Hidden Secrets Of Money Episode 1: Money vs Currency.
In the 1st Episode of Hidden Secrets of Money, Mike Maloney takes you to Egypt to unravel the difference between currency and money. This is one of the most important lessons you will ever learn, and will pave the way for your understanding of future episodes. Because without knowing exactly what money is... how can we expect to understand the ramifications of how it is treated by different civilizations, politicians, and central bankers?
Video Transcription:
Money vs Currency - Hidden Secrets Of Money Episode 1 - Mike Maloney
Your true wealth is your time and freedom. Money is just a tool for trading your time. It's a container to store your economic energy until you're ready to deploy it. But the whole world has been turned away from real money and has been fooled into using currency, - a deceiptful imposter that is silently stealing your two most valuable assets. Your time and your freedom. Welcome to the rabbit hole. We are entering a period of financial crisis that is the greatest the world has ever known. The wealth transfer that will take place during this decade is the greatest wealth transfer in history. Wealth is never destroyed. It is merely transferred. And that means that on the opposite side of every crisis there is an opportunity. The great news is that all you have to do to turn this crisis into your great opportunity is to educate yourself. I believe that the best investment that you can make in your lifetime is your own education. Education on the history of money. Education on finance. Education on how the global economy works. Education on how all of these guys, the central bankers, the stock market, how they can cheat you. How they can scam you. If you learn what is going on and how the financial world works, you can put yourself on the correct side of this wealth transfer. Winston Churchill once said that the further you look into the past, the further that you can see into the future. This program is all about creating your own crystal ball. Being able to gaze into the future. Being able to change this crisis, the greatest crisis in the history of mankind, into your great opportunity. The hidden secrets of money. Some of them are hidden in plain sight. They're like right in front of you. Uh, the way the monetary system works is something that isn't actually hidden away from all of us. It's out in the open, but it's complex and people just don't, they can't see how it works. It's hard for them to imagine that we're living in such a hoax. Others are meant to be secret, but the truth is slowly coming out. Like the Federal Reserve being a private corporation and not really part of the U.S. Government. But when I started studying this, uh, what I found was that there was no place that I could point people to where they could get it all in one spot. And so I basically decided to write my book about it and consolidate monetary history, economics, the markets, uh, the fundamentals of gold and silver. There's a lot of smoke and mirrors in economics, and I've sort of made it my job to lift the fog for people. Welcome to Egypt. This is where it all began. Roughly 5,000 years ago, the Egyptians started using gold and silver as their predominant form of currency,- but it was not yet money. The pieces of gold and silver that they were using were odd sizes and weights. Odd purities. So it still was not interchangable where each unit is the same as the next. This meant that nothing really had a price yet. You couldn't put a price of so many coins on something because they didn't have coins yet. Trade was still difficult. It was still a guessing game when it came to the exchange of values. One of the reasons that we are in the financial mess that we are today globally is that people do not understand the difference between currency and money. Currency is a medium of exchange, a unit of account. It is portable, durable, divisible, and something called fungible. Fungible means that each unit is the same as the next unit. A dollar in my pocket buys the same amount as a dollar in your pocket. Money is all of those things plus a store of value over a long period of time. Even financial planners, bankers, your accountant, they don't understand the difference between currency and money. The currency in your pocket is a medium of exchange. It's a unit of account because it's got numbers on it. It's somewhat durable, it's portable, it's divisible in that you can make change, and it's fungible. A dollar in my pocket buys the same amount as a dollar in your pocket. But because governments can print more and more and more of it and dilute the currency supply,- it's continually transferring wealth out of your pocket, out of your bank account to the government and to the banking system. The reason that gold and silver are the optimum form of money is because of their properties. It's an easy medium of exchange because gold and silver store a large amount of value in a very small area. It's a unit of account. Pure gold has the same value all over the planet. So an ounce of gold buys the same amount here in Egypt as it would in China or in the United States. It's durable. The same gold that Egyptians were using in trade 5,000 years ago is still here with us today. It does not corrode. It's divisible. You can make change with it. It's very portable. You can use something like oil as money. It's just that you can't carry around a barrel of oil on your back. It's fungible. Pure gold is the same wherever it is on earth. Pure silver is the same wherever it is on earth. It's limited in quantity. That's the reason that it maintains its purchasing power. Governments cannot print it. Over the last 5,000 years, only gold and silver have maintained their purchasing power. There have been thousands upon thousands of fiat currencies. Currencies that are unbacked by gold or silver, and they have all gone to zero. It's a 100 percent failure rate. Well, fiat currency, of course, is um, a currency that is, exists at the dictate or by fiat from, from a government. They have their printing presses, and the paper money rolls off the printing presses. And then they give it the fiat designation which then makes the currency official. It's just worthless paper, but when Ben Bernake gives it the special sign, and they have the cult meeting - at the Federal Open Market Committee meetings, it suddenly becomes currency. If you look at what's really going on it's, it's a con game. And so there's confidence. Well, the Federal Reserve is very forthright about what they're doing. If you read their website they'll tell you it's a confidence game. They tell that there's no intrinsic value in their money. They'll tell you that they print it backed by absolutely nothing. They actually display all these facts. But if you tell somebody in the public that this stuff is created out of thin air, there's no backing whatsover - , it's absolutely worthless, it's about as valuable as Monopoly money, they'll look at you like you're nuts. Is there an example throughout history of a fiat currency, a piece of paper that's unbacked by anything, surviving? Short answer, no. Long answer, no. And here's why. When Addison Wiggin took over at The Daily Reckoning, they got cranked up. Uh, Bill Bonner asked him to catalogue all of the fiat currencies throughout history and what happened to each of them. Addison dutifully went to work. Within a short period of time he had gone through the alphabet. All the fiat currencies that started with the letter A were done. They all went to zero. He was halfway through the letter B and all the fiat currencies that started with the letter B,- and there were 600 of them in just the first letter and a half of the alphabet. And every single one of them went to zero. Every one. 600 fiat currencies that start with the letter A, and half of the ones that start with the letter B, there are 600 of these things. Not one ever came close. And you think this one, the United States dollar is gonna be the first one after all that? I don't think so. No. No currency, fiat currency has ever survived. None. The thing about money is there actually is a fairly well accepted definition of what money is. The question is as you apply that definition to particular things that are, people claim to be money, do they fit the definition? Well just take the paper dollar for example. How well does it perform those functions? Will it store a value? Uh, the dollar has lost 95 percent of its purchasing power, uh, since the creation of the Federal Reserve in 1913. So not very good as a store of value. One of the things I do is, uh, just a way to get the audience's attention is I have a slide and there are three pictures on the slide. One is a pile of Monopoly money. The other one is a pile of Federal Reserve notes. Uh, what Americans would call paper money. Uh, the other one is a solid gold, uh, American Eagle, uh, one ounce coin. And the title of this slide is which of these is not like the other. And if you know the show Sesame Street or if you have children who watch it, it's one of the favorite vignettes in Sesame Street. And what it really is is a kind of IQ test for five year olds. They're supposed to look at the three things and look at characteristics and find the one that's not like the other. Well, I've shown this slide to, um, groups of, you know, Ivy League university professors, and I've also shown it to, uh, you know, uh, children. You know, kind of find results in my nieces and newphews and so forth. Uh, and when the, uh, professors look at it they say well, um, clearly the, uh, the dollars are not like the others - 'cause gold has no role as money and Monopoly money is junk and the American dollar is a store of value. So that's not like the other. But the children look at it and they say well, the gold coin is not like the other - because the other two are just piles of paper, and the gold coin is clearly something different. So my question to the audience is who's smarter? A five year old or an Ivy League professor? Before World War I, each note that a treasury issued would say that there has been deposited with the United States Treasury - 20 dollars in gold coin payable to the bearer upon demand. The money was in the vault. The currency was a note they gave you that was a claim check. Only a claim check on the money. The same as if you go to the dry cleaners and you give them your shirt and they give you a claim check for your shirt. The value is, is that shirt at the dry cleaners. Not the piece of paper that says that you own that shirt. So our currency that's circulated was the paper U.S. dollars and they were claim checks on money. The next hidden secret is the difference between currency and money. Money must be a store of value and maintain its purchasing power over long periods of time. As we progress through this series, you'll learn that national currencies are really a tool used by the government - and the financial sector to leach away your time and your freedom by stealing your purchasing power. So rather than storing your economic energy, currencies leak. Now compare that to the gold and silver the Egyptians were using. Like I started with, it still wasn't money because it wasn't interchangable yet. Like I started with, it still wasn't money because it wasn't interchangable yet. But they were on the right track as gold and silver have proven over thousands of years to be the ultimate store of value. Gold is only formed when a star explodes, a supernova. And it stays around forever. This is one of the properties that make it the ultimate money. You know, people are amazed that after 5,000 years the pyramids are still here. But what I'm more amazed at is that the currency that the people that built this were using,- that currency, that gold and silver that they were using in trade on a daily basis, is still around today. It may have been melted down and re-refined and it's in a coin or a bar or in some piece of jewelry. But it's still with us today and it still purchases something. Yes, it is the ultimate money because there is nothing else even in the same league. It's divisible. It's permanent. It's a store of value. It's, uh, a unit of account. It's got everything you want out of money, but it doesn't go away and it can't be increased. That is what makes gold the most beautiful money of all. What more can you ask out of a money? It keeps governments under control. You can maintain a solvent system. Governments don't like gold at present because they're getting away with the fiat currencies, and they'll do everything they can to discredit it as an asset class. I mean, my goodness. Gold has, uh, outperformed the Dow Jones Industrial Average in each of the last seven years. Uh, yet it's not considered a legitimate asset class. Why? Again, it's the fear that maybe gold will be imposed on the system. That it will constrain government ability to spend beyond its means. They can't print it. They can't print it, no. The proper definition of inflation, I use Milton Friedman's definition. Inflation is an expansion of the currency supply. Deflation is a contraction of the currency supply. If you expand the currency supply, eventually prices will rise. And if you contract the currency supply, eventually prices will fall. This is a pool. But it's not a pool of water. This is a, the currency pool. And these are prices. And if you expand the currency supply, prices like a sponge in water have to rise to suck up the excess currency. Governments never stop printing more currency and adding currency to circulation. Therefore, prices keep on going up. Not because they stuff that you're trying to buy is changing. The real estate doesn't change. What has changed is the currency purchases less and less. It's the currency going down. Not prices going up. The truth is, what we have that makes our world work right now is a big story. None of it's real. It's all just promises. And if you think about it, that's how currency began to work in the beginning. You know, before we had currency we had barter. I'll give you three coconuts and you give me four fish 'cause that's kind of a fair exchange on coconuts and fish. But that got complicated so we had to invent this thing called money to be a divisible, portable medium of exchange. And the challenge is that we've lost that a long time ago. We lost having things of value be our currency. And now we have this thing called numbers and accounts. But trust me. It is not real. It's a big made up story. One of the biggest make believe stories ever is called quantitative easing which sounds complex, - but it's really just a smoke and mirrors term for currency creation. QE started with the banking bailouts back in 2009. This currency was created out of thin air and then given to the banks who paid themselves record bonuses in reward for crashing the world economy. This is a global phenomenon, but all you have to remember for now is that whether it's QE, bailouts, or stimulus programs, - these are all just voodoo, hocus pocus terms for increased currency creation. I believe gold and silver will reassert themselves as money and when they do, there just isn't enough. And their purchasing power is going to go up many, many, many times. Egypt is an amazing place. There's a franticness about it, an utter chaos. Especially like the traffic. When it comes to like all of the merchants that are trying to get every last dime out of you, - you get fleeced to the point where you come back with an empty wallet. [LAUGH] But you know what? They're amateurs compared to Wall Street. In the past several years, I've, I've spoken in many countries about the crisis that's coming, - and a lot of people think that they're gonna be okay in their country. That it's only gonna happen in the United States or maybe the United States and Europe. Uh, but what they don't realize is that this is a global phenomenon. I got to show you something here. This is, uh, base currency in the United States. This is the number of paper dollars that exist basically. It took 200 years to go from no dollars in existence to 825 billion. And then we had the bailouts, and then we had QE1, Quantitative Easing 1. Then QE2. And then we had QE3 and then QE4 and then soon we're gonna have QE57 and QE382. [LAUGH] And, uh, it isn't just here. This is what the Canadian currency supply looks like. This is Australia. South Africa. Russia. Now this starts out in just the year 2001, and this is like 18 times more currency in existence in a little over a decade. Uh, here's Singapore. Same story. Look at that. Since the crisis, just bam. India. China. Every government on the planet is - doing this insane deficit spending and expanding their currency supplies, uh, doing bailouts. And history shows that there is no example of this turning out well. It is sometimes amazing that we haven't experienced more inflation than we have. If they keep expanding the money supply so vastly, why aren't our prices growing faster than they really are? And the answer is that a good chunk of the money that the Fed created has been shipped overseas. Uh, I remember early in my research I heard this expression that the Americans have exported their inflation. I thought what is that? How can you export your inflation? Put it in a box and send it out? What do you do? Well now I understand. You export your inflation by simply sending all these dollars that you created to these other countries - and then they send you their refrigerators and their cars and whatever, their TV sets. So you get hardware and they get little pieces of paper. It's a great deal for the American people for a while. For a while. Sooner or later all of those pigeons come home to roost. When the time comes as it looks like it's now coming, when the rest of the world is saying nuh-uh we don't want to play this game anymore. Uncle Sam's dollars are just becoming worthless. There are too many of them. We've got to find something else other than American dollars. Then those dollars start to come back to America. People, we don't want them anymore. What do we do with them? Once this revs up and we've got this, this little trickle of money coming back that we'd previously exported, - when, once it becomes a flood and it starts to rush back, now we are getting our former exported inflation brought back to us. And then we'll see the quantity of money inside the United States grow much more rapidly - even than the Federal Reserve can create it because we're getting our previous money back. And, uh, that's when we will really see the tanking of the U.S. Dollar in terms of what it will buy. During the second round of quantitative easing, global food prices went up 60 percent, - and this created a humanitarian disaster for the two billion people on earth who live on less than two dollars a day. These people were hungry to start with. They became hungrier and some of them started overthrowing their governments in North Africa and around the Middle East. So quantitative easing was the spark that ignited the Arab Spring. So that's, that's it. When you create money, you get some sort of inflation. It just depends on where the inflation goes. Given the premise that you have a permanent underclass or poor class and how does inflation affect them disproportionately, um, it affects them basically in the percentage of their income that goes to food. And we see this as a ratio, and we know that there are some danger points. For example in Egypt recently, once that ratio got to 40 percent of income going to food - and the price of food rising due to inflation, when it got to 40 percent that's, uh, historically a point where people actually stage a revolution. That's exactly what we saw. The French Revolution similarly was all around the price of food getting to a certain critical point where people simply, the risk-reward for revolution was favorable toward revolution. Well, exactly right because when you have a runaway inflation, it's punishing the very people who are most productive in society. In other words the people that produce more than they consume and save the difference. The problem is is that those productive people, the savers, save in their national currency - and unfortunately the national currency is just a fiat piece of paper at this point. So when it's destroyed through runaway inflation, that 100,000 dollars that you were hoping to retire on doesn't exist. And the things that you were gonna buy with it and provide for others don't exist either. Now what are you gonna do? So that all seems pretty scary. However, uh, you know, this is going to happen and you can only play the hand that you're dealt. But the great news is that gold and silver always end up doing an accounting of the expansion of the currency supplies. Basically the will of the public and the free markets. When governments do this kind of stuff to their currency supply, they debase it, eventually it comes back in inflation. People sense the loss of their puchasing power. They rush back to gold and silver and they bid the value of - the gold and silver up in the country until it meets or exceeds the value of all the currency in circulation. This is a process that's been going on over and over again throughout history except this time it's happening on a global scale. It has never before happened in all countries at once. And that means that this is the greatest wealth transfer in history. Therefore it's the greatest opportunity in history and it's not gonna happen again in your lifetime. So now we've learned that your true wealth is your time and your freedom. Money is a trading tool that stores the economic energy that is your time and freedom whereas currencies leak them away. Gold and silver are the ultimate money simply because of their properties. Fiat currencies are based solely on confidence and always return to their intrinsic value of zero. Governments don't like gold because it imposes restraint. Rising prices are a symptom of an expanding currency supply - and gold and silver always acocunt for an expanding currency supply. So that's it for this episode. Join me next time as we begin to investigate how monetary history just repeats and repeats - and how gold and silver always win the battle between currency and money. Until then, my challenge to you is to stop calling currency money. It's a crucial first step towards setting your mind free of all this economic voodoo and changing your context. It's a crucial first step towards setting your mind free of all this economic voodoo and changing your context. You can learn more by watching the bonus features on our website and if you have any questions you can post them there - and we'll answer some of your questions in future bonus features. So good luck. Thanks for watching. And we'll see you next time. Good morning. Wow. What does fiat mean? It comes from the Latin for crappy car. I'm in the desert in a suit. My camel died. You're not too sure about that are you? Huh? I am ready for a, a good long nap. Hi, welcome to this bonus feature for the very first episode of hidden secrets of money, - uh, and this is currency vs money. So that's the, uh, major topic-
Hidden Secrets Of Money Episode 2: Seven Stages Of Empire.
In episode 2 of the Hidden Secrets of Money, Mike takes us to Greece to learn when, where and why currency became money. You'll also learn about one of the most predictable long-term economic cycles – the Seven Stages Of Empire. Then join Mike at a private meeting in London where he lets you connect the dots of the seven stages across the last 140 years of our own monetary history.
An understanding of the past gives us foresight. This is particularly significant when studying the rise and fall of markets. Monetary history is cyclical, a never-ending process of currencies rising to prominence and then collapsing as the pendulum swings back and forth between quality money and quantity currency.
How does the cycle play out? It usually begins with a monetary system and economy based on a commodity like gold — the supply of which can increase slowly, as the economy grows. But, as time moves on, the system moves away from gold as the source of underlying value of its currency. Eventually, the system completely replaces gold with fiat money (e.g. paper money backed by nothing with any intrinsic value), which can be printed without restraint. Thus, the value of each unit of currency is debased over time, which ultimately leads to a market crash.
To better understand the currency cycle we must look to the Seven Stages of Empire as described by Mike Maloney, the founder of GoldSilver.
Video Transcription:
Seven Stages Of Empire - Hidden Secrets Of Money Episode 2 - Mike Maloney
The world is going to have a new monetary system in this decade that we're in. We're going to experience this huge deflationary crash around the world. And people will just lose confidence in currency. And what do they always go back to throughout history time after time for the last 5000 years? Actually they always go back to gold and silver. We are entering a period of financial crisis that is the greatest the world has ever known. The wealth transfer that will take place during this decade is the greatest wealth transfer in history. Wealth is never destroyed. It is merely transferred. And that means that on the opposite side of every crisis there is an opportunity. The great news is that all you have to do to turn this crisis into your great opportunity is to educate yourself. I believe that the best investment that you can make in your lifetime is your own education. Education on the history of money. Education on finance. Education on how the global economy works. Education on how all of these guys, the central bankers, the stock market, how they can cheat you, how they can scam you. If you learn what is going on and how the financial world works, you can put yourself on the correct side of this wealth transfer. Winston Churchill once said that the further you look into the past, the further that you can see into the future. This program is all about creating your own crystal ball being able to gaze into the future, being able to change this crisis, the greatest crisis in the history of mankind, into your great opportunity. So it all started back in 1999 when my sister and I hired a financial planner to help my mother with her assets. And we gave him control of the family's assets. And in the next year and a half, he lost 50% of what she had. You know, he would come to us every six months. We'd have a meeting and he'd have this smile on his face, just ear to ear smiling. We did really well. The S&P lost 24% and you only lost 18. And so, I fired him. And I moved all of her assets to cash. And I dived into studying the financial markets which led me into setting the economy. And when you start reading about the global economy, the people that are concerned with trade deficits and budget deficits, it's the hard money advocates the gold community. And once I started reading them, they also write about monetary history. And then I really fell in love 'cause monetary history just repeats and repeats over and over again, echoing all the way back to the beginnings of civilization. Gold and silver have been the predominant currencies for about five thousand years but it wasn't until somewhere between 680 BC and 630 BC that they became money. that when they were melted in the coin of equal weights somewhere in Lydia where each coin was a same size and have a same weight. This made them interchangeable. It's called fungible. At that point they became useful as a unit of account and a measurement. You could price a good or a service in those gold or silver coins in a certain number of them. And it was always the same for anybody whenever they were buying that good or service but it wasn't until they made their way to the world's first free-market society. The prototype of democracy, the cradle of civilization: Athens, that they exploded in use. Suddenly money found its natural home: the free markets. Athens was the first society to have a working tax system and free markets. This enabled them to rise to the pinnacle of civilization. Their prosperity allowed them to create great works of art and achieve a level of architecture and engineering that the world had not yet seen. Here we are 2,500 years later, and people are still in awe of their achievements. it was truly a fantastic period in human history and the Athens star shone brightly for many years. So this begs the question: What went wrong? How did such a great and powerful civilization fall? The answer lies in the same pattern that we see throughout history: too much greed and too much war. It was when the Athenians got involved in the Peloponnesian wars but war with Sparta that their monetary problems began. First they lost access to their gold and silver mines. They were also paying armies that were on foot and they were miles and miles away from Athens. So as they paid their armies to buy goods and services from the local populations, a deflation occurs in Athens because they're sending all of their coinage out of the city. Then they started debasing their coinage to pay for the war. If you take in a thousand coins in taxes and then you melt those down those gold coins and you mix 50% copper into your gold now you can mint 2000 coins. so if you take in only a thousand coins but you spend two thousand coins, what is that called? That is deficit spending. Athens began to do that during this war with Sparta. They also had these great public works which were very expensive. And they finished the temple of Athena Nike during the truce in the middle. There was a six-year truce in the middle of this 27 year war. So they didn't stop there great public works and allow their market economy to heal from the expense of this war. As they debase their coinage, people would take the new debased coins at face value at first until there were a whole bunch of those and there's something called Gresham's law where people tend to save, to keep the thing that's rare and they spend the thing that's common into circulation first. So all of the gold and silver coins started to disappear from circulation and become quite rare and it was just these copper coins. suddenly it took a whole bunch of copper coins to buy a gold or silver coin one of those old gold or silver coins. This is the first time that gold or silver ever had a price. Before that everything was measured in a weight of gold and silver. So a large factor in Athens downfall was the expense of war, the expansion of Empire, the debasement of their currency, the eventual inflation that was caused. You know, they minted these coins until they became nothing but flecks of copper. This was actually the world's first hyper inflation and what it did was it financially debilitated Athens to the point where in 404 BC they surrendered to Sparta and eventually they became nothing but a satellite of Rome. The thing that amazes me is how history just keeps on repeating and repeating and repeating and we never learn from all of our stupid mistakes. We just repeat the same stupid mistakes over and over and over again. Today we are doing the same thing that the Athenians did that caused the loss of their great culture. We're doing the same currency debasement, we're doing the same deficit spending, and it's for the same reasons: it's for war and it's for great public works. The interesting thing about the Peloponnesian War was how it started. I would say one of the interesting parallels is that it started really with Athens at its height and with a level of hubris that sent them down the road towards ruin. - Perhaps they felt that they were, you know,... - Superior. Couldn't make a mistake. They knew better. Exactly! And they ended up destroying their society. As a result. - It's a road that we're going down today, right? - I think absolutely. there was a play written shortly after the Peloponnesian wars about the worthlessness of the copper flecks that are where their coinage at the time. So we go from gold and silver very high value money to a currency that has a face value. And it's the first example that I can find in history where a war was... war and great public works were being funded through deficit spending. What you've just seen is the first recorded example of one of the most predictable hidden secrets of money: The Seven Stages of Empire It's a long term cycle that echoes throughout history right to this very day and is basically a societal pendulum that swings from quality money to quantity currency and back again to quality money. It always plays out in seven stages. It always ends with gold delivering a knockout blow to debased currencies and it goes like this... Stage One A country starts out with good money which is either gold or silver or it's backed by gold or silver. Stage Two As it develops economically and socially it begins to take on more and more economic burdens adding layer upon layer of public works. Stage Three As its economic affluence grows so does its political influence and it increases expenditures to fund a massive military. Stage Four Eventually it puts its military to use and expenditures explode. Stage Five To fund the war it steals the wealth of its people by debasing their coinage with base metals or replacing their money with currency that can be created in unlimited quantities. Stage Six The loss in purchasing power of the expanded currency supply is sensed by the population in the financial markets triggering a loss of faith in the currency. Stage Seven A mass movement out of currency into precious metals and other tangible assets takes place. The currency collapses and gold and silver rise in price as they account for the huge quantity of currency that was created. This process transfers massive wealth to those who had the foresight to position themselves beforehand in real money: gold and silver. You know, our monetary system basically steals from the poor and middle class and transfers the wealth to the banks. We see this throughout history and it's just repeating over and over again. What's happening in Greece right now is basically the same thing that was happening back in 407 BC. The deficit spending to fund all of these public works and the debasement of their currency supply caused them to become nothing but a satellite of Rome. Today, they're becoming nothing but a satellite of the banks. Well, the idea of Gresham's laws is simply that people are going to hold on to what's value and spend what is value. Way way back in my youth, I was 11 years old when we went from a silver based monetary system to a purely fiat system. People saw that silver was money, they got used to it, they didn't really think about it and in 1965 under President Johnson, he basically said little silver is too valuable to money, we're gonna just start putting out these substitutes which were what we call cupronickel coins. They were nickel copper plated with nickel at the time. And of course the metal value was far less. And I understood that as a kid. And yet very few adults really seemed to get the idea of what was really going on or a few and all it takes a few. And of course the Gresham's law took effect, so the currency came out of circulation rapidly. It's very interesting to be, you know, knowing monetary history fairly well is there always, you know, put out in silver looking or gold looking form and in most cases, you'll have in fact they look rather interesting and some of them are like silver on the inside and gold on the outside WITH THE LOOK. They have no value at all, really other than melt value of pot metal. To me it's sort of subconscious level. Why are they making them gold colored? Why are they making them silver colored? I think there's an inherent knowledge in the human species that knows that gold and silver have value so if they look in their pocket and they see something gold colored or silver colored it makes it give them kind of a warm fuzzy feeling and it's like, oh yeah, you know, but there's no value in these coins really. The next question is how does this affect you? My next stop was in London where I had been asked to give a presentation to a group of businessmen. They wanted to understand the reason that gold had surged recently and I explained to them that to understand gold you have to understand monetary history. Once you see where we've come from, you can get a much clearer understanding of how the 7 Stages of Empire are playing out right now. We weren't allowed to show their faces but we were allowed to film my presentation. So here it is. The last hundred and forty years of monetary history condensed into just ten minutes. Keep the 7 Stages of Empire in mind. And as you watch this, see if you can recognize the signs. Everybody thinks the US dollars still as good as gold and it hasn't been since 1971. This is the world monetary systems. From 1873 when Germany went on the Classical Gold Standard where each unit of currency is backed up by an equivalent amount of gold in the Treasury in the United States. $20 bill - $20 gold piece in the vaults. Go into any bank, slap down your currency which was a receipt for money, a claim check on money ask for your money (gold and silver) and they would give it to you. So this shows this is currency, this is money. Otherwise there was no reason for any government to store gold in their vaults and then print this currency that was backed by gold. This is what gives confidence in that. And it gives governments the ability to start this scam in the first place where they print these receipts for gold and then they can print more of them than gold that exists. And that happened when we got to World War I. And all the combatants stopped redemption rights? You could no longer go on the bank and trade your pounds, lira, marks, francs no longer redeemable in gold. And they lit up the printing presses and started printing like crazy. Then between the wars they went on something called the Gold Exchange Standard where currencies would be backed partially by gold. So in the United States under the Federal Reserve Act of 1913, the Federal Reserve was allowed to put $50 worth of claim checks on gold currency in circulation backed up by only $20 worth of gold So it was a 40% reserve ratio. For every $20 gold piece in the vault They could put $50 in circulation. We're the dollars of the nation on parade We're the biggest batch of dollars ever made Oh we used to march by millions but now we march by billions and maybe we'll be trillions before you're dead! Then we get to 1944. Now during both wars, Europe paid the US with gold. During World War I, the US didn't get into the war until the very end of it. We didn't really have troops on the ground here in any quantity until the last six months of the war. So for the first four years or so, you're selling you, all of, you know... You take all of your young men off of the farms and turn them into soldiers. You take your factories that make toasters and they start making machine guns. Your factories that made cars are now building tanks. And so you turn your economy toward war. And all of your consumer goods and your grains had to be imported from the United States. And you paid us with gold. Then in World War II, Hitler starts saber-rattling in 1936, annexes Austria in 1938, invades Poland in 1939. Pearl Harbor wasn't until the end of 1941. We didn't have troops on the ground until I believe August of 1942. So again, it's like 6 years where you're paying us with your gold and we're selling you stuff. This is where Americans have this myth that war is good for the economy. War is good for the economy if you are not in it and you're selling them the tools of the trade. Yes. The American national income gets bigger and bigger. In 1943, it was a hundred and forty two billion dollars. That was double the 1939 figure, triple a figure for 1933. But by the end of World War II, the US had two-thirds of all the world's monetary gold, the central bank gold, and the rest of the world had to share the other third and Europe had none. So the world monetary system was no longer going to work. It would collapse. But we had made all these loans of dollars to Europe so Europe was flooded with dollars. And so representatives from around the world met at Bretton Woods, New Hampshire in 1944. They come up with a new world monetary system called the Bretton Woods system where every currency on the planet with the exception of just a few, they would be backed by the US dollar, and the US dollar would then be backed by gold at $35 per ounce. This gave confidence to all currencies. so this gave the world stability and it pegged all the world's currencies to each other through the dollar to gold. So there was no such thing as the forex. Currencies didn't float, the exchange rates were fixed year after year. And this helped to make world trade boom. Then the Dollar Standard starts because we kept on printing dollars. Under the Bretton Woods system, there was no reserve ratio established where the US actually had to have a certain amount of gold for how many dollars we created. So we had done a bunch of deficit spending for Korea, for Vietnam, for Johnson's Great Society and expanded the currency supply, the amount of paper dollars in circulation, and exported them all over the world. And then in the 1960s, Charles DeGaulle, President of France, realizes that we don't have the gold to back up the dollars. The fact that many countries, accept as a principle, dollars being as good as gold lead Americans, to get into debt, and to get into debt for free... at the expense of other countries. Because what the US owes them is paid, with dollars they are the only allowed to emit. We consider it necessary, that international trade, be established, as it was the case, before the great misfortunes of the world, on an indisputable monetary base, and one that does not bear the mark of any particular country. Which base? In truth one can't see, how one could really have... any standard criterion other than GOLD! And he starts asking, France acts asks for their gold and trades and the dollars. And at that point, other countries saw this and started jumping on board. And the US lost 50% of its gold from 1959 to 1971 but we still had in 1971 about 12 times more dollars that we had created than there was gold and this run on the bank basically. The US now being the bank. This is a giant worldwide bank run because the US for the second time had committed a fraud and created more receipts for gold than there was gold. It's...it's that simple. Then finally the markets sort of sense this. And Nixon was forced to take us off the gold standard because if he had paid out gold until it got to zero, once we couldn't pay on some of those dollars, the entire worldwide monetary system would have collapsed. I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the United States. In full cooperation with the International Monetary Fund and those who trade with us, we will press for the necessary reforms to set up an urgently needed new international monetary system. And on August 15th 1971, all the world's currencies became fiat currency I don't know why the rest of the world didn't rush out and hang him but they didn't, they just all went along with this. To our friends abroad, I give this assurance: The United States has always been and will continue to be a forward-looking and trustworthy trading partner. There have been thousands upon thousands upon thousands of fiat currencies throughout history and there isn't one that survived. It is a 100% failure rate. And we started this experiment where all the world's currencies would be fiat currencies simultaneously in 1971. But what we have here: 30 to 40 years different monetary system, 30 years, 28 years, 39 years plus. What's next? The world is going to have a new monetary system in this decade that we're in. We're going to experience this huge deflationary crash around the world. the world will probably end up on some sort of new monetary system probably after governments try and print their way out of this and cause hyper inflations of all the currencies. And people will just lose confidence in currency. And what do they always go back to throughout history time after time for the last 5000 years? Actually they always go back to gold and silver. In a world of floating currencies and that's what all national currencies are today, they bob up and down relative to each other but they're all syncing relative to gold, that includes the Dollar as well as the Euro and the British Pound and all the others. They're going to continue to lose value, continue to lose purchasing power. Personally I don't think there's any way of avoiding what is coming. There's no way to fix it right now. There's only a way to either let it wipe you out or to benefit from it. And I want to make sure that it's not just all, it's not just a few of the big investors in the world that are ending up with all the cookies. So I want to make sure that there's as many small investors as possible that are benefiting from it because that's what makes society run: middle class, small investor. One of the biggest challenges for human beings is that physiologically we are designed to operate in recency. It's the fight or flight response. It's literally in my cells. Literally. And so that when I'm in the wild, it's about I need to look for something to eat or make sure I don't get eaten. And how that translates into the modern world is that we think only about what's happening immediately in front of us. And so we think a long time is last week. In the world of YouTube and Facebook and instant messaging, we think three seconds is a long time like: Did you get the post already? I already posted it. And the reality is that if you look at history, I don't mean a week, I don't mean a month, I mean decades, I mean a hundred years, I mean a couple of hundred years, I mean more than a couple hundred years. You can start to see some patterns, you can see some things that are going on because history repeats itself there are some trends and there are some movements that you can learn from. And you literally have to go outside of your your human instincts to look at history because we just want to focus on right now, because I said that's about either eating or being eaten. So we're gonna go beyond that and that means not just focusing on the hair now but learning some real powerful stuff and what's happened because they just might be some indicators there as what's gonna happen in the future. Now, the 7 Stages of Empire just as a reminder started with sound money and then a country adds layers of public works and social programs and then develops a massive military and then puts that military to use and to pay for the war it debases its currency supply which causes a loss of faith in the currency which then leads to a currency crisis and gold does an accounting of the expansion of that fiat currency supply that happened over all those years of the first five stages. We are in the sixth and beginning the seventh stage. Gold started the accounting in the year 2001, it was 250 dollars then but we're still in the very early stages of this. Well, that's right. I think one of the problems with gold is people just don't understand it. I mean for one thing it's sort of been banished from the curriculum for 35 years. We have going on two generations of academics and scholars who have never studied gold unless you're a specialist in economic history, you can go back and look at it now. When I was in university and even when I was in graduate school in economics, we were still on the gold standard, in some form it was fairly attenuated. But when you studied the IMF and you looked at how they present the finances of a country and they break down the reserves and you know, the capital accounts, gold was a line item in the capital account. He had to understand how it, what role had played and how it, you know, could equilibrate in terms of balance of trade. Well, that's gone. The IMF, Nixon went off the gold standard in 1971. And bright young economic students just don't understand gold. They think it's a joke or they think it's maybe a commodity trade, a momentum trade. They don't understand that it really is money parks loss. So now we've learned that money was born in roughly 630 BC when it became fungible. It was free markets and sound money that led to Athens great prosperity. But debasement of their money for deficit spending on war and public works played a large role in their demise. Over the past 140 years, we've based our own currencies to the point where two generations of scholars don't even understand gold. We learned about Gresham's law and that Bad Money Drives Out Good. In recent history there has been a new monetary system roughly every 40 years. And we've learned that we are in the 6th stage of the 7 Stages of Empire. So that's it for this episode. Join us next time when we learn more about the chaotic state of the US Dollar Standard and how it's going to affect you no matter where you live on the planet. When I wrote my book I said that we're coming into an era that is going to be the greatest wealth transfer in the history of mankind therefore it's the greatest opportunity in the history of mankind. I've made it my mission to help as many people as possible get through this crisis and to come out on the best side of the wealth transfer. I've just finished filming an exclusive presentation titled "How The 7th Stage Will Unfold" where I detail what I'm doing personally to prepare for a range of scenarios. It's available at hiddensecretsofmoney.com as part of your free information toolkit. So my challenge to you for this episode is to try and find a single example in all of monetary history of a crisis that was brought on by too much deficit spending, too much debt and too much currency debasement being solved by more deficit spending, more debt and more currency debasement. Until then, good luck and I'll see you at the bonus presentation at hiddensecretsofmoney.com. Thanks. You bet, there's no other, there is no other side. you're either silver and gold or you're doom. That's exactly the way the world is always working. That's the way it's working right now. Turn on television. Watch what the price of gold because the dollar going down, gold going up, silver going up. That's exactly the way it's always working. It's always working that way. And it's working that way now. Why is anyone surprised? Why is it surprised? It's always working like that. 5000 years, it's always working exactly that way. It's happening that way now. They're "Woo! Wait a minute..." Weird! Beyond weird!!! Mike Maloney's hidden secrets of money is made possible by the clients of goldsilver.com. Your continued loyalty and support allows us to educate the public on how to both protect themselves and benefit in the turbulent times ahead. To all goldsilver.com customers, thank you. Hidden Secrets of Money would not be possible without you.
