QUESTION:  Hi AE, et al. Your blogs not only inform, but are actually entertaining as they give most of us a point of view we’ve never before contemplated.
My question….you have stated numerous times that one of the reasons the Roman government survived for 100’s of years is because they simply created currency, as needed, instead of borrowing (gov’t bonds) as they do today. But their currency was mainly silver, which possessed at least some intrinsic value, as opposed to today’s digital, key-stroke variety.
The only public figure I can think of, with whom I would entrust such easy access, might be Thomas Jefferson. Human nature being what it is, corruption would be as inevitable as it is today.
To many of us, currency without some intrinsic value, just doesn’t make sense. Too much temptation. Would love to hear a more fulsome reply, with your thoughts on this subject. All of us here deeply respect what you are doing.

Thanks.
HS

ANSWER: All currencies today are still backed and are not intangible. Now, that statement may provoke thousands of emails. But the value of any currency has NEVER been its intrinsic value even throughout history. Proof of that statement is the fact that the surrounding economies to the Roman Empire imitated the gold and silver coinage of Rome for a single reason — the coins were accepted and regarded as more valuable than their intrinsic value simply in metal content.

Here is an imitation of a gold aureus of Rome struck in India. The weight of the gold was even greater than that minted in Rome. India routinely imitated Roman coinage from the reign of Tiberius (14-37 AD) to Gordian III (238-244 AD). Obviously, India had gold but the coinage of Rome carried a premium. There would have been no other reason to imitate Roman coinage if the monetary system was purely intrinsic.

So, why do I say that ALL currency is backed to this very day and it is not simply fiat with no intrinsic value? All currency is backed by the total productive capacity of its people. For further proof of that statement, just look at China, Japan, and Germany and you will see that each economy rose to the top 10 list in the world when they had NO gold reserves after World War II. It was the total capacity of its people that created the wealth of those nations.

Italy has more gold reserves than France. Yet, Italy is considered to be the third-largest economy in Europe behind France. Algeria has the largest gold reserves in Africa followed by South Africa. At the end of 2017, Algeria had a GDP of about US$170 billion. But South Africa’s GDP is about US$350 billion. The size of an economy does not correlate to its gold reserves.

A currency does not move into hyperinflation because it increases its money supply with no backing. It moves into hyperinflation BECAUSE of the collapse in the confidence of the government both domestically among its citizens and internationally.

With 300,878 million barrels of proven oil reserves, Venezuela has the largest amount of proven oil reserves in the world. The VEF/USD has collapsed to 0.09 from a high of 0.46 back in 2010. Despite having intrinsic assets, the collapse in the currency reflects the total collapse in the confidence of the government.

Therefore, step back a moment and abandon this old world mercantilist idea of what is behind the wealth of a nation, which was more Phyisocrat than Adam Smith. Your labor is not worthless. Each of us constitutes the wealth of a nation. America has the greatest economy, NOT because of gold, but because we have the biggest consumer market on the planet to which everyone tries to sell goods in order to take home money.

This idea that money MUST be tangible is not realistic. It is the product of people frustrated by the business cycle, no different than Karl Marx. Marx sought to confiscate all wealth to kill the business cycle and others keep preaching a gold standard to fix the currency to also defeat the business cycle. If money were truly fixed and could not rise or fall, that would mean your house could never rise or fall in value and you should not expect a raise at work.

Money is the perception of the wealth of a nation, which is its total productive capacity of its people, and not its gold reserves or tangible resources. Russia has tremendous natural resources, but its economy is dominated by oligarchs who have prevented Russia from expanding as China has shown the opposite. The fluctuations in currencies are how capital votes on the confidence of the political state behind each currency.

I have heard what I thought was every excuse for governments to raise taxes and seize money, but this is one I quite honestly thought was something too low for even the police. New South Wales police have come up with the most bizarre excuse to rob your money I have ever heard of. They now claim that driver safety is the main reason for this new initiative to confiscate whatever coins you have in your car. They have the audacity to claim that “Loose coins within cars are a safety hazard.” (see Double Bay Today)

They claim that a driver may perhaps bend down to pick up a coin and get into an accident. What’s next? They confiscate your phone and then sell it back to you after you are done the driving?

