When confidence dies, the empire falls. This is just as true about the American Imperium, as with all the other kingdoms and empires of human history. And, one of the first things to fall when confidence fails, is money. And, the question in all of our minds is…
How much longer will Americans and Europeans be confident in their governments, their banks and their money?
Unfortunately, the answer is ‘not much longer’, and that spells doom for our current way of life. So, let’s look at how we’ve defined money over the years and see where our confidence is going.
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Where We Go From Here, Part 1: The Crisis of Financial Confidence
YouTube shortlink: https://youtu.be/XuVZqq0xnKM
Without a financial system or economy, you cannot have civilization. And, without civilization, your life will be solitary, poor, nasty, brutish and short.
The Basis of Civilization
You might recognize the phrase ‘nasty, brutish and short’, but you might not remember where it comes from. The man who coined that phrase was Thomas Hobbes in his book, Leviathan, in 1651. And, his quote about the lack of social order is here:
“…In such condition, there is no place for Industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea; no commodious Building; no Instruments of moving, and removing such things as require much force; no Knowledge of the face of the Earth; no account of Time; no Arts; no Letters; no Society; and which is worst of all, continuall feare, and danger of violent death; And the life of man, solitary, poore, nasty, brutish, and short.”
For all of his faults – and they are many – Hobbes understood one thing:
Without civilization, life is awful.
The only question is how much civilization you need. And no, don’t listen to Hobbes on this. His ideas are a foundation for the Antichrist – a topic for another time.
Again, how much civilization do you need?
Unfortunately, the answer for most peoples and nations is… more. No society ever says ‘this much civilization, and not an inch more’. Everyone, everywhere always wants more. And, it’s directly connected to the economy and financial confidence.
Do you want to make sure that your neighbor doesn’t kill you and steal your stuff?
Your town or village needs to be prosperous enough to have a police force and a set of laws that forbid your neighbor from killing you and stealing your stuff. And that takes money. Yes, you could probably pay a judge and police force with sheep and chickens. But, a barter economy never really goes very far.
Do you remember the guy who disobeyed God when Jericho was destroyed?
That’s in the Book of Joshua chapter seven. He saw some gold, some silver and some really cool clothes from Babylon. And that tells us that Babylon was known for making great clothes. The problem is that you have to give something to the Babylonians – something that they want – to get that awesome outfit.
What did the Babylonians want?
Well, they needed good material to make those great clothes. They needed tools. They needed colorful dye. They needed food. And, if they didn’t have it available locally, they had to trade for it.
But wait, trade means transporting something from point A to point B and passing through an area full of people that might want to kill you and take your stuff. Bandits. They do that. And, Islam got its big start by raiding caravans.
Can you have a civilization if people are waiting for you to walk by, so that they can kill you and take your stuff?
Not really – which is why civilization is all about protecting people from bandits. The more that you can protect your people from being killed and having their stuff stolen, the bigger and better your civilization will be.
Does anyone remember how the US Navy and the US Marines got their start?
Well, you might find your first clue in the first stanza of the Marines’ Hymn:
From the Halls of Montezuma
To the shores of Tripoli;
We fight our country’s battles
In the air, on land, and sea;
First to fight for right and freedom
And to keep our honor clean;
We are proud to claim the title
Of United States Marine.
The official birthday of the United States Marine Corps is the 10th of November, 1775. However, the USMC was disbanded after the American Revolution. And, it was only brought back 1798, because the French were attacking American freighters.
That’s right. The USMC was brought back because American trade was being threatened by the French.
The original job of the United States Navy and Marine Corps is to protect commerce. And, that’s where that reference to the ‘shores of Tripoli’ come in. Muslim pirates in North Africa were raiding American ships, so the US Navy and the Marines went in and taught the Muslims not to do that. The other nations of the world bribed the Muslim pirates to leave their ships alone, but the Americans didn’t want to play that game.
From its very beginning, the number one goal of the US Navy and Marines was to protect American businessmen as they traded with Europe, the Middle East and the Far East. And, every civilization of any note had some kind of military whose purpose was to do just that.
Why did the Assyrians and Babylonians conquer Israel?