Hidden Secrets Of Money Episode 3: From Dollar Crisis To Golden Opportunity.
You may have heard stories on the news lately that suggest an international move away from the US Dollar is underway...but have you ever seen these events listed on a timeline?
Welcome to Episode 3 of Michael Maloney’s Hidden Secrets of Money. Mike was asked to speak at an event in Singapore and to give his opinion on the future of the US Dollar. His presentation was titled "Death Of The Dollar Standard" and showed very clearly that the Dollar Standard is developing serious cracks, and will likely split at the seams during this decade. How will this affect you? It's not all doom and gloom, as you'll learn from watching the video.
Video Transcription:
This Timeline Shows The Death Of The US Dollar As World Reserve - Hidden Secrets Of Money Episode 3
I'm in singapore, and I'm about to go on stage in just a few minutes I have [not] given a presentation for over a year [now] I was in a little fender-bender a while back and so I took a little bit of time off There's this sense of urgency now. The global dollar standard was put in place by a series of accidental events that were very fortunate for the United States because it gave us an advantage over the rest of the world But our politicians over the past decade or so have abused this privilege as though it was their birthright, and now the rest of the world are turning their backs on the US dollar standard This is going to cause a financial calamity the likes of which we've [never] seen before and it's going to be devastating for most people. I don't *want* this to happen, but the damage has already been done So I'm going around trying to alert people and show them how they can protect themselves and turn this into a great opportunity for themselves There's always one result from what we are doing right now, expanding the currency supplies all over the planet; there's one result and that is higher gold and silver prices I love America – at least the America that the Founding Fathers created and I'm hoping people get interested in this so that they'll see that what made America great is the answer to our problems: to get back to free markets, free people, and sound money. Our own history proves that this is the road to maximum prosperity We are entering a period of financial crisis that is the greatest the world has ever known The wealth transfer that will take place during this decade is the greatest wealth transfer in history Wealth is never destroyed; it is merely transferred, and that means that on the opposite side of every crisis there is an opportunity. The great news is that all you have to do to turn this crisis into your great opportunity is to educate yourself. I believe that the best investment that you can make in your lifetime is your own education: education on the history of money, education on finance, education on how the global economy works; education on how all of *these* guys – the central bankers, the stock market – how they can cheat you, how they can scam you. If you learn what is going on and how the financial world works, you can put yourself on the correct side of this wealth transfer Winston Churchill once said that the further you look into the past, the further that you can see into the future. This program is all about creating your own crystal ball: being able to gaze into the future, being able to change this crisis – the greatest crisis in the history of mankind – into your great opportunity I was born in Salem, Oregon in 1956 and we moved to California when I was four years old in 1960. But when I went to school, it was obvious after just the fourth grade, that there was something different with me; and by fifth grade, I was in remedial classes. And it turned out that I was dyslexic and teachers were not taught to recognize that back then. I was always falling behind everyone else. When I would get a teacher that would lecture instead of making us read out of books, I would just absolutely excel; I suddenly went from the dumbest kid in class to the smartest kid in all of the periods of that class But the result was that, you know, after a while, I was in every single remedial class, and I just couldn't take it and in tenth grade I dropped out, middle of 10th grade; and I've never been back to school. I often say that in every crisis, there's an opportunity; and in this case, the handicap of dyslexia has also been a blessing. Because I couldn't learn out of books and I couldn't take notes I just had to remember everything. And I have the ability to – my brain's wired a little bit differently; I have the ability to look at a chart today, and I know how it relates to a chart that I saw 10 years ago But it was back in about the year 2000 when Steve Jobs of Apple introduced OS X – the world of books opened up to me... built right into the operating system was a text-to-speech program; now I could just have an assistant slice and scan my books and turn them into text and e-mail me and then all I have to do is highlight the text, press a button, and the computer reads to me. "People are turning to assets; it will keep their value... if prices rise... "So much money has been pumped into the system that people are worried about inflation down the road, said Bruno S. Frey, Professor of Economics at the University of Zurich..." The dyslexia is no longer a problem But what it's also done for me, is I have the ability to explain complex things to people in a simple manner for some reason, and so I sort of made it my mission to try and wake up the middle class, to let them know how the monetary system works; to let them know that there is a major economic calamity coming sometime down the road And it's most likely within this decade that we're in right now The US dollar is about 60% of the value of all the currency on the planet and more than half of the dollars reside outside the United States The reason they – every country has US dollars is, first of all, that's what central banks use as the reserve currency Second of all, oil is priced in dollars So this is the world and what we – what you see here is that these are the countries that are avoiding the US dollar in trade; they're doing bilateral agreements where they'll either hold each other's currency and settle that way, or they're establishing – like right now, they're talking about a BRICS bank: Brazil, Russia, India, China, and South Africa having a bank that will do settlements between the countries directly without using the US dollar These countries, they tried to avoid using the US dollar like Iran tried and we banned them from using SWIFT How many here have made wire transfers before? So do you know what a SWIFT number is? It's a code that you plug in and this SWIFT system is what transfers those dollars from one person's account to another person's account. Well Iran decided that they were going to sell oil only in Euros; they got banned from SWIFT But there's countries right now coming up with a replacement for SWIFT, and it doesn't use the dollars, the SUCRE system; and Iraq started selling oil for Euros In Libya, they were talking about creating the gold dinar and selling oil for gold. So, those are the countries that are trying to use something other than the dollar. Then we've got gold competing with currency and there's a lot of talk around here about the gold dinar, and there's people that are actually using gold in some of the countries over here. And then in Utah, Utah has recognized gold and silver as money again It's legal tender currency in the state of Utah in the United States. And then you've got physical gold accumulation I'll show you later that China is accumulating an immense amount of gold; that all the countries with an up arrow, that's gold accumulation Then we have gold repatriation Germany has been asking for their gold back, and they're getting it Venezuela has repatriated their gold from the Bank of England. And then, if we put this on a timeline Here's the nails in the coffin for the dollar standard and you will see that there's not a lot of time left This is my evidence that I think is proof that the death of the dollar is coming, and it's coming shortly Nixon ended Bretton Woods and we went on the dollar standard. Then the first nail in the coffin is, Iraq sells oil in Euros; the crisis of 2008 and we added 1.25 trillion to our base money in the United States. As we add to the base currency, people get worried about inflation; they start rushing toward gold and silver. Iran ends oil sales in dollars and they're taking commodities in trade for oil, they're taking – in Turkey, they take the local currency and then buy gold in Turkey and export the gold to Iran, so they're basically selling oil for gold. They do the same thing with India QE2 – quantitative easing, that's more currency printing in the United States Libya China and Russia bypassed the dollar, they did a bilateral trade agreement where they hold each other's currency and they do direct debt settlement without having to wire transfer US dollars Chinese president just recently, said that the dollar as the world's reserve currency is a product of the past Utah recognized silver and gold as money China and Iran bypass the US dollar with a bilateral trade agreement. Venezuela repatriates its gold. China and Japan trade directly India and Japan bypass the US dollar. Russia and Iran trade directly Iran sells India oil for Rupees and commodities. China and Brazil trade directly Swiss citizens demand gold repatriation African countries ban the dollar; in Zambia, you can go to JAIL if you use US dollars Quantitative easing number three: they have announced at the Federal Reserve that they're going to be – they're starting with 40 billion dollars of currency that they're creating each month and now it jumps to 85 billion dollars That's more than one trillion a year; and remember, it took 200 years to go from no dollars to 825 billion. And now they're going to create a trillion every year Iran trading energy for gold Singapore removes tax on money Germany repatriates 150 tons of gold from the New York Fed. The citizens of Netherland demand gold repatriation Ecuador repatriates part of its gold reserves Austrian citizens demanding gold repatriation. China acknowledges fundamental market shortage of gold. And now the Fed is increasing the rate of printing when I said from 40 to 85 billion every month; just over a trillion per year So those are the nails in the coffin for the dollar standard; and if you noticed, they are all speeding up and they're all happening right now You don't have a whole lot of time; and if you wait too long, then the opportunity is gone It's going to fail Why is the dollar sacrosanct? Why is it *not* going to happen to the US dollar? What will? People think, oh no, it's high technology; we have computers now, or the internet – these are ridiculous arguments The truth is, all fiat currencies have failed and there's no reason why this one won't. What worries me again so much is that it's a global situation. And so it's going to cause problems on a global basis And it's a trust breaking down. And you're already seeing the trust breaking down, as I said earlier – because you're seeing different countries exchange directly with each other's currency, circumventing the dollar; you're seeing that in oil; you're going to see it more and more and people are just going to opt out of the dollar. And you'll probably get to a point before the whole thing collapses entirely where the dollar is more or less used internally, United States, and externally it's not used as much because there'll be a lot of agreements made between nation states outside of the United States that will want to use each other's currency and not the dollar This isn't going to be pretty when it happens I am not an end-of-worlder or a doomsday guy. All you can do is play the hand that you are dealt If we go to a new monetary system, and I think it's absolutely inevitable: there's just too much energy built up in this one that has to release; it has to come crashing down somehow When that happens, there's an enormous wealth transfer for people that are on one side of the bet or another. And people don't realize that whether they are – they think they are making a bet or not, they are making the bet They are involved; this wealth transfer affects everybody, whether you want to participate or not. If you are holding paper assets and paper currencies, you have bet one direction; if you're holding gold and physical assets you've bet the opposite direction So, these are changes in Chinese holdings. They are accumulating gold, they are getting rid of US Treasury bonds This is gold held in China. The green line is the cumulative gold, that's on this side, this scale, so it's gone from about 700 tons to almost 6,000 tons just since the year 2000. So this is their central bank holdings This is their mine supply But this is – and my researcher put all of this data together. You're the first people to see this – this is the amount of gold flowing through the Hong Kong exchange that goes into China and the past couple of years here, they have ramped up their buying. They know that the dollar standard is coming to an end and they are protecting themselves, and you're probably going to see gold-backed Renminbi someday – the Yuan So this is an interesting chart: Change in Global Influence So this is the correlation to this basket of currencies. This basket of currencies, if you add them all up, they're trading up or they're trading down and this was pre-Crisis, so it's before 2008, so – this is from the International Monetary Fund, it's their data – so from 2005 to 2008, this is the correlation of, you know, if that basket of currencies was trading up, the dollar was probably doing about the same thing, is what it's saying That Chinese Renminbi, a little less so. And then, this is today The US dollar is done for! I don't think there's any question we're heading for a new monetary system. The question is, what would it consist of You know, the four choices are sort of a world of multiple reserve currencies, and Barry Eichengreen of Berkeley is the leading proponent of this, or leading scholar on this topic. The problem with that and where I disagree with Eichengreen is there's no anchor in that system We did have multiple reserve currencies before, in the 1920s He's right about that And it was sterling in the dollar, but they were both anchored to gold. And in the post-Bretton Woods world since 1944, it's been one reserve currency which is the anchor, and it was anchored to gold until 1971. Since then, the dollar has been detached from gold but all the other currencies are still linked to the dollar So at the end of the day we've had an anchor of some kind, we've never had a world of multiple reserve currencies with no anchor. I'm not sure that's that stable. The SDR is the second choice. The SDR is a basket currency sponsored by the IMF At least for the time being it's also printed money; the IMF literally prints the SDRs ships them out to the members. And their reserves go up, exactly the way the Fed creates money and bank reserves go up But it's not backed by anything. Third choice is gold, some variation on the gold standard And the fourth choice is what I call chaos, which is that nobody does anything; there's a lot of wishful thinking; there's a lot of denial; there's a lot of delay, and we get to the point where people just totally lose faith in paper currencies, go to hard assets, and we have a sequential collapse of paper currencies around the world – at which point, governments will have to react with emergency measures. That could include coercion, confiscation, you know, various sorts of freezes on paper assets... could be a lot of things in that scenario, so to me it's multiple reserve currencies, SDRs, gold, or chaos I favor gold, but I fear that we may get chaos I've talked about every 30 to 40 years the world has a new monetary system. And the thing is that over the years, governments and these central – and the banks, have basically screwed us more and more and more And these new currency systems are always created by the same idiots that created the last one that fell apart It's the big banks, it's the central banks, and it's governments that are creating these new systems each time; and each time the system they come up with is a system that cheats the population more and enriches the government and the banks more. It's a system that transfers wealth at greater and greater speeds. You know, this one is going to fall apart just like all of the others There's a difference this time, though: there's the internet. People are connected all over the world; information is spreading and people are getting educated So I'm hoping that we go back to gold. Not a gold standard; gold standards suck Did a video on that With a gold standard there's supposed to be a certain amount of gold in the vaults for each unit of currency. In other words It's a one-to-one ratio, is the way that it started. And then, they print more receipts than gold that exists So if we have gold standards, we're going to get scammed again If we used gold and silver, if the public gets educated enough before all of this happens If we went back to gold and silver, then governments can't scam us; it limits their ability to transfer wealth from the population to the government and to the banks A lot of people say that you can't use gold and silver today because they're too heavy and bulky and it's completely wrong You could put gold and silver in a vault and you could make payments to somebody by transferring ownership of nanograms, grams, or ounces of gold and silver from one person's account to another by means of a check, a credit card, or even your cell phone If we go back to a gold-backed currency, gold-backed US dollar, at that point, I think the minimum scam that the US could get away with, which means the minimum number of dollars in existence that they could make convertible into gold, would be the dollars that are held in foreign central banks That would be similar to the Bretton Woods system that we had from 1944 to '71. Well, I did some analysis on this when I was writing the book back in 2005, and back then it required $20,000 an ounce gold for the Treasury to have enough gold to cover those dollars – or the New York Fed, actually – and if they were going to back all of the dollars, you're talking gold measured in the hundreds of thousands of dollars per ounce There just isn't that much gold and there's a whole lot of currency. We keep on printing it every minute of every day This is gold and how it accounts for currency supply This is our base money in the United States, which was gold back here from 1900 until the Federal Reserve; the amount of currency in circulation and gold were the same Then we established the Federal Reserve and we inflated for World War I; and we had more currency in circulation than we had gold to back it. There were some bank runs in the '30s; then Roosevelt unpegged the dollar from gold and gold's value rose from $20 an ounce to $35 an ounce. And when it did, the value of the gold held at the US Treasury rose to meet the value of all the currency that was printed in the meantime Here's the same chart again, but now I'm taking it out to 1971. And what you see is these gold inflows during World War I, during World War II, it's another 117 percent gold increase. This is what made the United States a superpower: it's all financial It isn't our war machine necessarily; it's all the gold inflows that we got because everybody else was at war and we were isolated from it. And they had to pay us for all their consumer goods and so on. And then we jumped into the war and we inflated, and then in about 1959, countries started figuring out that we didn't have all the gold You know, we were printing more dollars than gold that we had to back it; and under the Bretton Woods system they could go to the New York Fed and turn in their dollars for gold at $35 per ounce. Only foreign central banks – individuals couldn't do that So gold started flowing out and the US lost 50% of its gold from '59 to '71, and in the meantime, we kept on printing currency If this had continued until it got down to zero, if there was one more dollar out there that laid claim to gold, that came in and said, "we want our gold for currency" and there was no gold to back it up, the entire world monetary system would have come crashing down So Nixon had to take us off of the Bretton Woods system, the last vestiges of the gold standard, in August 15th of '71 So here's the same chart again: there's the first chart and the second chart to '71, and now I'm taking it out to '85, and I'm adding a second line here How many people would agree that credit cards are replacing cash in circulation? Yeah, credit cards – you use your credit card more and more every year, right? You use cash less and less. Well this is outstanding credit card balances. It's called Revolving Credit Outstanding, is the name of the chart that you get from the Federal Reserve When you charge something on a credit card, you create currency The bank didn't actually loan you anything; they invented numbers And then they have the gall to charge you interest if you don't pay those numbers back on time But so, the thing is, that the merchant that you're paying, the restaurant or the grocery store, that merchant's checking account can't tell the difference between the credit dollars that *you* created or the cash dollars that you pay him So to that merchant's checking account, it all looks the same. And those dollars that you created stay in circulation until somebody saves them up and pays down credit card debt. So unpaid credit card balances, I include as part of the cash in circulation. And in 1971, Nixon took us off the gold standard and gold became a freely traded, separate, commodity-slash-money, and it did an accounting of the currency supply There was quite a while here where we could have gone back on the gold standard. The value of the gold at the Treasury exceeded all the dollars printed: from George Washington to Jimmy Carter. And for a week or so, a couple of weeks, it exceeded base money *plus* outstanding revolving credit. So here's the same chart again. That was to 1985 and now I'm going to take it out to today. And so there's that 1980 peak where it shot past base money and base money + outstanding revolving credit And then we get to the crisis of '08 and Ben Bernanke – oh, by the way, instead of billions, we're now measuring in trillions So we started in millions, and then it went to billions and now it's trillions So, we did the bailouts and all the quantitative easings, and that's what the currency supply looks like today. And then, they announced quantitative easing 3, which is that 85 billion a month that they're creating, and they think they're going to have to do it until about 2015 So, here's the projection: for gold covering the currency supply today, would be $13,400 per ounce gold, for history to repeat and for gold to do the same thing that it did in 1934 *and* in 1980. And believe me, it shocked people in 19- – in the 1970s. When gold was $35 an ounce and Nixon took us off the Bretton Woods system, all the economists were predicting that gold was going to go down, because now there was going to be no more monetary demand for it Anybody that said gold was going to go to a *hundred* bucks was considered an absolute lunatic – and it went to 850; it rose 24 times its price. Well, when I wrote my book, we were right here with base money: so base money + outstanding revolving credit. It took about $6000 an ounce for history to repeat; today it takes $13,400. And if you include the same overshoot – remember in 1980, it didn't just cover base money but it shot past it – $24,000 an ounce gold is what it would require to meet that. Except we've – the Fed has announced that they're going to keep on printing currency until there's lower unemployment, and the economy gets back on track. And they think till 2015. So the projected price, according to the Fed and history repeating, if that was to – if the Fed does this, and then history repeats and gold – the public gets afraid of what the Federal Reserve is doing, and they rush toward gold and silver to protect their purchasing power, gold would have to rise from there to way up here and that is $26,000 per ounce gold to cover. If it does the same overshoot, we're talking about $47,000 an ounce gold. Now, I don't even like to measure gold in dollars. If you measure it in a price, price doesn't mean anything; it's the value. How much can you buy with the proceeds? If we have deflation and some of this currency evaporates, because it's all just numbers that they type into a computer these days – if we have deflation, maybe gold peaks at $3,000 an ounce and the currency supply collapses to way down here somewhere, and the Dow is at 1500. That means gold will still be double the Dow; you're still going to get 14 times more paper assets one day than you can buy today with them And it's probably only a couple of years left that this is going to take, as you saw about how the nails in the coffin of the dollar standard, how they're speeding up If we have big INflation and the Dow goes to 30,000, maybe gold will be $60,000 an ounce; and if we have hyperinflation, the Dow would be 30 trillion and gold would be 60 trillion It doesn't matter; in any case, gold would buy you 14 times more paper assets than it does today So, these are the global assets: here's the sto-... the bond market, here's the stock market, this is the value of real estate on the planet, and these are bank deposits And there's gold Now that little slice of the pie is going to get a lot bigger in just the next few years, and it's not going to do it by a whole bunch more gold just appearing. It's going to do it by the price of other assets going down or at least their value going down and the value of gold going up So the price of gold will change, that piece of the pie is going to grow; it was a lot bigger back in 1980, when gold was at $850 It's going to get a lot bigger today again; but today, as you've seen, it requires far far higher prices So, the death of the dollar standard: how many people here believe that I'm sort of predicting what's going on in the future here? You can see, that there's a new world monetary system coming It happens every 30 to 40 years; except this time, instead of a baby step off of gold, we've got to go from nothing back to something. It's going to be a worldwide convulsion, the scale of which has never been seen before At the end of the day, the fundamental, fundamental driver of gold, it's not so much that gold's in a bull market, it's more the dollar's in a bear market. And people say, well, how high can gold go? And my answer is, well, how low can the dollar go? The answer is the dollar can go to zero If you divide any number by 0 the answer is infinity. So gold can go to infinity if the dollar goes to zero. Now, in the real world, something else will happen. It's not that gold becomes worth infinite number of dollars; it's more the case that the dollar just falls off the stage. The dollar gets the hook, so to speak, and you'll count gold in dollars to five thousand, to ten thousand at some point, but there will come a time when you won't count gold in dollars anymore, because dollars won't count. People won't want dollars There is so much opportunity in crisis, it is absolutely extraordinary. That's just not me saying that, that's just history You read any amount of history – and I don't mean last week, I mean real history – you know, in times of crisis, it's when huge fortunes were made. Times of crisis is when human beings create and develop newest technologies and new... science and new medicines. In times of crisis, there's so much opportunity – as long as you can remain calm, get educated, be resourceful. The challenge for most people is that in crisis they go into crisis mode. Which means they go into scarcity, they go into lack, they go into blame; and none of those emotions are resourceful for helping you solve whatever challenge is in front of you I believe that this is probably the greatest opportunity of anyone's lifetime. There has never been a situation where all the – everything came together, just like this. This is the first time in history where all the world's currencies are just fiat currencies backed by nothing And if what happens – what I think is going to happen happens, this is the greatest wealth transfer in history. It's the greatest opportunity. And it'll never happen in our lifetimes again So now we've learned the following hidden secrets of money. There is a global loss of confidence in the US dollar that is accelerating rapidly The change to a new monetary system is inevitable and will most likely be chaotic Gold standards do not work over long periods of time, but gold itself does. The public contributes to the massive amounts of currency creation by using credit cards and signing loans Gold has already accounted for the expansion of US dollars twice in the last century and may likely do so again So that's it for this episode. I thank you for watching and I hope you enjoyed it I know I threw around a bunch of astronomical prices for gold someday in the future, but it isn't the price measured in dollars It's, how much is its value? What is it worth? How much stuff can it purchase? The price measured in dollars, or any currency for that matter, is just a bunch of numbers And it really doesn't mean anything There are numbers that are created by the world's central banks, by the commercial bank system, and we're forced to transact in these currencies; but in our next episode, we're going to clear away the smokescreen of national currencies and show you how the world monetary system really works, and how all national currencies *have* to continue losing value It is not possible for them to maintain purchasing power over any reasonable period of time As for the golden nails in the dollar's coffin, it's only been a short while since we filmed the presentation in Singapore and already there are more of them. So for an update, visit HiddenSecretsofMoney.com, and in your free information toolkit, there's an exclusive presentation on the latest developments of the golden nails in the dollar's coffin. Now I know this episode was kind of serious, and it might have you upset right now, but believe me, it's not all doom and gloom. As I've said many, many times before, there are these brief moments in history where the safest asset class, the safe haven investment for the last 5000 years, also becomes the asset class that has the greatest potential gains in purchasing power. And I have bet my life on it First I became an investor back in 2002, and then I started telling everybody about it. I started warning them what was going to happen with the world economy and how to protect themselves, and I made it my mission to educate as many as I could So in 2005, I wrote my book. And then I gave people a means to protect themselves and opened up GoldSilver.com I believe that my team and I have created the world's best precious metals dealership, because we don't just sell gold and silver; we are gold and silver investors. And what we want to do is help you understand how to get through what is coming, to protect yourself, and to turn all of these bad things around to your benefit So if you decide that precious metals are for you, please visit GoldSilver.com We'd love the opportunity to become your dealer, because we feel that we are more than a dealer; we are a partner with you, and we're on the same side of the fence as you So thank you very much, good luck, we'll see you at the exclusive presentation at HiddenSecretsofMoney.com Thanks Do you think this is a "man the lifeboats" situation? Let me ask you this: if you knew the Titanic was going to sink and you were *on* the Titanic, you know there's going to be a lifeboat situation coming up soon Would you like – (...have life boats available) – that's right: would you like to get in the lifeboat early, get a nice seat? Maybe close to the water. Maybe closer to the [food] supply Right there in the middle, nice and comfy... or you want to be one of the last ones on the boat and you're jockeying for position? You have to throw a kid out to make room for you. Yeah, so uh... you know, lifeboat situation, it depends ...how you like your accommodations on the lifeboat, is whether you should be working your way towards it right now. And I will be edging my way towards it right now Mike Maloney's Hidden Secrets of Money is made possible by the clients of GoldSilver.com Your continued loyalty and support allows us to educate the public on how to both protect themselves and benefit in the turbulent times ahead To all GoldSilver.com customers: thank you. Hidden Secrets of Money would not be possible without you
Hidden Secrets Of Money Episode 4: The Biggest Scam In The History Of Mankind.
