Power and Money

I want to share some passages from Macalester College professor Jack Weatherford’s excellent book The History of Money, which I highly recommend for your post-Christmas shopping season. It is a masterful and enjoyable outline of…well, the history of money…and one that manages to reveal the essential aspects of the subject while transcending the navel-gazing that goes along with books which deal more specifically with economics and financial markets and such. That's because it is first and foremost a history...an instructive tale told by following the thread of the most unusual resource the human race has ever known. And it is also a damning argument against our belief that money is equivalent to wealth.

Weatherford reveals that money is actually a relatively modern invention…and one whose primary characteristic seems to be its transience. In its most popular early aspect, precious metal coinage, it represented little more than an efficient proxy-material for what were still essentially barter economies. However, the economic efficiency it provided meant it would gradually assume a central importance in fueling the growth of human enterprise—as well as a resulting desire among the ruling classes to manipulate it to their own purposes, typically by diluting the money supply (i.e. "cutting" precious metal coins with baser metals). More recently, with civilization’s eventual degeneration toward a fiat paper currency, the story of money during the past couple centuries could be said to be an unbroken series of inflationary collapses.

The History of Money is a very accessible book, and makes for invaluable reading during our current period in world history, a period characterized by inordinate worldwide confidence in a single paper currency, the U.S. Dollar. And one which is quickly approaching the precipitous moment of its collapse.

While The History of Money is rich with enlightening passages, the following sections from Chapter 13 struck me as particularly thought-provoking [emphasis in specific lines is mine]:

“Although inflation existed in the past, particularly in the century following the introduction of the gold and silver taken from the Americas by the conquistadores, the twentieth century has proved to be its heyday, and hyperinflation seems to be unique to modern times. As long as currency retained some metallic base such as gold, silver, or even copper, hyperinflation could not occur….With the arrival of the paper money era, governments found themselves in a whole new economic world. So long as they had access to paper, ink, and printing machines, they could print as much money as they liked. And so they did.

Governments have three primary ways of financing their expenditures: taxing, borrowing, and printing more money. If the government lacks credit and anything worth taxing, the seductive alternative is to forgo taxes and debt by unilaterally printing more money. The increase in the money supply drives down the value of the money in circulation; and the drop in value forces the government to print even more money to meet its expenses. In exceptional circumstances such as wartime or some special strain on the economy…this minor excess by the government grows into an uncontrollable flood and the country is trapped in a rapidly whirling spiral of dizzying inflation.

The first of the twentieth-century countries to see its currency collapse was Russia soon after the revolution that brought the Communists to power. The Communists deliberately sabotaged their own currency by printing as much money as everyone wanted. This meant that 10,000 new rubles had the purchasing power of one Tsarist ruble. Some of the newly powerful Communists felt that by allowing rampant inflation, they would destroy the currency and therefore be able to build a society without money.”

“At the end of the war [World War I – Ed.], the victorious governments of France and Britain pressed hard to extract as much money as possible in the form of reparations from Germany, which had to accept full blame for causing the war….Despite American objections, the Allies presented Germany with a bill for 132 billion gold marks, twice the national income of Germany and equal to $33 billion….Within three months of receiving the full bill, prices in Germany began to rise, and by the end of the year they were thirty-five times the prewar level. By the end of 1922, prices stood at 1,475 times the prewar level, and they soon surpassed one trillion times their earlier levels. In less than two years, the cost of a German postage stamp increased from 20 pfennigs to 500 billion marks. Lenders charged interest rates of 35 percent a day. At the end of the war it had cost roughly 4 marks to buy a U.S. dollar; by July 1922 the cost had risen to 493 marks. By New Year’s Day 1923 the mark had dropped to 17,792 to a dollar. By November 15, 1923, at the height of the inflation, it required 4.2 trillion (4,200,000,000,000) marks to buy one dollar.”

“…Because the mark fell so low in this period relative to other world currencies, Germany became a bargain basement for anyone with dollars, pounds, or other hard currencies. The German government had to pass a law prohibiting foreigners from buying and exporting its national art treasures.”

