History

 

"The Past is Prologue..." a wise man wrote. 

 

What is about to happen to the savers and acceptors of United States Dollars has happened dozens of times in the recent past, to other citizens, of other nation states.  Even peoples whom thought they were invincible.

 

Let's look back...

 

 

a) Germany

 

 

Exhibit A: (right) - Why would a woman stuff stacks of money into her stove?  Because it was 1923 and hyperinflation fell on Reichland.  This pile of paper must have been better fuel than the amount of wood it could be traded for.

 

Exhibit B: (below) - A 200 Billion Deutsche Mark Bill printed in 1923.  Seems the 1000 DM bill, the 100,000 DM bill, and even the 100 Million DM bills were not enough to buy a loaf of dark rye.  So the failing State attempted the 200 Billion Deutsche Mark Bill.  It didn't buy bread either...

 

But Hitler took control of the breadless, (and temporarily mindless) and encouraged them to pull on fancy boots and march to far off places and essentially steal other people's bread.  That was called World War Two...

 

 

 

 

 

b) Argentina
 

Argentina is a more recent example of financial collapse caused by government intervention in private economic transactions, and especially of government control over money.

 

Imagine you're an Argentinean living in beautiful Buenos Aries for the last 25 years, attempting to get ahead financially.  Lets say its 1983 and you have managed to save 1,000,000 Pesos!  Good job!  Unfortunately for you however, the Argentine State was broke and the printing presses were in full swing.  In 1983 was the year of the first currency reform, where the government created a new fiat currency called the Peso Argentino to replace those worthless Pesos, which the day before they insisted had value.  Your Rulers allowed you to exchange your 1 million Pesos on a 10,000 to 1 basis.  Not so good.  Now you have 100 Pesos Argentino, which if you combine with one lone US denominated dime will buy you a cup of coffee.  Strangely, the government edict did not give value to those newly minted Pesos Argentino.  The hyperinflation, which never really stopped, killed the new currency too, and in 1985 the State recalled all that paper and launched their third attempt at printing Dead Thugs on paper and calling it money, in hopes the people would be foolish enough to pretend it had value.  The living thugs call the new fiat the Austal.  Those worthless Pesos Argentino could be exchanged for the 'Austal' at a ratio of 1000 to 1.  Those original million Pesos you saved, if you're keeping track, are now worth 1/10 of an Austral.  The Austral lasted for seven years.  In 1992 it was replaced by the New Peso, at an exchange rate of 1 New Peso for 10,000 Australes.  I had to take out a calculator to figure out how many New Pesos you could buy with your original 1 million 1983 Pesos...  0.00001 is the answer.  The New Peso was pegged to the USD at a 1:1 ratio, and lasted for 10 years, until the financial crisis of 1999 - 2002 which you may remember on the news.

During a recession both Argentineans and foreign investors understandably expected another bout of hyperinflation.  Capital was withdrawn.  Citizens attempted to withdraw their cash from banks and convert it into the (by comparison only) 'stable' US Dollar.

 

But in a maneuver known as the 'Corralito', the State froze all bank accounts for one year, allowing citizens to withdraw only a paltry 250 Pesos per week.  USD holders were not allowed to withdraw any money unless they first converted it back to Pesos and let the government have their dollars.  

 

The middleclass began to protest, walking through the streets banging on pots.  Soon these protests turned violent.  Many protesters were killed in clashes with the police.

 

Exhibit C: (left) - Three Argentines lay still after a riot in 2001. 

 

 

The (new) Peso now floats freely at a rate of about 1 USD to 3 Pesos.

 

Now why did all of this happen?  Because when a population grants a government control over the money they use, the government will always (I challenge any reader to give me an example where it does not.) - always manipulate the money to its advantage.  This means when it is short of money, the government simply creates more out of thin air, thus devaluing existing savings, or to be more precise, stealing from current holders of the fiat currency.

 

Back to the future, and we're here again in 2007.  The United States of America has been off the gold standard for 37 years.  In those 37 years, if you can trust government statistics (and you can't) the US Dollar has lost 95% of its purchasing power.  This is known as inflation. 

 

If your Dad left a 10 dollar bill in his sport jacket in 1970, and you borrowed that jacket for some sort of a disco theme party, that ten bucks would have lost ___% of its value.  It would be worth only 1.23 in today's money.  That's not really fair is it?!  But that's inflation, the systematic destruction of a people's money by the state.  Presidents, Kings, and Emperors, have been running this scam since the days of Rome, and Rome fell too!

 

The Roman Empire

 

From Peterson’s Law of Inflation:

 

"At any rate, according to a reference work we found in the museum, the denarius issued by Augustus was, save for a bit of hardening alloy, pure silver – i.e., its silver content was practically 100 per cent. Yet by Nero, in 54 A.D., the silver content of the denarius had slipped to 94 per cent; by Vitellius, in 68 A.D., to 81 per cent. By Domitian, in 81 A.D., it had climbed to 92 per cent; by Trajan, 98 A.D., up another notch to 93 per cent; but by Hadrian, 117 AD., it had again wended its way down, to 87 per cent; by Antoninus Pius, 138 A.D., to 75 per cent; by Marcus Aurelius, 161 A.D., to 68 per cent; by Septimius Severus, 193 A.D., to 50 per cent; by Elagabalus, 218 A.D., to 43 per cent; by Alexander Severus, 222 A.D., to 35 per cent; by Gordian, 238 A.D., to 28 per cent; by Philip, 244 A.D., to 0.5 per cent; and by Claudius Victorinus, 268 A.D., to 0.02 per cent. Then came Diocletian’s famous answer to inflation, his price-fixing edict of 301 A.D., replete with very sharp teeth for price-breakers. It didn’t work; Inflation persisted. And anyway Rome was out of business before long.

 

Wikipedia has a compelling list of nations which have proven indisputably that the Welfare-Warfare State hasn't a clue how to manage economies, set interest and exchange rates, or supply money.  All (ALL) government control of the money supply ends in debasement of the people's money, and thus the people's poverty.  I really don't know how else I can put it.

 

The United States

 

The Government of the United States and the people who follow it will fair no better.  The believers in the US Dollar are about to be trampled by that 'electronic stampede', foreign exchange traders who will indubitably, on D2Z day, race to unload those trillions of dollars they hold.

 

 

Read On!