You are about to learn one of the biggest secrets in the history of the world... it's a secret that has huge effects for everyone who lives on this planet. Most people can feel deep down that something isn't quite right with the world economy, but few know what it is.
Gone are the days where a family can survive on just one paycheck... every day it seems that things are more and more out of control, yet only one in a million understand why. You are about to discover the system that is ultimately responsible for most of the inequality in our world today.
The powers that be DO NOT want you to know about this, as this system is what has kept them at the top of the financial food chain for the last 100 years...
Learning this will change your life because it will change the choices that you make. If enough people learn it, it will change the world... because it will change the system. For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, and it's all accomplished through this... The Biggest Scam In The History Of Mankind.
Video Transcription:
The Biggest Scam In The History Of Mankind - Hidden Secrets of Money Ep 4
You are about to learn one of the biggest secrets in the history of the world. It's a secret that has huge effects for everyone who lives on this planet. Most people can feel deep down that something isn't quite right the world economy, but few know what it is Gone are the days where a family can survive on just one paycheck, every day it seems things are more and more out of control, yet only one in a million understand why. You are about to discover the system that is ultimately responsible for most of the inequality in our world today. The powers that be do not want you to know about this, as this system is what has kept them at the top of the financial food chain for the last 100 years. Learning this will change your life because it will change the choices that you make. If enough people learn it, it will change the world... because it'll change the system. For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, And it's all accomplished through this, The Biggest Scam In the History of Mankind They say that money doesn't grow on trees but the truth is that the modern banking system creates currency far faster than trees can grow. Most people don't have a clue how currency is created economists and bankers make it sound so complex that people think they can't understand it. But I'm going to strip our monetary system down to its essence so you can see the scam behind the curtain and just how it affects you. Every modern society creates currency in pretty much the same way but since the US dollar is the majority of the world's currency I'm going to use the United States as our example. It all starts when some politician says 'Vote for me and I'll make sure the government provides you more free stuff than my opponent will' But there's no such thing as a free lunch - so to provide that supposedly free stuff the politicians vote for the country to spend more than its income. This is called deficit spending. To pay for that deficit spending the Treasury borrows currency by issuing a bond. So what's a bond? If you think about it a bond is really nothing but a glorified I.O.U. It's a pretty piece of paper with numbers printed on it that says 'Loan me a trillion dollars today and I promise over a 10-year period I'm gonna pay you back that trillion dollars plus interest.' But what you need to understand is that Treasury bonds are our national debt. These glorified I.O.U.s are to be paid back by you and I and our descendants through future taxation. Therefore: When the government issues a bond it steals prosperity out as the future so that it can spend it today. The Treasury then holds a bond auction and the world's largest banks show up and compete to buy part of our national debt and make a profit on by earning interest. You'll notice that as we move through this process the big banks are there taking a cut every step of the way. This isn't by chance as you'll see shortly. Then, through a shell game called Open Market Operations the banks get to sell some of those bonds to the Federal Reserve at a profit. To pay for the bonds the Federal Reserve opens up its big old checkbook and writes bad bogus counterfeit checks that should bounce because they're drawn on an account that always has a zero balance, there isn't one penny in there. To quote from the Boston Federal Reserve: 'When you are I write a check there must be sufficient funds in our account to cover that check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check it is creating money." The Fed then hands those checks to the banks and at this point currency springs into existence. The banks then take that currency and buy more bonds at the next Treasury auction. But what is a check? A check is also an I.O.U. When you write a check you're making a note that says "Here's my I.O.U. for cash, all you have to do is go to the bank and pick it up." Now it's very very important that you understand this process because we're going to come back later and show you the devastating effect this has on you. The treasury issues I.O.U.s, (bonds). The banks then buy those I.O.U.s with currency. The Federal Reserve then writes I.O.U.s (checks) and hands them to the banks in exchange for the Treasury's I.O.U.s (the bonds). And currency is created. So what's really happening is the Federal Reserve and the Treasury are just swapping I.O.U.s, using the banks as middlemen, and abracadabra presto currency magically springs into existence. This process repeats and repeats over and over again enriching the banks and indebting the public by raising the national debt. The end result is that there's a buildup of bonds at the Federal Reserve and currency at the Treasury. This process is also where all paper currency comes from. The Federal Reserve and the government mistakenly call it 'Base Money' because they didn't watch Episode 1 of this series, and they don't know the difference between money and currency. But I will correctly refer to it as 'Base Currency' because it is not money... it is CURRENCY, and as we've learned there is a big difference: Money has to be a store of value and maintain its purchasing power over long periods of time. We learned in Episode 1 that earlier in our history our paper currency was just a claim check. It was a representation for real money of intrinsic value, the gold and silver that was held on deposit at the Treasury. You could walk into any bank and slap your currency, like say a twenty dollar bill on the counter, and redeem it for real moneyÉa twenty dollar gold piece. But now this base currency that's piling up back here is really nothing but a receipt or a claim check on an I.O.U. (that bond), so it's really nothing but a supply of numbers. The Treasury then deposits the newly created currency in the various branches of the government, and the politicians say "Hey thanks for that!", and the government does some deficit spending on public works, social programs, and war. The government employees, contractors and soldiers then deposit their pay in the banks. Now this may come as a shock to you, but when you deposit your currency with the bank you're not actually depositing it into an account to be safely held in trust for you. Instead, you're actually loaning the bank your currency, and within certain legal limits they can do with it pretty much anything they please. This includes gambling in the stock market, and loaning it out... at a profit of course. Now this is where the machine of currency creation really gets cranking, because this is where something called 'Fractional Reserve Lending' comes into play. Fractional Reserve Lending is exactly what it says. The banks are allowed to reserve only a fraction of your deposit and long the rest out. Although reserve ratios may vary, I'm going to use a 10 percent reserve ratio as our example. If you deposit $100 dollars in your account, the bank can legally take ninety dollars of it and loan it out without telling you. The bank must hold ten dollars of your deposit in reserve just in case you want some of it. These reserves are called 'Vault Cash'. But why does your bank account still say you have one hundred dollars if the bank has stolen ninety dollars of it? Because the bank left I.O.U.s it created called 'bank credit' in its place. Now I know this sounds crazy, but here it is in black and white from the Fed: "Commercial banks create checkbook money when they grant a loan simply by adding new deposit dollars in accounts on their books in exchange for a borrower's I.O.U." These are nothing but numbers that the banks type into their computers, and even though these bank credit I.O.U. numbers are very different from base currency numbers (because they only exist in computers), they are still currency. So now there is one hundred ninety dollars in existence. Now the reason people take out loans from the banks is to buy something. They're going to buy a house or a car or something like that. So the borrower takes the ninety dollars that the bank loaned to him from your account, and he pays the seller of item. But then the seller deposits that currency into his account, and his bank loans out ninety percent of that, and leaves bank credit numbers in its place. So now there's two hundred and seventy-one dollars in existence. This process repeats and repeats until under a 10 percent reserve ratio an initial deposit of just one hundred dollars can create up to one thousand dollars of bank credit all backed by one hundred dollars of vault cash, just 10 percent. But as I said reserve ratios vary wildly... on some deposits it's 10 percent on others its 3 percent and on some forms of deposits reserve requirements are zero! The result is that the expansion the currency supply by the banks is far greater than even this example would lead you to believe. So once again, when currency is deposited in the banks, the banks get to lend it out and then it gets we redeposited and relent, redeposited and relent, redeposited and relent over and over again creating bank credit all the way. This is where the vast majority of our currency supply comes from. In fact 92 to 96 percent of all currency in existence is created not by the government, but here in the banking system. Now, massive amounts of currency spewing into society may at first sound like a fun idea... that is until you remember one of the most important Hidden Secrets Of Money from Episode 1: That the prices of everyday goods and services act as a sponge on an expanding currency supply. The more currency we have the more prices rise. This is where inflation comes from. The true definition of inflation is an expansion of the currency supply, rising prices are merely the symptom. So our entire currency supply is nothing but a couple bucks whipped up in this hocus-pocus scam where the Treasury and the Federal Reserve swap glorified I.O.U.s and a bunch of numbers that the banks just type into their computers. That's itÉthat's our entire currency supply. It's nothing but a supply of numbers. Some of them printed, most of them typed, and there is nothing else. But if you thought that was crazy, get ready to enter the twilight zone ofmodern economics. We work for some of that currency supply. True wealth is your time, but we trade away moments in our lives hour by hour, day by day, and year by year for numbers that somebody printed on pieces of paper or just typed into a computer. Now those numbers represent our blood, sweat, tears, labor, ideas and talent. We are what gives the currency its value. But here comes the really cruel joke...we work hard, so that we can save some of that currency, so that we can pay the tax collector (in the United States it's known as the IRS), they then turn it over to the Treasury, so that the Treasury can pay the principal plus interest on that bond that the Federal Reserve bought with a check drawn on an account that has nothing in it. Now let's do a recap on this section because this is where the system begins to rob you and I on a massive scale. Much of our taxes are not used for schools, roads and public services, but to pay interest on bonds that the Federal Reserve bought with a check drawn on an account that has nothing in it. The Federal Reserve is committing FRAUD. But here's one of the biggest secrets of them all: Before the establishment at the Federal Reserve there was no need for personal income tax. The Federal Reserve was created in 1913 and that very same year the Constitution was amended to allow income tax. Do you really think this was just a coincidence? Ask yourself how much income tax you've paid over your lifetime. Much of it has been silently siphoned away into the hands of those who own the system. Yes this system has owners... who they are is an even bigger secret that we'll get to shortly, but first we need to understand the mumbo jumbo of the so-called 'debt ceiling'. It's all based on a huge paradox: There was interest due on that bond, and there was interest due on every one of those loans that the banks made. That means that there is interest due on every dollar in existence. Let me ask you something: If you borrow the very first dollar into existence and that's the only dollar that exists on the planet, but you promise to pay it back plus another dollars worth of interest... where you get the second dollar to pay the interest? The answer is that you have to borrow that one into existence and promise to pay it back with interest as well, so now there are two dollars in existence but you owe fourÉand so on and so on. The result is there's never enough currency to pay the debt. There is always more debt in the system than there is currency in existence to pay the debt. Therefore, the whole system is impossible it is finite it will come to an end one day. What would happen if the government stopped borrowing to do deficit spending? Are the payments on those treasury bonds going to stop? What would happen if the public stopped borrowing and going deeper into debt? Are your house and car payments going to stop? No, there is a payment due every month on the principal plus the interest on every dollar in existence and those payments do not stop. If we stop borrowing then no new currency is created to replace the currency that we used to make those payments. Whether you're making a payment on a loan or paying tax to make a payment on a bond, the portion of the payment that goes to pay off the principal extinguishes that portion of the debt. But the debt also extinguishes the currency. Currency and debt are like matter and anti-matter. When they meet they annihilate each other. If we just pay off the principal only on all the loans and bonds that exist the entire currency supply just vanishes. So if we don't go deeper into debt every year look what happens: the whole thing goes into a deflationary collapse under the weight of those payments. Politicians and pundits alike talk about balancing the budget paying down the debt and living within our means. They don't understand that that is deflationary, it is impossible to do under our current monetary system without collapsing the whole economy. This is why any talk of a debt ceiling is not only ridiculous... its delusional. The system is designed to require ever-increasing levels of debt just to continue, and that's why politicians will always kick the can down the road and raise this so-called 'debt ceiling' over and over again until the whole system finally collapses under its own weight. In other words, they don't want it to collapse on their watch. The founding fathers of the United States knew the dangers of central banking and fought to free themselves from this very thing. The revolutionary war started out as a tax revolt, but now we must pay tax just to have a monetary system. Having just suffered through the hyperinflation of the Continental Dollar which was printed into oblivion to finance the Revolutionary War, they understood the dangers of fiat currency and debt based monetary systems. So to protect future generations from institutional theft and out-of-control government they wrote into the constitution that only gold and silver can be money, for the simple fact that you can't print them. Our current system is not only unconstitutional, but it robs us of the liberty and prosperity our forefathers fought and died for. We are all feeling the effects of ignoring the Constitution right now. By forcing more currency into circulation our purchasing power is diluted. Inflation is a slow and insidious stealth tax that is simply the result of this in dept-based monetary system. This system empowers and benefits those who create the currency and receive it first as they get to spend it into circulation before it has an effect on the economy. They're stealing purchasing power from you and transferring it to the banks and the government every hour of every day because of this false monetary system. And it's not like the people at the top don't know this. To quote the Federal Reserve "The decrease in purchasing power incurred by the holders of money due to inflation imparts gains to the issuers of money." This is a fraud, it is a pyramid scheme, it is a Ponzi scheme, it's a scam and it's a lie. Our entire monetary system is nothing but a form of legalized theft. But here's the biggest con job of them all: The Federal Reserve is not federal - it has stockholders. There is no federal agency that has stockholders. What's a stockholder? A stock represents a percentage of ownership in a corporation, so the stockholders are the owners of that corporation. Therefore the Federal Reserve is a private corporation with owners... and you can see it for yourself if you go to the Federal Reserve's website and it will say: "The stockholders receive an annual dividend of six-percent." Now we know that the stock in the Federal Reserve was originally issued to the largest banks in the United States but because of mergers and acquisitions through the years you can't actually trace who owns the stock in the Federal Reserve. That's a very closely guarded secret. My guess would be that the owners are those primary dealers, the banks that get to make a profit by selling part of our national debt- those bonds, to the Federal Reserve who buys them with a check from nothing! Then WE pay tax to pay the principal and the interest on those bonds so that the Federal Reserve can pay the banks a 6 percent dividend. Don't be alarmed if you don't quite comprehend the deception of this system at first glance. Very few people do. It is purposely complex. The economist John Maynard Keynes once wrote: "By this means government may secretly and unobserved confiscate the wealth of the people and not one man in a million will detect the theft." I believe that presented correctly anyone can understand the system, regardless of how complex it is. So let's do a recap and break it down even more... The way this system works is that Step 1: The government creates glorified I.O.U.s These bonds increase our national debt, and put the public on the hook to pay it back. Step 2: I.O.U.s are swapped to create currency. The Treasury sells the bonds to the banks. The banks then turn around and sell our national debt at a profit to the Federal Reserve, which they probably own. The Federal Reserve then opens its checkbook that doesn't have a penny in it and buys those I.O.U.s with I.O.U.s it writes, checks on a checking account that has a zero balance. Then they give those checks to the banks and currency just springs into existence, and then the whole process repeats. This results in a build up of bonds at the Federal Reserve, and currency at the Treasury...which is really just a supply of numbers. The Treasury then deposits the numbers in the various branches of the government and we get to Step 3: The government spends the numbers on promises, public works, social programs and war. Then the government employees, contractors and soldiers deposit their pay into the banks and we get to Step 4: Where the banks multiply the numbers by magically inventing more I.O.U.s through Fractional Reserve Lending, where they steal a portion of everyone's deposit and lend it out. That currency gets redeposited and then a portion is stolen again, and the process repeats over and over magnifying the currency supply exponentially. Then we work for some of those numbers which brings us to Step 5: Where our numbers are taxed. We pay taxes to the IRS who then turns our numbers over to the Treasury, so the Treasury can pay the principal plus the interest on bonds that were purchased by the Federal Reserve with a check from nothing. Then we get to Step 6: The Debt Ceiling Delusion. The system is designed to require ever-increasing levels and debt and will eventually collapse under its own weight because politicians always kick the can down the road, they don't want it to collapse on their watch. And finally Step 7: The Secret Owners Take Their Cut. The world's largest banks own the Federal Reserve, those banks make a profit selling our national debt top the Fed, they make a profit when the Fed pays them interest on the reserves held at the Fed, and the Fed pays them a six percent dividend on their ownership of the Fed. This system is fundamentally evil. It funnels wealth from the working population to the government and the banking sector. it is the cause of the artificial booms and busts of modern economies, and it causes great disparity of wealth between the rich and the working class. AND - it is only possible because we no longer use real money, we use currency. But worst of all it is a form of enslavement. BOND is the root word of BONDAGE. Whenever a government issues a bond it is a promise to make us pay tax in the future. Nobody asked you if you wanted to pay tax today for the prosperity we all enjoyed in the last century. Nobody is asking our children if they want to work hard in the future to pay for the prosperity we're enjoying now. George Washington once wrote to James Madison: "No generation has the right to contract debts greater than can be paid off during the course of its own existence." By stealing prosperity from tomorrow so we can spend it today we enslave ourselves and future generations. Now this all sounds pretty bad but there is great hope for YOU are the greatest threat to this false monetary system. This system relies on the public being ignorant of its workings. Please share this knowledge with everyone you know because an informed public that fully understands the system can build a better future for generations to come. And now I leave you with this quote, widely attributed to a former Director of the Bank Of England: "The modern banking system manufacturers money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money and control credit and with the flick of a pen they will create enough money to buy it back again. If you want to continue as the slaves of bankers and pay the cost of your own slavery, let them continue to create money, and to control credit." This the Federal Reserve in Washington DC it's located on Constitution Street, and that is just as much a joke as the New York Fed being located on Liberty Street. Both of them are unconstitutional both of them limit our Liberty, and they transfer wealth away from us every second of every day to the Federal Reserve, to the government and to the banking sector. YOU are now among the one in a million that can detect theft of your prosperity... so the big question is, what can you do about it? 1: Watch this video until you can describe and teach it to others. Those who understand the system can make preparations for its unavoidable collapse and protect themselves. History shows that those who don't will probably wiped out. 2: Share this video with everyone, especially those you care about. All it takes is a mouse click or two to get this message in front of millions. Post this video on Facebook, Tweet it, email it to loved ones. Please share it wherever you can. 3: Join the conversation. The current world monetary system is based on a three hundred-year-old design meant to enrich a few at the expense of the many... there must be a better way. At HiddenSecretsOfMoney.com we've created an open source platform for the design and development of a new world monetary system. We're calling on every economist, every student, every college, every bright mind and anyone who cares to join the discussion. In educating ourselves and each other we can prevent the further loss of our freedoms and maybe, just maybe win some of them back. ... ... Stay tuned for Ron Paul... ÉJim Rickards, and Steve Forbes Watch more episodes at HiddenSecretsOfMoney.com [Ron Paul] I think your Episode 4 is very beneficial, very helpful, it's gonna introduce these ideas to a lot of people, and like I've just been talking about, we have to change people's minds and the more they understand it the better, and I think we're at this point now where more people in the last several years..four or five years have thought about the Fed than they ever have in the previous ninety five years so I think I an explanation and diagrams to show it is very helpful because quite frankly they're not going to get it in their grade school they're not going to get in their high school they're not going to get it in college unless they're in a very rare circumstance to understand how this works. [Jim Rickards] You know for years before I got involved in huh really studying gold and some of the things I write and talk about today I was a monetary economist for decades you know in your video you talk about the primary dealers I was chief counsel and chief credit officer for one the largest primary dealers for ten years so I had an inside seat on the Treasury market and have the privilege of working with several former Vice Chairman of the Board of Governors: Johnson and David Mullins going back to the 80's and 90's so I'm very immersed in what you're talking about I thought it was extremely accurate, extremely clear, I didn't think you were stretching on any points it was is really like something out of a PhD course except that it was very easy to understand, I think it's accessible, I think I think we're seeing a little bit of a revolution in communications in the following sense you know as you point out the Fed was created in 1913 well in 1913 there was no web there was no YouTube, no Twitter there was really no one to stand up and oppose the Fed or call them out if you will, or really get into a discussion that everyday Americans could follow. That's not true now - with social media and everything else you can reach out to millions and tens of millions of people and tell them what's going onÉI think you've done that, You've done it successfully I applaud it, I think it's a great video I look forward to seeing it again, I know millions of people will enjoy it. [Steve Forbes] Well as we know the Federal Reserve believes it can create money out of thin air, and not realize money is supposed to represent real products and services and what people don't realize is when the Fed does that in effect as Keynes pointed out it's a form of taxation, it's a form of confiscation and because people don't see it the politicos get away with it, but it also undermines social trust, it just is corrosive throughout society. We're going to have a lot of turmoil in the coming years, but it's going to be the kind of turmoil that leads to positive things. So don't despair, get out there and fight because the tide is gonna turn. This is going to be the statists last stand. [Mike Maloney] Thank you! [James Anderson] This episode of Mike Maloney's Hidden Secrets Of Money was brought to you by GoldSilver.com and the new Silver Pegasus round. To learn how to protect your family and turn the coming economic storms and opportunity visit: GoldSilver.com
Hidden Secrets Of Money Episode 5: Rise Of Hitler Was Economics.
Welcome to the 5th episode of Michael Maloney’s Hidden Secrets Of Money. In this installment, we travel to Berlin and Frankfurt, where we were able to film in the money museum inside the Bundesbank: one of the world’s largest Central Banks.
This episode serves as an ideal primer for those waking up to the monetary matrix around them, as it clearly shows the history of true money and why it so important to our freedom.
The quality of a society is directly proportional to the quality of its money. Debase a currency for long enough, and you end up with dangerous deficits, debt-driven disasters, and eventually, delusional dictators. History proves this to be true.
