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The evolution of credit

March 19, 2022

The evolution of credit

After fifty-one years from the end of the Bretton Woods Agreement, the system of fiat currencies appears to be moving towards a crisis point for the US dollar as the international currency. The battle over global energy, commodity, and grain supplies is the continuation of an intensifying financial war between the dollar and the renminbi and rouble.

It is becoming clear that the scale of an emerging industrial revolution in Asia is in stark contrast with Western decline, a population ratio of 87 to 13. The dollar’s role as the sole reserve currency is not suited for this reality.

Commentators speculate that the current system’s failings require a global reset. They think in terms of it being organised by governments, when the governments’ global currency system is failing. Beholden to Keynesian macroeconomics, the common understanding of money and credit is lacking as well.

This article puts money, currency, and credit, and their relationships in context. It points out that the credit in an economy is far greater than officially recorded by money supply figures and it explains how relatively small amounts of gold coin can stabilise an entire credit system.

It is the only lasting solution to the growing fiat money crisis, and it is within the power of at least some central banks to implement gold coin standards by mobilising their reserves.
Evolution or revolution?

There are big changes afoot in the world’s financial and currency system. Fiat currencies have been completely detached from gold for fifty-one years from the ending of the Bretton Woods Agreement and since then they have been loosely tied to the King Rat of currencies, the dollar. Measured by money, which is and always has been only gold, King Rat has lost over 98% of its relative purchasing power in that time…

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Economic Collapse and Dollar Hegemony – How Did This Start?

January 26, 2018

Economic Collapse and Dollar Hegemony – How Did This Start?

Economic Collapse and Dollar Hegemony – How Did This Start?

In the previous article I explained why bitcoin should be considered a reaction to US dollar hegemony and how other nations and central banks are facing the crisis of the dollar brought on by de-dollarization. In this article I will go into how we came to this point and what mechanisms helped to bring about a debt-based society. In the third and last article we will examine the nature of the future geopolitical and geo-financial transition as well as the signals we need look out for in the immediate future.

From Gold to Paper

To understand what is happening today we must look back to simpler times, back when people bartered with each other. The utility and availability of commodities determined their value. Gold in particular represented a finite good that was difficult to find and was useful in various fields. For this reason gold has always been considered the highest example of a valuable good, together with diamonds, platinum, silver and other elements that are difficult to find but have a common or daily use. For example, the importance of utility transformed uranium, an otherwise worthless element, into a valuable commodity following the discovery of atomic energy. Returning to gold, one can understand how in the era of barter, gold was the reference element with which to price the value of everything. Little by little, gold was joined by silver and then bronze in simplifying the exchange of goods and increasing convenience of use.

Gold had its own intrinsic value and was valid in every empire around the world; the same with silver and bronze. Gold had become not only a means of exchange and a measure of value but also a reservoir of value to be bequeathed to heirs. Above all it was a means of payment.

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Can an Economy Advance Without Savings?

January 21, 2018

Can an Economy Advance Without Savings?

According to Frank Decker, Honorary Associate at the University of Sydney Law School, it certainly can. Not only that, but eschewing savings in favor of “monetisation of assets” will yield better results! I refer to his article in Economic Affairs–Volume 37, Number 3, October 2017–, a publication of the Institute of Economic Affairs, London.

Mr. Decker purports to answer the question “Central Bank or Monetary Authority? Three Views on Money and Monetary Reform.” The three views examined are commodity money, state money, and money as a derivative of property. All three views are explained very well, and a beginner to the study of the role of money will learn a lot in a short period of time.

Commodity money is the name Decker aptly gives to money backed by gold or some other widely accepted medium of indirect exchange. Commodity money’s proponents see two major advantages–that it ends inflation and the business cycle. He quotes Mises and Rothbard to good effect.

State money, or money as a state liability, is fiat money that all the world knows today. Its two most famous proponents are Keynes and Friedman. State money’s main advantages, as seen by Decker, are that the state can engage in countercyclical spending and the state can fund itself by printing all the money that it needs for current expenditures.

Decker’s third type of money–money as a derivative of property–sounds no different than fractional reserve banking, except that the fraction of reserves required to be held by the lending banks is so low that it is not a factor of lending restraint. Decker gives the example of a business that uses its assets as loan collateral. According to Decker, the money that the bank creates is NOT created out of thin air, because it is backed by private property; i.e., the loan collateral.

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Olduvai IV: Courage
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Olduvai II: Exodus
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