The History of Money October 2011. Why do we have money? Convenience It is often easier to use money than barter / trade Would you prefer to receive fish.

The History of Money

October 2011

Why do we have money?

Convenience It is often easier to use money

than barter / trade

Would you prefer to receive fish or eggs instead of cash for the services you provide to your employer ?

What is money?

Features of Money

A medium of exchange

A unit of account

A store of value

Medium of Exchange Liquidity

Easily tradable, with a low spread between the prices to buy and sell

TransportableHaving a high valueto weight ratio

A Unit of AccountDivisibleCan be divided into small units without destroying its value (which is why leather and live animals are not suitable)

FungibleOne unit or piece must be equivalent to another (which is why diamonds, works of art or real estate are not suitable)

Precisely MeasurableOf a specific weight, or measure, or size to be verifiably countable. You must be able to weigh, measure, and count your unit of account!

A Store of Value Durable

It should be long lasting and not perishable or subject to decay (which is why food items, expensive spices, or even fine silks or oriental rugs are not generally suitable as money)

Stable value

ScarceCan’t be easily manufactured

Difficult to counterfeitIt must be difficult to make fakes, and the real thing must be easily recognizable.

Features of Money

A medium of exchange

A unit of account

A store of value

Best Forms of Money

Historically, gold & silver coins and bars

Warning on Love of Money

The love of money is a root of all kinds of evil...

-1 Tim. 6:10 NIV

[Note: money is not evil, just the love of it.]

Currency Debasement

The practice of lowering the value of currency.

Results in financial gain for the sovereign at the expense of citizens

Lowers the value of the coinage, causing inflation

- Wikipedia

Currency Debasement in Rome The Roman Denarius

Currency Debasement in Rome Collapse of the

Roman Silver Monetary System, measured by silver content, 10 BC – 290 AD

Currency Debasement in China 11th Century China – Flying Money

Called it “flying money” because it could just fly from your hands

Banks had switched to the use of iron coinage due to copper shortage

These iron coins became over-issued and fell in value

A bank in the Szechuan province issued paper money in exchange for the iron coins

Currency Debasement in China Initially, the paper money was fine, because it

was exchangeable for gold, silver, or silk

Eventually, inflation began totake hold, as China was fundingan ongoing war with the Mongols,which it eventually lost.

In the end, the best families inthe empire were ruined, a new set of men came into the controlof public affairs, and the countrybecame the scene of horrific warfare and confusion.

Currency Debasement in France

John Law was the first man to introduce paper money to France in the early 18th Century

Louis XIV died and left 3 billionlivres of debt to his son, Louis XV

Louis XV required that all taxes be paid in paper money, which was initially backed by coinage

After high inflation, people demanded coinage, and the currency collapsed.

John Law became the most hated man in France and was forced to flee to Italy.

Currency Debasement in France

In the latter part of the 18th century, the French government tried paper money again.

By 1795, inflation of assignats was running at approximately 13,000%.

Then Napoleon returned the countryto gold coinage, a stable currency.

French gave it another go in the 1930s, this time with the paper franc. It took only 12 years for them to inflate their currency until it lost 99% of its value.

Currency Debasement in Weimar Germany

Post-World War I Weimar Germany was one of the greatest periods of hyperinflation that ever existed.

The only way the Germans could pay the war reparations required by the Treaty of Versailles was by running the printing press.

Thousands of people lost their life savings

Many starved to death

1 billion mark, 1923

Currency Debasement in Weimar Germany

Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces.

Currency Debasement in Weimar Germany

Brief 4-year timeline of the marks per one U.S. dollar exchange rate:

April 1919: 12 marks

November 1921: 263 marks

January 1923: 17,000 marks

August 1923: 4.621 million marks

October 1923: 25.26 billion marks

December 1923: 4.2 trillion marks

Modern Currency Debasement

Hungary – 10 million pengo, 1945

Modern Currency Debasement

Nicaragua – 10 million córdobas, 1990

Modern Currency Debasement

Yugoslavia – 10 billion dinar, 1993

Modern Currency Debasement

Bosnia – 100 million dinar, 1993

Modern Currency Debasement

Turkey – 5 million lira, 1997

Modern Currency Debasement

Zimbabwe – 100 trillion dollars, 2006

Modern Currency Debasement

Currency Debasement

Gold Certificate

Silver Certificate

Federal Reserve Note

Fiat Currency Currency that has value only because of

government regulation or law

Has no value other than what government declares

Not backed by gold or silver

The term derives from the Latin fiat, meaning "let it be done“

Originated in 11th century China, and its use became widespread during the Yuan and Ming dynasties.

Fiat Currency Spread to Europe gradually

Outlawed in the USA until 1933

The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold

Broken promise to pay

Since 1971, all reserve currencies have been fiat currencies

Competitive devaluation

Dishonest Measure of Value

The Lord hates dishonest scales (including fiat currency), but accurate weights (like gold and silver) are his delight.

– Proverbs 11:1 NIV

Evolution of Fiat Money

1. Goldsmiths store gold and become banks

2. Banks lend gold that’s theirs

3. Banks lend others’ gold

4. Banks lend with no gold backing (fractional reserve concept)

5. Money is debt; no gold backing

Gunpowder

Change in Warfare

Clever Bankers

“Permit me to issue and control the money of a nation, and I care not who

makes its laws.

- Mayer Amshel Rothchild, Banker, 1744-1812

Currency WarsGeithner Says U.S. Will Never Weaken Dollar to Gain an Advantage in Trade

- April 26, 2011, Bloomberg

Debt Slavery

The borrower is slave to the lender.

- Proverbs 22:7 NIV

USG Debt, 1940-2010

The wicked borrows and does

not repay.

- Psalm 37:21 NIV

Who Owns USG Debt

Stewardship of Money Today

Inflation is like a tax, but it’s worse than a tax, because it is on your hard earned savings, not just your income – UNLESS you hold your savings in appreciating assets like gold and silver.

Gold Up 17% Per Year on Average

Silver Up 18% Per Year on Average

Bibliography

Special thanks goes to the following: Jay O’Keefe of www.somehelpful.info/Money/

Jason Hommel of www.silverstockreport.com

Martin Armstrong, All Systems Collapse Overnight

Wikipedia

Fiat Currency: Using the Past to See into the Future

The Daily Reckoning Presents, Fiat Currency: Using the Past to See into the Future

US National Debt Clock, www.brilling.com

The Skeptical Optimist, www.optimist123.com

More information:

www.somehelpful.info

Thank you!