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In June I started a series of (TBR)tweets named #TheBigResetSynopsis

Today I will share the core of #TBRchapter1 – The History of

The previous tweets can be found here
There’s no limit to central bank expanding its balance sheet in
– Dennis Lockhart, Chairman of the board of the Federal
Reserve Bank of Atlanta (2012)
Inflation is a more fundamental danger than speculative investment. Some countries seem to be in the unusual situation where they are trying to create inflation. They will come to regret that.
– Paul Volcker (2013)
Since 700 B.C., the peoples of almost all cultures have considered gold and silver to be a valuable means of exchange. And because of their unique characteristics, scarcity and attraction, these precious metals have formed the basis of monetary systems
Precious metals also turn out to be perfect stores of value. Proof of the fact that gold has around the same value as 2,000 years ago can be found in the Museum of London. A Roman aureus coin (8gr gold) could buy some 400 liters of cheap wine. Today worth 400 EUR
Alexander the Great, Julius Caesar and Emperor Augustus all
built their empires around a monetary system based on gold.
Maintaining the value of one’s currency was key to keeping
power. Soldiers were kept happy by regular payments of wages in gold and silver coins.
Whenever the value of the currency was undermined, the empire came under pressure. There are strong indications that the Roman Empire fell because the Roman currency
was debased.
During the Middle Ages, the Byzantine gold solidus coin,
commonly known as the bezant, was used widely throughout
Europe and the Mediterranean. The bezant was possibly the most successful means of payment in world history. These gold coins existed from 491 to 1453
After the decline of the Byzantine Empire, and the spread of
the bubonic plague and a series of fijinancial crashes hammered Europe, the role of the bezant as money was replaced by silver coins in many European countries.
A silver standard was also adopted by the United States in 1785. In the period between 1750 and 1870, many wars were fought on the European continent. Because of this and also due to ongoing trade deficits with China, a significant amount of silver moved eastwards..
Having a gold standard brings with it many advantages. The
most important advantage is that it forces governments to be
disciplined in their fiscal policy because they cannot turn on
the printing press to finance budget deficits.
The stability of prices over a long period of time can be attributed to the disciplinary monetary effect of a gold/silver standard. England experienced almost no
inflation for almost two hundred years up until the dissolution
of the gold standard in 1914
Many European countries went off the gold standard in 1914 in order to be able to print more money to finance the First World War.. Accelerating the printing presses is an easier method –
and often the only way – to pay for a war
After the end of World War I, the excessive money creation
continued apace, leading to the creation of a massive credit
bubble in the 1920s. This led eventually to the market crash of
1929, after which the world economy collapsed and fell into a
deep economic crisis
In a financial system where money is not backed by something
substantial like gold or silver, banks can create virtually limitless amounts of money by creating new loans. All money is created in the form of credit. If all loans were to be paid off,
all money would disappear
We call money that is created during this process of unbacked money creation, fiat or fiduciary money. Its value rests on the confijidence that goods or services can be paid for. The term fiat refers to the first words that God spoke according to the story of Genesis in the Bible
‘Fiat lux’ in Latin, or ‘Let there be light’ in English
All known fiat money systems have failed in the past (see
Appendix I). Central bankers, however, continue to claim that
this time, all will be well. If turning on the printing presses would lead to prosperity, then Africa would not be a poor continent
In a fractional reserve banking system, the bank retains only a
portion of all outstanding liabilities as available reserves. In 1900 this was around 30%, and has now declined to just 3%.
Fractional banking started at the end of the Middle Ages
fiat money was first invented in China. Marco Polo, who travelled extensively throughout the Far East from 1275 to 1292, published a book describing Emperor Khan, had found a way of creating paper money that was just as valuable as gold and silver
Paper money in Asia disappeared from the 14th century onwards. A great thirst for silver followed. Almost 25% of the world population was living in China at that time. Paper money would not reappear until 1609, when the Wisselbank in Amsterdam started issuing ‘bills of exchange’.
Over 400 years later, in 1716, the Scottish economist John Law managed to convince the French King to conduct an unparalleled monetary experiment. Law was the son of a banker and travelled throughout Europe as a financial expert hoping to win rulers over to his economic ideas.
He understood that a country could stimulate the economy through means of fiat money. France was on the edge of an abyss due to the many wars of the Sun King, Louis XIV. The French regen allowed John Law to set up a bank with restricted powers to issue banknotes
Large volumes of money were pumped into the economy this
way, which did indeed stimulate the French economy. Law eventually got himself into trouble pursuing another business
opportunity. In 1717, he founded the Mississippi Company.
His company received monopoly rights on trade between France and the French colony Louisiana in the south of the US. Thanks to a promotional campaign about the unlimited possibilities of the new promised land, more and more French people bought shares in the new company.
But the speculation turned into a hype and got out of control. The boom turned into a bust and both experiments failed: the share price of his new company and the value of the fiat money plunged. Law’s life in France was no longer safe and so he fled to the Netherlands.
In 1726, with the permission of the Dutch government, he succeeded in setting up the first national lottery.
Hardly 100y later, it all went wrong again. After the French Revolution, the Assemblée Nationale issued national bonds, so-called ‘assignats’. The suggestion was planted that these bonds, which were also used later as money, were backed by the church’s possessions
.. that had been confijiscated during the Revolution in 1779. According to a government report from 1790, an attempt was made to stimulate the economy by turning on the printing press: We have to save the country and the even greater amounts of money shall help France to recover
We might well call this Quantitative Easing (QE) avant la lettre.
Because of all this newly printed money, people began to distrust paper money. The French government quickly implemented some strict new rules. Maximum prices were set to curb inflation ..
and it was forbidden on pain of death to ask to be paid in
gold instead of paper money when selling goods. In a last attempt to protect the paper money system, all trade in precious metals was forbidden as of 13 November 1793
These measures, however, only delayed the inevitable. As history has shown time and again, rulers have yet to succeed in printing extra money with lasting success. In 1796 the lack of public confidence in the French currency reached an apex, and hyperinflation ensued
Soon, paper money lost all value. The people’s anger was so intense that mobs gathered in the Place Vendôme to publicly burn paper money, printing plates and money presses.
Due to the subsequent hyperinflation, many years of chaos ensued. After this monetary disruption, Napoleon introduced a bimetallic monetary system which restored financial stability from 1803 onwards. Most of Europe joined this monetary system.
The new French franc remained in existence for almost two hundred years, until the introduction of the euro.
One of the worst things that can happen to an economy is hyperinflation. The definition of hyperinflation is a rise in prices
of over 50% within a year. Hyperinflation is so harmful because money loses its value and power. We could well call it the death of money.
Without money, the economic system disintegrates
and people revert almost immediately to bartering. A good example of the dangers of fiat money is the hyperinflation
that scourged Germany’s Weimar Republic in the beginning
of the 1920s.
Periods of hyperinflation ..
Central banks’ websites often mention that all is about ‘financial stability’ and that combating inflation is their main task. But they never tell you that they are the ones causing inflation by creating more and more money every year.
By printing more and more money, all currencies in a fiat money system are debased. According to former US Sen Ron Paul, the Fed’s claim that it is fighting inflation is as incredible as cigarette manufacturers’ statement that they want to help consumers stop smoking
Central banks now also act as the lender of last resort. As a
consequence, central banks such as the Fed and the ECB create over one trillion dollars (5tr now!?-wm) in new money every year in order to support their governments. And still, they claim they are fighting inflation.
End of Chapter 1. The full book (The Big Reset) can be downloaded here - for free:…
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