“The inflation took a horrendous toll. The birth rate fell while the death rate rose, particularly the infant mortality rate, which climbed by 21 percent, and the adult suicide rate. H. G. Wells called the German inflation an “economic massacre,” particularly for the middle class, professionals, and anyone living on a fixed income. Some of the most cynical observers of the time claimed that German officials had engineered the inflation as a way to arouse public sympathy and to force a decrease in the reparations forced upon their country.”

“…Inflation attacked all of the defeated powers as the currencies of Austria, Hungary, Czechoslovakia, Poland, Bulgaria, and Greece collapsed one after the other. This collapse, followed by the world-wide depression of the 1930’s, also fostered extremist political movements on both the Left and the Right, resulting in the rise of dictators in each country.”

“In the presence of regional economic problems and situations, hyperinflation seems to erupt like a plague that ravages one country and then races on to another. France, Belgium, Italy, and Spain saw the value of their money drop to around one-fifth of its prewar purchasing power. The pressure on the British pound caused a threefold rise in prices that Britain curbed only by returning briefly to the gold standard in 1924-1925. The resulting depression forced Britain to leave the gold standard once again, and it has never returned.”

So Weatherford paints a very interesting picture. We have this recurring—seemingly inevitable—problem of runaway inflation in unbacked paper currencies. And despite the unquestioned modern reliance on "managed" economies, we continue to see the collapse of fiat currency bubbles worldwide...indeed, they appear to occur with greater and greater frequency the more "managed" they become. So against this backdrop, we might highlight the following points:

--there is an unsettling precedent in Western history for intentional inflation, in other words inflation created (or encouraged) for the purposes of forcing economic distress upon the citizens and/or for avoiding the repayment of substantial government debt obligations. This fact should give us pause for reflection on our own situation here in America....

--we can recognize that inflation is epidemic, invariably spreading to closely related countries and currencies.

--And lastly, that a typical and recurring response to inflationary crisis is the imposition of a restrictive central authority or dictatorship, generally accepted by the population to 'control the unrest'.

It should be understood that rampant inflation in a country's currency is in some ways analogous to a "crash" in the "stock" of that country—the result, while a crisis for many, may conversely be an opportunity for others, who are either more prepared or more fortunate in avoiding the misfortune. In this respect, ownership of the newly depreciated assets can be assumed by such individuals at a tiny fraction of their previous cost. Thus land, real estate, businesses, resources and other assets of a country which has suffered hyperinflation are invariably gobbled up to whatever degree the authorities either cannot enforce it or even actively allow it (this was called "carpetbagging" when it occured in the bankrupt American South after the Civil War, but now frequently goes under the term "reconstruction"...).

The recognition of this can help us to clarify that in our modern era we should be careful not to confuse 'wealth' as simply being equivalent with 'money'; money, or more precisely currency, is really only a tool or a resource for human enterprise. More correctly, material 'wealth' is today exactly what it was before the invention of money, and what it has always been: the ownership or control of tangible assets of recognized importance. The value of such assets will be independent of any particular currency's value (although obviously reciprocal influences stemming from a change in currency value may sometimes apply). And even 'wealth' is really only a means and support for the ultimate acquisition in the material realm: power, or the ability to exercise one's personal will or influence over the events and actions of people and the world. So, for instance, the recognition of such distinctions will help us understand that people like Bill Gates and Warren Buffet will probably never stand on equal footing with what I call the "Patrician class" (the 'old money' families in the world, like the Rockefellers), because while they very likely possess more money or even wealth, they don't truly command the same degree of power. The individuals who have achieved the upper eschelons of power have generally done so over a long period of time and through a dedicated effort toward establishing the proper relationships—and most importantly, they have sought this power because they possess certain peculiar aspects of personal character.*

So all in all, the Patrician class—who are bred and versed in the modern history of money, and who already control incredible resources in many of the wealthiest nations of the world—must undeniably be cognizant that there is incredible opportunity available after an inflationary economic collapse. Power, Ownership, and Fortune can be had quickly, easily and cheaply for those who are prepared for its occurance. And realizing that the collapse of paper currencies is continual and inevitable, wouldn’t it be prudent, even advisable, to prepare for the collapse of the one paper currency which underlies and influences every economy on the globe? The secret is to have some portion of your wealth in the one asset which would actually benefit from this collapse: precious metals, especially gold.