Because of the trade route between the northern Middle East and Africa. The Israelis were taxing the caravans going through Israel, and the Israelis got greedy. So, Assyria and then Babylon took ’em out.
Trade (aka, commerce) is the health of a civilization. Without it, civilization dies.
So, here are the requirements – so far- for you to have a life that is not solitary, poor, nasty, brutish and short:
A police force, laws, government, commerce and a military to protect it all.
The Rise Of Money
But wait… there’s more:
How do you pay for all that?
Well, taxes. Everybody knows that you need taxes to pay for all that. You’re not stupid, right?
But… um …what do you pay your taxes with?
Well, you remember Achan, the guy who disobeyed God at the fall of Jericho. He got some cool clothes from Babylon and silver and gold. And, for a long time, silver and gold was money.
But, does silver and gold NEED to be money?
For the vast majority of history, it has been the best money. There isn’t that much of it. It doesn’t rust or degrade – except under certain specific circumstances. It’s shiny, and we all like ‘shiny’. It’s easy to form into coins. And, you can put your picture on it and force people to pay their taxes with it.
Ya’ gotta love them Romans.
Now, what is the idea that ties all those ‘reasons’ together?
When you go to a clothes shop in ancient Babylon and give the owner a gold coin, they’ll give you some cool Babylonian clothes in exchange – because they are confident that your gold coin can be used to buy dye, fabric, new tools and put food on the table. Oh, and they’ll be able to pay their taxes to the local warlord. And, it is THAT confidence that is the key point about money.
Without confidence, you can’t have money, and gold inspires confidence.
The same goes for civilization. Without confidence in the laws, the police, the government, and each other, you can’t have a civilization.
Would you buy food from a grocery store, if you weren’t confident that it was safe to eat?
Would you eat at a restaurant that poisons one out of ten people?
Would you drive a car that had a 10% chance of exploding and killing you every time you drove it?
If there was a one percent chance that someone would jump out of the romance section and stab you every time that you went to the book store, would you ever buy a book?
(Seriously, Romance novels. Just don’t.)
Right. Without confidence, society and civilization don’t work. But, we’ll deal with all of that later. Let’s stick with money.
People treated gold and silver as money, because they were confident that they could use it to buy what they needed and pay their taxes. But, we don’t use gold and silver anymore.
What do we use instead?
If you say ‘pieces of paper’ or ‘digits on a computer screen’, you are only partly right. We actually use oil, but that’s a complex subject that requires a different article, all by itself. So, let’s stick with ‘pieces of paper’ and ‘digits on a computer screen’. It’s only half-right, but good enough for now.
How did we get from gold, to pieces of paper?
The Rise Of Banking
Well, it took a long time, but civilization got too complex to lug around pieces of heavy metal. So, people started storing it in vaults, in exchange for a promise by the vault owner that they would keep it safe. The vault owner would issue a receipt that would state how much gold you had in the vault. Eventually, as ‘vault owners’ gained the confidence of the public, those receipts became worth… well …money.
As long as you could take the receipt that someone gave you to the vault and get the amount of gold stated on the receipt… you would trust the receipt as if it were money. And, the process worked for a while, until a vault-owner got greedy and printed too many receipts. When that was discovered, confidence in those ‘receipts’ took a big hit. Of course, back then, a ‘vault-owner’ would quickly lose his head for doing that.
(Remember this, when we get to Richard Nixon and 1971.)
Then, along the way, the Protestant Reformation happened.
Up to that point in time, the Catholic Church didn’t allow ‘vault-owners’ to charge interest on loans. And that made it really hard for ‘vault owners’ – also known as bankers – to make money. If the king wanted to borrow a bunch of money to pay for some special event – like a war – he either needed to start charging higher taxes, shoot a few rich people or borrow from the Jews. Shooting rich people and charging higher taxes was unpopular, but you could always borrow from the Jews.
The Jews were a great source for a big loan – because you could always throw them all out, if your debts got too big. (And yes, the British did that.) But, that was before the Protestant Reformation.
Why the Protestant Reformation?
