Paper Currencies: What came first – money or real things? Easy answer – real things. How could it be otherwise? One farmer raises wheat and another farmer raises chickens. The two get together and trade wheat for chickens. Now they both have bread and chickens. Fine, but after a little while both farmers need to find a way to obtain candles from a candlestick maker who needs neither bread nor chickens. The three get together to come up with something that can be used to represent the value they attach to wheat, chickens and candles. This makes trading between the three so much easier. The substance that the three came up with to represent the value of wheat, chickens and candles is what we now call money. Clearly, real things preceded money and money only had value because it represented real things. If the number of real things stays the same but the substance being used as money doubles in supply, what would happen? Well, the measurement attached to real things would double. Total wealth would not increase because the number of real things has not increased even though twice as much money would be circulating to buy the same number of real things. In short – prices would go up – they would in fact double.
Paper Currencies and Counterfeiters
Now lets introduce a counterfeiter into the above scenario. Lets say the candlestick maker figured a way of creating more of the substance agreed to as money and did not tell the wheat farmer and the chicken farmer. What a deal – the candlestick maker starts using fake counterfeit money to buy as much wheat and chickens as he wants and he gets to buy them before the price rises as a result of his artificial expansion of the money supply.
STOP – If you understand the above two paragraphs you understand the cause of inflation (i.e. rising prices caused by an increase in the money supply), better than many Harvard educated economists. To fill in the blanks a little bit – the counterfeiter is the US government through its private banker, the Federal Reserve.
Now to the question – Why Paper Currencies Always Fail?
Simply stated, when money stops being real things or stops representing real things and instead takes the form of paper and ink (i.e. paper currencies), it is too easy for some party to cheat and create more money than there are real things. The plot thickens when the party asserting the power to introduce paper currencies is also the party who will benefit the most by being the first to spend newly created paper money before the prices rise for everyone else.
How Can They Get Away With This?
Easy – They are counting on the average person not being able to understand the system they devised.
What Can I Do About This?
Buy a form of money that cannot be artificially expanded by any party – Gold and Silver Bullion.
Ron Miller, President and Founder – Atlantic Precious Metals LLC
Phone: 1-800-APM-GUIDE 1-800-276-4843