There is some evidence that the monetary confusions rampant amongst economists was not always so.
And God created the two precious metals, gold and silver, to serve as the measure of value of all commodities. They are also generally used by men as a store or treasure. For although other goods are sometimes stored it is only with the intention of acquiring gold or silver. For other goods are subject to the fluctuations of the market, from which they (gold and silver) are immune.
Ibn Khaldun, Al Muquaddimah (circa 1379)
Misunderstandings about money’s role as a store of stable value go back a long way. The Chinese governments were the first to print paper and try to use it as money. In 1024 A.D, the Sung Dynasty circulated the world’s very first paper money. It went to zero value in 1127 and the Sung Dynasty collapsed. The paper money had lasted 103 years.
In 1153, the new Chin government of the Tartars who had invaded the top part of China after the paper money collapse, went one step further. They not only handed out paper money, they made it illegal to refuse it. The paper money, rather whimsically, had pictures of real money on it. It went to zero value in 1233 and the Chin government collapsed. It had lasted 80 years.
Meanwhile the Chinese, who had retreated to southern China, reformed as the Southern Sung Dynasty. In 1160 they introduced another paper money. In 1275 it went to zero value and the Southern Sung Dynasty collapsed. The Mongols took over China. That paper money had lasted 115 years.
In 1260, the new Mongol government of the whole of China established the Yuan Dynasty and issued a new paper money. It collapsed to zero value in 1368 and the Yuan Dynasty fell. The paper money had lasted 108 years.
In 1375, the Ming Dynasty introduced a new paper money. It collapsed to zero value just before the end of the 15th century. The paper money had lasted just over 100 years.
A pattern is noticeable that is still being adhered to today. In 2024, it will be the one-thousandth anniversary of the Sung dynasty’s first paper money. 2014 was the one-hundredth anniversary of our latest paper money experiment. There were no celebrations. Paper money provides no safe haven, just a non-stop history of misery, hunger, wealth destruction and war.
In 1661, China’s experiments with paper money finally, mercifully, came to an end. The Manchu Dynasty banned it. The toll in terms of social destruction, and loss of human life and sovereignty, had become unbearable*.
* Sourced from ‘Fiat Paper Money: The History and Evolution of Our Currency’ – Ralph Foster
All paper monies since have had a reliable track record of always and everywhere failing. The macabre joke is that there are two different types of paper money: those that have failed, and those that are about to. Paper money is not a store of stable value and people eventually wake up to this, at which point they fail. Paper money is the real ‘fool’s gold’.
In one of those quirks of fate, in precisely the same year (1661) that the Manchu dynasty banned the use of paper money in China, the earliest printing of paper money outside China was commenced. It happened in the western world’s first central bank, the Swedish Riksbank. When this collapsed and impoverished the people, copper tokens were issued in lieu of the paper, which furthered the impoverishment.
On March 3rd 1719, Baron George Heinrich de Goertz, the Swedish central banker, was found guilty of the charge of “ruining public credit with imaginary money”**. It was a popular decision and Goertz was beheaded in front of a cheering crowd.
** ‘Why Sweden’s Central Banker Was Beheaded – 1719 A.D.’ by Paul Tustain
It is an extraordinary fact that neither these nor subsequent failures have given our politicians pause for thought in the 20th or 21st century. Twenty-one paper monies collapsed and disappeared in the 20th century. The remainder are likely to disappear in the first quarter of the 21st century.
Civilizations are durable. Despite the chaotic upheavals of the past one hundred years, the majority of people are still going about their normal lives. This eye-of-the-storm situation should not mislead. Durable they are, but there is only so much tolerance to anything. Freeze steel cold enough, then hit it with a hammer and it will shatter.
Our way of life seems indestructible. It is not. Shattering it does not involve a hammer; just withdrawing Gold from circulation and waiting. The waiting is almost over. Soon, everyone will know what money is and, as importantly, what money is not.