It’s not the fall that kills you...
This is a story that's going to end very badly for a lot of people...

Most people just don't get what money really is... and what it isn't. They take it as a given, as part of the cosmic firmament. But it is not. A prime example of this is the mistaking of debt for money. This is why the entire world's monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There's no way around it. 

You can't use debt as money... Aristotle, in the fourth century BC, was the first person to define what money is. And what is it? It is a store of value and a medium of exchange. 

The paper we use today is a medium of exchange - it got that way because governments made it illegal not to accept it,  but it's not a store of value. And it's rapidly and radically becoming less of a viable medium of exchange. What we use as money today is actually not money; it's currency. Technically, that's simply a word that indicates a government substitute for money by decree. 

What is real money? Again, Aristotle gives us the answer... It's something that has five characteristics; it's durable and divisible, consistent and convenient, and has intrinsic value unto itself. And for these reasons, gold and silver are almost certainly the best things to use for money. Not because I say so, nor because Aristotle said so, but because, over the millennium, people have found it to be the most durable, divisible, consistent, convenient, and inherently valuable thing to use. Copper is the next traditional step down the ladder.

That, plus one reason that's pertinent today, but was not a problem in Aristotle's world... Gold can't just be printed up on the arbitrary whims of those in power.  Using precious metals as money takes the whole matter out of the hands of the government and its bureaucrats... Something the government and its bureaucrats don't like.

Think of our dollars this way... It's as though a bunch of friends without any real money started exchanging IOU’s for money, and then after a while forgot that the IOU’s were supposed to represent, and be redeemed in, real money. The problem with this is that, in the case of the IOU’s between friends, paper is based solely on hope and trust. One can move away, or die, or turn dishonest, or become insolvent. A guy stuck with a dead man's IOU has nothing. 

With government IOU’s, or fiat currencies, it's worse, because they can increase the number of IOU’s in circulation without telling anyone - that's what inflation is. Since the government creates the IOU’s, it gets the benefit of spending them before the inflation they create with them raises prices, which is basically stealing from the people. And, of course, sometimes governments do “die,” leaving the holders stuck with nothing, just as with the IOU’s between friends. In fact, it's arguably far more likely that such problems will arise from trusting a government to print IOU’s than from trusting a friend. Most people feel that they should do right by their friends... Government's don't have friends, and most see their citizens as being property, like cattle. Therefore, inflating the currency isn't a crime in their view, just a tool for controlling the dumb masses. But in reality, it’s taxation without representation. 

Since the institution of government is based on force and compulsion, they feel they have every right to do what they want. They sanitize all types of criminality by saying it's in “the national interest” or some such poppycock. 

You might ask, “Why one would think is it inevitable that government currencies will fail?” The answer in simple... because governments are not living persons who care and can be motivated to do the right thing. They are collections of individuals - politicians and bureaucrats, not exactly the most desirable, or trustworthy types, who pursue their own interests. Regardless of the rhetoric, their interests coincide with the public good only on occasion, and usually by accident, like a broken clock being right twice a day. Even in the most enlightened times... Even in the best of times... Governments have huge incentives to spend more than they collect.

Well, my friends, contrary to the insistence of the criminals in Washington, these are not the best of times. The population has been trained for generations to expect subsidies and freebies as their due, without regard as to who pays, or how they will pay. Every whim, every lustful wish, every unfulfilled desire has now become a “Right” that must be provided by the government and paid for with the theft of the taxpayers hard earned money.

I find it quite remarkable that someone who can seem perfectly sensible when he's discussing sports, or the weather, or the state of the roads, will likely become a moron when it comes to economics. And that when he becomes part of a crowd of like minded morons, it gets even worse... The entire gaggle of morons seem to magically transform into a drooling, screaming pack of imbeciles led by the lowest common denominator. And worse than that... they actually get to vote, which explains a lot.  But, I digress...

The dollar has remained in existence for many years, even though it's steadily degraded over time, first with the creation of the Federal Reserve in 1913, then with the unconstitutional repudiation of domestic gold redeemability in 1933, then with the unconstitutional repudiation of domestic silver redeemability in 1964, then with the repudiation of international redeemability in 1971. Even though the government has created trillions of new ones, the dollar is still thought of as some kind of a cosmic standard. In point of fact, it's no better than the Argentine peso, and will soon suffer the very same fate. 

The government itself has no idea how much of their toilet paper is in circulation. These FRN IOU’s have a quite ephemeral reality and are far too easy to create - there's literally no limit at this point (at least until we run out of paper and ink). We don't even have to actually print them anymore, they're created by computer strokes, so it's unrealistic to expect fiscal restraint on the part of any government. It's just too tempting to spend money you can create out of thin air. 

When was the last time you heard any average person worry about the national debt? Americans have become so used to carrying huge loads of debt around, right out of college with student loans, that it doesn't even occur to them that there could be any reason for concern over the national debt. It's an abstraction, like the number of light years to the Andromeda Galaxy. People used to at least pay attention, though most would say, “It's not a problem, we owe it to ourselves.” But that was always a delusion. Some people, organized in a “Good Old Boys” club called the government, borrowed it from some other people when it became more difficult to steal it from its own citizens. So, now the US government owes it mostly to foreigners... The Chinese, the Japanese, the Taiwanese, and most of the rest of the world. Americans, who at least theoretically have some interest in keeping the US government on the straight and narrow, are tapped out. So, we continue the begging and borrowing from those still foolish enough to trust us.

Even during Germany's infamous hyper-inflation of the 1920s, or Zimbabwe's more recent dance with the devil, in which they have so many zeros after the ones on their bills you can't even count them. Right now in Zimbabwe, backpacks full of notes must be carried to the local grocery for a loaf of bread, and an old U.S. silver dime will buy you a car.  At least in Germany, there were still ten and twenty mark gold coins available, if not exactly in circulation. 

People forget that the mark, the franc, the lire, and the dollar, all used to be names for a certain amount of gold or silver. Like the British pound, all were measures in weight of precious metals.

When World War I started, Germany went off the gold standard. The exchange rate was about five marks to a dollar. By 1923 the exchange rate was trillions to the dollar. Only the Germans who either kept those gold and silver coins under a mattress, or had foreign bank accounts, were still solvent by 1923. Everybody else was wiped out. So people didn't spend their gold and silver if they could avoid it. That's what “Gresham's Law” is all about. If there is a “legal tender” fiat currency floating around, you try to pay your obligations with it. You try to get rid of the over valued hot potato. But, you try to get paid in the good stuff (gold and silver) and hold on to it. The Weimar hyper-inflation of Germany was an utter disaster for that country which led to all kinds of nastiness... Not the least of which, was the rise of Adolph Hitler.

All the world's major currencies are issued by governments of countries that are now much more urbanized, with economies that are predominantly service oriented. In the US, the UK, the eurozone, and Japan, all of the currencies are in big trouble for a number of reasons, and there's relatively little production of what you could call the basics, on which true national wealth can be measured.

By all means, hope for the best, but the smart money is on planning for the worst... The demise of the dollar and other paper currencies is going to be much, much more serious than any of those numerous, and apparently unheeded episodes of the past, because when we go, the whole world is going with us. 

“Duck and cover” isn't going to save you this time around. I hope you're sleeping on a lumpy mattress...
 
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It’s not the fall that kills you...