Minted coin can be traced back to Lydia around 680 BC. These were gold minted coins, and they eventually made it to Greece, the cradle of the free market system and European civilization. During the war with Sparta, Greece spent most of its minted coins on war (particularly salaries for soldiers) and public works. It quickly run out of reserves as the soldiers carried it to the battle fields, away from the Economy. The Government then decided to ‘debase’ the currency. They melted the Gold coins they had left and mixed them with copper to make more coins. They rapidly debased the currency to support the war. The population lost trust in the copper coins and held Gold instead, they spent the copper coins as soon as they got it, and this caused the first ever documented hyperinflation.
During the American civil war in the 1700s, the states began to print more money than the gold they reserved to support the war. Again this led to hyperinflation.
Prior to the First World War (Something we are all familiar with) in 1900s, Germany removed its paper money/receipts from the Gold standard. You could no longer take paper money to redeem Gold at the central bank. It did this to print currency beyond the gold reserves to finance the war. European countries turned all consumer manufacturing towards war machine manufacturing. Europe turned to USA for all consumer goods. USA started to accumulate gold in vast amounts. Gold/Silver were the main acceptable mediums of international exchange.
After the great depression, the U.S government made Gold partially redeemable by the USD, at around 40 percent of face value per ounce of Gold. World War 2, USA joined much later, so Europe would still rely on it for its consumer supplies. USA would also loan out dollars to Europe. After the Second World War, Europe was out of Gold to repay the loans. If Europe defaults on its debts, it would put the global financial system at risk. The superpowers met and made an agreement (Bretton Woods agreement). The USD would be the universal ‘money’ of the world. All other currencies would have a fixed exchange rate with the USD. The USD would then be anchored to the real asset, Gold. At this point, USA had 2/3 of all the gold reserves in the world.
This was a solid arrangement until the Vietnam war and Johnson’s great society expenditures. The U.S government began to print more money than the Gold reserves it owned to support the expensive war. The president of France in the late 1960s called out USA, and questioned why it had the ability to print money than gold that existed. It was fraud, it was a crime (more on this later). The European countries gradually started to redeem the USD for Gold. At this point, only central banks were allowed to exchange USD for Gold. By 1971, USA lost about 70 percent of its gold reserves. Then President Nixon announced that he would be taking the USD off the Gold standard. The problems the financial system is facing today originated from this crime.
Again, this was fraud. Day light robbery. More on this wealth transfer later. From 1971, the USD was no longer money, it became currency. It was no longer backed by an underlying asset. The other central banks of the world should have hanged the U.S gvt at this point, but they didn’t. They followed suit instead. A new Global monetary system was created. Fiat currency would dominate all central banks. Giving the power to the government to print and create as much money as it wants without an underlying asset.
So how does money work. Money starts off by being backed by an underlying asset. Then war, or strong appetite for public works, tempts government to print more currency than the underlying asset. In the modern era, the government just prints more money to satisfy public spending. Too much currency, chasing a few goods causes inflation. That’s the case of Malawi. In Europe, and America, the central banks are pumping billions of currency into the economic system to avoid deflation (more on that later).
The Global monetary system on average changes every 30 years. We are long overdue for one. Be on the right side of the wealth transfer.
Remember every time the government prints more currency, the middle class loses wealth (inflation). That is why they say, currency is destined to lose value. As you can see from above, history keeps repeating itself. For thousands of years, we keep making the same mistakes.
China, Russia are not falling for the USD manipulation. They’ve started accumulating gold. They are also staying away from holding USD cash reserves. The BRICS, agreed to trade using the Yuan and not USD. China no longer trades using USD in large quantities, it prefers just balancing current accounts instead. Large companies don’t keep cash reserves (with the exception of Apple). Robert Kiyosaki, Warren Buffet are staying away from keeping large Cash reserves. Rich people and institutions in Malawi have negative current account balances for a good reason. When this Global Financial System collapses, you have to be on the right side of the wealth transfer. Most of these views can be credited to Mike Maloney, the founder of GoldSilver.com
The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. ‘Abraham Lincoln’.