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"Studying past civilizations may however, sheds a more commanding light on our own future. Looking to ancient Rome, the clues are uncanny, as to what could lie ahead for us. Monetary policy and civilizations walk in lockstep. A culture with a sound monetary system will inevitably survive longer and suffer fewer degradations than a culture that debases its currency. Monetary debasement, political decline and moral deterioration often travel the same road at the same time. For example, in Rome, 277 BC, the denarius was born. It was a silver coin, and for the first 250 years its silver content declined only modestly. The modest decline corresponded with Rome's rise to become an empire. From the original 66 grains of silver, the value had only declined 10% to 60 grains, by the time of Julius Caesar (49 BC). But soon afterwards monetary tumult commenced in earnest. The "aureus" - a gold coin - was created by Julius Caesar. It was to be
125 grains of gold. Gold was used to pay the army and support the Emperors, silver - the denarius - was used for international trade, and of least value, the copper coins were used by the common people . In 54 AD Emperor Nero started to inflate and debase the value of Rome's money. Nero took 14.3% of the silver out of the denarius coin and 11% of the gold out of the aureus coin, replacing the precious metals with base metals. If we flash forward to the U.S. in the 1960s, we find that, in one fell swoop, all of the silver was taken out of our coins and replaced with base metals. Are we Rome on steroids??? As Rome continued on its moral, political and monetary decline, by 193 AD, the denarius had only 26 grains of silver - a 61% devaluation from the original 66 grains. Shortly thereafter, Rome's denarius stopped being accepted in trade by the rest of the world. By 268, the denarius was nothing but base metal with a thin silver coating Coming back to America in 1971, Richard Nixon order
ed the dollar to be taken off the gold standard. From that moment forward, the dollar was, and is, backed by nothing, other than the "good faith" of the U.S. government. The U.S. managed to do, with the stroke of a pen, what it took the Roman's decades to accomplish - eliminate any credible backing to their currency. Today, central banks around the world increasingly diversify their reserves, including cutting holdings of American dollars. It seems like the world is growing uncomfortable taking dollars that are backed by nothing. The historic similarities between the denarius and the dollar should send chills down one's spine. Will history repeat itself? And let us not forget our own copper penny. Copper coins were used as the currency of the common people in Roman times. Our copper penny held its value (100% copper) from 1793 to 1982. Today our "copper" penny is 97.5% zinc with a 2.5% copper coating. That's a 97.5% debasement! Some of our future is quite predicta
b le. Throughout history, civilizations and nations have come and gone. But, if one looks at the money and monetary policy of these nations, a clear picture emerges as to what our future holds. Since going off the gold standard 1971, our dollar has lost over 80% of its purchasing power. It continues to be printed in ever increasing amounts, at the whim of politicians. It's safe to say, we will continue to see more irresponsible printing of money, more inflation, and more references to Rome and its decline. Unless there is a dramatic shift in U.S. monetary policy, the U.S. and the dollar will suffer the same fate as Rome and its denarius. It's just a matter of time." |
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