Is This the End of Paper Money, Part 2

We are in uncharted waters when it comes to the unfolding world-wide monetary collapse. Yes, we have historical examples of individual countries that have resorted to fiat paper money, but never before has every country in the world simultaneously tied its currency to paper.

On several occasions I have written about the two paper money schemes adopted in France. There was John Law’s monetary debacle that ended in economic and financial chaos after 1720. This was followed by revolutionary France’s adoption of paper Assignats some 70 years later. That monetary experiment also ended in economic disaster and was instrumental in bringing Napoleon Bonaparte to power in France. You can read about these two paper monetary fiascos in the following two books:

  • John Law-Millionaire. The philanderer, gambler, and duelist who invented modern France by Janet Gleeson.
  • Revolutionary France – Fiat Money inflation in France by Andrew Dickson White.

The issuance of paper money has always failed and, in nearly all cases, resulted in huge economic and financial dislocation. Besides the two examples cited above there are several other examples of paper money failures. The US continentals of the 1770s (Not worth a Continental!) and the Confederate currency, which failed after the US civil war are two US examples.

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Author’s collection.

The German Reichsbank issuance of paper marks following the 1st World War resulted in hyperinflation. The history of this paper money collapse is well documented in Adam Ferguson’s book-When Money Dies, the nightmare of the Weimer collapse. There are pictures of families using the banknotes for fuel, because that was cheaper than buying logs or of children using bundles of paper marks as building blocks. The outcome of this paper money failure was that Germany was essentially governed by a military dictatorship, which eventually led to the rise of Adolph Hitler.

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Reichsbank 100 hundred million mark note, August 1923. Author’s collection.

On the following link, I counted 150 different paper money failures occurring after 1945:

There were so many failures during this period because countries simply abandoned one failed paper currency with the introduction of another fiat currency. Thus many of these currency failures were multiple failures spread over the years. The point is, as Voltaire quipped many centuries ago, after living through John Law’s paper money failure, “Paper money eventually returns to its intrinsic value-Zero.”

The John Law and Assignat French paper money experiments were contrived when the French currency was gold and silver. John Law convinced the French Dauphin that paper money would be the means of paying down the massive debts that the country had amassed since the days of Louis X1V. Similarly, the French Revolutionaries believed that paper Assignats were the answer to their monetary problems. On both accounts they were sadly disillusioned. The solution to the ensuing chaos that these paper money fiascos wrought on the country was to re-introduce gold and silver as money. This decision almost immediately brought order out of chaos.

At the onset of the Napoleonic Wars in 1797, Great Britain abandoned convertibility to specie. In 1810, Parliament formed the Bullion Committee to examine why the price of gold had risen over that period. Between 1810 and 1811, David Ricardo published an essay on The High Price of Bullion.  In his view, the high price of gold was solely the consequence of an over-issue of Bank of England paper money, which the suspension of convertibility had made possible. Following the Bullion Committee’s recommendations, a Commission was formed by Parliament. The Commission recommended a return to gold payments. As a result the gold standard was restored on May 1, 1921, and the sovereign replaced the guinea as the standard British gold coin.

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George 111 Sovereign, 1820, shown approximately 6 times actual size.

“All the perplexities, confusion and distress in America arise not from the defects in their constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation.” John Adams, 2nd President of the United States.

“Natural law governs every aspect of this universe. This includes money and monetary practices. Every time Man ignores or tries to change Natural law, Natural Law eventually re-asserts itself. This is what Rudyard Kipling’s poem, ‘Gods of the Copybook Heading’ [see copy of poem at the end of this post] is all about. If you have never read it, I urge you to do so. Then consider that the principles that govern money and monetary policy are part of Natural Law. Therefore, it only stands to reason that if we ignore these principles, Natural Law will –eventually – reassert itself. History is clear on this, and if we look with wisdom and understanding, we will realize that that is what recessions and depressions and hyper-inflation are: evidence of Natural Law reasserting itself. Well, we are about to experience a serious reality check. We have been ignoring the laws governing money for far too long and on far too broad a scale. This time, when Natural Law reasserts itself, it will likely be on a global scale.” Joe Bakanovic, Principles of Natural Law: The Foundations of Money.

Fiat paper money is not money according to natural law. It is a money that has been imposed on us by government decree. It has no value, except that which the government says it has – paper, in some cases coloured differently and with pretty pictures, but with different values stamped on it.

Paper money, as I have discussed, is debt money and that clearly violates natural law, because it is destroying the very essence of money; that is, it is a store of value.

Paper money is theft by government decree. Since the inception of the Federal Reserve in December 1913 the value of the US dollar has been debased by 95%. Surely you will concede that this is a desecration of the natural law of money.

Paper money has existed essentially since 1931-1933 and arguably since the outbreak of the 1st World War in 1914. It is true that following Bretton Woods in 1944, the US dollar was convertible into gold at $35.00 an ounce. But that prerogative was only available to countries. Indeed US citizens were banned from owning gold until 1973 or two years after President Nixon cut off the dollar’s tenuous ties to gold. And he did that because the US had resorted to the printing presses for at least ten years prior.

So whatever date you wish to pick, and I tend to choose 1914, since that was the end of the classical gold standard, the world has been awash in paper money. Since 2007, Central Bankers, in particular the Federal Reserve, have resorted to frenetic monetary printing in a brazen attempt to perpetuate their evil paper currencies. Their hubris knows no bounds as they believe that they are able to thwart the laws of nature. They are soon to be sadly disillusioned and we are all going to pay for their insufferable actions.

The Gods of the Copybook Headingsby Rudyard Kipling
AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: “Stick to the Devil you know.”On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

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