Transcript The History of Money and What the Bible Says About It

The History of Money
October 2011
Why do we have money?
Convenience
 It is often easier to use money
than barter / trade
 Would you prefer to receive fish or
eggs instead of cash for the services
you provide to your employer ?
What is money?
Features of Money
 A medium of exchange
 A unit of account
 A store of value
Medium of Exchange
 Liquidity
Easily tradable, with a low spread
between the prices to buy and sell
 Transportable
Having a high value
to weight ratio
A Unit of Account
Divisible
Can be divided into small units without
destroying its value (which is why leather and
live animals are not suitable)
Fungible
One unit or piece must be equivalent to another
(which is why diamonds, works of art or real
estate are not suitable)
Precisely Measurable
Of a specific weight, or measure, or size to be
verifiably countable. You must be able to weigh,
measure, and count your unit of account!
A Store of Value
 Durable
It should be long lasting and not perishable or
subject to decay (which is why food items,
expensive spices, or even fine silks or oriental
rugs are not generally suitable as money)
 Stable value
 Scarce
Can’t be easily manufactured
 Difficult to counterfeit
It must be difficult to make fakes, and the real
thing must be easily recognizable.
Features of Money
 A medium of exchange
 A unit of account
 A store of value
Best Forms of Money
Historically, gold & silver coins and bars
Warning on Love of Money
The love of money is a root
of all kinds of evil...
-1 Tim. 6:10 NIV
[Note: money is not evil, just the love of it.]
Currency Debasement
 The practice of lowering the value of
currency.
 Results in financial gain for the sovereign
at the expense of citizens
 Lowers the value of the coinage, causing
inflation
- Wikipedia
Currency Debasement in Rome
 The Roman Denarius
Currency Debasement in Rome
 Collapse of the
Roman Silver
Monetary System,
measured by silver
content,
10 BC – 290 AD
Currency Debasement in
China
 11th Century China – Flying Money
 Called it “flying money” because it
could just fly from your hands
 Banks had switched to the use of
iron coinage due to copper
shortage
 These iron coins became overissued and fell in value
 A bank in the Szechuan province
issued paper money in exchange
for the iron coins
Currency Debasement in
China
 Initially, the paper money was fine, because it
was exchangeable for gold, silver, or silk
 Eventually, inflation began to
take hold, as China was funding
an ongoing war with the Mongols,
which it eventually lost.
 In the end, the best families in
the empire were ruined, a new
set of men came into the control
of public affairs, and the country
became the scene of horrific
warfare and confusion.
Currency Debasement in France
 John Law was the first man to introduce paper
money to France in the early 18th Century
 Louis XIV died and left 3 billion
livres of debt to his son, Louis XV
 Louis XV required that all taxes be paid in paper
money, which was initially backed by coinage
 After high inflation, people demanded coinage,
and the currency collapsed.
 John Law became the most hated man in France
and was forced to flee to Italy.
Currency Debasement in France
 In the latter part of the 18th century, the French
government tried paper money again.
 By 1795, inflation of assignats was
running at approximately 13,000%.
 Then Napoleon returned the country
to gold coinage, a stable currency.
 French gave it another go in the 1930s, this time
with the paper franc. It took only 12 years for
them to inflate their currency until it lost 99% of
its value.
Currency Debasement in
Weimar Germany
 Post-World War I Weimar Germany was one of
the greatest periods of hyperinflation that ever
existed.
 The only way the Germans could pay the war
reparations required by the Treaty of Versailles
was by running the printing press.
 Thousands of people lost
their life savings
 Many starved to death
 1 billion mark, 1923
Currency Debasement in
Weimar Germany
 Inflation got so bad in this
period that German
citizens were literally
using stacks of marks to
heat their furnaces.
Currency Debasement in
Weimar Germany
 Brief 4-year timeline of the marks per one U.S.
dollar exchange rate:
 April 1919: 12 marks
 November 1921: 263 marks
 January 1923: 17,000 marks
 August 1923: 4.621 million marks
 October 1923: 25.26 billion marks
 December 1923: 4.2 trillion marks
Modern Currency Debasement
 Hungary – 10 million pengo, 1945
Modern Currency Debasement
 Nicaragua – 10 million córdobas, 1990
Modern Currency Debasement
 Yugoslavia – 10 billion dinar, 1993
Modern Currency Debasement
 Bosnia – 100 million dinar, 1993
Modern Currency Debasement
 Turkey – 5 million lira, 1997
Modern Currency Debasement
 Zimbabwe – 100 trillion dollars, 2006
Modern Currency Debasement
Currency Debasement
Gold Certificate
Silver Certificate
Federal Reserve Note
Fiat Currency
 Currency that has value only because of
government regulation or law
 Has no value other than what government
declares
 Not backed by gold or silver
 The term derives from the Latin fiat, meaning
"let it be done“
 Originated in 11th century China, and its use
became widespread during the Yuan and Ming
dynasties.
Fiat Currency
 Spread to Europe gradually
 Outlawed in the USA until 1933
 The Nixon Shock of 1971 ended the direct
convertibility of the United States dollar to gold
 Broken promise to pay
 Since 1971, all reserve currencies have been fiat
currencies
 Competitive devaluation
Dishonest Measure of Value
The Lord hates dishonest scales
(including fiat currency), but accurate
weights (like gold and silver) are his
delight.
– Proverbs 11:1 NIV
Evolution of Fiat Money
1. Goldsmiths store gold and become
banks
2. Banks lend gold that’s theirs
3. Banks lend others’ gold
4. Banks lend with no gold backing
(fractional reserve concept)
5. Money is debt; no gold backing
Gunpowder
Change in Warfare
Clever Bankers
“Permit me to issue and control the
money of a nation, and I care not who
makes its laws.
- Mayer Amshel Rothchild, Banker, 1744-1812
Currency Wars
Geithner Says U.S. Will Never Weaken
Dollar to Gain an Advantage in Trade
- April 26, 2011, Bloomberg
Debt Slavery
The borrower is slave to the lender.
- Proverbs 22:7 NIV
USG Debt, 1940-2010
The wicked
borrows and does
not repay.
- Psalm 37:21 NIV
Who Owns USG Debt
Stewardship of Money Today
Inflation is like a tax, but it’s worse
than a tax, because it is on your hard
earned savings, not just your income –
UNLESS you hold your savings in
appreciating assets like gold and
silver.
Gold Up 17% Per Year on Average
Silver Up 18% Per Year on Average
Bibliography
Special thanks goes to the following:

Jay O’Keefe of www.somehelpful.info/Money/

Jason Hommel of www.silverstockreport.com

Martin Armstrong, All Systems Collapse Overnight

Wikipedia

Fiat Currency: Using the Past to See into the Future

The Daily Reckoning Presents, Fiat Currency: Using
the Past to See into the Future

US National Debt Clock, www.brilling.com

The Skeptical Optimist, www.optimist123.com
More information:
www.somehelpful.info
Thank you!