Video Transcription:
Where Does Money Come From? - Hidden Secrets Of Money Ep 5 - Mike Maloney
This episode is brought to you by the new GoldSilver Vault App Get it for free at HiddenSecretsOfMoney.com The entire world is facing a debt driven disaster the scale of which has never been seen before in human history. The situation is now so severe that we're left with only two options: default on our debt, or inflate it away. You can already hear people blaming the free markets and even money itself for our problems and to me this is just tragic because we don't have free markets any more and we certainly don't use real money, This is the real reason for our problems: Our money itself has been corrupted. It's not just an issue of economics, this affects your freedom. When this crisis hits people will be screaming for the government to do something, when it was the government who caused the problems in the first place. Many societies have faced this dilemma in the past and we can learn what the outcome might be simply by studying what they did and comparing it to what we're doing today. So while I was in Germany I decided to stop by one of my favorite museums and take you on a kind of crash course on the history of real money, how it evolved, and the twin dangers that arise When Money Is Corrupted. I'm here at the Bundesbank Money Museum in Germany and this is one of the best museums I have ever seen. Right at the very beginning of the museum you walk in and it starts with barter, you know originally the first form of currency was livestock... the problem with livestock though like for instance this cow, if I traded this cow to you for something and somebody else wants to trade you something else that has a much lower value you can't make change! A system that relies on barter is very inefficient because you not only suffer from the problems of divisibility you also rely on the hope that you'll find someone who has a good or service that you need who wants something that you have at the same place and at the same time. In economics this is called the Coincidence Of Wants. Now add the fact that most goods have a shelf life before they perish and you can see why barter systems held mankind back for so long. So what was it that solved the Coincidence Of Wants and propelled us out of the Stone Age and into space? It was the invention of money. Money is not evil, it is a magnificent tool that allows us to trade our specialized skills and to store our economic energy. Without it we be struggling to feed ourselves each day and our average life span would still be thirty. In episode one we learned that real money has to fulfill certain properties in order to function. But twenty six hundred years after its emergence people still confuse money with currency... even the so-called experts. So they've got here some of the things about what money is, the first example here is 'Money is whatever goes' So, 'in earlier cultures commodities such as cattle stones or medals were used as money. Buyers took the value of the goods on trust when making their purchase. Today too, money is a question of confidence.' So, the currency today isn't money today we're using currency... that's the only reason it has any purchasing power whatsoever, it's because yesterday your experience was that it purchased something so you have faith that it's going to purchase something tomorrow, otherwise it has no value. 'Whatever form it takes reliable money has two characteristics: It is genuine, and it is stable. People can rely on its value.' Well you know what fiat currency around the planet has maintained its value? They all fall in value so right away you can see the difference, they're talking about currency here and when they say it's genuineÉI mean what is genuine? A counterfeiter, somebody that's running their own printing press in their basement is making genuine notes as far as he's concernedÉthey're genuine counterfeits! These things that just come off a printing press well yeah, it's a genuine lie from a central bank or government that you've got something that's going to store value for you because it doesn't over long periods of time... it loses value. 'Gold banknotes and electronic money (meaning electronic currency) may be stored, divided up or transported. As its material value has declined over time, its genuineness has had to be beyond question.' Well this one says that it's got to maintain its value and right here they're contradicting the the next one. The one thing here, gold is the only thing that they're talking about that has not lost its value. 'In the past rare goods were used as money. Today central banks must ensure that the supply of money is restricted.' Well what are they doing all over the planet today? They're lifting all restrictions on how much currency they are creating... they're flooding the planet with currency. The next display shows the usual museum pieces that are described as commodity money cowry shells, representative axes, cocoa beans and the like. While these worked better than barter none of them were actually money because they all had a weakness, one or more properties of money that they couldn't fulfill. Therefore they are commodity CURRENCIES not MONEY. Some of these were widely used right up until the beginning of the 20th century and there's some stuff here that I haven't seen beforeÉ Here's something very interesting, this brick of tea, its value is in the intrinsic, it's in the commodity that you're using, it's the tea. But this one has a certain fungibility to it, each unit would have the same value and you can make change. You can snap these things apart into units of six, it's portable it's not that heavy, this one fulfills quite a few functions and money... I would not imagine that is that durable, and probably doesn't wear that well. And now we come to the emergence of real money. Here we have little pieces of metal, just little pieces that have been broken off bars or something that was cast, other little blobs of metal. They were traded as a currency you know they had purchasing power they had an intrinsic value but they still weren't fungible which means interchangeable... every one of them has a different value, you can see that some of them have a higher silver content, some of them have a higher gold content. These are called electrum, a mixture of gold and silver, naturally-occurring. What you notice is that this is from the 7th century BC and then between the seventh and the sixth century were talking about somewhere between 680 and 630 BC the emergence of true money. Here we've got four coins, the large one is a one-third stater coin, and the other three are one-sixth stater coins. Each unit is interchangeable, it's now a unit of account you can take so many of these in trade for so many have loaves of bread and you don't have to break out your little scale and weigh them any longer. With the little chunks of metal you had to weigh every transaction that was going on and you had to weigh whatever your payment was and then take a guess as to what the purity was. Here you have some standards that were set by mints and guaranteed by those mints. These are a unit of account, they're fungible, every one of them is interchangeable, their portable, they're durable, in your pocket over long periods of time, they're divisible you can make change. You can see there's a one-third stater and one sixth staters. And they're a store in value over long periods of time. These still have purchasing power today 2,600 years after they were made. Another thing that I find really interesting is that between maybe 680 BC in the year 300 BC cultures all around the world, they all gravitated toward gold and silver coinage as money. The entire world sort of decided altogether that gold and silver were money. Why? Because the free markets keep on selecting gold and silver as money because of the properties that they have. So now we get to the room of real money. This is a vault door and this is where they've got all the great examples of the real gold and silver coins so come on in and join me. So here we get to the first display, here's gold and silver, what they're using to make money and here we have some very early representations of gold and silver coins. And, I love these displays, they start with coins in Lydia so these coins go back to the very first minting of true coinage. So here we have... starting the 6th century BC, and then it goes up to the 3rd century and then from the 5th to the 11th century and the 13th to the 15th century and these displays just go on and on with the history of real money, gold and silver. And here seventeenth and eighteenth century, here we come to the 19th century and now we're all the way up to the 20th century here. And here we come to our first example government issued fiat currency this is a from China this is from 1375 and what's interesting is I have a chart that compares the value have the paper currency in China compared to silver, and there was a hyper inflation of this currency it wasn't backed by anything, it wasn't backed by taxes it wasn't backed by anything. The Treasury they could just print this and so this went into hyper-inflation because the government was just running its budget by just doing deficit spending by printing. And then I'm gonna skip to sum of the colonial currency. This is the United States and each one of these currencies is printed by a different state, we've got Maryland South Carolina, North Carolina, Connecticut, New York, this one here is particularly interesting it's printed in the fourteenth year of the reign of King George the third, it's dated March 25th 1776 so this is just a few months before the declaration of independence. it says here 'Tis death to counterfeit' This was printed just before we started coming out with the continental dollar which went into hyper-inflation because of pure deficit spending on the Revolutionary War. And so...this is the wall where real money gets corrupted. This is where it all turns to paper which sometimes is backed by something but it can be a lie, they can print more than they have of the stuff to back it. As we learned in Episode 2 one of the first things the country does at the outbreak of war is to suspend redemption rights so that their currency is no longer redeemable in gold. This is exactly what Germany did before World War one. After losing the war they suffered through one of the worst hyper inflations on record when they were burdened with massive reparation payments to France and the Allies. These heavy penalties stifled the German economy and brought it to a standstill leaving the country with the same two choices all indebted nations have faced throughout history: Default on their debt or inflate it away Defaulting was not a viable option as they were completely impoverished, weakened, and surrounded by armed forces ready to take their land. Since the currency was no longer tied to gold it was decided to light up the printing presses and inflate their way out, paying the debts with new currency created out of thin air. This had drastic consequences, check out some other this Weimar currency. The display starts with one mark that actually purchased something, but soon the notes rise to the thousands, then the millions, then the billions, and finally the trillions. It's mind-blowing. You'll notice that I'm laughing a little bit as we move through the museum but I'm not laughing at the people, I'm laughing at the stupidity of central banks, and of governments, and how we never seem to learn from history. OK, and this is an example of different currencies used during the hyper-inflation and they call some of it inflation money and emergency money. This is interesting, they figured the way out of hyper-inflation was to print more! So, 'In 1923 the value of money fell by fifty percent or more per day.' That means prices are doubling every day, it's falling by fifty percent. 'Nearly everyone spent their money as quickly as possible on bread, shares and other safe assets.' Well I don't consider shares safe assets, actually the stock market did not keep up with the inflation. 'However, this rapid circulation only served to stoke inflation even further.' That's the function of velocity of money it's just a when velocity picks up it's just like expanding the quantity, it has the same effect. 'At the end, even 144 printing companies working for the Reichsbank could not keep up with the demand for banknotes. Emergency money issued by cities, local authorities, as well as banks and other enterprises started being circulated.' So everybody was issuing currency to add to the currency that the government was printing like crazy! 'Although bank notes with face values of trillions of marks were issued the vast demand for moneyÉ' That's not correct! 'The vast demand for CURRENCY led to a paper shortage. Printers used anything that could be found including wool wood and silk.' So so here's some examples of wood, wool and silk currencies over here. So this is a great example of how even here, in a museum of what they call 'money'... this is the Bundesbank, one of the world's great central banks, (if you can call any central bank great)Éthey don't understand the difference between money and currency! They're calling all of this 'money' and it has nothing to do with money, it was a promise to pay money at one point, and then it was a broken promise. People have faith in these government created currencies and it allows governments to basically rob their own people. The government erased the debts that they had left over from World War one by just hyper inflating the currency and basically that transfers all the wealth of the middle class to the government. The government inflated away the debts but they also inflated away the prosperity of their entire population. When we were in Germany we got a chance to shoot in front of the Bundestag, which used to be called the Reichstag, and it felt... it's very very significant in that...out of monetary crisis you very often see the political landscape change dramatically. It's the middle class of a country that defines the country with their vote they're the largest sector of any country, about 70 percent. And a currency crisis like a hyperinflation wipes out and impoverishes the middle class, and they become filled with fear, and it's very easy for somebody to come in and prey on that fear... and dictators arise out of hyper-inflation, and this is one of my greatest fears as far as the United States goes. I think that we all have to be very very careful and very watchful for what happens in the future. A few years ago I was interviewing Congressman Ron Paul and he said 'I think that there's going to be a financial collapse before they come around to thinking seriously about monetary policy but the real thing we have to worry about is not the loss of our wealth, it's the rise of a dictator, it's the loss of our freedom.' What's interesting is that the rise of Hitler, there were two times where he played on the public's fear, he could never have come to power had there not been a hyper inflation back in 1923. Just one week before the end of that hyper-inflation that's when Hitler made his first big public appearance. Playing to the public fear Hitler and his storm troopers took over a beer hall called the BurgerBraukeller that seats around 3,000 people and he took the stage by gunpoint, and to this literally captive audience he gave a speech that would change the world. Because of the hyperinflation the audience had been recently impoverished, their wealth had been stolen by the government running the printing presses, and so they're all scared. He offers them a scapegoat and tells them he's got the way out. He became very popular after that and the very next day the people that we're listening to him followed him in an attempt to overthrow the government. He was arrested, tried and convicted of high treason, and served time. While he was in jail he was provided with a private secretary, Rudolf Hess and he actually wrote about half 'Mein Kampf' while serving time. But once the economy started to recover Hitler lost that leverage, that power, he could no longer play on the fear of the public, once the economic situation had changed. By the middle of the Roaring Twenties he had become a joke. The Nazi Party had gone to less than two percent of the vote, then along came the Great Depression, and Hitler seized this opportunity again. He was the first politician to actually campaign by aircraft hitting multiple cities in a single day and the Nazi Party went from two percent of the vote to the second largest party in Germany. So playing on the public's fear Hitler was able to take away the rights and Germans, all these guaranteed rights in Weimar Constitution private property rights, the right to assemble, public assembly, the right to privacy in the mail, the telephone system, he'd just took away all their rights and seized power. So this is some of the things that we have to be concerned about and be very mindful of... Economic crisis very often leads to the rise of a dictator. Yeah the fact that this was just seventy to eighty years ago, basically there are still people alive today that experienced this, but enough of them have died off to where the warnings fall on deaf ears. Berlin is a great example of another massive danger to individual freedom that economic crisis can bring: the swing from capitalism to collectivism. After world war two the city was basically divided in half the West being capitalist and the East communist. Germany was reunified in 1990 but even this short period of separation showed the vastly different levels of prosperity that the two systems achieved. So this is the famous Checkpoint Charlie and what's interesting is how quickly an economy can heal. Just twenty years ago you would have seen a tremendous difference between the East and the West you'd have one side that has tall buildings and is much more industrialized and new and then one side that was that's very old and gray. It was one of the best examples of what a state-run society does to an economy. How the more the public relies on government, the worse the general economy gets. What happens you know in capitalism you have the greatest disparity between the poorest and the richest individuals and there's a backlash against that and you see this happening in waves and cycles, this cycle that goes from capitalism to collectivism. Here, the example, I mean you had this line going right through a city and one side of the city that was very poor and the other side prosperous by comparison. Now when we go toward collectivism, they want to eliminate this great disparity between the poorest in the richest individuals, but what happens is it that they don't raise the standard of living for the poor up here, they drag the whole economy down so that everybody ends up living down here... except for the people that are in running the government. Collectivism is a danger because we've proven time and time again that it doesn't work. The evidence is in. If you look at history it's clear that maximum prosperity can only be achieved through individual freedom, free markets and sound money. You'd think that we would learn from history, but I'm going to show you a few more displays from the museum that prove conclusively we haven't. And this is where we are today, this is a sheet of Fifty Euro notes and these just come out at printing press bam bam bam bam bam just like those notes did! and the entire world today is sort ofÉ every central bank across the planet is creating currency like crazy right now, toÉI i think we're going into deflation so they're trying to stave off deflation right now, by printing their way out of it. So here we've got some examples of the technology that governments around the world are putting into their counterfeit currency so that the public can't counterfeit the currency that the governments are now counterfeiting. So you've got all these holograms and watermarks and different threads and different types of the paper, and then here's this big old printing plate where they pop these things out a mile a minute, and right now they are hyper inflating the base money around the world - the paper money. We're going into a deflation of the credit money - that voodoo hocus-pocus currency that the banks just type into the computers, that's starting to collapse where this stuff is expanding. So we learned in episode 4 that modern currency creation is a complete scam, but a whole lot of people had trouble believing that it could be true. The European Central Bank has this awesome display that shows you exactly how it's done and it's basically the same as our episode 4, so here's a quick recap thanks to the ECB. Basically the central bank and the Treasury swap IOUs, the central bank writes a check and the Treasury issues a Treasury bond which is an IOU and that creates currency, and then somebody is paid, it gets deposited into a bank account and a thousand marks - they withhold 10 percent so right here they're already telling you that his bank account is a lie, he deposited 1000 in it, they only withhold 100 in case he wants some of that and then they loan out 900 which then she buys something from this guy he deposits the nine hundred they borrow ninety percent of that and leave just 10 percent on deposit for him and the result is that it expands, every 1000 ends up creating 10,000, or every one dollar creates ten dollars. You know they've got the result here - it's all sort of a voodoo hocus-pocus scheme. One of the great things that I've noticed here is that throughout the museum they keep on proving the point that even though this is the Bundesbank museum... they prove the point that fiat currencies that come off of a printing press, eventually go to zero, that they're really worthless. This says'The ideal goal of all monetary systems was to ensure that money is trustworthy and kept in short supply. Metal-based currencies restrict the money supply because metal deposits are naturally limited. However, during the industrial revolution in the nineteenth century the rapidly growing economy needed a means of payment which could adapt flexibly to this growth.' BALONEY! You can have a fixed currency supply and when you have economic growth it means that the currency gains in purchasing power. 'In the 20th century uncovered currencies (meaning un-backed currencies) have been the norm. In principle the money stock could grow unchecked. This is why central banks must ensure that the money stock is in line with economic growth.' Yeah, right! So here we've got my buddy Milton. Actually Milton was a sort of semi-free market economist, he won the Nobel Prize, so he's considered the Dean of the Chicago School of monetary thought, which are 'Monetarists' - they believe that we should have a Federal Reserve and it should expand and contract we currency supply to achieve a stable prices. One of the problems with Keynesians and Monetarists and so on is that they think you should expand it and contract it but they never contract it! They just, you know Keynesian: You're supposed to spend when the economy is bad the government's supposed to spend and stimulate and then withdraw currency from circulation to keep us from going into a bubble caused by the expansion of credit and the spending that they did during the bad portion in the economy so they take this rubber band and they stretch it and is supposed to come back, but they never do that, they just keep on stretching it to infinity! And here we are right now, where we are in the world is that that rubber band is about to snap with every currency on the planet. And so I'm in instability, and deflation, inflation let me see maybe I'll cause a hyperinflation... Uh! It just went off the inflation scale I guess I did cause a hyper-inflation... oops! And now the whole thing is collapsing! I this game of inflation and deflation has never worked, right now we're on the precipice of the whole system collapsing and just like the game, our monetary system will reset. This is where the twin dangers we learned about may rear their ugly heads so it's up to all of us to learn from history. I mentioned earlier that it was the invention of money that allowed humans to prosper and rise out of the Stone Age, but money is only part of the equation. What use is money if you don't have freedom? So what's going to happen? Will we default or inflate our way out of the mess we're in? Since 2005 I've been stating publicly and I also wrote in my book that I believe we're headed toward a series of events involving a short term deflation, followed by a big inflation or hyperinflation. If you really want to learn how this inflation might affect you and your family join me at HiddenSecretsOfMoney.com for this episode's exclusive presentation, It's a special video that shows where I believe we are on this economic roller coaster ride and how I think it'll play out. So for now what can you do? 1 - share this video on social media and subscribe to our YouTube channel. 2 - Educate yourself by watching the rest of this series, and 3 - Take action to protect yourself and your family. Learn what you can do at HiddenSecretsOfMoney.com I'll see you there. Should I buy half million or a million? Let me see how much, this is not gonna travel well in the suitcase...but it would be good to have a million euros wouldn't it? Tough decision, so okay I'm gonna buy a quarter million Euros so here's 50 Euros for your quarter-million and uhhÉ. yeah, and I get change back! It's about 8 euros to buy a quarter million Euros. OK Okay and what's interesting is these are going to eventually be in here. And it won't be too long before these end up like this. Oh, and we get some a chocolate gold coins! Danke. So that's our tour of one of the best monetary museums I've seen so far, but what amazes me is that they still just don't get it! This episode was brought to you by the new GoldSilver Vault App Get the latest silver and gold prices, news, videos, and track your holdings using the virtual vault feature all in the palm of your hand. Get it for free at HiddenSecretsOfMoney.com
Hidden Secrets Of Money Episode 6: The Rollercoaster Crash.
There are 4 unmistakable signals a financial crisis of epic proportions is headed straight toward us. And to walk you through each of them, bestselling author Mike Maloney has released a shocking new video. It’s the first episode of the all-new season of the Hidden Secrets of Money. And it contains vital information for avoiding a stock market collapse.
It’s all part of our mission to educate as many people as possible about how money really works. And expose the dangerous game the Fed and government is playing with our financial system.
Video Transcription:
Top 4 Reasons For Deflation BEFORE Hyperinflation - Hidden Secrets Of Money Episode 6 (Mike Maloney)
I'm Mike Maloney, author of "Guide to Investing in Gold and Silver". It's the world's number-one best-selling book on investing in precious metals. It's available in eleven languages. And in my book, I said that we are on a wild rollercoaster of a ride, and that we would first see the threat of deflation, followed by a helicopter drop, and that would be followed by big inflation. And that has happened. There was the 2008 crisis... We're seeing the base money around the planet being hyper-inflated right now while all of the credit aggregates are collapsing, and so it's sort of netting out to zero inflation or just slightly positive inflation, even though base money around the planet is just taking off like a rocket. But it would then be followed by a real deflation and then followed by hyperinflation. So I think it sort of looks like this: we've got the markets going up in the real estate bubble in 2007, and then we had the threat of deflation, which was the 2008 market crash, and the big helicopter drop of currency, and you are here [laughs]. And then I think that we're going into something like this, and it'll be followed by the world central banks overreacting. People, you know, some people say I've been calling for hyperinflation, hyperinflation, hyperinflation... There isn't any time that I can find, in all of history, where a population that's all on one side of the boat, when you have a nation of debtors, what has to happen is that you go into a deflation first, allowing the banks to foreclose. The public, in general, is on the losing side of the bet. We are entering a period of financial crisis that is the greatest the world has ever known. The wealth transfer that will take place during this decade is the greatest wealth transfer in history. Wealth is never destroyed, it is merely transferred; and that means that on the opposite side of every crisis, there is an opportunity. The great news is that all you have to do to turn this crisis into your great opportunity, is to educate yourself. I believe that the best investment that you can make in your lifetime is your own education: education on the history of money, education on finance, education on how the global economy works, education on how all of these guys – the central bankers, the stock market – how they can cheat you; how they can scam you. If you learn what is going on and how the financial world works, you can put yourself on the correct side of this wealth transfer. Winston Churchill once said, that the further you look into the past, the further that you can see into the future. This program is all about creating your own crystal ball: being able to gaze into the future; being able to change this crisis – the greatest crisis in the history of mankind – into your great opportunity. Well I've been traveling overseas quite a bit, but I'm on my way home now to speak at an event in California, finally. What I've been trying to make clear is the fact that this rollercoaster crash that I was talking about in my book, and that I've been predicting since 2005, is playing out right before our eyes. One of the things I really like about speaking at live events is the chance to interact with people and sort of get my finger on the pulse of what they're thinking. And lately, it's become pretty obvious that for a lot of people, it's difficult to grasp why I think deflation is coming before big inflation, or even hyperinflation. So here, I'm going to break down four of the biggest reasons that I see deflation coming first. The first one is simple: The overreaction to the 2008 crisis has caused a credit / debt bubble, and all bubbles pop. So, I talked about hyper-inflating base money. This is, this *is* hyperinflation right here. Inflation and deflation is either an expansion or a contraction of the currency supply, and prices follow the inflation or deflation eventually. Now, most of this currency does not circulate. It's sitting on banks' balance sheets and what's called excess reserves. You know, if you look at the years leading up to this crisis, this red line is reserve balances. The white line is how much of it is excess, and here we have Alan Greenspan's response to 9/11. Look at the scale of how big this emergency is compared to 9/11. But what is Ben Bernanke afraid of, and now Janet Yellen has inherited this legacy? Well, one of the things that happened in the 2008 crisis is that banks froze up and wouldn't lend to each other. They were all scared to lend to each other, and our system is such a fraud, that at the end of each day, they all have to be able to borrow digits from each other that were created from nothing just to keep the whole smoke-and-mirrors game going. They all have to do this interbank lending to keep things balanced. Well, if one bank won't lend to another and they don't have any reserves, the whole system freezes up. Now, if you've got all these excess reserves that are on their balance sheet and you pay them interest to keep the reserves there and not use this as a basis of fractional reserve lending, they're going to be liquid. This basically prevents bank runs *by* banks *on* banks. It's not a public bank run with the the public lining up at the doors. It's a bank run where one bank is trying to get their currency out of another or won't lend to another, and so this keeps things liquid. Right now, what this has done though, the banks get to use this stuff in the middle of the day. And so, you see the use of margin in the stock market going to record levels. You see the stock market going to record levels. Things like – I follow collector cars – they've been going astronomical. The number of 10-million-dollar cars out there now is just absolutely insane. And there are cars now selling for *30* million dollars. Wine collections, art – it's all going ballistic at this point. And all bubbles pop. This is the average price of a new home divided by the median annual household income. Normally, 3, 4 times your income is about what you can afford with a house. When you drop interest rates, the affordability goes up, so people pay more for a house. But interest rates don't stay in one spot forever; they *have* to revert some time or another, and all these people are going to be trapped. Every bubble pops; that's a bubble. We are in for something big again, and this time it's going to be more horrific than the crash of 2008, simply because the response to 2008 created a lot of stored energy. And then when the market crashes, that energy is released in the opposite direction. That previous chart of the hyperinflation of base money, well, we're going to get a reaction from all of this. Whatever bubble you're in, the opposite happens of what is of greatest benefit to the most people. Right now, if we went into big inflation or hyperinflation, the average Joe Six-pack would get rewarded for mass stupidity. They're all out on credit; we're in a credit boom, we're in a bond bubble; those bubbles have to pop. And the popping of a credit bubble is deflationary. It's deflationary... and history's crystal- clear on that. A lot of the gold bugs say, you know, the Federal Reserve and central banks, they're creating money, which they are, unprecedented; but, they're actually inflating to fight the deflation that started to set in the late 2008, early 2009. And if you look back at history, as you say, every major debt and financial asset bubble in history – the railroad bubble of the early 1870s that peaked, followed by deflation; you know, the auto and farm bubble and tractor bubble – that's actually a tractor bubble that caused the Great Depression. It was farms failing and it was smaller local banks failing that caused the Great Depression and high unemployment. Deflation. Because the deflation has to root out the massive debt, and the financial assets that get over-inflated. And it's good if we bring down the cost of living, if we restructure debt, if we bring financial assets down; it actually improves our standard of living long-term. But it is painful when it happens. People don't – people think that the Federal Reserve can prevent deflation; that they control the money supply. Most people don't realize that the Federal Reserve controls *base* money only; and it's an incredibly small portion of – it's so tiny! – right, and all they do is influence the rest of the economy with interest rates and reserve balances and such. Well, you know, some people say the strategy didn't work. Well no, it did work: we would have been in a depression, just like the early '30s. We were going there: banks were melting down, financial institutions; *major* Fortune 100 companies were failing, like AIG. We would have imploded because once you have that much debt and leverage and things go wrong, it just builds the other way. Like you say, you get a bubble on one end, you get a crash. Bubbles don't crack; they burst. So we were going into that, but governments said no, we will do whatever it takes: Mario Draghi, you know, Ben Bernanke... and they created trillions of dollars to fill the hole. Well, all that does, it's like taking more drugs to keep from coming down. I mean a drug addict can keep taking more drugs until it kills them. Or until they just fall down and get dragged into detox. It's [the] exact same thing. Debt, especially when it's extreme, is a financial enhancing drug: it gives you more than you deserve, makes you feel better in the short-term. And, but when it's over, you have to go through a detox, as they would call it: a debt detox. And that's where you get deflation. This is the demographics of the United States back in the year 1940, and it's broken into five-year age groups. And what I'm going to show you here is the baby boom and one of the reasons that we're going into this deflationary scenario, and we're also in this swing from individualism to collectivism. This is a pendulum, a cycle that just goes back and forth throughout time. And this is the greatest threat to your well-being and the well-being of the economy – and, freedom. We're going through a period where this demographic is going to cause some huge problems. So, here we are in 1950 and you can see the beginning of that baby boom taking off: 1960, 1970, and this wave – now, the reason I've got this broken up into these different colors – children are the ultimate consumers: they consume everything, they produce nothing – except a quality of life for their parents; you know, a big reward as far as seeing them grow up and so on. But economically, children are an economic loss. They consume economic energy. What you're seeing here is this wave coming into working-age. The green area is sort of a break-even area; that's when people are getting a job and it might be a minimum-wage job or something like that, and uh, might be sharing an apartment with a few other people. And then, as you get into the yellow area you start to become a net positive for society. You're paying income tax, you're producing more than you consume, and then you get into what's called the maximum spending demographic. The maximum spending demographic is ages 45 to 54. And this group lives in the largest houses of their lifetimes; they're driving the most cars of their lifetimes; they're sending their kids off to college; they're spending A LOT. Then, the kids – then they become empty-nesters; that's the maximum saving demographic. Once the kids are gone, off to college, they go, "holy moly, we didn't save anything! We want to retire in five years or ten years!" And so they start saving. And then, you get to the point where they retire and they become maximum social burden demographic, I call it, simply because they're liquidating assets; they're pulling – they've got their stocks and their savings and each year they're going to liquidate some of those to live. And the only driver that in – the economic driver is the medical industry; they drive the medical industry. So economically, the maximum social burden group is a net loss for the prosperity of society, the prosperity of an economy. And so, I'm going to go back again and you can see that that maximum social burden group almost didn't exist in 1940. And there's a lot of people of that working age and maximum spending age supporting the few people that were of the maximum social burden category. And then we get the baby boom sweeping through and in the '80s and that stock market boom of the '90s and all the way up to 2000, that yellow area that really drives the economy was growing every year. Now, we have an economy where it's supposed to grow at about 3% or it's going to stall; we have, we inflate the currency supply at about that rate and... but now, after the year 2000, we've got 2010, the peak of the maximum spending demographic, and from now on it's sort of downhill. Maximum savers, they do help drive the stock market, but look at that maximum social burden category and look at what happens next. So we are going into this time period right now. Now, the reason there's no children on there is they haven't been born yet. But if you look at... you know, when I first presented this a couple of years ago, birth rates have been falling for quite a while now, and they've been falling at an even greater speed since the crash of '08. And if you look at the data from the Great Depression, birth rates just fell off a cliff in the Great Depression. And so you have less people, less people of the younger age coming into this demographic to support the people that are retiring. They didn't have the pill during the Great Depression. Contraception was something that was not within most people's reach. So here it is automated, and you can see that big wave sweeping through there. And if you could imagine data for the children, it would be a much lower rate. And if we do have a big economic pullback, you're going to see that really reduce. So we're in, most likely, some very serious trouble here. Because all of our social programs and the way the economy and the society is set up, everybody is expecting to be able to retire at a certain age and live fairly comfortably off of the rest of us, off of the government. Any comments on this, these different age groups: maximum spending demographic, maximum savings – you've got the same model we do. What is unique at this time in history – and it's the main topic of my most recent book – that's why I call it the Demographic Cliff. This is the first time in most wealthy countries – there's a few exceptions; let's call it Sweden, Switzerland, and Australia, countries like that – that have a larger millennial or echo boom; but almost every other country has an echo boom that only comes up near the same heights or is much smaller [like Germany and Japan] – oh, okay, so this echo boom here is what you're talking about – so my question to people is, what – like you say, it is a pyramid. Each generation has been larger and more wealthy to help pay off the debts or the accumulation from an aging generation before them. What happens when the millennial is having to support a generation that's actually larger than them? And what happens when there's not enough for them to drive house prices back? I've got a model now for housing that says, people spend the most on housing at age 41, but then when they die, at age 79 or 80 on average, they become sellers. So I have to subtract the dyers from the buyers, and when I do that, baby boomers are going to be dying at higher rates than the millennials are going to be buying. At some point there's going to be net negative demand for housing. Everybody thinks, oh, we're going to need more housing for them. No – not when a smaller generation follows a larger. So, for entitlements, that's huge; There is no way this next generation in the US, nevertheless in Japan or Europe where they're much smaller, can even hope to pay the entitlements [that have] been promised the baby boomers; it's a fairy tale. And, housing will never be the same. We saw the Bob Hope generation come out of World War II, the first middle-class generation in history, where the average person could buy a house on a mortgage. That was not the case in the Roaring Twenties, even; only the [affluent?] could do that. That so that was a big boon for housing; and housing went up, the Depression went away. Then the baby boom comes; unprecedented numbers. All of our lifetimes, housing's gone up with a few exceptions here and there. Housing is going to do well to go sideways for the coming decades, nevertheless go up much again, because of this generational shift. We've never seen this in history. So now that we've covered three of the major components for deflation, I wanted to show you one of the real biggies here. And this one is the convergence of cycles. There's a whole bunch of cycles. The first one is the wealth distribution cycle, and I want to use my own family as part of a demonstration of this. This is my father. He's right here, he's about the age where he enlisted in the army to fight in World War II. He fought in the Battle of the Bulge; he was among the troops that liberated Dachau. Here he is in the mid '50s; he was manager of an auto parts store that sold high-performance equipment. And here's his tax return from 1955; this would have been, he would have been filing this about a month and a half after I was born. And so, what you see here, is that he's a store manager in Salem, Oregon, and his income was about 9600 bucks, and he paid about 1160 bucks in tax, for an effective tax rate of about twelve percent. And you say, well, he only paid 12% because he didn't make very much, so he's in a really low tax bracket. But wait! This is median home values, this is US Census Bureau data, and here we have 1950 and 1960, so we're going to Oregon, 1950... a median price single-family home was 6800 bucks, and in 1960 it was $10,500. So, I'm going to say probably 8500 dollars as a happy medium there. Today, in Los Angeles where I live, a single- family median price home is 360,000. Now, he was making enough – making 9600 bucks he was making 1100 bucks more than the cost of the average home in Salem, Oregon. So, a auto-parts store manager would have to be making 360- to maybe 420,000 dollars, and then paying only 12% tax on it, to equate to the same amount. And it's part of this wealth distribution cycle. This is the amount of national income that the top 1% earns, and back in the '20s, the end of the roaring '20s, it was above 20%, of the national income, was going to the top 1% of the income earners. There's a trough here in the '70s where it got down to just 9%, but it's back up to 20%. And so, you know, in this area, the middle class was doing better, but – and paying less taxes – but, on the trip there, was the Great Depression, right here. So, getting back to that is going to be a very deflationary, painful thing. This, we've already seen the baby boom demographic, but I just need to show you one thing here. You recall that the maximum spending demographic drives the economy. The maximum social burden puts deflationary pressure on the economy; they sell their stocks, bonds, and real estate to survive, and they don't produce anything. But what I want to point out is that there's about 6 times more people driving the economy here in 1940 than there are putting deflationary pressure on it. And when you watch this wave go through, the drivers are always more until just the last couple of decades here, and now the people putting deflationary pressure on the economy exceed the number of people driving the economy. So if you could chart this out, with time on that axis and the energy going into the economy on this axis, the curve would probably look something like this. And I believe that we are right about here, right about now. And now for the next cycle in this big convergence, the stock market cycle. This is the S&P 500 P/E ratios. A P/E ratio is the price of a stock per share, divided by the annual earnings of that company per share. And if you're paying somewhere between 10 to 14 times annual earnings, that's fair value. Anything under 10 is undervalued, 14 to 20 is overvalued, and anything over 20 is bubble territory. And here comes the data – and what is important here is that when the stock market goes into a bubble, without exception, it has to visit undervalued before a new bull market can begin. Except for this time, the bubble, biggest bubble in history in the year 2000. And when it popped, we went down to fair value and bounced back up into a bubble. Do you really think that a new bull market can begin from here? That we're not going to visit extreme under-valuations? I don't think so, I think that we *have* to visit extreme under-valuations before a new, solid bull market can begin. And now for probably the biggest factor in this convergence of cycles: This is Nikolai Kondratiev. He's a Russian economist that Lenin commissioned to prove that capitalism wouldn't work. He went away for a couple of years to do his studies and came back with his findings, that capitalism was the superior system and would work marvelously well, but it would always suffer from these long-wave, boom-bust cycles – to which he gave the names of seasons – of spring, summer, autumn, and winter. We'll come back to this in some other episode and really dig into it. But for now what you need to know, is that the winter is the deflationary season; the last winter was the Great Depression. And they used to call this the 50-year cycle, but lately it's gotten stretched out and takes longer. Now, I believe, that it's got to be the length of a human lifetime. And the reason is that the winter is deflationary, and the people that were old enough to be of working age and have young families, that lost the house, lost their job, lost the family farm; they become very emotionally scarred. And they become very risk-averse, and very very frugal; and in order to make all the same stupid mistakes that we made in the Roaring Twenties that led to the Great Depression, that generation has to die off. Well, they *have* died off, and we *have* made all the same stupid mistakes. So this is very deflationary, should it happen. And here's the supporting evidence: this is interest rates, and what you see here is that they go right along with the cycle. This is wholesale prices in the US, and again, they go right along with the cycle. Until the point the Federal Reserve decides that what we really need is constant inflation. This is one of the biggest cycles of all. It's hard for people to see, though; this East-West cycle takes about 500 years for the pendulum to swing each direction, and 500 years back. It's innovation and prosperity, swinging from Asia, to Europe and North America, and back. And in the Dark Ages, China was developing gunpowder. Then, China stagnated while we had the Renaissance and Industrial Revolution. So, ingenuity and prosperity does flow back and forth; and right now, you should be able to feel that the Western economies are stagnating and have sort of stalled, while the growth in the Asian economies over the last 20 years has been mind-boggling. And so this is very deflationary for the West. And here is probably one of the most deflationary cycles of all: this is household debt as a percentage of disposable income. And alarm bells should really be going off when people owe more than their disposable income: anytime this exceeds 100%. But I believe that this is also a cycle; and that if we had data, if we could go back further, it would probably look like this. And what's interesting is that this reflects the seasons of the Kondratieff wave, of spring, summer, autumn, winter; spring, summer, autumn, winter; And we're going into a winter and that's very deflationary. The next cycle you've seen before; we learned about this in episode 2. But it's the shift in world monetary systems: the classical gold standard, the gold exchange standard, the Bretton Woods system, the US dollar standard, and there's something that's coming next; these usually coincide with major wars. But whatever this next shift is, it's going to be chaotic, and it's probably going to be a little painful; it's not going to be pretty. Right now, and we learned in Episode 3 how countries are abandoning the US dollar standard at a blazing rate right now; it's developing stress cracks, and it's going to implode. And here's the thing, is that that is going to be happening with the convergence of all of these cycles. We have the East-West cycle; we have the baby boom demographic; we have the wealth distribution cycle; household debt as a percentage of disposable income; the stock market cycle; the Kondratieff wave; and the shift in world monetary systems. And the thing about all these cycles is that they have all peaked, and they're starting to descend, which is deflationary. Deflation, deflation, deflation, deflation, deflation – and that is all happening at the time when the world monetary system is developing stress cracks. It's about to implode – and it's going to be extremely chaotic. These things are all going to make it even more chaotic. So that's the convergence of cycles and all of these things are the reason that I am expecting deflation before big inflation or hyperinflation. But just as I said in my book, any deflation is probably going to be short-lived. This is the nightmare scenario for every central banker, and all of the world's central bankers are Keynesians. They believe that they can print their way to prosperity, even though they have proved that you can't, time after time; all it does is cause a wealth transfer. When all of the world's central banks start printing their currencies into oblivion simultaneously, what you will see is a wealth transfer where the vast majority becomes very poor and just a few people become very rich. It's horrible for the economy. But Japan is the prime example that it does not work. You can't print your way to prosperity. And here's what you can do: educate others. Protect yourself from what is coming. And please, share these videos with everybody that you can. And until the next episode, thank you very much for watching. You can do stuff now to be ahead of this, and be positioned right, when this happens – cause this is inevitable. This *is* going to be the first time that we have an economic event of this scale that is global – a small percentage of people are going to make a fortune and do very well and most people are just going to not know what hit 'em.