Australia has become perhaps the MOST aggressive country in Western Culture to hunt down its own citizens for money. They follow school children and then investigate how the parents are paying for the school. The Australian Tax Office (ATO) has applied for access to everything to hunt for money. They want access to phone calls, emails, posts, and SMS text messages.

Australians could face two-year jail sentences and fines of up to $25,200 under proposed laws that limit the use of cash to $10,000 — a move some groups argue would create an Orwellian state by giving authorities greater control over people’s finances. The government’s slogan – Cash is for Criminals. Thus was hidden in the 2018 Australian Government budget claiming it would save $5.3 billion by banning cash payments of $10,000 or more. Australian Treasurer Scott Morrison said it was a crackdown on the black economy.

Instead of reform, they are reforming ways to hunt their own citizens. Australia began as a penal colony. The king needed money so just about anything you did from stealing an apple to any minor issue landed you not in prison, but they would sell you to a plantation for 5 years and transport you to a foreign land and leave you there. If they could torture you and get you to confess to one of 240 felonies, they carried the death penalty where the king could confiscate all your assets and throw your family out on the street. Prisoners would die under torture to save their families.

The King is Dead – Long Live The Tax Extortioner

We actually owe the Fifth Amendment and the right to remain silent to John Lilburne (1614 – 1657). He defended himself vigorously in court, quoting from the works of the great jurist Sir Edward Coke (1552-1634) whose work the Institutes was the seminal statement of English law.

The Miranda decision by the Supreme Court quoted this right to remain silent enshrined in the Constitution of the United States known as the Fifth Amendment right against compelled Self-Incrimination. Lilburn proudly declared:

“Another fundamental right I then contended for, was, that no man’s conscience ought to be racked by oaths imposed, to answer to questions concerning himself in matters criminal or pretended to be so.”

Governments have made so many promises to win votes that they cannot keep. When in danger of being exposed, they turn on their own citizens and hunt them down for money. This is how Empires, Nations, and city-states collapse into dust.

The hunt for money is moving into high gear in Germany. Prior to 2017, it was possible to buy gold anonymously in quantities up to €15,000. In 2017, this limit was reduced to €10,000. Now, Merkel has drastically reduced this limit to just €2,000 beginning in 2020. Any transaction greater than that amount requires the buyer to prove their identity and give their data to the gold trader.

While Merkel has allowed the refugees to pour into Germany, denying there are terrorists hidden among them, she has justified this reduction in anonymous gold purchases by arguing against money laundering to stop terrorism. This means that terrorist would be buying gold inside Germany, which on the other hand she denies letting them in to start with.

Merkel is not satisfied with imposing just a price limitation. She also wants to introduce the 50-gram rule, which would apply regardless of price. For physical gold buyers, this means they will not be able to buy a 50-gram ingot (1.60754 troy ounces) without the gold trader taking personal data and saving it for five years. This certainly applies if you tried to buy just two one ounces coins.

Merkel has formally justified this change in the laws on gold as a step in the fight against money laundering and terrorist financing. The government studies show that out of 77,252 cases registered in 2018 that suspected terrorism financing, only 175 cases involved precious metals.

Terrorism has been a real windfall for governments since 9/11. They have increased their powers globally and probably send thank you cards to the terrorists for handing them the excuse to create total financial surveillance that they use in the hunt for taxes.

The Merkel government has been making a concerted effort to introduce a total surveillance state and track the finances of its citizens. There is chaos in Europe with negative and punitive interest rates, high bank charges, and a declining euro. All of this is mixed with a prolonged economic recession in Europe since 2007 as we approach a 13-year decline in 2020. More and more Europeans are looking for ways to safely and anonymously invest their savings, which have been under direct assault by the government. This has been leading to the hoarding of US dollars and now the change in legislation on gold is only going to increase the switch to dollars.