Gold And The Debasement Of Currency Con

April 30, 2020
Precious Metal Expert & Author

It is reasonably well known that many Roman emperors debased their currency (coinage). This was a very bad practice, since it is really a reflection of the debasement of the value of the kingdom (empire or country); going from a honest and just society to a corrupt and unjust society.

One of the reasons (effects) of debasing the currency was the transfer of wealth from the citizens to the ruling class. When the gold or silver content of the coinage is reduced, then more of the official coinage can be made, with a similar amount of gold or silver; therefore, increasing the money supply without the input of more gold or silver.

The increase of the money supply leads to reduced purchasing power, and this is the mechanism whereby they are robbed, since it is the ruling class that essentially bags the difference in purchasing power.

It is by this same or similar mechanism that US money printing is funded by the world (other nations) having a reduce purchasing power, since they use the US dollar as a reserve currency.

Below, is a chart that shows the extent to which the Roman emperors debased their coinage:

 

source: By Nicolas Perrault III - Own work, CC0, https://commons.wikimedia.org/w/index.php?curid=67224989

Over a period of about 300 years, the coinage was reduced by about 65%, according to this chart. If that is bad (and it was), then where does it leave the current society, where coinage have been debased by 100% over a period of less than 100 years (this is since most countries have moved from a gold & silver standard to where their coins (or currency) has no precious metal content).

This is how the rich gets richer and the poor gets poorer. This is is how the “too big to fail” gets bigger.

Note that (mathematically)the difference between going from 100% (or even, say 20%) to 0% is infinitely worse than going from 100% to 35%.

If one considers what eventually happened to the Roman Empire, then this society is in for an experience that can only be described as Hell.

The increase in credit that this debasement has facilitated, has had a huge effect on how this society prices gold, for example. The massive amounts of credit has deflated the price of gold significantly.

When this credit extension has run its course, then gold prices react violently to the upside, as explained here.

Here is a chart of the gold price relative to the US M2 Money Stock (in billions of dollars):

Currently the gold price is just slightly less than 10% of the M2 money supply (in Billions of dollars). In 1980 it was as high as 45.4% of the M2 money supply (in Billions of dollars). If one goes further back, then gold was even more valued relative to the M2 money supply.

Interestingly, in 1913 when the Federal Reserve was created, gold was priced at 131.4% ($20.67/15.73) of the M2 money supply (in Billions of dollars). At that ratio gold would today be around $22 166 ($16 869*1.314).

Although debasement of the currency started before the creation of the Federal Reserve, it does show to what significant extend the gold price has been suppressed by credit creation facilitated by the Fed since its inception.

A prudent study of gold prices will lead one to understand that the gold price will likely revert to historically high levels relative to the M2 money supply. Owning gold at the right time is a very effective way to counter the effects of this debasement robbery. That time is now.

For more on this and additional analysis, you are welcome to subscribe to my premium service. I have also recently completed a Silver Fractal Analysis Report as well as a Gold Fractal Analysis Report.

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Hubert Moolman is a self-taught gold and silver analyst who writes a precious metals newsletter specializing in fractal chart analysis and monetary fundamentals (especially gold and silver). He has a background as a Chartered Accountant, and managed his own firm for 9 years. He also has a website that publishes educational articles on gold, silver and the dangers of fiat money. 

Nearly 40 percent of all gold ever mined was recovered from South African rocks.

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