Hidden Secrets Of Money Episode 7: The USA’s Day Of Reckoning.
In Episode 7 of Hidden Secrets of Money, Mike Maloney glimpses into the near future to show you how fast the U.S. dollar and economy could collapse. You’ll learn about the velocity of currency, a concept economists try to complicate but that is actually quite simple when you realize it has more to do with psychology than numbers. You’ll also see all the potential moves the Federal Reserve will attempt to prevent disaster and how they will all fail.
Mike also takes you back to the 1920s to show you the astonishing parallels to today and what life could be like in the years ahead. He is joined by Jim Rickards and Rick Rule who provide further insights into the bond markets, currency creation, and of course precious metals. It’s only a matter of time before USA’s day of reckoning.
Video Transcription:
The Money Illusion - Hidden Secrets Of Money Episode 7 - Mike Maloney
We're gonna have another catastrophe sooner than later It'll be bigger than 2008 but the next one's gonna be strike three, we've had two warnings. They've been ignored the third time It's game over We are entering a period of financial crisis that is the greatest the world has ever known The wealth transfer that will take place during this decade is the greatest wealth transfer in history Wealth is never destroyed It is merely transferred and that means that on the opposite side of every crisis There is an opportunity the great news is that all you have to do to turn this crisis into your great Opportunity is to educate yourself. I Believe that the best investment that you can make in your lifetime Is your own education? education on the history of money education on Finance education on how the global economy works Education on how all of these guys two central bankers the stock market how they can cheat you how they can scan you If you learn what is going on and how the financial world works you can put yourself upon the correct side of this wealth transfer Winston Churchill once said that the further you look into the past the further that you can see into the future This program is all about creating your own crystal ball being able to gaze into the future Being able to change this crisis the greatest crisis in the history of mankind into your great opportunity Hi in the last episode of hidden secrets of money I spoke with Harry dent about deflation And the reason that we both feel that it's absolutely inevitable in the bonus feature I talked with Harry about some of our differences and he believes that it's going to be a long drawn-out deflation I believe it's going to be a very short-lived deflation followed by potentially a hyperinflation and the reason is something we're going to talk about in this episode and it's velocity of currency and That is all controlled by psychology. I'm very fond of saying that the economy is both psychological and psychological it runs in waves and cycles and those waves and cycles are very logical because of this psychology that's going on behind it and that Psychology controls the velocity of currency now. I like to teach through the looking-glass of history So I'm going to read you a little bit of my book because there's a perfect example of this In the Weimar hyperinflation and after I'm done with the book We're going to come back and we're going to look at some data So that you get a full understanding of what velocity of currency is and how it affects you so on page 16 We have at the beginning of World War one Germany went off the gold standard and suspended the right of its citizens to redeem their currency the mark for gold and silver like all wars World War one was a war of and by the printing press the number of marks in circulation in Germany quadrupled during the war Prices however, had not kept up with the inflation of the currency supply. So the effects of this inflation were not felt The reason for this peculiar phenomenon was because in times of uncertainty People tend to save every penny and World War one was definitely time of uncertainty So even though the German government was pumping tons of currency into the system. No one was spending it yet But by war's end confidence flooded back along with the currency that had been on the sidelines and the Ravaging effects worked their way through the country as prices rose to catch up with the previous monetary inflation Just before the end of the war the exchange rate between gold and the mark was about 100 marks per ounce But by 1920 it was fluctuating between 1,000 and 2,000 marks per ounce Retail prices shortly followed suit rising by 10 to 20 times Anyone who still had the savings they had accumulated during the war? Was bewildered when they found it could only buy 10 percent or less of what it could just a year or two earlier Then all through the rest of 1920 and the first half of 1921 Inflation slowed and on the surface the future was beginning to look a little brighter. The economy was recovering Business and industrial production was up, but now there were war reparations to pay So the government never stopped printing currency in the summer of 1921? prices started rising again and by July of 1922 prices had risen another 700 percent This was the breaking point and what broke was people's confidence in their economy and their currency Having watched the purchasing power of their savings fall by 90% in 1919 they knew better this time around They were smarter They had been here before all at once the entire country's attitude toward currency changed People knew that if they held on to their currency for any period of time they get burned The rising prices would wipe out their purchasing power Suddenly everybody started to spend their currency as soon as they got it The currency had become a hot potato and no one wanted to hang on to it for a second now on the next page I talked about the front page of the New York Times 1923 and I referenced some information there and I just happened to have a reprint of the front page of the New York Times from 1923 and There's an article here about the German hyperinflation but what I find more interesting than that is the entire paper is this wonderful time capsule and if you replaced the names and dates in and names of countries and so on and most of these articles It would all be pertinent today. You'd think that you were reading today's newspaper but when it comes to this article on the German hyperinflation It talks about these paper mills pumping out forty five billion marks per day Now, this is the February edition of the New York Times by November those paper mills were pumping out five hundred quadrillion marks per day so now we're going to take a look at velocity and How it could affect us in the future So this is me now I developed this keynote presentation to make understanding velocity easy Most economists make it sound really complex and people don't think they can understand it But stick with me, I think you'll enjoy this when you're measuring velocity You're measuring the number of times each unit of currency changes hands I'm going to have lunch and I'm going to Pay the waiter I'm going to tip him a buck and Then he parked in a red zone that smart morning so his car got towed He's going to have to take a cab home and he's going to pay that cab driver That same dollar when he gets to his destination then later on that day The cab driver is going to have to fill his cab with gas and he's going to use that same dollar again As part of the payment to pay for his tank of gas. So that dollar was used in one two three transactions It had a velocity of three that day in other words $1 but $3 worth of goods and services now we're going to kick this up a notch and we're going to call this a country of ten people this economy of just ten people and Their currency supply is one dollar. That's the only dollar that exists and it circulates once and so you've got one dollar times the velocity of one equals a GDP the health the size of the economy is one dollar if it circulates twice It's two three four five six, seven eight. Nine ten, so $1 times a velocity of ten or ten transactions equals a ten dollar GDP the health of that economy now if you expand the currency supply we've given each one of these people $1 if they all make a Transaction there has now been ten transactions But each dollar was only involved in one of them So it's a currency supply of ten dollars times one transaction each equals a ten dollar GDP So even though you've got ten times the currency supply the economy has the same vibrance there was ten transactions it equals ten dollars then we have a Second transaction a third a fourth. This could be a healthy economy. It could also be a common economy running into hyperinflation Keynesian --zz that's the type of economists that are running the modern-day economy Believe that you can create a healthy economy by changing this figure here the size of the currency supply so the Federal Reserve thinks that by adding currency to the economy that they're going to be able to stimulate it and make the economy grow and The thing is it isn't the quantity of currency It's the amount of goods and services that are created in that country that determines the country's level of prosperity So if you just add a bunch of currency, all it's going to do eventually is drive up prices Velocity will slow at first and that's what we're seeing now Well, the same thing happened in Weimar, Germany This is the entire hyperinflation from the beginning of World War one in 1914 until the end of 1923 and Most economists are attracted to this big hyperinflation on the end But one thing I discovered when I was writing my book is that there's almost always a pre hyperinflation Hyperinflation and we see one here where there's this rise of prices And quantity of currency and then it levels off for a little while and then rises again, and this has to do with the psychology this is the time where I said those people had been there before and experienced that I'm going to zoom up on it and So here you see the currency supply Increasing so they're they're doing monetary inflation But prices stay level in the price of gold actually dropped toward the end of the war But as soon as the anxiety is lifted from the population and they start feeling better all of that currency comes out of hiding and people start making transactions and velocity picks up and prices and the price of gold especially Just rose Dramatically and then leveled off Some 16 times higher than they were originally notice that the currency supply is growing at a certain rate the Prices are delayed and then BAM they rise to meet it and and exceed it and then stabilize where to account for that quantity of currency Back to this original chart here what I find interesting. Is that during the war it lagged and Then it caught up and matched the currency supply but then as they kept on printing velocity started to exceed the Currency supply so prices started to rise Faster than they were printing currency and and that's the endgame for a hyperinflation The big lesson here is that the people who owned gold and silver instead of the national currency Came out relatively unscathed or even made huge gains in their purchasing power Now this is the u.s. Currency supply from 1918 until today and We've created all of this currency But we haven't seen any ravaging inflation yet and that is because velocity has fallen to compensate For the creation of currency, but there will come a time when the psychology of the of the country changes and you will see After this short term deflation where velocity falls even further You will then see the velocity pick up and Prices will rise and I believe that we will go into a hyperinflation because they're going to create more currency than this and that currency is going to be sitting there and Velocity will have slowed and slowed and slowed to compensate it until something changes psychologically The beginning of every hyperinflation looks like everything is ok again the economy gets better velocity picks up and And and that's the really danger point and nobody can see it as velocity starts picking up Well, of course, there's a name for that It's called money illusion, which is before the inflation really kicks in and and either gets extreme or turns into hyperinflation there Is this feel-good period where you know, there's more money around and you know, unemployment dropping and people feel more prosperous The price is having quite skyrocket yet it's all illusory because it'll go away once the price level adjust but there is that kind of you know period in between and it Is a feel-good period but it doesn't last very long But you're making a very good point which is a lot of people assume that Inflation is a function of money supply or money printing and that's not right It's a partial function of money supply but the other part of the function is Behavioral it has to do a velocity which is just a psychological phenomena, you know Do you feel good you want to go out for dinner? Do you want to take your friends? Yeah, do you want to take a vacation or do you want to stay home? Leave your money in the bank and watch TV Those are two different states of the world based a lot on your confidence and how you feel Both things have to come together to get the kind of inflation. The Fed wants now here's the problem They can make the money supply whatever they want. There were certainly printing trillions of dollars. We understand that so far They have not been able to bend the velocity curve They have not been able to get you and me and everyone else in America and around the world to spend more money But let's say they do they change the psychology. They change the behavior once you change it. It's very hard to change your back It's not it's not like throwing an on/off switch I mean it's taken years for the Fed to you know, kind of try to inject inflation scared try to get some inflation But what if it actually comes what if inflation goes from? 1% to 3% no matter six months and stays there and looks like it's going to three and a half percent well The next stop is 10% It's not the Fed thinks they can dial it back down to two and a half which we're that which is what they say They want but what they'll find is once that once that velocity once that behavioral genie is out of the bottle They won't be able to get it back in. It'll take off. It'll take on a life of its own What's the fair going to do? You know raise interest rates of 10% with unemployment at 7% I mean though people go down and burn down the Fed I mean their their limits on what they can do it, but but the point is once it starts and you're exactly right It's a feedback loop. It feeds on itself. The Fed thinks they can control it. They're wrong the behavioral Aspect of it will be out of control and I guess a we'll be on our way to 10% if not worse It seems like all of these bright minds that want to run things None of them trusts the free market mechanism. Well, I think that's right They they will talk to you at nauseam about the failures of the free markets without realizing that most of the so-called Failures are actually the result of misguided government policies from prior times. I'll give you a classic example 1998 was a warning that's you know started in 1997 Capital outflows from emerging markets started in Thailand. There was blood in the streets and in Jakarta and Seoul Made its way to Russia Russia imploded took down the hedge fund long-term capital management. I was associated with that So I had a front-row seat On that disaster and finally the world built a firewall around Brazil and Brazil did not collapse Although it would have been the next Domino to fall now there was a clear-cut lesson capital markets came within hours of complete closure and I was there I said with Peter Fisher who was head of open market operations at the Fed his associate Dino cos we were on the phone with Bill McDonough president of the Federal Reserve Bank of New York Gary Gensler was there from the Treasury all the lawyers all the bankers on Wall Street We were trying to hold this together now we did bring it in for a soft landing So the world has kind of forgotten about that episode, but it was extremely close and extremely delicate We were literally hours away from shutting down global bond markets and and and stock markets now What lessons were learned? well the less of that Cascades into the credit card not working in the gas coming out not coming up around that. That's right There would have been a global bank holiday. We were and we hours away from that now it didn't happen sir Everyone's like. Oh, no big deal. That's fine You know, but there were some lessons that should have been learned You know banks should have been broken into smaller units derivatives should have been banned You know etc. There were things that should have been learned from that instead. What did we do? We did the opposite We repealed glass-steagall which allowed banks to be hedge funds We repealed swaps regulation which allow them to create swaps and derivatives on all kinds of other things that had never been done before We repealed the net capital rule for broker dealers So instead of fifteen to one leverage you were allowed to have thirty to one leverage which Lehman had on the day it went down We we implemented Basel two which allowed banks to use more leverage We did the exact opposite of what we should have learned in 1998. Is it any surprise that ten years later? We had a bigger catastrophe Almost destroyed capital markets again And now here we are not learning the lessons again. We haven't done anything we need to do so therefore We're going to have another catastrophe sooner than later It'll be bigger than 2008 but the next one's going to be strike three, we've had two warnings. They've been ignored the third time it's game over I Don't see any particularly different difference between my outlook at yours Certainly a situation where society owes more than it can pay and where it has to default either honestly or dishonestly Is deflationary deadly initially being off a default? We are bankrupt we can't pay ya Dishonestly inflating the way exactly exactly honestly would be to say to the bondholders. Yep. That's right We say we're gonna pay it back and we serve it and pay it back with interest. Well too bad So sad times are tough. We lied stronger to follow right say to guys like me. You're six. Yep I know you're supposed to get social security when you're 62 or 65 The truth is we don't have the money so you're not gonna get it, right? That's the honest, right? I think the yield politician is very low with regards to the honest way So I think that we're going to have deflationary scares and I think we're gonna have deflationary events I think we're gonna have asynchronous events, like long-term capital management and things like that that will Initially have deflationary outcomes but I suspect like you that the demand for the public will be for the big thinkers to solve that problem and solve it in the only way they know how Which is to fill every crack even the Grand Canyon of currency So, how is this all going to play out You know, I don't know exactly but what I do know, is that the longer this goes on the bigger? It's going to be and I wrote about the past some of the possibilities in my book and this was written before the crisis of 2008 and so in here I refer to Ben Bernanke But I'm going to change that to just the Federal Reserve or central banks for you right now so The day of reckoning will come when millions of baby boomers reached the age where they have to take mandatory distributions from their IRAs as They find that the investments they were counting on for their retirement Their homes and their IRAs full of mutual funds have actually lost value that the amount of stuff that they can buy from the proceeds if they sell their home is actually less than when they bought their home and As they realize that their dream of a comfortable retirement was just that a dream All those boomers will get scared and pull in their horns They will stop spending they will start selling off their assets and the greatest stock market crash in history will unfold As more and more abou MERS panic and sell I believe this will also be accompanied by the greatest real estate crash the world has ever known this perfect storm of bankruptcies and foreclosures will cause the currency supply to contract as the giant credit bubble pops and all those big spenders become big savers When people save their currency, it stops circulating The economic engine runs out of oil and the whole thing locks up This is every central bankers worst nightmare this is real deflation and The world's central bankers are about to discover the true scale of the horrors of a credit bubble implosion When this happens the Federal Reserve will once again send out its Armada of money bomb dropping Helicopters, but this time something will be different Something will have gone horribly wrong The bombs will have been defused the Fed will try pumping the banking sector by buying up every kind of debt They can get their hands on but to no avail They will go to the extraordinary measures that they had said they were prepared to go to They will buy every mortgage mortgage-backed Security and any other type of debt that panicky investors and banks are trying to sell but nothing good will come of it They will start buying stocks to buoy the stock market, but retail sales will continue to plunge They will try broad-based tax cuts, but it won't jumpstart the economy They will work with foreign central banks to buy each other's debt, but the global economy will continue to plummet People will finally see through the veil. They will see what Dorothy the Scarecrow the lion and the Tin Man saw That The Wizard of Oz is really just some dopey old guy frantically pulling levers Remember when we talked about how during World War one the Germans increased their currency supply by 400% yet. There was no price inflation Because of the public's anxiety over the war and the uncertainty of their future imagine the anxiety 75 million baby boomers will feel as they approach retirement Only to find their homes and their mutual funds are now worth next to nothing The nest egg ladies and gentlemen has just cracked When they get their tax rebates, are they going to buy that new big-screen TV and the latest cell phone? I think not I Think they're going to save every dime they can get their hands on just like in Germany during the war But there will be a point at which a threshold is reached for each income class. It will be different It will be the point where they feel that they finally got enough saved for retirement for Some it will be $100,000 for others it will be $1,000,000 and for others still it will be 10 million dollars The Fed knows there is a point Where they'll finally feel safe enough to replace that aging computer and maybe get that new TV At this point the boys at the Fed will buy enough government debt to fund tax rebates For all the taxes in the previous year, but still Nobody will buy that new car The threshold the Fed is looking for will not be reached then in not so quiet desperation the Fed will say screw the helicopters send in the bombers and as the shadow of millions of stealth currency bombers darken the skies currency will begin to fall like rain in the desert as Joe Sixpack and John Q get tax rebate checks in the mail for all the taxes They paid during their entire lifetimes fear will be temporarily alleviated and some of that currency will come out of hiding Just as in Weimar, Germany Prices will rise quickly and dramatically as all that stored up currency energy is released In a panic the Fed will call back the Bombers, but it will be too late there's nothing they will be able to do to stop it now because the hyperinflation Will have already begun the Dow will begin an invisible crash of epic proportions and gold prices will shoot to the moon if You are wise enough to moor your boat in the safe harbors of gold and silver and other commodities You will weather the storm it won't be pretty but at least you'll be safe At this point confidence in the currency will fall faster than it can be created cost of living increases for government employees and the costs of all government projects the Subcontractors the labor the materials will all skyrocket and each time more currency is created to pay for the increases the value of the currency will fall even faster in Times like that governments have only two choices shut down the government and all of its projects and services Send everybody home without pay Turn off the printing presses and wait for the free market system to discover price levels that account for the quantity of the currency in the supply or Print the currency into oblivion Governments have always chosen the latter But the stored up energy of excess currency creation doesn't have to take place within the United States and it doesn't Necessarily have to be in the future in Fact there is an abundance of stored up currency. Just waiting to be released right now as I mentioned earlier All the dollars we sent overseas to other countries to buy their goods and services are now sitting in their bank accounts Just waiting to be spent eventually the world economy will lose faith in the US dollar and will want to dump it by buying up goods and As all those dollars come flooding back into the u.s It will of course cause the prices of those goods and services to rise and could and probably will Trigger a scenario much like the one I have just finished describing Throughout history economists have suffered from what I like to call this time Syndrome This time they've become masters of the economic universe This time they've figured it out This time they've tamed the economy This time they've mastered the art of infinite currency amplification This time a fiat currency will work History gives this a probability of zero Each time we sailed toward economic doom. The greatest financial minds in the world were at the helm Do you really think we should continue letting them steer the ship? I? Think not it would be nice If we started listening to people that have been right rather than the people that have theories And it would be great if they would allow the free market to work But that's not the way it's going to happen the people that have the theories will continue to rule and we will vote for people that don't know what they're doing and so the best that we can do is try to protect ourselves and even you know, potentially benefit from government and economists stupidity and so the way you do that is by learning as much as you can about what's happening and Developing your own opinions on what is coming at you rather than being reactionary and you can do that by watching some of the bonus features just click the info button and We'll see you in the bonus feature and until next time until the next episode. See you there one of the most important things is how to prepare for all of this so that you can be able to see Through that economic veil and understand what's going on when things start to shift
Hidden Secrets Of Money Episode 8: The Crypto Revolution.
The Crypto Revolution: From Bitcoin to Hashgraph is about the evolution of cryptocurrencies and full consensus distributed ledger technology, and how they will change our world. I believe that this video is by far the easiest way for the average person to gain an understanding of what cryptocurrencies are and how they work, but more importantly, the immense power of full consensus distributed ledger technology and the impact it will have on our daily lives.
Cryptocurrencies are our future, and there is no escaping it… this is the way everything will be done from now on. But, we now stand at a crucial turning point in history. Full consensus ledgers such as Blockchain and Hashgraph have the power to enslave us, or free us… it all depends on how we choose to use them. If we choose to support centralized versions issued by governments and the financial sector we will be granting them more control over our daily lives.
So, will the monetary system become fully distributed and help to free mankind, or will it be centralized and enslave us? The choice is in front of us right now, and our decisions will create our future. I believe that this will be a binary outcome, there is no middle ground, it will either be one future or the other. The question is, will it be the future we want? Or the future they want?
