History
For those still skeptical about the future price of precious metals, let's take a look back at similarities between the once mighty empires of long ago and those of today. And more importantly, see what impact the actions of the most powerful nations ever known to man have had on not only their own currencies but that of "REAL MONEY" which we know to be GOLD and SILVER…
Story 1 "It's all Greek to me"
"It's all Greek to me" Did you know that with the advent of the first free market system and first working tax system, that the first democracy ever known to man was founded in ancient Greece?Greek Statue Image Did you know that the great public works and architecture of Athens was built and paid for by gold and silver coins (the first real money known to mankind) that began to be minted in equal weights in roughly 680 B.C.? And did you know that it was not war, disease, or hunger that brought down the first great nation in history but rather the simple economics of currency debasement and the catastrophic chain of events that were unleashed upon them (and every other great nation thereafter) when they tried to cheat the system? While it's true that greed and war was a root cause of the problem (sadly, no different than today) it was the inability finance of the two properly that ultimately became their demise. Greek Coin Image Knowing that there were only so many coins in circulation, and only so many ways to tax the citizens to pay for the public works at home and the war abroad the government figured out how to magically multiply the coins they possessed so they could march on. The ever genius tax men of Athens soon discovered that if you take in 5,000 gold and silver coins from the masses, melt them down and mix in 50 percent copper, you now have 10,000 new coins to spend! Now you can see where the old saying "the more things change the more they stay the same" comes from. And with that said, the advent of currency debasement and devaluation was born. Over the next few years the public took notice, and exception, to the rip-off and their now devalued currency became practically worthless. Only those who held on to the original pure gold and silver coins were left with any real purchasing power making them of course the richest of the land.
Story 2 "Rome is Burning
If someone would have told Julius Caesar that his mighty Roman Empire wouldn't have a seat at the table with future superpowers and you would have been beheaded on the spot. But look at what the laws of the economic universe reduced the mightiest nation of its time to. Once again as it was with the Greeks before them, the Roman Empire fell not by a sword but by their own mishandling of their currency.Rome Colliseum Picture Gold and Silver coins began to be minted smaller but with the same face value, edges of coins were clipped off when entering a government buildings (later to be melted along with tin to reproduce more coins), and our favorite! The Roman tax man outsmarted his Greek predecessor when he figured out that you can print the same coin as before but stamp and higher value on it and presto you've got thousands of more coins to spend! Yes another birth, this time called REVALUATION all of these dirty deeds were necessary for, of course, the funding of more wars and too many social services.Roman Coin Image By now the currency had become next to worthless and the economy had started to unwind. With a population of roughly 1 million people up in arms the Roman government was forced to hand out free wheat to over 200,000 of its citizens. And here we have another first which we now have come to know as WELFARE (these stories should really start to sound familiar by now).Of course what would any sane government do in times like these? Debase the currency at a record pace and spend more, in effect doubling the size of the government. And what was the result of such actions you ask? The first documented case of HYPERINFLATION ever recorded! Once again another once invincible empire fell by the wayside thanks to its own government's fiscal irresponsibility leading us to the old saying that "the pen is mightier than the sword".
Story 3 "Why Weimer"
Why in economic debates raging on right now about which fiscal policies our government should adopt does the story of the Weimar Republic and 1923 WWI Germany continue to be told? Because the suggestion that hundreds of billions (if not trillions) of dollars in currency be freshly printed and injected into the economy for stimulus is not a new one. And the story of how Germanys decision to do just that, not that long ago, resulted in one of the worst economic catastrophes of all time and needs to be told.German Woman burning marks In a 4 year period from 1919 to 1923 the Germans economy was bleak. They were coming off of a very costly war and owed huge sums of money to France as part of reparations negotiated at the end of Word War 1 all on top of the normal cost associated with social services. Not having the money on hand to pay for such things, the German Weimar government made the ill fated decision to simply create massive amounts of German marks out of thin air and put their printing presses into overdrive. At its peak, the government was churning out 500 quadrillion new German marks per day and in a four year period the amount of currency in circulation rose from roughly 29 billion marks to almost 500 quintillion marks. As always the premise of injecting more money into a system and giving people more money to spend sounds like a good idea, unfortunately there comes a heavy price tag for such policies as the Weimar Republic soon would find out. German mark It didn't take long for the public to lose complete confidence in their currency when the masses realized that the money that they had worked so hard to save had just lost 90% of its purchasing power once the newly printed money found its way into circulation. With hyperinflation firmly in place the price of common items soon became astronomical. A pair of shoes once costing 12 marks was now priced at 30 trillion marks; eggs once going for less than 1 mark were selling for billions of marks. And of course gold rose from 100 marks per ounce to 87 trillion marks per ounce. The incredible story of the rise and fall of the Weimar government will be told for centuries to come and used as a classical example of how financial ruin can come to any great government who dares defy certain economic principles. As always it is not wealth that is destroyed but it is simply redistributed to those that know how to read the signs and adapt to changes that not only survive but reap the rewards...
Story 4 "In Gold We Trust"
"In Gold we Trust" Ever wonder how we found ourselves in the mess we are in now? How did we go from a period where there was virtually no inflation and conversely no debt to speak of to 11 trillion dollars in debt compounding daily? Many experts point to the demise of the gold standard as the single biggest factor of all citing that from 1871 to 1914 when most of the world's currencies were pegged to gold there was a very narrow range between inflation, deflation, booms or busts.Silver Dollar Bill Picture The reason being is that as countries traded between each other the goods were either paid for in gold or with a certificate (that countries currency) that was backed up by real gold or silver held by the treasury. In doing so the ebb and flow of currencies and real money (gold and silver) meant that trade balances between countries were kept in check because a country could only import or buy what they could afford to spend. Thanks to WWI and WWII the United States accumulated the lion's share of gold in the world because the majority of the world was either paying for the goods we produced to fight the war or paying for our goods to rebuild after being torn apart from the war. Essentially our currency was now considered to be as good as gold. Gold Bill Picture In 1946 after World War II a system similar to the gold standard was established by the Bretton Woods agreement. Because the United States had amassed 2/3 of the worlds gold reserves it was decided by 44 countries that the world's currencies be pegged to the dollar and that the dollar be redeemable in gold. Unfortunately, all good things must come to an end. The French started unloading U.S. dollars for gold, the Vietnam War was raging, and Lyndon Johnson refused to raise taxes necessary not only to fund the war but pay for his "Great Society" programs which could only lead to only one thing…deficit spending With 50 percent of its gold gone from the vaults, the U.S. government could no longer be held to the fiscal restraints of the Bretton Woods agreement. Now President Richard Nixon was left with no other option but to put an end to the agreement and in August of 1971 for the first time in history no currency was left that could be converted to or redeemable in gold. Interestingly, not only was the dollar freed from gold but gold was now freed from the dollar and over the next few years gold rallied from the governments once fixed price of $35 per ounce to $900 per ounce and Silver followed with a move of $1 per ounce to $43 dollars per ounce!
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