Dateline: En route to Doha, Qatar
It took until the sixteenth century in France, during the House of Valois, for the monarchy to gain total power. And it didn’t take long before they started taking advantage.
In 1539, Charles I banned the import of wool and wool products from neighboring Flanders and Spain in order to prop up the local economy. It was presented in the same way as was the Romans devaluing their currency: as a way to support the local economy.
Just another example of the same way the government soft sells everything they do to screw you.
Once the genie was out of the bottle in this new trade war, it wasn’t long before hundreds of other import restrictions and tariffs were imposed.
The policy of keeping goods from neighboring empires out became known as mercantilism and most notably spread through France and Great Britain until advocates of free trade knocked some sense into matters hundreds of years later.
Mercantilist policies included limiting imports while exporting as much as possible. Governments became so deeply ingrained in the economy that they would literally dictate how much of what could be shipped out and what products their subjects could consume.
Private industry soon devolved into monopoly, especially through networks of guilds that worked together to prop prices up. Violating government monetary policy became a crime in the same way that the US government would make traitors out of those who charged above the approved price for grain.
To see the full effects of mercantilist policy, you’d think you were living in the Soviet Union. Of course, these policies worked a lot better when you couldn’t sell things worldwide on the internet and global trade was a fraction of what it is now.
But citizens still suffered the effects of living under an incompetent monarchy hellbent on telling them what they should and shouldn’t buy based on where it was made.
In today’s more global age, governments have moved from mercantilism and into a system of pseudo-free trade and government control of the monetary system.
Rather than fully control movement of products, governments and their cronies control the money supply and profit from wreaking havoc on the general population.
One way they do this is through what is called “seigniorage”; profit accruing to a central bank by virtue of their printing money with a far higher face value than their actual cost to mint that money.
While the Roman government ultimately failed in debasing their currency by substituting gold and silver content in coins with lesser metals, governments now have an even craftier way to enrich themselves.
They merely churn out a banknote stamped with a figure made up out of thin air.
While ancient cultures used large, almost immovable stones of varying sizes as monetary instruments, today we believe that a piece of paper with a few numbers on it represents some kind of intrinsic value.
As if printing a piece of paper with some special inks at a cost of only thirteen cents each magically creates $100 in value.
Think about it: the FBI and CIA have poured billions of dollars and tried to bring South American economies to their knees over some guys in a basement printing fake $100 bills. Yet governments openly brag about the profits they earn from seigniorage.
Every year, the US government earns $25 billion in profits from the practice. The Canadian government actually puts out a glowing annual report.
And in the midst of hyperinflation in Zimbabwe, it was estimated that well over half of the government’s budget came from the profit made through this legal counterfeiting process. Whenever the government needed money, they just fired up the printing presses.
Until something went tragically wrong, that is.
One key element needed to pull off a bankrupting scam like this is the support of the public. And in today’s modern western world, not only do few people know much about central banks, but even fewer care.
It’s as if bankrupt western governments have been given carte blanche to beg, borrow, and steal in the form of printing money.
And all of that money printing has led to currency wars around the world. As opposed to the good old days when you could simply keep your neighbors’ goods out of your lands, countries today need an advantage to sell their goods at a discount and provide their citizens with a reason to keep them in power.
Rather than use free market principles to let the best man win, governments have decided to manipulate their currencies against those of their rivals in order to gain an unfair advantage.
While western governments accuse China of manipulating its renmibi, it is the US, UK, and European Union that are some of the worst manipulators of all.
Once the gold standard came to an end, these world leading governments had all the power they wanted to go to war against each other. And while these currency wars have been going on for years, some believe they will soon lead to the death of money.
The conditions that led to the US dollar as the world reserve currency after World War II no longer exist. Nations that were little more than impoverished backwaters seventy years ago are now emerging superpowers.
Nations like China, India, Iran, and Russia have no use in seeing the continued global circulation of US dollars. Heck, it was just earlier this year that the BRICs nations got together to devise a strategy to remove the US dollar from its perch.
Interestingly enough, these aspiring powers realize something most Americans do not: that these currency wars will ultimately lead to the death of money in a way that economist Jim Rickards says has already happened three times in the last century.
Jim Rickards, author of the bestsellers “Currency Wars” and more recently “The Death of Money”, spells out his vision for the fate of western currencies, saying the damage has already been done.
Now, he says, we’re just waiting for the snowflake that starts off the avalanche.
Rickards suggests that lessened acceptance of the US dollar and more competing currencies for global trade, especially the renmibi, will ultimately lead to a dollar collapse.
That collapse will be followed by leaders getting together and figuring out the next steps. It’s not that we’ll all go back to living in huts and wearing loin cloths while bartering with berries and seeds.
Rather, a new road map will need to be established. And unlike seventy years ago, the US government won’t have the power to bully everyone and call all of the shots.
As we frequently discuss here, the United States is broke. Not just the government with some $100 trillion in debt and unfunded liabilities. But the people. Most Americans are close to flat broke.
Despite the alleged boom markets of the last generation, just 6% of US persons have a mere $100,000 to their name.
That will not only pave the road for government wealth confiscation supported by an angry populace in years to come, but it will lead to a dumbing down of monetary policy that won’t be good for the few who do have any kind of wealth.
The world’s currency wars can only benefit emerging countries that have been pushed to the sidelines. That is why we discuss taking part in undervalued emerging markets that are removed from the madness of US and western monetary policy.
And I’m pleased to announce that Jim Rickards will be spelling out his exact blueprint for the dollar collapse, and how to profit from “the death of money”, at our Passport to Freedom event in Cancun this January.
Jim has just signed out to keynote the event and share, in great detail, exactly what he believes will transpire in the next one year, the next ten years, and beyond.
Last year’s Passport to Freedom event featured Peter Schiff discussing the economic death of America, but this year promises to be even better as Jim Rickards will share exactly how we should all be reacting to the coming dollar decline.
Should we be holding foreign currencies, and if so, which ones? How much gold and silver should we own? How should we invest to insulate ourselves as best as possible?
While we address many of these questions on an ongoing basis, I couldn’t be more excited to be sharing a stage with Jim Rickards, especially just steps away from one of the world’s most beautiful beaches.
Jim doesn’t speak at many public events, so if you’ve read his bestsellers, this may be your one chance to see him live. Of course, we’ve got two dozen offshore and international investing gurus speaking alongside him, which makes Passport to Freedom an event I’m really excited about.