Video Transcription:
From Bitcoin To Hedera Hashgraph (Documentary) Hidden Secrets Of Money Episode 8
Today mankind stands at a crossroads And the path that humanity chooses may have a greater impact on our freedom and prosperity Than any event in history in 2008 a new Technology was introduced. That is so important that hits destiny and the destiny of mankind are Inextricably interlinked, it is so powerful that if captured and controlled It could enslave all of humanity, but if allowed to remain free and flourish it could foster unimaginable levels of peace and prosperity It has the power to replace all financial systems Globally to supplant 90% of Wall Street and to provide some functions of government it has no agenda It's always fair and impartial it cannot be manipulated subverted corrupted or cheated and It inverts the power structure and places control of one's destiny in the hands of the individual in The future when we look back at the 2.6 million year timeline of human Development and the major turning points that led to modern civilization the creation of farming the domestication of animals the invention of the wheel the harnessing of electricity and the splitting of the atom The 60 year development of computers the internet and this new technology will be looked upon as a single event a Turning point that will change the course of human history It's called full consensus distributed ledger technology And so far its major use has been for crypto currencies such as Bitcoin But its potential goes far far beyond that Hi, I'm here in Washington DC Across the street from the Federal Reserve because I'm really excited about something We could be on the verge of a paradigm shift in Currency and trade that could put places like this the Federal Reserve and other central banks out of business in Our fourth episode of hidden secrets of money we called upon the viewers To join a discussion to develop a new world monetary system and the people that put forth the most logical and compelling Arguments where the cryptocurrency and Bitcoin people? So I'm here at a massive Bitcoin conference that has drawn experts from all over the world And I'm going to be hanging out with them asking a lot of questions Developing my own opinion. I'd like you to develop yours because this could be something that changes the world The most common question I get lately is when are you gonna make an episode of hidden secrets of money about crypto currencies The reason this has taken so long is that I wasn't happy releasing this video until I was comfortable explaining How it works and now I finally can As I said in the intro we're gonna start this journey at my first ever Bitcoin conference This was the first time I had done a deep dive into researching Bitcoin and after it finished I kept on learning and Learning some more and it actually became difficult to finish this episode because the speed at which this space is evolving But just a few weeks ago I learned about something new that could change everything and I knew we had to get this video out quickly This really is big We'll learn more about this latest Breakthrough later in the video because in order to explain it we need to go right back to the beginning and learn how Bitcoin works Like most people at first I found the whole thing to be very abstract and complicated But now I've found a way of breaking it down so that you don't have to be a rocket scientist to get it I'm going to explain it by using an ancient problem that Bitcoin claims to have solved. It's called the Byzantine generals Problem and until now it's been unsolvable The problem goes like this How do you make absolutely sure that multiple entities which are separated by distance R in absolute? full agreement Before an action is taken in other words How can individual parties find a way to guarantee full consensus? Here's the example Imagine that you are a general in the Byzantine army and you're planning to attack an enemy city You have the city, surrounded by several battalions Each of them camped several miles from the other and each of them. Led by another general a Coordinated attack on the city from all sides at the same time will be successful But an uncoordinated attack will likely end in defeat you have decided to attack at dawn, but you have no walkie-talkies or cell phones and Signals from flags torches, or smoke could be seen by the enemy How do you make sure with absolute certainty that all of the other generals reach? consensus and all attack together at dawn You could send messengers on horseback, but what if one of them is captured or killed before delivering the message You would need to have a reply from each of your generals confirming that they have received your message Which means that they would have to send messengers to you on horseback, but what if they are captured or killed? what if a messenger is captured by the enemy and an imposter messenger with a fake reply is sent back to you and How do the other generals know that the messages that they receive from you are genuine and haven't been? intercepted and altered by the enemy Worse yet what if some of the other generals are traitors And they send messages back to you confirming that they will attack at dawn When their true intention is to retreat? How can you ever be absolutely certain that all of your battalions will reach consensus and attack simultaneously Like I said this problem has remained unsolved for thousands of years and at its core It's all about individual parties being able to trust each other directly. No strings attached Bitcoin claims to have conquered this, bro now imagine that the battalions are actually computers on a network and that the generals are copies of a computer program running a ledger a ledger that via some very complex math Records transactions and events in the exact order that they happened The key here is that all of these Ledger's are exactly the same for every one as Soon as a change is made on one copy of a ledger if it is proven to be true by the math all Other copies of the ledger are updated to match What we have here is a distributed ledger that is also always in consensus This is one of the first things to understand about Bitcoin It is the first full consensus distributed ledger mankind has ever seen This network can be expanded across the entire planet It means that individual parties on opposite sides of the world can come to consensus on an event without requiring any third party as an intermediary for trust whether it's an order from a general to his troops, or are an order from you for a pizza a Distributed ledger confirms via math whether an event is true and records it permanently Bitcoin the first full consensus distributed ledger is a trust machine But is it 100 percent reliable That's a question for later in the episode, but for now where did Bitcoin come from and who invented it Well Bitcoin was originally developed by an a pseudo, nonnamous developer, Satoshi, Nakamoto There's a lot of speculation about who he is and frankly I I work directly with him, but I have no idea but that never really worried me because Bitcoin itself is open source and so any engineer can evaluate the Bitcoin source code evaluate the Bitcoin cryptography and understand and trust the software So you don't have to trust who wrote it you trust the software itself and so that was one of the big reasons why Satoshi chose Open-source for Bitcoin is so you can have trust in the system. You don't have to trust who he is I don't know who Satoshi Nakamoto is I? Also, don't know who Euclid was Might have been some dude in Sicily a few years, BC But we don't really know we have some historical records that tell us that Euclid was someone who invented geometry in the ancient world but It doesn't matter Euclidean geometry works whether I know who you chlid is or not whether Euclid was a nice guy or an evil person Euclidean geometry Simply works. It's completely independent of its creator, and if we didn't know who Invented the electric motor or the radio or any of these core technology developments? electricity So what they still work? You don't have to have any appeal to Authority We don't have to worry about the motives now in a centralized system. Where someone is in control it Matters who is behind the curtains it really matters Who is in control it matters? who invented it because they remain in control or they might have a secret way of controlling it bitcoin is wide open and No, one is in control and everyone can see exactly how it works So how does it work and what's the point? crypto currencies like Bitcoin Allow people to transact with each other using the internet anywhere on earth Instead of having an account number like a checking account or a credit card Crypto currencies are much more secure because they have a public key and a private key It's like having to account numbers one for deposits and another for withdrawals You'll often see them displayed as a string of characters, or a scannable code This level of security means that you could put your public key on a billboard if you wanted to and your funds would Still be secure the only thing other people can do with your public key is send funds to you It's your private key that gives you access to your funds as long as you keep control of your private key Your funds are absolutely safe and theft and fraud are virtually impossible But just like cash in your wallet You need to keep it safe to prevent it from being stolen its security is entirely your responsibility Cryptocurrencies can also give you privacy just like cash You don't have to disclose any personal information when you spend them by contrast a credit card has your name Account number and expiration date these act like a public key But the equivalent of your private key your signature and security code are displayed in plain sight This is just plain stupid. I've toured five national money museums and while I was at one of them I saw a group of young students on a school outing I can just imagine that some day in the future a group of kids will be standing around the credit card display Pointing and laughing at the incredible stupidity of the system we once used and this is the point Crypto currencies are lightyears ahead of our current technology since Bitcoin was the first cryptocurrency I'm going to use it as our example, and I'll expand on our earlier description of a distributed ledger But first where does Bitcoin get its value Bitcoin is brand new to mankind in that it's both a currency and a payment network Simultaneously, and this is where Bitcoin gets its value the immense network of computers all around the world running the Bitcoin distributed ledger every Second of every day these computers are keeping the ledger updated and in full consensus via a system that Incentivizes them to process and confirm transactions the system that Bitcoin runs on is called blockchain Think of it as a modern version of an old-fashioned bookkeeping ledger but instead of a handwritten list of entries and calculations a blockchain is a digital list of entries and Calculations a block is simply a bundle of transactions think of a block as a whole page of transaction in the old-fashioned ledger a Blockchain is just a chain of blocks It's the same as a whole series of pages in the old-fashioned ledger easy, huh? Here's how it works the Bitcoin blockchain Actually exists in every one of the millions of computers on the network as exact copies of each other However for this example so that we can zoom in and you can really see just how a blockchain works I'm going to show it as one giant blockchain in the middle of a small network of computers Let's follow a pizza transaction with Bitcoin when the transaction occurs it first appears on the network in a pool of Unconfirmed transactions along with thousands of others from all around the world millions of different computers from the network Then gather some of these transactions and place them in their own blocks the computers are all creating blocks Constantly in the hope that theirs will be the next one added to the official chain a new block is added to the chain Every ten minutes or so when one of the computers wins the right to have its block? Recognized as the next in the chain and is rewarded with a prize of newly created bitcoins The way a computer wins the prize is by trying to guess the answer to an extremely difficult math problem in Fact the problem is so difficult that even with millions of computers making guesses Billions or even trillions of times per second it still takes roughly 10 minutes to find the answer Once one of the computers guesses the correct answer and wins all of the millions of computers on the network that did not win are Instructed to throw away all the work. They have done update their Ledger's with the block from the winning computer and Start again with a new math problem in doing so the computers use an immense amount of power and cost a literal fortune to run So why do they do it because it can be very profitable This is where the term mining for bitcoins comes from instead of striking gold by mining for precious metals in the wilderness These computers are hoping to strike Bitcoin by mining precious numbers on the Chane But when these millions of computers are selecting transactions to go into their blocks They aren't all selecting the same transactions and not all the blocks are the same size Some contain more transactions some contain less when blocks are thrown away the transactions they contain go back into the pool of unconfirmed Transactions this means that the probability of a transaction being confirmed and staying in the order it was confirmed in is not Absolute but it becomes more of a certainty every 10 minutes as new blocks are added in fact for very large transactions It's suggested that you wait for six or more blocks about 60 minutes to be absolutely certain that a payment is permanent so Why is it so slow? Why is your pizza cold before you own it interestingly? The system is slowed down on purpose And here's why? With the insane difficulty of guessing the answer to the math problem you would think that the odds of two or more computers winning at the same time are Extremely improbable, but it actually happens quite often This is called a soft fork and when it occurs all the computers in the network Received both of the winning blocks and are instructed to create a new block that will chain to the block they received first But because of varying internet connection speeds different Computers receive different winning blocks at different times the tie is broken Roughly ten minutes later when one of the computers solves the new math problem And it's block is added to the ledger and the longest chain wins but what happens to all of the blocks on the other side of the fork they're discarded along with all the Transactions they contained which go back into the pool of unconfirmed transactions this soft Forking is the main reason the system must be slowed down on purpose Via the math problem if the system was instant it would be forking everywhere all the time and there would be no consensus No one would have any idea Of which ledger was the correct one and every computer would be busy building a different block to create yet another fork The slowness and immense amount of computing power is required to keep the bitcoin Ledger in full consensus Therefore as more and more computing power is added to the network the system automatically Adjusts to increase the difficulty of solving the math problem Which then requires even more power? If bitcoin is ever going to be widely used it will be using a massive amount of the world's energy There are other systems for reaching consensus, but we'll look at those later in the episode For now Bitcoin is working as intended and allows people to transact with each other using the internet anywhere on earth Bitcoin it's the first full consensus distributed ledger that mankind has ever seen but it's not the last I'm here at the conference with Eric grill of coin outlet And I am going to buy some of my very first bitcoins right now And so Eric's going to show me how to do this. He's gonna. Tell me this is a paper wallet That's correct, so I can put I can load this paper currency. That's inside this little ziplock here with bitcoins, and so I'm gonna take $100 bill and Hold that for a second, so what am I supposed to do with this now? You'll scan the your public address into the in there. Yes, okay, and pull it out when it beeps okay? Okay, it beeped awesome show your balance and okay, and okay And Aha, so I've got 0.16 0 7 3 2 9 4 bitcoins, and I just finished this session, and now it's sent it and it's done and so basically In the blockchain the hundred dollars that I just put in Gave me that 0.16 something bitcoins in the blockchain it's been assigned to my account code and Behind here I can peel this open, and there's a code that is my private key that Purchasing power is now protected in the blockchain That is mirrored around the world millions of times, so thank you very much Eric great. That's great meeting you yeah Wonderful machine and a great advancement forward for and when it comes to convenience yes the people built it. They'll start understanding Cryptocurrencies more when they get an exposure that's very similar to an ATM That's what we're married. Yes. Okay. Thanks. Thank you So I've spent a day at the conference now and I wanted to come and sort of elaborate on some of the things that I've soaked up and I came here to Washington Circle in Washington DC Behind me as a statue of George Washington a lot of people don't know this But you know the Revolutionary War was a war fought to free themselves from regulation from government intrusion on their lives from too much taxation and The founding fathers were fighting for liberty and freedom and at the end of the war George Washington was in control of the armies of this continent and could have crowned himself Emperor But instead chose to resign his commission and retire to private life Giving us this gift of a free Republic One of the things that I'm getting from this conference is that a lot of them are worried about regulation and so it's this same revolution being fought all over again They're worried about regulation they can't actually stop transactions with crypto currencies but they could come and try and punish us afterwards and make it less likely to be used and This is a tool that could free humanity It's an amazing leap in technology and amazing leap in the potential evolution of mankind And so if this battle is lost and governments do succeed in trying to regulate The crypto currencies it would be like losing the Revolutionary War this stands for everything that the founding fathers stood for the belief in freedom liberty and the individual choice and responsibility for your own actions On day two I Listened to more of the experts and the more I learned the more I realized just how much I needed to know Even once you know all the technical details about Bitcoin. There's still a lot to learn about keeping your funds secure in the real world One of the most interesting things I found out is in the early days of the Internet They were actually paving the way for something like Bitcoin before they even knew what it would be So when the first web browser was built There was a 404 error page not found and there's also a 402 error Payment method not specified so back when they originally built the web browser They were thinking about the time when they would eventually Discover the technology create the technology to transfer value over the Internet they didn't have the technology back then But they still had the foresight that eventually we would get there Well now we're here Bitcoin is a solution to that You guys it's hard to isolate. What in particular about Bitcoin is so amazing, but I've had to name one thing I would say was a distributed network This is kind of an amazing thing because it's essentially immortal it can exist In trillions of copies all over the world what that means essentially is that it can't be destroyed I mean you could apply every regulator every bureaucrat every politician every Central banker in the world assign it to destroy the blockchain and they could spend you know 24/7 doing this smashing copy after copy after copy and destroy trillions of copies, but so long as there's one left somewhere and there always will be it can reproduce itself instantly and Come into existence of billions and trillions of times over again Virtually instantly what this means is that the blockchain itself is more powerful that all the government's in the world Combined many times over this is huge. We've never had a tool this powerful to beat back the despot of the Throughout most of the convention I couldn't find anybody that shared a few of the concerns that I have about Bitcoin such as being a Deflationary currency that was until I met Chris Ellis Chris Tell me about the concerns that you have so Bitcoin right now is still an experiment as are most crypto currencies and the price is mostly supported by a Speculative sentiment and that's because markets are forward pricing mechanisms people are looking at the information And they're buying on the basis of what they believe other people will do in the future with that information And I think that a lot of people having spoken to a lot of merchants as well They are telling me anecdotally that people are not spending their bitcoins, so I am concerned. I think the the economic Side of Bitcoin is probably The weakest, that's why we need a lot of these Alternative crypto currencies to play around with some of the parameters, but we should we should consider this an experiment for now mm-hmm one of my concerns is that in a deflation velocity slows down because your currency is going to be worth more tomorrow than it is today and So people have a tendency to hoard currency in a deflation like the Great Depression for instance Bitcoin is going to have So many coins per month released, and then that level drops every is it every year or four years Until it gets to a level where it reaches 21 million coins and it stars When it stops I have two concerns One the Bitcoin mining that people are doing is what encourages Them to leave computers running all over the planet, and that's what makes Bitcoin work now I know there's a small transaction fee, and if velocity the number of transactions picks up enough Then the transaction fee is a reason to leave your computer on but you have a deflationary currency that encourages hoarding and not spending it on transactions and So when it reaches the 21 million What is the reward for leaving the Computers running if velocity? Slows and people tend to hoard it and there's no new coins to be mine Anymore so and plus the cost of power is probably going to go up in the future. Yeah. Have you got any other concerns? Yeah, one of my concerns in this space is that there are most people here are communications and marketing they're in the business of persuading people and I think we need more developers we need to inspire younger people there are probably fewer than a thousand people on the planet that actually know how to Code a cryptocurrency and that is a huge form of centralization they become like Congress And then we have to kind of go to them as lay people who don't know how to code and ask for changes or otherwise We end up having to fork the code and produce our own one so I still think there's a lot to do in terms of outreach getting existing programmers into the Bitcoin space onto the github Repository so they can start making their own changes and start experimenting and learning as well So what have I learned in the past few days about Bitcoin and other cryptocurrencies I've learned that they're a simple mathematical formula that is fair honest and impartial I've Learned that this is more than just a digital currency I thought that this was just for sending value from one person to another This is a revolution that will change the world it will tear down borders It will connect the globe it is as important as the internet was But because it connects people because it frees people there will come a day Where there is a call to regulate it - stop it - shut it down possibly? The people that are calling for those things their motives need to be questioned Because what they are trying to prevent is freedom. It's that simple One of the things that cryptocurrency does is it provides freedom and the people that are will be calling for its? Regulation or its abandonment will be the financial sector a central bank's? government's because It provides for a lot of the things that government does very poorly it will do very well That the financial system currently does very poorly it will do well It's fair honest impartial instant and cannot be subverted The only caveat are that Bitcoin has first mover advantage It's the largest one, but it may not be the one that succeeds It's an experiment at this point But the important thing is that the genie is out of the bottle freedom is on its way to us right now We can all support it or we can let it languish And I think that this cannot be stopped so am I going to sell my gold and silver and convert it all to Bitcoin absolutely not Bitcoin as I said is an experiment There is a possibility that these things could go to zero before they're fully developed There's a possibility of some sort of catastrophic failure Right now it has proved very robust and unhackable You don't know what is going to happen in the future so one thing to keep in mind The Germans came up with the Enigma machine in World War two, and it was supposedly uncrackable And then we broke the code And then they added another dial to it to increase the complexity many-fold And it was supposed to be uncrackable and we cracked the code So bitcoin has not been completely proven It's got five years of existence now and robustness This may be the answer to all of mankind's problems when it comes to a simple medium of exchange But it's more than that you can make these smart contracts that settle with with a set of rules So somebody doesn't get paid until all of the rules that you have established are fulfilled You can create escrow with yourself where there's a third party that has to sign off that a transaction has been completed Before the payment goes through they're working on things where you can take delivery of something Continuously and pay for it as you use it It would be like paying for the internet for every second that you're using it only or paying for the gas That's delivered to your house instead of monthly You are being billed per thermal unit and with no frictional costs involved so this adds up to efficiency Therefore mankind is left over with more prosperity if there's no third party in between bleeding off Economic energy you end up with more prosperity This is a very good thing for all of us and because it is so fair and impartial There's less of a need for the court system. There's less need for government, and rules and regulation and People to enforce all of this stuff in the future there will be less need for Wall Street that Wall Street Does not realize it yet? But they are antiquated dinosaurs of the past about to go extinct you can attach stocks and bonds and things such as that to Crypto currencies and companies could now do I POS just on the internet they do not need Wall Street anymore? They don't need a third party like goldman sachs or some other big brokerage house taking a cut There's no need to worry about corruption because the code cannot be corrupted I do know that I am going to be putting some of my capital into Cryptocurrencies from now on and supporting this movement and helping to push the freedom of mankind Forward and here's something else the reason that people buy bitcoin is the same reason that people buy gold and silver It's an alternative to all of the other currencies the fiat currencies that are being printed into oblivion on this planet right now, and they eliminate the Need for a third party trust you don't have to trust somebody else with your bitcoins You only have to trust yourself. You don't have to trust somebody else with your gold and silver you have to trust yourself So the reasons are the same and so I would encourage every precious metals investor to investigate Bitcoin and the other cryptocurrencies And I would encourage every Bitcoin and cryptocurrency User and investor to investigate precious metals, I'm going to hold both I look at the crypto currencies as a very speculative volatile and Potentially risky play I look at gold and silver Just like savings. I see them as something that has never failed in 5,000 years they are proven and I see them as extremely undervalued Compared to the morass of fiat currencies on this planet at this point So when I came here I expected to find nothing but a digital payment system and what I found is a technology that can revolutionize The planet if the founding fathers of America were standing here beside me They would be fighting for this revolution Hi, this is an action alert for July 11th 2014 I promised all of the insiders that I'd keep them updated on what I'm doing financially and Recently I've done something quite unusual up until now my portfolio is entirely precious metals gold and silver physical but I've been investigating Bitcoin quite a bit I was in Washington DC Recently at a Bitcoin conference, and I learned a lot about it. I became convinced that this has a tremendous upside potential The downside potential it would be short-term And there is a downside risk that it could entirely fail So I'm not going to put a lot of my portfolio into it but someday I will probably be up to around 10% of my portfolio going into Bitcoin believe it or not The other thing that I'm doing is I'm buying a bunch of Pegasus 1 ounce Rounds because they're a bargain, and I recently cut a video about how? One of the things I didn't get around to during the conference was talking to retailers about their experience of accepting Bitcoin as payment I'd become interested in accepting Bitcoin at my own business But I still had some questions so I made a trip to Salt Lake City to see Patrick Byrne now. This is a guy I've really got respect for because he understands monetary history economics and the frictional nature of our current monetary system and Wall Street So I know that you're in a fairly low profit margin business being an online retailer of discount goods I too, am in a very low profit margin Business you've been taking Bitcoin You're one of the first large businesses to adopt Bitcoin the first the first large business excellent What is your recommendation for me? well We have Publicly, and you can look at our public filings our gross margins are in the high teens which is quite low For a retailer and our operating margin is A little over 1% 1.2 percent and of course to take people's credit cards Costs about 2 or 3 or 4% for most businesses if you start doing sales in Bitcoin And it saves you say 3% on your expense those those sales instead of being 1% that margin go to 4% net margin so it's really especially if you're a tight margin business it makes a lot of sense to accept Bitcoin and Avoid those credit card processing fees those credit card companies and that part of the financial industry really has an amazing ability to sit on your The exchanges you're making with the public and extract they're basically extracting the entire profit margin for themselves and Bitcoin ends that Cryptocurrency ends that so so it's a frictionless system frictionless system, but you can you know the Empire is gonna strike back? No matter what they're saying. I think the financial industry is quite. Sorry They didn't do more to put a stop to Bitcoin kill it in its cradle now that it's getting some momentum. They're not able to You know that's their entire business model is to extract is to be in that position where they can extract the rents through their monopoly or oligopoly and Bitcoin ends that so it's really an arrow right at the heart of their business model if you don't trust the financial system anymore There's basically two ways of checking out you can buy gold physical gold and silver and get it somewhere safe where it can't be taken from you and the other solution is to Get get into the crypto revolution Since starting this episode we've seen a blockchain boom the IPO as I mentioned are happening now but they're actually called ICO initial coin offerings and The early nonchalance of the financial industry has been replaced by a race to develop their own blockchain payment systems Because of its rate of growth Bitcoin has been stressed to the limits where it was once fast and cheap it is now Slow and expensive in fact the issues Bitcoin has suffered from have led to political infighting Bitcoin forking into multiple versions and alternative cryptocurrencies gaining market share every day Distributed ledger technology has caught fire And there's a speculative mania occurring while the speculation can't go on forever one thing is for sure Blockchain is here to stay or is it? Last week I was in New York City For a meeting that we had scheduled that I thought was going to take a couple of days And it ended up only taking a couple of hours so with all the leftover time I decided to go visit an old friend Demetri Covina's he used to have a one of the best financial shows on television called capital account you might remember him from Episode two of hidden secrets of money where he talked about Greece and the hubris of leaders and empires and how history repeats Anyway, he has a new podcast called hidden forces and when we visited him He was all fired up about this new technology and this podcast you know when I listened to it I got all fired up and he invited us to attend an event so we went home to Los Angeles There for two days and right back to New York again and to the event that he hosted about Hash Graff technology created by Leland Baird that is Probably going to end up replacing blockchain technology I mean This is big. We went to the event we listened to some of the people that are involved with this And we were just absolutely blown away So I'm going back To visit with Demetri now and get his take on how the event went last night and where the future of this thing is going Since the advent of Bitcoin there have been many thousands of blockchain based crypto currencies created And now there are more of them being created every single day So what's different about hash graph well it isn't blockchain. It's totally different in fact the way It works is a real Mind-bender and not very easy for me to explain that I'm gonna give it a try instead of a block in a blockchain Hash graph calls their packages of information Events your computer takes a transaction like a payment or anything else for that matter such as an action in a videogame an offer to sell merchandise or even sell stocks or bonds a bid on that item a contract or even a law pretty much any Information or transaction you want to record and it puts it in the event for transmitting information quickly hash graph uses a Technology that has been the gold standard in computer science for decades it's super fast and it's called gossip protocol Your computer randomly tells another computer in the network About the event you've created and that Computer responds by telling your computer about any events it heard about then that computer tells another Computer about your event and the other events it heard about and the computer It's talking to responds by telling all the events it knows about it's absolutely the best most efficient way to spread Information, and it's exponentially fast But here's the twist Each time a computer tells another computer about an event it also includes the information of the time it heard it And who had heard it from and the time they heard it And who they heard it from and so on and so on it's called gossip about gossip And it lets everyone know what everyone else knows and exactly when they knew it in just fractions of a second The other major component is an even older technology And it's the most robust secure and certain way of coming to absolute consensus It's called voting protocol, but until now It was so slow that nobody ever used it and the twist that hash graph has given. It is that there's no voting Instead because everyone already knows what everyone else knows you can mathematically Calculate with 100% certainty how they would vote it's virtual voting and it allows hash graph to come to consensus almost instantly So instead of recording things on a block and then adding it to the blockchain once every 10 minutes Hash graph events are added to the system instantly the moment they're created so they don't have ten minutes worth of Information in them this means that they're small and they contain far less data so they use very little bandwidth and are much easier to transmit and because it's not trying to guess the answer to an incredibly complex math problem trillions of times per second hash graph uses just a Miniscule amount of power from what I've seen so far Compared to blockchain hash graph is lightning-fast more secure and provably fair all events are time-stamped the moment They're woven into the system so the record of whose event came first in who's came second is instant and there's no such thing as soft forking or Unconfirmed events it can also replace huge portions of the internet that are currently run by Centralized servers by replacing them with the shared computing power of all of our own computers iPads and cell phones It looks like hash graph might just have the potential of fulfilling all the original hopes and dreams I had for blockchain technology the power to decentralize and remove the middlemen from commerce banking stock markets and much of the legal system and government with the speed at which this Technology is evolving the future is looking bright and hash graph is the perfect example of just how fast things are moving in this field Well I think the really amazing innovation that Leemon has made is in the way in which he has made adjustments to the gossip protocol And to the voting system in order to make them compatible at scale right because a voting algorithm can work And you can reach consensus in the in the exact same way but in order to Deploy that in the real world the bandwidth constraints on it would be such that you'd never actually be able to practically use it But by incorporating the gossip protocol and creating the hash graph And then being able to use that in conjunction with the local data that you have in memory and running a voting algorithm locally on the computer without having to cast any votes or send any votes over the You're actually able to get all those strong guarantees that you get with a voting algorithm But you're able to do it at scale and that's what's so remarkable and to be quite honest. It's it's hard to imagine How no one thought of it it's one of those brilliant ideas that you could have only Looked in retrospect and said how did no one think of this but at the time No one did so one of the challenges I think with any new technology like this is how do you really explain to people? How do you make a compelling case for what makes a technology so compelling right and? One of the things that's so compelling about this technology is the throughput it's the speed And it's it's you know you can tell people that they've tested over 300,000 minimum tested Transactions per second versus bitcoins three to seven max, but like how do you kind of get that in your head? And I sort of did a back-of-the-envelope calculation and that's roughly twice the speed of sound relative to a snail's pace Bitcoin being a snail's pace and This network literally being like a supersonic jet traveling at twice the speed of sound Which is I mean just wrap your head around that for a second? It's it's remarkable It's not even like within so you can see the difference It's tremendous and understanding of course that the speed of the network The reason why bitcoin is so slow is because they have to make it slow because if it's not slow it would fall apart it Would branch off everywhere you would never have consensus now remember the explanation of the Byzantine generals problem from earlier And how blockchain was built to solve it? Here's something not many people know blockchain systems aren't Technically Byzantine fault tolerant they came close, but no cigar So I like many people assume that block chain was Byzantine fault tolerant and in fact I didn't fully appreciate what that even meant I sort of just assumed it and because I saw it as a sort of part of the larger picture of Blockchain being very secure and not having been hacked but in fact it isn't Byzantine fault tolerant and the reason why it's not Byzantine is Because in order to be Byzantine you have there has to become a point in time when you've reached consensus You know you've reached consensus, and you know you'll never be wrong and you're never going to change your mind And that doesn't happen with blockchain because the nature of the network the the geometrical qualities of the blockchain network require you to always sort of Recognize that you're never entirely sure your probabilistically more confident that you're arriving at consensus But that's also why on the blockchain network. You need to keep a entire history of the ledger because you sort of have to have the capacity to do a Forensic analysis in the event that you are mistaken in the event that the network has fork Then you don't know it And so that's something that you don't have to do with hash graph because with hash graph Your your comb coming to consensus every few seconds And you can dump the entire history of the network's data and just keep rolling forward because you're absolutely sure that you reached Consensus and that's the difference. I think the major problem the sort of the big deal in the blockchain community for years ever since The community figured out that they could take this protocol that bitcoin was built on and sort of extrapolate it and use it to build these distributed Systems this distributed architecture around storage and computation etc and building applications on top of it is that there's there was a recognition that it was that it had limitations it had limitations at scale and the community's been trying to figure out how to address that while at the same time building apps on top of it and Something that LeMans said which really has stuck with me is that while everyone was really busy Building apps they forgot about what the core of distributed technology is all about which is reaching consensus And what hash graph has done is it has revolutionized that process we can agree about the things that were communicating about at Scale and that's a revolution. It's the biggest revolution since the web Right and you were just following your heart to do it. Oh, thanks the thing it wasn't right So we've been looking at this amazing new technology for about a week now and what I find so Incredibly amazing is that it holds the promise to solve all of the problems that the other distributed ledger distributed network ledger systems have Bitcoin once it started to scale up it turned out that it used an immense amount of energy to run the system and Also as it scaled up it became slower and slower and slower to where it was no longer at currency It was basically a speculative Vehicle you people could make some gains in purchasing power on it but it wasn't something that you could stand in line at a Starbucks and pay for a cup of coffee for a Friend of mine just did a transaction that took four hours for confirmation and so this is incredibly fast pretty much Instantaneous the number of transactions that it can process per second is mind-boggling compared to Bitcoin And it uses almost no power, so it solves all of the issues that I had with Bitcoin there's a lot of different crypto currencies now and many of them are engineered to either be faster or to be more sound and Robust, but everything has a set of trade-off And so whatever feature that they want to offer they have to give up something else so the really fast ones if they Want them to still be fast once they're scaled up? They're More vulnerable to some sort of attack or hacking The ones that are less vulnerable to attack and hacking have the problem of scaling they're going to be slow So you know speed fairness where the transactions are recorded in the absolute order that they came in some cryptocurrencies offer you the ability to pay extra to have your transaction mine first and that really isn't fair a Distributed ledger should be recording everything at the absolute time of event and then full consensus is reached and there's no argument No going back This is set in stone for ever So now we're actually on our way to talk to some of the team at hash graf and learn more about this When I first arrived I was chatting with some of the hash graph team about how much energy the Bitcoin system uses these days it has literally gone through the roof if Bitcoin were to replace the entire world monetary system and financial markets it would use more power than the entire world produces it's completely unsustainable This is one of the reasons. I'm interested in hash graph It's amazing efficiency the other reason these guys already have commercial customers using their technology at an industrial scale How it's being used today is in private enterprises? It's been deployed by the Credit union Association