Because Protestants were okay with charging interest on loans. All that a banker would have to do is switch over to whichever protestant entity was the ‘flavor of the day’, and you could start charging interest on your loans. Suddenly, Lutheran, Calvinist, Presbyterian and Anglican bankers were everywhere.
Bankers Always Take Over
But, there’s a problem with ‘charging interest’ that no one talks about:
You eventually run out of gold and silver.
Okay, let’s say that I loan Bill a hundred gold coins at ten percent interest. When Bill pays me back…
…where do the extra ten gold coins come from?
Well, Bill’s business venture worked out really well. His Babylonian clothing was a big hit, so people gave him a lot of gold. And, that means that I can loan out even more gold to people like Bill. And, when they pay me back, I can loan out even MORE.
So, when you charge interest, you eventually wind up with all the gold. The Bankers get rich and everyone else gets poor.
That’s a gross oversimplification, but the point remains. Charging interest tends to concentrate money into the hands of those who charge interest.
Do you remember what God said about this?
Don’t charge interest.
Of course, God was specifically protecting the poor, but I believe that there was another reason. Bankers tend to accumulate all the gold, and that’s not good for society – especially since bankers tend to use all that gold for things that are REALLY bad for society.
Also, bankers had a problem. If you accumulate all the gold, people will come and take it from you.
But, what if you offer to loan out RECEIPTS that are ‘just as good’ as gold?
The First Big Emergency
Americans called those receipts ‘banknotes’, and they were issued by banks and printed only on one side. Then the US Civil War happened, and the government ran into a problem:
They needed to pay for the war.
Up to this point, the government minted coins, and minting coins wasn’t going to give them enough money to defeat those rascally southern rebels. This meant printing paper money. Lots of it.
This also meant the need to create a US Department of Treasury and something called the ‘United States Note‘. They were printed from 1863 until 1971 – the same year that Nixon took the US off of the Gold Standard.
Printing all that money meant going off of the gold standard. But, it was an emergency, so people accepted this fact. After the Civil War, America went back to the gold standard, but some of the changes instituted by the US government stuck around:
Before the war, people didn’t trust it. After the war, people did. The idea of trusting pieces of paper had taken hold of the American mind.
Again, it was the issue of confidence.
The Next Big Emergency
Then, some moron named Otto tried to play games with the financial system and attempted to corner the market in copper in 1907. That created a crisis that almost destroyed the banking system. The New York Stock Exchange lost almost 50% and did further damage to an economy already suffering a recession. It was yet another ’emergency’, and that meant SOMETHING NEEDED TO BE DONE. (Yes, in all capital letters.)
Greedy morons should not be allowed to play games like that, but humanity is full of greedy morons. So, situations like the 1907 Panic were inevitable. But, the bankers were frightened for their jobs, their wealth and their banking system, and fear is a great motivator. So is greed, and both led to a conspiracy of bankers that led to the creation of the United State Federal Reserve in 1913.
It was a really bad idea.
Also known as the Creature from Jekyll Island, the US Federal Reserve united the big banks with the government. The government got access to a big supply of money, and the banks got access to government protection for their little banking monopoly. It was the big takeover of the financial system, but the gold standard was still out there, applying the brakes to both what the government and the banks could do.
The Really Big Great Emergency
Then came the Great Depression. President Hoover tried to fix the situation with tariffs, which made it even worse. He lost the next election to aristocrat Franklin Delano Roosevelt (FDR) who lied his way into office. And then, lied even more while he was IN office. Once he got into the White House, he immediately started the process of doing the exact opposite of what he promised. The size of government and the amount of government debt increased dramatically – in direct contradiction to his campaign promises.
Here are the four big reasons for the Great Depression from an article titled What Caused the Great Depression?:
- The government’s “easy money” policies caused an artificial economic boom and a subsequent crash. (sound familiar?)
- President Herbert Hoover’s interventionist policies after the crash suppressed the self-adjusting aspect of the market, thus preventing recovery and prolonging the recession. (whoops! shades of 2008)
- After Hoover left office, Franklin Delano Roosevelt’s “New Deal” expanded Hoover’s interventionism into nearly every aspect of the American economy, thus deepening the Depression and extending it ever longer. (We’ll probably get this one.)
