monetary system, and yet at the same time perhaps we have never encountered such a large potential global threat as the death of the US dollar.  The actual risk and the perception of risk are diverging faster than ever.  The US dollar is officially the most far reaching reserve currency ever used apart from gold.  The difference? The dollar is a fraud and gold is real money.

The loss of confidence in the dollar that follows the ballooning deficits and rampant money printing is not just the loss of status of one paper currency, but would be a loss of confidence in all paper currencies.  After all, the dollar effectively backs most paper currency in the world.  The debts incurred by the United States in many instances underpin the integrity of the other paper currencies.  When people start to lose confidence in paper currency, it starts to die, and when money dies, the value structure we call our economy that has been allowed to build up on top of it also dies.

In this scenario, forget “recession” or “depression”, we’ll have to invent a word.

What’s my point?  The simple point of this post is that current inflationary policies around the world are effectively nothing more than governments and their central banks slowly destroying value in a manner in which “not one man in million can diagnose” (J.M. Keynes).  That means that the most fundamental basis for our economic prosperity – the division of labour and productive specialisation - is being undermined.  The state is quite literally fighting against real economic prosperity, often, sadly, without even knowing it, and all too often, knowing exactly what it’s doing.

And that folks is the monetary horror story we face in the years ahead.  The death of the dollar is not just the death of a few billion pieces of worthless paper, it is the biggest risk to the global economic order in history and it will impact real people in real and deeply damaging ways to their material and psychological state.  It threatens to halt production and logistics processes, it threatens to stall invention and investment, it threatens to stop basic trade, and it threatens to break out the legs of the very economic structure as we know it.

That is why the re-development and re-introduction of sound money is so important.  This is not just some fantasy pipe-dream that us gold bugs dream about after too many absinth shots.  This is going to be the single most important economic issue of the coming years.  Why settle for worthless depreciating sludge money when you can buy and own the real deal in the form of gold and silver, and prepare yourself to have the economic power that rests with those who have and control sound money?

Write your own destiny, don’t let Ben and Friends write it for you.