where Cu ledger is a group of 6,000 credit unions and a consortium that had to make a decision what distributed ledger Technology were they're going to use it and we beat IBM hyper ledger, and we're super proud of that it's we're a small company no more than six people today and The fact that we could go up against IBM. It's a true David and Goliath story, and we're really proud of that it's also being used in aetherium based projects where a lot of these ico coin offerings are starting to realize the limitations of the etherium protocol in that today It's five to seven transactions per second Hash graph is again that hundreds of thousands of transactions per second Which opens up a whole new genre of applications that could never run on aetherium our technology speaks for itself It's night and day in true comparison to everything else in the market and everything falls short Especially when it comes to security we're asynchronous Byzantine fault tolerant. We're the strongest form of security you can get in a distributed architecture You don't have to take our word for that. There's 30 years of academic literature on in the space of voting based systems Ours is a voting based system without the voting we do virtual voting which sounds weird, but it works. It's peer-reviewed Mathematically proven, that's what got the credit unions the fact that We have absolutes certainty that when we achieve consensus. This is consensus It's not it's not blockchain in that with every additional confirmation We become a little more certain, but we're never truly certain and that's the case certainly of blockchain with hash graph you never have that what if You're a hundred percent certain that this is the way things are this isn't theoretical We're not talking about a white paper or some voodoo idea that is Is not practical because the fact of the matter is this is a tech stack that you can go download today It's been out for a while now We took it to TechCrunch Disrupt to have developers and the hackathon out there build on it We gave a $5,000 prize to a team that built up the hash graph fair auction ledger and what that is is a distributed auction for the first time ever in the history of mankind where there is no centralized infrastructure, but Distributed parties could submit a bid and we can still decide who won that auction think Sotheby's or eBay But without a leader without any vulnerability and with complete fairness, that's never existed before Well for me the most exciting Applications or potential applications for hash graph are in in terms of Internet of Things in terms of identity and In allowing us to be able to control our own identity instead of it being in the hands of corporations or other organizations from our currency or economic standpoint It opens up possibilities in in developing countries You know there's so many possibilities that before hash graph got invented. You know all these possibilities didn't exist, but now they do It really does seem like hash graph has cracked the problem of consensus at scale once again You can see the speed of evolution in this space right in front of your eyes and like I said in Washington DC It may not be Bitcoin that dominates this space it may not be aetherium it may not be hash graph But you need to understand how quickly this thing is moving. It's a very exciting time The more I found out about this technology the more, I needed to know about it So I headed straight to Texas to meet with lemon Baird hash graft CEO mance Harmon We we both lived in the same town It was actually a suburb of Austin, Texas, Cedar Park, Texas And there is a Starbucks on the corner we would meet there after Kids have gone to bed and would sit at the Starbucks until they would close and very often Until late in the evening after they've closed we would often watch the people at Starbucks Bag up all the trash and throw it over into the dumpster and leave it And I would be sitting there talking about The latest thought and in the latest evolution of the hash graph that you know what's the latest rabbit hole that? Leeman was going down in terms of exploration of how to solve this problem And so there are great many memories of this process in that particular location It's clearly the case that we're wanting to change the face of the internet We're wanting to make the internet what it should have been from the beginning But nobody stopped to figure out What's the right way to do this and the internet grew up in such a way that there are serious? Architectural flaws and security flaws and and there's a lack of trust at a very real sense And we see the opportunity to fix that problem And there's a general understanding across the community that what we're doing today in the world of distributed consensus is sort of equivalent in many ways to what happened in the mid-90s with the introduction of the World Wide Web and how that changed Society and fundamental And and so we're not alone in this it's obvious to the community We just happen to have the best technology in the market at the right moment in time And so we've been given this privilege of being able to be on the leading edge and and perhaps uh sure in this new trust layer on top of the existing Internet and There's a certain camaraderie that comes along with wanting to Do so your to do something as as bold as say we're going to change the internet So it's funny the ledger field is very broad and people come to it from different directions some people thirty years ago We're coming to it from making computers not have faults but they're also concerned about how to Create cryptocurrencies or how to create smart contracts or how to create? Short stared in short information or how to do databases the database world has been doing this for decades my My interest was slightly different What I wanted to do was to enable collaboration My goal is that we should have anyone on earth at any moment can just wave their hand and carve out a chunk of cyberspace Carve out a world of their own without having to pay anything for free create a court world of their own and invite some friends And now we have a shared world Anybody should be able to create this shared world and in this shared world you and I should be able to create Documents and create movies and create 3d objects and we should be able to collaborate with each other and talk to each other We should be able to interact in ways where I'm not the dictator of the whole world. I can't delete everything arbitrarily We should have rules enforced So maybe it's a fair world where I can't delete things you create or maybe it's a fair world where we vote on things Or maybe it's a world in which We have a stock market And you can make sure that the first bid gets matched up with the first acts not the later ones We won't have a world that you and I can trust and that our friends that we have invited and maybe the strangers we have Invited can trust is going to work the way we want And we can trust that if my computer dies and is erased I can get all the data back the data will never disappear But to do it totally for free No server involved just the computer the people involved with complete trust without having to trust any one person in any way and Be able to have this shared world that has the fairness and then the speed I mean I wanna be able to play gains in this world So I want a ledger where I'm recording every single time a person moves or shoots or pick something up you want to be able to do a game and We're talking hundreds of thousands of transactions per second, maybe we want huge speed and we want complete security We want privacy we want no one is spying on us this isn't funded by advertisements you want to spy on me So I have better advertisements we want it just to be something that appears out of nothing That's just living on our computers And then when we're able to have a shared world we want to have multiple shared worlds that connect to each other So maybe you and I and a few friends set up a little stock market just for ourselves to send things back and forth The banks do this they're called dark pools. It's like a little tiny stock market just for a few players that Trust each other sort of but not entirely. I don't entirely trust you and have even the problems with dark pools where maybe Banks are taking advantage of some of the information involved, maybe one banks hosting the server But they can manipulate the timing a little bit, and we have to worry about this I don't want that I want a completely trustworthy stock market that maybe you and I in a few banks set up But then I want to have a different sort stored world that maybe keeps track of a cryptocurrency And I want them to be able to link so that that cryptocurrency is used to buy and sell our stocks. I Want to be able to have a game world that links to a Wikipedia? World where it appears that pieces of Wikipedia are actually part of our world and as they change in the Wikipedia world they change in Our world you want to have shared worlds that are internet interlocking with each other that allow shared trust even across these things This is the vision for what we want The internet to be it will change the way we even look at what? Cyberspace is what the Internet is what our networks. Even what our computers? This is what's going to happen and 20 years from now when The children who are born, then are growing up. They're not even going to think about websites and Emails as a separate thing and Internet and many of the hacking attack that we have today They're just gonna take it as a matter of course that any time. I won't talk and wave my hands I get a shared world. It's free It's easy it's trustworthy and reliable I can invite two friends or a million friends and it all just works And it will change the way we think of what the Internet is That is what I? started being interested in building and This is the direction that we're going this is what distributed Ledger's do is They will ultimately allow us to do that and there's a lot of rough edges is we have growing pains and distributed ledger technology today but we'll get over the growing pains we will get to a world that really is fast and secure and fair and We will enable to then have this vision of shared worlds big public ones little private ones everything connected That was the idea that was five years ago so I like playing with math so I kept playing around with how would you do it, and I convinced myself? Yeah, it's impossible. You can't do that. There's no way that you can have really high throughput because and And also have all these security and fairness properties You just can't do it because ultimately you end up having to tell everybody what you think and then telling people what other people thought And they you can have millions or billions of extra votes and receipts on votes floating around and just doesn't work so I was able to convince myself. It's not possible And I set it aside And it would come back and haunt me, and it would keep nagging at me, and so I would pick it up again And I would spend a couple of days going through it and going through the math and realizing No, I was right. It really is impossible You can't do that and set it aside again, and this kept going for years I have lots of math problems some I've been working on for decades they just for whatever reason I don't know why they just latch on to me, and I can't get away from them and eventually I said Wait a second if we're all just talking to each other and you include a tiny bit of extra information We could each end up with a complete history of exactly how we talked to each other in what order? But if I had that I would know exactly how information flowed through our community I would know what you know I would know when you learned it I would know what you know about what Alice knows and what you know about what Alice knows about what Bob knows and about when? They learned it. I would know so much that I could take one of those huge impractical impossible to slow voting algorithms and do it with no votes at all I Could just sit here and say oh, I know how you would vote so don't bother voting don't tell me your vote I know it. I'll just pretend that you voted and I'll just pretend and I'll just get to the conclusion and So all we do is we just talk to e we talk anyway to send out our transactions We had a tiny bit of information and it gives us this entire history the history is called a hash graph You just get this entire hash graph that lets you see such incredible amounts of information about who knows what when That then you get consensus for free But that's where we're going and where we're at the very early stages I mean the planet is at the early stages of what Ledger's can do and I think whatever you think that Ledger's might be able to do they can do that But they can also do more and we are just as as a as a species beginning to learn what the final limits are and we're pushing as fast as we can along that path and so this is the Gateway to the next net this is it this is the next note Technically the geeks will always know well. There's multiple layers, and the Internet's still down there at the bottom Just like it always has been but for the users What they think of when they think in their mind of what the net is is changing and that's what's going to be different and a low energy cost ah Let's talk about energy cost you can run this on your cell phone Am I correct the processor and a cell phone apps is enough to actually run absolutely hash graph absolutely so There are systems that would require you to buy a supercomputer. It's called a mining rig It's a big box full of specially built chips that don't do anything useful humanity They just mind which means they solve math problems that have no inherent use The purpose of them is to slow down the network This isn't this isn't sound good Just on the face of it. I'm going to spend a lot of money on a supercomputer and then I'm going to Use a lot of electricity to run my supercomputer and the whole point of the supercomputer is to slow down the network But that's what it is and so proof of work systems work that way Proof of work is really exciting because it was the first to show us all the possibilities of Ledger's But it's the first generation. We're clearly need to move beyond that and we will I think over time So with hash breath yeah, you could run a full note on your cell phone You've accomplished something a tool that is extremely powerful. What are your hopes and dreams? My hope and dream is that this pushes us forward along this path to an Internet of shared worlds like we've been talking about Where anybody can collaborate with anybody and? The data is stored You don't have to pay for a server to hold it it is secure. It is private where you have the rules enforced We could set up an organization and trust that elections aren't being rigged Because the rules are enforced you don't have to trust any one Person we could have money and trust that no one's going to inflate the money supply because the rules are enforced and it is Guaranteed we could store The deed to your house and at any given moment I could know that we're all seeing the same answer as to who owns it So that you can't sell it to one person and also sell it to someone else at the same time you'll get caught because it's a publicly visible thing that everyone knows that everyone else is seeing the same thing I I vision a world where the whole internet works this way or we all know that we can all see the same thing and that rules are enforced that we have collaboration and To do that we need speed we need security we need fairness And I my goal is that what we're doing? Pushes us along that path because that's the goal that we need to get to where the nature of the Internet itself is Different because it has a trust layer So this has been my three-year journey of discovery from Bitcoin to hash graph and all the promise that they contain Now when we make a documentary like this You shoot hours and hours and hours of film and you have to decide what to put in and what to leave out? many of these guests we interviewed for somewhere between a half an hour to more than two hours and they said amazing things and stuff that you really do want to learn and So we're going to make all of this available as bonus footage on hidden secrets of money Dot-com and so go there if you're interested in any of this, but especially hash graph You know we wanted to take you on this journey of discovery to show you these stepping stones along the way and My hopes and dreams when I first started on this journey Was that Bitcoin was going to be the technology that was going to help free the world to make a fairer more prosperous freer planet for all of us by helping to change the monetary system and it has Bitcoin is Extremely important, it's like the very first automobile It's like the discovery of Electricity it's like figuring out how to harness fire It's it's a very very important technology, but no man can Design something that is supposed to be a free-market interaction and predict all of the unintended consequences, and what satoshi nakamoto has done here is beautiful except when he did it figuring out how to Incentivize people he over Incentivized the mining area and what has happened to Bitcoin is it has become this behemoth That is no longer the promise of a currency It's not going to replace the world monetary system or the financial markets nobody is actually using it for transactions they're using it as a speculation now and So it isn't living up to the original promise of what bitcoin was supposed to be Hash graph might we have yet to see right now none of the blockchain technologies that I know of can run markets where it's got to be absolutely instant and Absolutely fair hash graph can provide these things you know The people on Wall Street were sort of like dinosaurs looking up at an asteroid and not realizing What was coming suddenly? everybody in the financial sector is scrambling to try and figure out how they can get a cut of this and One of the things a lot of the Wall Street people don't realize yet, is that a lot of them are already obsolete now hash graph Because it's plant patented. There's there's no token that you can buy right now there's It's a platform. It's just like the blockchain. It's it's something that underlies Applications that will be built on top of it so but this The part that underlies those applications. This is a Revolutionary trust layer that speeds everything up Conserves energy and turns the Internet into something completely different because it's completely decentralized As far as government in the financial system We have seen a tremendous change since the founding of the United States of America It was founded on freedom and what we've seen is more and more controlled by government and the financial system inserting themselves more and more and more between Individuals that want to transact with one another now the powers that be are not going to want to go down without a fight and this does have a potential to supplant most of what they do to take away much of the power and That's really what I would like to see and so this is my great hope and dream, but we're not out of the woods yet, we have to keep pushing this forward and Please support it. This is something that Everybody should get involved with and everybody should spread the news on it if you want it to succeed just like the beginning of this episode These technologies really do have the power to enslave or free mankind It's going to be one or the other there is no middle ground here and right now We have the opportunity to choose. This is a decisive moment in history the future of mankind Depends on what you do so learn as much as you can about this space all of it Visit hidden secrets of money comm and watch the bonus features especially the stuff from Lehmann Baird at hash Graph share this video with Everybody that you can and until next time. Thank you very much for watching good luck, and we'll see you next time but they're actually called ICO initial coin offerings and
Hidden Secrets Of Money Episode 9: Fall Of Empires Rome Vs USA.
In Episode 9 of Hidden Secrets of Money, Mike Maloney draws eerie parallels to the misguided leaders and monetary policies that doomed civilizations from Ancient Rome to modern-day America.
Can President Trump save America? Will the Federal Reserve Board be able to pull off yet another round of extremist interference and postpone a crisis? Find out how Mike believes it will play out.
Video Transcription:
Fall Of Empires: Rome vs USA (Hidden Secrets Of Money Ep 9)
Right now the world economy stands at an alarming precipice, but would it surprise you to learn that the events of today are nothing new Give me the next few minutes and I'll show you that there are Cycles to history that can not only allow you to see the future but to make preparations for the very predictable outcomes You're about to discover that huge financial gyrations inflation loss of personal freedom and Out-of-control government are all things that we have been warned about for centuries and are the direct Consequences of the monetary system itself. In fact most world history is determined by monetary history So what lessons can we take from the past to help us navigate the perfect economic storm that awaits us Debasing a nation's currency supply to pay for public works and war is a pattern that just repeats and repeats Throughout history and it's a pattern that always ends badly in this double episode We are going to create a timeline to show the similarities between ancient Rome and the United States today Just like the USA Rome started out as a republic after Overthrowing a monarchy. So let's begin with their early economy in around 500 BC In the early days of the Roman Republic for the first 178 years there's no evidence of big inflation They were using gold and silver coinage mostly as their currency small denominations were made out of copper and bronze Then Hannibal of Carthage Starts to harass Rome in something called the second Punic War and to pay for this war they did deficit spending by taking the coins that they took in in taxes melting them down and Adding cheap and abundant base metals such as copper so that they could mint more coins. This caused a big inflation and The inflation was one of the factors that brought the Roman Republic down to a dictatorship the Roman Empire Most of Rome's gold and silver was stored in vaults under the floor of their Treasury Which was also known as the temple of Saturn if you visit Rome go to the forum in the center of the city where you can still find the ruins of the temple today and Here's something I found really interesting The US Treasury in Washington DC has almost exactly the same design So now let's start filling in our timeline of events to keep track of the major similarities between Rome and the USA We just learned that the early Roman Republic enjoyed a long period of practically no inflation Because they used sound money pure gold and silver Interestingly the United States started on the same path from the late 1700s to the early 1900s prices were very stable Thanks to laws that mandated the use of gold and silver as money and our people were not robbed by inflation But in both instances it was the ongoing debasement of the money for war spending and Public Works that led to economic chaos Tell us the parallels between Rome and What's happening in the United States today? Well, they obviously two very different societies, but there are some broad parallels Rome was a republic They made sure they had two people each year. Who were the the rulers the consuls? They always changed because the Romans were worried. They'd had a monarchy before very unpopular They overthrew it so they didn't want anyone getting too much - too many powers What did in Rome no surprise? excessive taxation and debasing the money when you look at the coinage it started out being an exact measure of copper for the Cistercian and silver for the denarii and By the time it was all over worth. Absolutely Nothing with perhaps a wash of silver to make it look like the original thing, which is exactly what we're doing now So this patterns repeat themselves? They always repeat themselves The Romans were the first culture to understand that a currency maintains its value because of its rarity Julius Paulus once said this device being officially promulgated Circulates and maintains its purchasing power not so much from its substance as from its quantity Even still the Romans never stopped churning out more currency just like the USA Today and the ancient Greeks before them But in their race to debase the Romans came up with some new twists of their own The first of these twists was coin clipping Whenever a Roman would enter a government building, they'd simply clipped the edge off of their gold or silver coin they would save up all of those clippings melt them down and mint more coins expanding the currency supply and when that wasn't enough they developed the art of revaluation where you just take a coin and you stamp a new value on it you got 1/100 That simple The move away from precious metals to Something less than precious metals and the Roman Empire famously clipped their coins This was a debasement of the currency. There wasn't a paper currency, but it was a debasement of the currency in the US There's a very interesting phenomenon going on where they're not clipping coins But when you go to the supermarket you find that the portions of the items at the supermarket on sale are shrinking, you know The servings on various other consumer products are getting smaller and smaller, but this price is the same So it's very similar to that old Roman coin clipping trick from 2,000 years ago It's it's another form of currency debasement, but it's hidden through cardboard and marketing and fancy presentation But the people are nevertheless having their currency to baste So why should you care about this the quality of a society is directly proportional to the quality of its money Stable money leads to stable prices which leads to a stable society whereas debasement of the currency leads to the demise of empires The major reason for Rome's ongoing currency debasement was to pay for their ever-expanding empire and never-ending Wars The precious metals content of their coinage fell further and further until it had next to no Connection with the pure gold and silver that had initially provided them with a stable economy Cut to today and we see the same pattern up until the outbreak of World War one the United States had very high levels of precious metals in its coinage and Treasury notes were backed by gold at a one-to-one ratio From there the USA debased its currency more and more to pay for World War 2 the Korean War and then the Vietnam War until Finally the link between gold and the US dollar was severed completely For those new to the series, let's revisit The pivotal event that has managed to sneak under the radar of modern historians as nothing more than a side note Even though it will have repercussions for generations to come. It was an unprecedented act of global debasement by a Wanna be Emperor that would make any Roman ruler. Hang his head in shame Most people think that President Nixon's criminal activities were limited to Wiretapping and spying on the competition, but his greatest crime came on, August 15th 1971 when he severed the last ties between the dollar and gold when he ended the Bretton Woods system. I Have directed secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets Except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the United States The Bretton Woods system tied all of the world's currencies to gold through the US dollar but instead of running out and hanging the guy when he took as the world off of gold the world just yawned and Accepted that we were now on a fiat currency system that we were now on this infinitely Expanding system that we no longer had money we had currency Money should be a fixed measure of value. It's like 5,280 feet in a mile or 12 inches in a foot I gave the example Imagine trying to build a house a twenty five hundred square feet if the foot changed each day It was 12 inches one day 10 the next 20 the next very hard to do if that's changing Well the center or the clock The the 60 minutes in an hour imagine if they floated the clock So it's 60 minutes an hour one day 30 the next 90 The next you shouldn't have to have had just rivers futures to figure out how many hours you're working. You're baking a cake I love this example And it says that bake the batter for 45 minutes then you have to figure out is that inflation adjusted minutes? Is it a California minute a Nevada minute just makes life infinitely complicated So when you have a fixed measure When you go to the market you assume if you're getting 16 ounces of liquid, it's 16 not 13, not 18 Just makes a con which is the source of wealth people doing things with each other infinitely easier It is very odd That we've established a situation where what people do is scramble to borrow liabilities certainly I guess the most attractive Liability in the world or put a different way the most attractive free-trading lie on the planet is the US dollar We joke an investment conferences It's the worst currency in the world, except all the others if you're gonna trade it in a lie, it better be a liquid lie What the United States dollar has going for it is the most liquid lie in the world I mean if you think about the advantage that we have now, yes, it's It's a horrible thing to do morally but what we do is amazing. It's amazing that we can get away with this we print a lie a dream on a piece of paper and we ship it to Brazil and they send us coffee and we ship the same lie to Germany and they send us a Mercedes and we ship the same Y to Japan and they shipped us a stereo It's actually a pretty cool deal I mean, I feel bad about it in the sense, but it's it's grandly amusing and a sort of a cosmic sense You just need to understand that somehow some time some way. There's going to be a reckoning The dollars involved a worldwide as a major currency, so it's one half of everything we do and It has no definition. I used to get a charge out of asking Bernanke and Greenspan had define a dollar and you know They can't define a dollar they you know in the old days It was a weight the weight of silver a weight of gold and and that's what it was supposed to be according to the Constitution Well, dr. McCracken not being an economist, can you explain to me briefly how in the world do you determine? What a value of a dollar is in relation to a French franc for instance If you can't convert that dollar into gold what standard do you have? What is it worth at all? You determine that's going to be determined in the marketplace just as really largely it has already So what is this going to do then to for instance the speculator in gold. How is this going to affect him? Is that price going to drop arise the? The official price of gold of course has not been changed That was not that was not a part of this program at all nor is that contemplated? Well, maybe they should have contemplated what was likely to happen because for anyone who had studied history the outcome was perfectly clear Rather than help the economy Nixon's actions made things a lot worse and the public started feeling the effects of inflation much more acutely It was hard for savers to keep their heads above water unless they had saved in the ultimate stores of value gold and silver Just as it had always done throughout history Gold once again accounted for the expanding fiat currency supply by rising in price to cover that supply Gold had done this as recently as 1934 when the USA's debasement really started heating up and gold was revalued from 20 dollars and 67 cents an ounce to $35 an ounce Now the process began again as the public bid the price up from $35 an ounce in 1971 climbing all the way to 850 dollars an ounce in 1980 Easily accounting for the massive quantities of currency the USA had conjured out of thin air now that Nixon had removed all restrictions Gold had once again held an out of control currency to answer Getting back to the Julius Paulus quote about the value of a currency being decided by the quantity rather than the content one of the biggest economic Hurdles that mankind repeatedly trips on is that we have never been able to control the quantity of currency And this is one of the reasons why gold has always been the ultimate money. It can't be printed and it keeps us in check Today, I think cryptocurrencies are a very exciting development and have tremendous possibilities the bottom line is that governments have a long history of trying to cheat gold either through the basement or manipulation of the markets but here's the thing in the end gold always wins and That brings us back to the Romans who went through many cycles of currency debasement for war spending Then inflation being felt by the public then revaluation of the currency then more debasement for deficit spending on war resulting in even more inflation being felt by the public the cycle repeated again and again Those who were able to hold gold outside the official system maintained their purchasing power those who did not Suffered greatly in two 70 AD Emperor aurelion took power and had the now worthless official coinage recalled and minted again To contain a small amount of silver just 5% this Act brought a new vitality to Rome But unfortunately, it was short-lived as government after government gave in to the temptation of spending beyond their means Eventually wars were funded by levying huge taxes on businesses and the rich This only had the effect of closing down many essential businesses. The more meddling the government did with the economy the worse things became The government started confiscating private property by force to fill their empty state coffers Rome was sliding into ruin and That brings us to Emperor Diocletian His actions are the first recorded example of the following hidden secret of money wage and price controls do not work He came to power as inflation was surging but his decisive actions only added fuel to the fire So because the economy was getting worse and worse Diocletian created a whole bunch of great government solutions. He created a bunch of works projects he hired he hired a bunch of the homeless and People that were unemployed made them soldiers and government employees and this caused deficit spending to just go out of control an inflation raged into what is known as the first documented hyperinflation So to get inflation under control in 301 ad Diocletian issued his infamous edict of prices this was a massive volume of a List of all of the wages and the prices people could charge for goods and services And it was all enforced under the penalty of death So what happened was instead of risking your life to sell something at a profit so that you could stay in business People just closed up shop Instead of doing a job that was listed in the book. That was below a living wage People quit their chosen career and tried to pursue a job that wasn't listed in the book The result of this was the Diocletian came out with a law that said every son had to go into his father's business under the penalty of death When governments start meddling with an economy. The result is always the same Prices become distorted. This is a huge danger because prices act as a signal for an economy They indicate to producers and buyers where true value lies The outcome is always economic turmoil shortages and black markets We've seen what happened to gold when Nixon started his economic interference so now let's go back and see what happened when Diocletian started his Jumbo-sized meddling with the economy We know when Diocletian created the Edict of crisis that the price of gold was fifty thousand Denarii per pound and then we also know From transaction receipts around fifty years later. The price of gold has risen to 1 billion two hundred million denarii pound That's a forty-two thousand four hundred percent Hyperinflation over a 50-year period that would be similar to if gold was $35 an ounce 50 years ago today One ounce of gold would be about a million and a half dollars. Another analogy that I can make is If an average family car was about two thousand dollars fifty years ago Today it would be selling for eighty five million dollars Just imagine 85 million on the windshield of a car at a car lot That's the type of inflation these poor people suffered through Well weigh wage and price controls Appends an economy gives more power to the government What are price controls? Prices are supposed to convey information. That's what markets are about knowledge and information So a price will tell you something is dear Oh get out and produce more The price is low. It may be a producer of producing too many of it. So it's a way of conveyance of information so you devote your efforts to something that people want not what a bureaucrat dictates so when governments trashed the money and Your prices nominal prices are going up The government responses. Oh, they're greedy speculators or merchants or whatever and so USA You can't charge as much or what? That means is you get a black market and you hurt the production of the thing the idea that government can substitute For people interacting among themselves is preposterous This pattern of failed price controls is something we see throughout history and across the globe Skip forward over 1,500 years and governments still hadn't learned their lesson during the chaos of the French Revolution the government Issued a set of wage and price controls known as the law of maximum also imposed under the penalty of death It's worth noting that when wage and price controls are implemented Government always tries to deflect attention away from the problems that it has created Itself by shifting the focus to businesses who are labeled as greedy hoarders or priced gougers In reality most are just average people trying to keep their business afloat Doing their best to deal with the unstable supply and demand curve Created by government meddling and France was no exception to this blame game During the law of maximum many innocent people were executed food shortages developed and black markets ruled until finally fifteen months later The Act was repealed because it didn't work and all the stored up energy of government manipulation was unleashed at once Leading to a further period of chaos and inflation for France I agree with steve forbes the idea of wage and price controls is absolutely preposterous Now we'll skip forward another 200 years and government was added again Many people don't realize that Nixon's speech from 1971 also included the announcement of a 90 day wage and price freeze The United States was suffering from big inflation. Thanks to deficit spending for the Vietnam War silver had been taken out of circulation in 1965 reducing our coinage to worthless flex of base metal and the paper currency supply had been expanded greatly Did that sound familiar? Just like Diocletian Nixon's team of economic boffins thought they could curb inflation by fixing wages and prices The time has come for decisive action action that will break the vicious circle of spiraling prices and costs. I am today ordering a freeze on all Prices and wages throughout the United States for a period of 90 days Working together we will break the back of inflation You'd think that these people would learn from history, but they don't To get an idea of how out of touch the men with their hands on the economic levers were Listen to what Nixon's adviser had to say about the duration of the controls would it be your anticipation that it would take more than 90 days to break the back of inflation as the president put it tonight that There would have to be a further extension of an actual wage price freeze. I Would not know I wouldn't I don't think one can say that It will necessarily take longer where we're sailing to some extent and an uncharted see here, but this This I think is is a reasonable estimate of the time that's going to be required Dan Rather President Nixon is expected to speak for about 15 minutes on his new economic policies The president's address tonight comes against a background of the following facts among others record high gold prices and rapidly increasing cost of living figures for most Americans the wholesale price index rose by 2.1 percent during the month of May The index of industrial commodities in the last three months has risen at an annual rate of fifteen point nine percent The worst since the Korean War twenty years ago All of that part of the general background of the president's remarks tonight Every American family is confronted with a real and pressing problem of higher prices And I have decided that the time has come to take strong and effective action to deal with that problem Effective immediately therefore I am ordering a freeze on prices This freeze will hold prices at levels. No higher than those charged during the first eight days of June It will cover all prices paid by consumers What was our effort how were dad signs saying? What kind of an idiot would do the same thing over and over expecting it expect different results each time? And it's the same pattern. It's happened to prepend li cycle after cycle after cycle after cycle for thousands of years country borrows itself into bankruptcy It creates more money to try to pay its debt prices go up people rebel the whole system falls apart And I'm scared about it Country's collapse over this they go to war about this kind of thing rebellion in the street Overthrows a government the whole nine yards there is nothing to be gained from inflation and everything to lose and we're going to lose everything Around the world people don't seem to realize that government intervention always makes things worse It's the government manipulating things whenever you manipulate something and try and control it over here And and not allow the free markets to balance everything all by themselves Something comes squirting out way over here that you just don't expect for instance the dot-com bubble popped in 2000 Alan Greenspan lowered interest rates to try and get the stock markets back up again, and he accidentally created a real estate bubble That's now devastating the world Beck during World War 1 they inflated the currency supply tremendously The Federal Reserve was born just at the beginning of World War one we added to the currency supply by adding bonds to our back our currency along with gold then there was this big It's called the Depression of 1921. It's the single greatest Deflation that the US has ever seen it's bigger than the Great Depression the contraction of the currency Supply was huge. The reason nobody knows about the depression of 1921 they're they only know of the stock market crash of 29 and the Great Depression is Because the government did not rush in to save us the Federal Reserve didn't try to suddenly lower interest rates down to zero They didn't manipulate the free markets. They let the free markets work. It was horrible for a year. There were bankruptcies and foreclosures People lost homes and things like that but the bankruptcies and the businesses that that folded there were new businesses that were more efficient that grew up to take their place and when a home gets foreclosed on it gets resold to somebody else and yes, it was horrible, but the people that were leveraged out are the people that weren't in full control of their finances or the Inefficient businesses that were just hanging on by a thread anyway, yeah, they went under but because the government didn't rush in to save us and the Federal Reserve didn't try and manipulate the economy the free markets healed at All and in 18 months was a memory In fact, 10 years later. Nobody could even remember the memory it was gone Mark Twain is often quoted as saying history doesn't repeat But it sure does rhyme and as you've seen from this episode that sure rings true the wage and price controls we will probably end up trying this in the United States sometime in the future and you know They tried it during Diocletian. It didn't work. It destroys the economy and eventually they have to repeal the Act They tried it during the French Revolution. It didn't work It ruins the economy and they have to repeal it Nixon tried it it didn't work It ruined the economy and they had to repeal it. It's not gonna work the next time they try it This stuff just keeps on happening Over and over and over again and part of it is caused by the four-year election cycle all of the Politicians are worried about what's going to happen on their watch and they push all the problems forward to them to the next administration They really don't care what's going to happen out in the future. They care what's happening. You know how they're remembered So I'm expecting this to happen in the United States sometime right now I'm expecting a deflation, but when we get to big inflation or hyperinflation You can pretty much count on the fact that they're going to make the same stupid mistakes Because politicians do not read monetary history This is just the beginning of the similarities between ancient Rome and the USA in the next episode we're going to focus on some more amazing events that are echoing throughout history to today and We'll see what the future holds for the United States if we continue down the same path so many societies have gone before You.