- Labor laws such as the Wagner Act struck the final blow to the remaining healthy sectors of the economy, dragging the last remaining bulwarks of productivity to their knees. (And, this one, too.)
The rest of the article is a great overview, but we’re interested in how FDR laid the basis for where we are now. And, he was in office for just days when he rammed through Congress the Emergency Banking Act. It was an example of Congress passing a bill that they didn’t read.
Can you think of another example of Congress passing a bill that they did read?
Less than a month after that bill passed, FDR signed Executive Order 6102, confiscating all the privately held gold in the United States. In less than a year, all gold was out of private hands, which allowed him to do the one thing that he had been planning all along:
Devalue the US dollar by more than 40% (actually 40.94%).
That devaluation happened on January 30th 1934, when Roosevelt signed into law, the Gold Reserve Act. With all the gold taken out of American hands, that law allowed FDR to increase the price of gold by 69%, from $20.67 per troy ounce to $35, massively devaluing the US dollar. American exports were now 40% cheaper, since the rest of the world was still thinking in terms of gold.
Again, Americans accepted it, because there was an emergency. All that it took for the United States government to steal the freedom and property of the average American, was an emergency like the Great Depression. That’s all it took. But, then came another great emergency – war.
The Great Big Emergency Called World War II
World War II destroyed Europe and Japan. Factories were pulverized. Cities and towns were ruined. And, three percent of the world’s population were dead. But, there was one country that had plenty of factories left standing – the United States.
Oh, and because the Europeans were afraid that Hitler would win and take their gold, they sent all their gold before and during the war, to the US. This meant that America had all the gold and all the productive capacity when the war ended. America also had oil. Lots of it. Oh, and America had a little thing called ‘The Bomb’.
That meant power. Lots. Enough power to reshape the world into its own image, and it did.
Instead of America giving back all of that gold, America said to the nations of Europe, “Look, we’ll keep all this gold for you, really really safely (we promise), and we’ll also agree to keep the value of gold at $35 an ounce. And then, all of you will just keep the exchange rate of your currency, at a certain rate to ours.”
That was part of something called the Bretton Woods Agreement. And, they were willing to make such a ridiculous agreement because they felt threatened by the Soviet Union and its allies in the the Warsaw Pact. America was their great hope of staying free of the Soviet menace, so they agreed to let America have the gold.
The Great Gold Disconnect
Under the Bretton Woods Agreement, the price of gold was set at $35/oz, and this part of the agreement lasted from 1945 until August, 1971, when President Richard Nixon took the America off of the gold standard.
Why did he do that?
Well, when you give someone lots of money to keep safe for you, the temptation to skim off some of that money is huge. And, that was essentially what the United States government did for years and years. They didn’t actually steal the gold, they just printed lots and lots and lots – even parking lots – of dollars.
Do you remember my point about the gold vault with too many receipts?
Yeah. It was just like that. It was as if the United States was ‘double counting’ the gold in its vaults. It was theft, plain and simple, and the rest of the world got wise to US lies. So, they decided to do something about it.
Remember that, under the Bretton Woods Agreement, gold was $35/oz. So, the countries of the world got dollars and started buying up the gold in the United States. And, by law, the United States had to give them as much gold as they wanted at that price. Gold started running out the door, so Nixon closed the ‘gold window’.
Suddenly, gold was no longer officially keeping the United States government honest – or, more accurately, ‘somewhat honest’. And, when Nixon cut the link between the dollar and gold, he also cut the rest of the world’s link to gold. This meant that none of the world’s major currencies had any gold connection at all.
And, hardly anyone complained. After all, Nixon won reelection by a landslide, the next year, in 1972. If people had truly believed in gold, Nixon would not have had such a huge victory. And yes, I know that he was up against a socialist – comrade George McGovern.
Seriously, a landslide?
Thousands of years of trust in precious metal had finally come to an end. Yes, there were times when nations went off a ‘precious metal standard’, but that didn’t change the confidence that people had in precious metal itself. But, it is obvious that when Nixon came along, gold was no longer valuable in the eyes of the average American.