Now the vast majority of the world’s precious metals supplies are held by the Central Banks in Europe and America. Yet its been deduced that these banks have been net sellers of their precious metals reserves for roughly the last decade. In fact, there is abundant evidence that they may not "own" substantially any of the gold supplies that they nevertheless continue to hold and protect. It makes one wonder who've been—or controls the entities that have been—the buyers of these reserves…? Answering such a question is beyond the capabilities of the author, but this concern and many others pertaining to the "gold cartel" are amply addressed at Le Metropole Cafe (a subscription site, but which offers a free trial membership), or by visiting its sister site for the Gold Anti-Trust Action committee.

Now we must recognize that the current U.S. administration has pursued a monetary policy that is considered by more optimistic sages as “fiscally irresponsible”, and by the more cynical ones as a seemingly intentional desire to bankrupt the U.S. Dollar (George Bernard Shaw wrote “The power of accurate observation is frequently called cynicism by those who don’t have it”). Since there can be no rational doubt that the controlling interests behind the modern American government are also the Board Members for very large, multi-national corporation, and since many of these Board Members could be considered to be members of the Patrician class that I spoke of, we can only logically assume that these people are implicitly supportive of this current economic policy. Thus they become apparently complicit in directing the world toward what even the most level-headed and long-standing economists and financial gurus have begun to admit is now an unavoidable “dollar crash”. (Not to mention the residual destructive shocks that will result in the secondary financial markets like stocks and mortgages, and most frighteningly, the multi-trillion dollar highly-leveraged derivatives market).

And finally, when we take into account that most of the controlling members of the current U.S. administration are founding framers for the Project for a New American Empire, which is an ideological think-tank devoted to the realization of a one-world government under the authority of Western interests, we begin to string together a rather sinister line of speculation. There appears to be a rational chain of arguments leading to the belief that certain very powerful individuals might be covertly pursuing this goal through the manipulation of U.S. monetary policy: namely, intentionally attempting to instrument the destruction of the American economy—and thereby most other world economies—through devaluating the Dollar, with the ultimate strategy being to bring about their dream of usurping global authority for themselves. In fact, I doubt that there is any other realistic way toward accomplishing such a scheme, either by militarily or diplomatic means. The whole Project for a New American Empire could likely only be predicated on first creating a global series of societal crises which would then soften the world's resistance to encroachment by the U.S. military forces.

And since this is indeed what appears to be happening anyway, regardless of whether the outcome will ultimately be successful or not, I think it is safe to assume that the theory is correct.
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* We might even take this line of study a step further. We should recognize that it is our striving to control the world that serves as a principle impulse or temptation turning us away from our possibility for the development of a proper and ascendant Being. One of the paths that the “Seeker for Truth” must navigate is to acquire discernment between “acting with humility and in harmony” vs. “attempting to impose our Self-ish desires” on “the Creation”. This lesson accounts for the admonition against attempting to “cast God in our own image.” Seen in this respect, the striving for power, even when exercised in a more or less unintentional or instinctive manner, exerts a markedly degenerative influence on our Being. However, when the will to control is exercised more consciously or intentionally, it effects a perversion of the Being, and the individual’s development will manifest a distinctly descending or nefarious 'direction' or aspect of growth. Indeed, the earnest pursuit of wealth and power serves only to destroy one's possibilities for establishing a connection with the finer Wisdom of the world. Thus it is easier "for a camel to pass through the eye of a needle, than for a rich man to enter the Kingdom of Heaven".

Additionally, ancient cultures which were still aligned with Traditional thought, held that leadership and power should come to one only via the attainment of true 'regality'—as the result of recognized personal attainments—and never as a consequence of the individual’s desire or design. Such a ‘profane’ ruler could only bring misfortune upon the society and the people....