Hidden Secrets Of Money Episode 10: American Bread & Circus.
Following up on the resounding success the World Premiere of Hidden Secrets of Money Episode 9, watch the powerful conclusion to this two-part installment.
Video Transcription:
American Bread & Circus (Hidden Secrets Of Money Ep 10)
In the previous episode we started a timeline that chronicled the parallels between the ancient Roman Empire and the United States of America today when we left off the Roman Empire was deteriorating thanks to the inflation caused by deficit spending on war and Public Works their government was constantly making things worse by meddling with their economy now their empire was stretched to its limit and under constant attack from barbarians the ongoing cost of war plus the huge amounts of deficit spending was bringing Rome to its knees now we're going to continue our journey through to the fall of Rome and learn of more striking parallels with the United States along the way the Romans were the first culture to have social programs the Athenians had great Public Works and they had the expense of war but in Rome they had the expense of all their great Public Works they had the expense of massive armies occupying foreign lands and they had the expense of social programs during the end of the Roman Empire Rome's population was approximately 1 million people and 200,000 of them 20 percent were receiving daily distributions of wheat that's welfare as their empire decayed Roman leaders employed a tactic called bread and circus to keep the public distracted and placated the bread refers to the free grain also known as the dole and circus translates to the games that would be held here in the Coliseum with free food wine and rather violent entertainment I find it absolutely fascinating to try to imagine what was happening here nearly 2,000 years ago these seats would have been filled with people eating and drinking many would be yelling for their favorite gladiator and a good portion of the audience would have been mindlessly drunk the emperor is an elite watching from up on high what a scene so the Coliseum is a great example of both the huge expanse of Roman Public Works and the endless deficit spending they carried out to pay for supposedly free stuff but is there such a thing as a free lunch breads and circuses give away oil give away grains and give away wine and people would love you that conquered Egypt by golly that was a lot of grain you could give away but what it did was destroy the economy and ruin when you put in the taxation to pay for it all what it did was destroy the small farmer and so the wealth creation that'll enable you to do these things went by the boards and so it became a vicious vicious cycle so now let's continue filling in our timeline from the previous episode so that we can keep track of where we are in this story welfare bread and circus we're basically distraction tactics used by the ruling elite who had offer promises of free stuff to ingratiate themselves with the public there's a famous quote from the satirist juvenile who summed up the situation very succinctly give them bread and circus and they will never revolt the citizens felt like they were getting these things for free when they were actually paid for by a crushing double blow of continuous currency debasement and increased taxation in the end the only way that the Roman rulers could enforce this tax collection was by doubling down on their stifling bureaucracy the size of their government compared to the private sector exploded business became incredibly difficult and many simply gave up steve forbes just mentioned how difficult the situation became for farmers or husbandmen as they were referred to in the past here's a quote that backs that up from lactantius around 300 AD there began to be fewer men who paid taxes than there were who received wages so that the means of the husbandman being exhausted by enormous impositions the farms were abandoned cultivated grounds became woodland and universal dismay prevailed all of these tourists go through the Coliseum here all amazed at the ruins of a great civilization and I have to ask myself are they asking themselves what happened to these people why did this thing fall into wrong everybody goes and they buy these trinkets at the gift shops and postcards and books and they have their pictures taken here and there I don't think any of them are thinking about the fact that most countries on the planet are doing exactly the same thing today most of what Americans know I fear is what movie stars are doing what sports stars are doing and what occurred on the last installment of Jerry Springer or some other reality show and the food stamps are not even food stamps anymore they give you a credit card that you can buy your food with so that you you you look like you can actually afford to eat as opposed to living off the doll it's it's uh yes this is very similar people's relationship to money in a country like America the biggest economy in the world is based entirely on the benefits they get from consuming and consumerism and right now you have an era of popularization of drugs that are being used like prozac and other drugs that people are taking massive quantities of while they're consuming popular culture for instant gratification so instant gratification enhanced by drugs with a consumer culture with easy credit so people are literally high all day long they're consuming they're taking they're on drugs if they've got cheap sugar they've got cheap high fructose corn syrup in America thanks those massive government subsidies so they're basically spinning their tits 24/7 365 now as soon as that value proposition changes and you're not getting high as easily as you did yesterday the cost of getting blitzed out of your skull on cheap drugs cheap sugar and cheap entertainment tips to an actual cost where you've got actually put in a day's labor then you're gonna see social unrest then you're gonna see real change because those people suddenly are going to be facing reality without the benefit of being on drugs and that's going to be a day when suddenly this economic model consumption at the expense of humanity comes to a screeching halt so the ancient Romans had welfare bread and circus today the USA has welfare and mass distraction we've had the Colosseum like venues for our games and theater for a long time and now we also have people filling these Coliseum's to watch digital gladiators battle each other in virtual esports events these sporting and electronic spectacles along with mindless entertainment like talk shows are piped directly into our homes on TV or now even to the cell phones in our pockets we have the same politicians who constantly make impossible promises of free stuff and a good portion of the population are hypnotized into believing them thanks to our modern version of bread and circus just like in ancient Rome the USA has increased taxation in an attempt to pay for all of the so-called free stuff and not surprisingly we are now also burdened with the stifling bureaucracy in order to enforce the ridiculous amount of rules taxes and regulations the size and scope of government has gone past anything that the founders of our country could have imagined in their worst nightmares and now we face the same problem as ancient Rome there are now fewer and fewer productive individuals and businesses left to fund the buffoonery of government remember governments cannot create prosperity they can only consume it now we're going to take a side trip so that I can show you some of the real-world effects of all this excess bureaucracy we're going to meet a new friend who belongs to the group of people who suffer the most under burdensome laws and Taxation small business owners and entrepreneurs these individuals are the lifeblood of an economy and when a government stands in their way it stands in the way of progress choice and a higher standard of living for us all we've been in many many restaurants all over the world and we came back to Rome on the way to Venice solely so that we could stop and eat at fiora desuka our favorite restaurant in the world and we've got the owner here Roberto we believe that government is very poor at doing things and that if government was running your restaurant it would not be exceptional one of the things that we feel is is sort of difficult and dangerous these days is that people are very upset with the economy and they want the government to do something about it and I believe that the best thing that government could do is to make it easier for small businessmen like you to do your job this is what makes the economy good the governments and the states are you toss them it's really not helping in any way government could probably open more of them you don't need government money though what you need is just through government to get out of the way and make it easier to go into business not so many rules not so many taxes request important and they are kept in discourse of the capital and discourse so the administration it is okay be passive it's exactly yeah in ancient Rome the government was telling you how much you could pay your workers and no more no less the government was telling you how much you could charge for that buffalo mozzarella and that flatbread if the government told you everything you could do would you want to stay in business even yeah absolutely not he went down McDonough Pahlavi it just becomes a big magnet for everybody yes this is the problem this is the problem we live in a state we call the People's Republic of California because it's it the government has made so many rules it is becoming very difficult for a small businessman in the end Italia here is the same problem Donna Burton davia then he died yeah that will have a really bar that shape everything to to to to take us away from this country Gandhari or not you know if you had the courage to go somewhere else you would do it it's uh it's a struggle to stay here I have all the same problems on the other side of the world all I want is for government to get out of the way and let me do my job what are they yeah I feel like I have found a brother my brother Roberto is still in Rome and I love nothing more than supporting his exceptional restaurant whenever I'm in the area but since filming this segment the burdens placed on my business in California became so totally unbearable that I had no option but to move operations out of state it pains me deeply to watch history repeat like this as this affects people's lives including some of the best employees and friends I ever had the role of government among other things is creating an environment where people can go out and do creative things our founders understood we are born with certain energies question is are those entities going to be directed in a positive way or a destructive way you know there two ways you can get ahead one is to steal from your neighbor and the other is to go out and provide a product or service that somebody else wants create something that hadn't existed before out of your mind to take the risk and you do it and we all benefit from it and and that's why it's so important to have that proper environment and what what are what makes up that environment well this is you don't have to be a PhD effective probably getting your way one is the rule of law where you know what the rules are sound money sensible taxation taxes are a price and a burden and if you lower that burden people are able to focus and do more real things making it easy to set up a legitimate business just basic rules and people will do amazing things amazing amount of creativity can be released but beware of government saying we're here to help you usually they end up harming us all government benefits but not the rest of us one of the things I've noticed is we keep on putting people in charge that not only don't know anything about monetary history but they don't know the fundamental economics that a normal businessman would know any businessman owner or just somebody that is able to control their own finances at home what they hire are people that they're quants that have theories in their head they've got some book knowledge but they've never actually hired a person they've never made the books balanced or had to go out and make sure that there's more profit coming in this month than expenses so that they don't go out of this exactly right it's exactly right it's it's this this fascination this love affair that the world has with academic economists the last twenty years you know I think you'll find like everything else it's it goes full circle at some point in the next 20 years we'll have central bank staffed exclusively by successful business people who've been brought in to fix the mess that that you know bureaucrats and academics have fostered upon us actually I think an even better future would be a world without central banks where the free market is left alone to decide what money is you may say I'm a dreamer but I'm not the only one anyway back to the story let's look at the last two entries on our timeline for both ancient Rome in the USA and see if we can use them to predict what comes next if you have more currency flowing into the government in the form of taxes and then multiply that by more bureaucrats what does that equal if you guessed the corruption of the political process you'd be spot on in ancient Rome one of the fastest ways to accumulate personal wealth was to hold office and bestow favors on individuals or businesses in return for gifts in other words bribery in the modern USA I hate to say it but not a lot has changed cronyism is now the norm in Washington this is where industries and individuals can basically buy a politician to vote a certain way in some cases we've seen their influence extent to the highest levels where outsiders are writing the legislation and having their cronies introduce it we've also seen the event of revolving door politics where politicians may not take cash directly as bribes but as soon as they've fulfilled their purpose in politics they walk out the door of public disservice and into highly paid positions in the private sector how convenient so when we take a look at our timeline the parallels are really starting to stack up our political and monetary experiments never seem to end and I know I'm not the only one who feels like we are accelerating towards something really big now I'd like to introduce you to my friend Chris Martenson he has an absolutely wonderful series called the crash course that I highly recommend that you watch chris is a scientist and entrepreneur who does an excellent job of clarifying complex systems and scenarios so I wanted to get his take on why it feels like we're speeding toward the edge of a cliff tell me about exponential growth because this was one of the pieces in your series that I was blown away by you know it's uh there's this famous quote by Keynes and not one man in a million understands inflation the inflation process is very important I think it's one man and a billion that probably understands what exponential growth isn't it's one of the most important things that we could get our arms around and the reason it's so difficult to talk about is because we're humans and we're not wired for exponential growth we think in linear form so if something goes from 1 to 2 to 3 to 4 people get a sense of that we know how that works but when something goes from 1 to 2 to 4 to 8 to 16 to 32 and just mushrooms off well it's much harder to understand it and we're surrounded by exponential growth it's in our economy it's in our monetary numbers it's in our debt numbers it's in environmental statistics it's in how rapidly we're depleting things in an inverse exponential decay it's in everywhere we were surrounded by so understanding is really critical so I have a couple examples to help people understand what exponential growth is and why it's so hard so if I had two erasers and I said all right I'm gonna give you $100 based on how evenly you can bring these two erasers together nice even speed you'll do a great job at that you'll win a hundred bucks for me every single time but now let's replace in two big heavy magnets you know neodymium magnets maybe maybe from a Tesla coil you know something really awesome and you'll do what everybody does all of a sudden they'll snap together right and it's because these magnets are pulling together with exponential force and even though you might be physically capable of controlling that your mind and your muscles and your neurons won't be able to wire that up I'll give you a hundred shots and it'll still be doing this because we just aren't wired for that another exponential example that really helps bring this home you have a park like a favorite park that you would wouldn't mind see getting ruined how about I think they're going to decommission Candlestick Park Candlestick and San Francisco all right let's let's use that as an example so here's the thought experiment imagine I have a magic eye dropper and it's magic because the drop of water that comes out of this eye dropper will double every minute so after one minute you get two drops and after two minutes you get four drops and after six minutes you can fill the thimble oh right all right so let's do two things we're gonna make this part watertight and I'm gonna handcuff you to the highest row of bleacher seats and let's start this tomorrow twelve o'clock you're handcuffed up in this highest row bleacher seats and I go down right up to the center of the field and I put one of these magic drops down now here's the question how long do you have to escape from your handcuffs knowing that this Park is going to fill up with water okay one drop and it's got to fill the entire park how about a day a day good that's close what if I told you the answer is 50 minutes Wow you can think of 51 minutes you know if you want to get rid of the skepticism right so that's that's amazing right just 50 or 51 minutes and it's all over the whole park is full that's not the important question here's the important question at what time is this park still 97 percent empty space it's not filled with water and do you realize the seriousness of your predicament well I know it would be half full one minute before my predicament so I don't know ten minutes it's five minutes five minutes okay so if we go back just five minutes in time there's a little bit of water in the infield and then five more minutes and it's over and so when I look at this I look across the world and I think okay from all of human history until 1962 put the first three billion people on the planet and then just 40 years to put the next three billion people on the planet and this is important because the earth is our stadium and we're living through one of the most extraordinary periods of human history not just American history not just in our personal lifetime history but human history because you and I will be alive during a time when human population will have fully tripled from roughly three billion to nine billion if we live to ripe old ages it's extraordinary it's putting pressure on everything and that exponential human growth is putting the curve on all those charts we just talked about how fast were depleting oil how much food we have to grow airline miles traveled loss of tuna from the oceans how much money has to be created all of that is being driven by this exponential process and so something I really like to be able to communicate to people is that exponential processes speed up at the end so if anybody watching this has the sense that maybe things are going faster and it's harder to keep up with events and what's happening in Europe it seems to be crumbling fairly quickly that's because we have all these exponential processes converging on this one moment in time and yes things really are speeding up here and now the system they have is failing is falling apart hazy and won't work to me we're in the beginning stages of what happened to the Soviet system we may be like yet 1987 in the Soviet system where two years later four years later it was gone and and that could happen to us and as long as people will still use the dollar that's going to continue but we're getting dangerously close and the end stages of a currency system comes rapidly so even though we've been slipping and sliding sliding for a hundred years our dollar is now worth two cents over a hundred years that's pretty much of a crash but it isn't a crash in a sense of going off a cliff and I believe that history shows that currencies eventually can go off a cliff when a false confidence is just dissipated and we have a confidence but it's based on all false notions and maybe out of desperation a lot of rigging but anyway it's still working the dollar although weaker as an international currency still works but that is what we as a people and not only United States around the world have to fear because it will affect the whole world when this comes and this is why this issue for me is so important we are in big trouble there's this no way out and I am sorry to say about that and I'd love my country and I'm sick to death about what's happening to it because of morons and government and a big bunch of morons and academia who let the Federal Reserve do what it did it's all so simple it could have all been prevented but just by following the damn Constitution monies are only the silver and gold how simple can it be it's less than a dozen workers at all are you gonna do is follow that yeah we have got a prayer we haven't got only people who got a prayer the people are buying silver and gold today you me what amazes me are the stark similarities between ancient Rome and today once again we're debasing the currency to pay for war social programs public works well we keep the society placated with bread and circuses football sports American Idol Dancing with the Stars our government keeps on getting bigger as our military aspirations expand our Empire congressman Ron Paul recently stated that we have over 900 military bases in 130 countries that is an empire and that brings us to one of the most dangerous parallels between ancient Rome and the USA the excessive influence of the military on government Rome's elite realized very early on that keeping the military happy was of the utmost importance if they were to either gain or stay in power as a result the military grew in size and attained high levels of leverage throughout politics in today's USA we spend trillions of dollars on our military and it has grown into a behemoth much of the revolving door politics mentioned earlier comes as a result of the massive deficit spending that we pump into so-called national defense our country has become a war machine we are on offense not defense and there is now an entire industry reliant on keeping things this way and it's not as though we haven't been warned about this in fact alarm bells have been ringing for longer than 50 years I'd like to show you part of a very important speech from the Year 1961 President Eisenhower had just served two full terms in office and he was just about to hand over the presidency to John F Kennedy despite his own military background as a five-star general and the supreme commander of the Allied forces in Europe during World War two Eisenhower chose one of the most important moments of his presidency his own farewell address to the nation to warn America of the dangers of the corrupting influence of what he famously termed the military-industrial complex until the latest of our world conflicts the United States had no armaments industry American makers of plowshares could with time and as required make swords as well but we can no longer risk emergency improvisation of national defense we have been compelled to create a permanent armaments industry of vast proportions added to this three and a half million men and women are directly engaged in the defense establishment we annually spend on military security alone more than the net income of all united states cooperation corporations now this conjunction of an immense military establishment and a large arms industry is new in the American experience the total influence economic political even spiritual is felt in every city every state house every office of the federal government we recognize the imperative need for this development yet we must not fail to comprehend its grave implications in the council's of government we must car guard against the acquisition of unwarranted influence whether sought or unsought by the military-industrial complex the potential for the disastrous rise of misplaced power exists I am an American Mike and there's a lot of criticism of our country and where it's been and where it's going and I'm part of that group I use the phrase picked up from Chalmers Johnson called sorrows of Empire and what he points out is that when you have what I call forever Wars and that seems to be what's happening since 9/11 wars in Afghanistan and Iraq and Lybia ad in Yemen still today on top of disruptions everywhere these wars are expensive we've never had the stand down of our armies and in at the same time the extent extended powers of the government have taken away a lot of our personal freedoms so publicly in the NSA revelations from Snowden but we as people were built on a country with mild government restrictions on what the government can do were the constitutional sources so you combine Wars personal freedom loss and a control of us through the deceptions and you've got a system that feeds on itself and we can't afford 1.2 trillion dollars if you add the spooks that hidden parts the veterans the Energy Department's the nuclear operations for weapons all together and a bit of interest on the debt it's almost half our budget that we spend on this military and that's not a good direction I hope we could go to more peace and avoid the sorrows of empire that are too expensive and when you spend 1.2 trillion dollars on your military the effects are destructive on your economy in other words these supposed spending for strengthening our country on military is destroying our economy when we were in Rome it was to see how a great society a great Empire can completely collapse and fade into history because of deficit spending and currency debasement because of all the things that the u.s. is doing today because they were trying to fund these armies that are occupying foreign lands just like the u.s. is doing today because they were trying to have bread and circuses what we call guns and butter while they were funding all of this war and all the deficit spending and currency debasement to pay for it is one of the key factors and what brought Rome down and this great civilization faded into history and not only that but they lost for a long time the technologies were lost all the knowledge and insight that they had the standard of living I mean we were plunged into the dark ages but there's another side of this story that is rarely heard or explained to me what you're about to learn is something that absolutely cements the importance of sound money and how it is foundational to a prosperous society as Rome was struggling in the late fourth century Emperor Flavius Theodosius divided the Roman Empire into two parts each to be ruled by one of his own sons the Western Roman Empire kept Rome as its capital economically it was soon crippled beyond salvation by the repetition of the misguided monetary practices you've learned about in these episodes and it's generally considered by historians to have fallen around the Year 476 ad while the Western Empire crumbled the Eastern Empire flourished for a further 1,000 years its capital was Constantinople known today as Istanbul the Eastern Empire changed their official language to Greek and even though their own people at the time referred to themselves as being part of the Roman Empire today we know them by a different name the Byzantine Empire so why did the Western Roman Empire fall while the East flourished I believe a major part of the answer is contained in two simple words sound money the Byzantine Empire based their monetary system on a coin originally minted on a small scale by our friend Emperor Diocletian it was called the selita's it weighed just 4.5 grams or 1/7 of an ounce and was made of pure gold the Byzantine rulers had learned from their own history and they made a conscious choice to avoid the continual pattern of debasement that rome had suffered from with amazing results they defended the purity of the selita's for a further six hundred years until 1034 when you guessed it the same old story started to play out the debasement of this elitist was gradual at first but it soon accelerated and the coin was eliminated less than 60 years later in 1092 a new gold coin the HIPAA pyrin was issued in place of this ëletís and its purity was maintained at 85% gold until the early 1200s until it too was debased by the 1350s it had no gold content at all and served merely as a unit of account is it a coincidence that this time period matches that of the decline of the Byzantine Empire it's impossible to say for sure but I'd like to say once again that I believe that the quality of a society is directly proportional to the quality of its money there are many factors that all contributed to the fall of Rome but in these episodes I wanted to draw your attention primarily to the economics because when you study monetary history two things become crystal clear the first is that bureaucratic managed economies always lead to disaster and the second is that monetary debasement brings the fall of Empires [Music] so could this same pattern of currency debasement that we have seen time and time again throughout history happened in the United States take a look around it's happening right now but the big difference this time is that it's it's like all those other times in history times a million this time it's global but what concerns me most isn't the loss of our financial wealth it's the loss of our freedom all of this meddling in the free markets that they have done and the price that we are going to pay because of that meddling is going to cause a loss in confidence in the free market system and capitalism we don't have free markets and we haven't had since 1913 you cannot have free markets if you don't have free market money the currency is 50% of every transaction there is in society and if you have a small group of men at the central bank having a meeting each month in the United States is called the Open Market Committee the FOMC deciding how much currency there's going to be in the system and what the cost of that currency is the interest rates that's a manipulated market by definition you've got a few people deciding what it's going to be that's 50% of every transaction therefore there is no transaction in this society that isn't manipulated so we can't we don't have when people say that the free markets are failing we do not have free markets when people say that capitalism is failing we don't have capitalism we've got prony ISM we've got special favors being granted by Congress to the people that Lobby them and it skews the economy and warps the economy and creates all of these artificial bubbles that end up popping and then everybody and everybody loves living in a bubble so they just want the Fed to create the next one what's happening in Washington doesn't indicate that all of a sudden they're going to gain and wisdom and do the tough make the tough choices which is sort of like getting somebody off drugs you know and people who want to quit the drugs and our system is based on debt and inflation and they're not going to wean themselves also we have to have to anticipate there's going to be a major collapse but then the big question is are we going to have a greater move toward totalitarianism and give up all our freedom or are we going to say we still have a spirit left in this country to say yes we overstretched and we know what the alternative could be and we can build a much better society Milton Friedman the great economist once said when government in pursuit of good intentions tries to rearrange the economy legislate morality or help special interests the cost comes at inefficiency lack of innovation and loss of freedom government should be a referee not an active player in the United States government has gone way too far it is proven beyond the shadow of a doubt time after time throughout history that managed economies do not work free markets have always won and they have always provided a higher standard of living when people cry out for the government to do something about it they're asking for the government to manage the economy they are asking for the government to lower their standard of living ultimately what you get is the USSR or Mao's China that is what a managed economy brings you it's time for you to take action it's time for you to get educated on this to find out more and then to voice your opinion to make yourself heard if we want changes in the economy and changes on a monetary system change our foreign policy the people have to speak out and decide that they want to change and they have to make it very clear to the politicians that that's what they expect they expect and matter of fact that's one area where I tend to be more optimistic because I think the people are learning with the work that you've done in others they're learning something about monetary policy but but the most important thing is that people understand the nature of freedom and the role of government and money being a major part of all that so now that we've seen the economics of the fall of Rome it's time to take a look at the options in front of us for the USA will we choose more debasement more war more intrusive government more cronyism and special interests more taxation and regulation and less freedom or will we choose sound money stable foreign policy restrained government a level playing field of fair laws for everyone sensible taxation and regulation and maximum freedom I want to thank you for watching this series and for sharing these videos with your friends and family if you'd like to learn more join me at hidden secrets of money comm for more interviews and discussions much of this episode was based on material from my book and you can download a copy for free until then thanks for watching and we'll see you next time [Music] you [Music]
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