Gold Replaced By Materialism
This was literally the first time in history that people did not care about precious metals, as money. It was a gigantic break with the past. It was a psychological shift in how people thought and what they trusted.
For the first time in history, gold was no longer money.
What replaced gold?
For Americans, wealth was measured in ‘buying power’. It was the nice car, the nice house, the nice neighborhood, the big television and the big stereo. And yeah, greed was good. And I watched it happen.
We were no longer the builders of a nation. We were consumers. We consumed. Everything. It was all about me, and it was the boomer generation that introduced us to the idea of looking out for number one.
That book was in every bookstore in 1977, and people ate it up. Greed was a way to build a better society. Belief in God was… optional. And, our decline accelerated. And, if you want to put a price on it, just look at this graph:
That’s consumer credit, not housing loans. That’s for buying ‘stuff’ and for buying luxuries. At least, for most people. The poor? Yeah, the poor get shackled to more and more debt.
The whole consumer credit industry was a giant gravy train for the banks. All that money, all those interest payments… all going to the banks and through the banks.
I remember getting my first credit card. That piece of plastic was like a rite of passage. It was like becoming an adult and making adult decisions. It meant freedom and power. It was so utterly…
Instead of living ‘within our means’, we lived large. And, I was at the cutting edge of an insanity that would destroy us all, just decades later.
Just look back over the history of the human race.
Has there ever been a time when the economy of a nation would fail because the average person didn’t go out and buy stuff that they didn’t need?
I am truly amazed at how stupid we’ve become. And, not just America, the whole world. In the ten years that my wife and I have lived in Taiwan, this traditional and conservative society has caught a lethal case of the American Dream. This little island off the coast of China has decided to join the world in giving up anything and everything that is truly meaningful in return for shiny toys.
So, where does this collapse of our financial foundations take us?
The Big Emergency And The Big Crisis Of Confidence
Remember that every big emergency brings with it big change, and the the powers that be will always rush through as much change as your society is willing to take. They will offer you more security, if you will just give up your freedom, if you will just agree to release the brakes on government. Oh, and if you let them pump more money into the system, that would be great.
Who would argue against the idea of ‘more money’?
The problem is that people eventually wake up and realize that they can no longer be confident in their government, their institutions or their currency. It’s not the amount of currency in circulation that matters, it’s confidence.
When people lose confidence in something, they avoid it. They exchange it for something else as quickly as they possibly can. In Israel, in 1983, it meant buying anything that you could, immediately when you got your paycheck. The Israelis had lost confidence in their banks, their government and their currency. And that meant televisions, refrigerators, and radios – everything – was flying off the shelves at the end of every month. It was a disaster.
I arrived in Israel almost ten years afterwards, and it was still a disaster. But, they were recovering from it, but only by draconian measures. Negotiating through all the currency controls was a huge challenge. Unemployment was still high, and the cost of everything was outrageous. Still is.
It took a while, but Israelis eventually regained at least some of their confidence in their government and their banking system. Some. But, it took a very long time.
So, the question is this:
When will the average American and average European lose confidence in their government, their banks and their currency?
Remember that a collapse in confidence doesn’t happen during a great emergency, only after. Hyperinflation didn’t hit Israel until well after the great emergencies that threatened her existence in 1967 and 1973. Hyperinflation didn’t hit Weimar Germany until after the great emergency of World War I. The same goes for our current emergency.
Once we get out of our current Great Emergency, people will reexamine what happened. They will ask themselves if their confidence had been misplaced. But, it will take time before the crisis of confidence materializes. And, once that confidence is lost, it will not return.
When the Antichrist and Beast system rise, it will be at the low point of our confidence in the institutions that we previously believed in. And, like the Great Depression of the 1930s, this Man of Fierce Countenance will offer a New Deal, and our society will embrace him as the savior of civilization.
And, I’m afraid that most of us will live to see it.
I truly hope that you’ll be ready for this
A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished. – Proverbs 22:3
If you find a flaw in my reasoning, have a question, or wish to add your own viewpoint, leave a comment on the website. Your input is truly welcome.
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