Ron Paul: Here’s Why Trusting the Government Leads to Poverty
By Ron Paul, for Birch Gold Group
I was talking to my friends at Birch Gold a couple of weeks back, and I mentioned the debasement of Roman currency. We sometimes say “debasement” today, when referring to the plunging value of our money, but technically this term refers to lowering the intrinsic value of coins by diluting their precious metal content with a low-value or “base” metal. Here in the U.S. we broke three centuries of tradition when we debased our own penny, for example.
I explained that debasement is one of the most pernicious forms of theft. See, back in Roman times, the denarius started out as a pure silver coin weighing 4.5 grams. In those days, the money supply consisted only of circulating coins. In order to spend money, the government had to create more money. And if they didn’t have enough silver to do this, well, then they had to debase the denarius.
Take a look at this chart and you’ll notice that steep declines in the silver content of the denarius coincide with wars and other crises:
You’ll also note that once debasement begins, once the actual value of the coin declines, it doesn’t recover. In another 50 years not covered by the chart, the denarius contained only 2% silver.
Why is this such a big problem? Here’s why:
Once the government mint dilutes the value of money like this, they leave its face value alone. A pure silver denarius and a 2% silver denarius are alleged by the government to have the same purchasing power. The whole point of debasing currency is so the government can spend it at face value before anyone catches on that this new money is actually worth less.
This is a problem that’s existed since coins were first minted in Lydia in 600 B.C. Historically, nations that managed their coinage well, and didn’t debase it, became global reserve currencies: the Florentine gold florin, the Spanish silver dollar, the Dutch guilder, the pound sterling. Every one lasted about 100 years, until financial pressure caused the issuing nation to debase their coins and pass them off at face value.
In other words, money lasts as long as trust. Once that trust is broken, it never recovers.
Money is trust
Government, whether it’s a monarchy or a representative republic, has two universally-recognized powers:
- To collect taxes
- To determine the money in which taxes are paid
That’s it. Everything else is window dressing.
Now, this phenomenon of debasement is nearly as old as coins themselves! Here’s an example from Aristophanes’s play The Frogs, performed in 405 B.C. (as translated by Gilbert Murray in 1908):
Gold or silver, each well minted, tested each and ringing clear.
Yet, we never use them! Others always pass from hand to hand.
Sorry brass just struck last week and branded with a wretched brand.
So, if everyone catches on when money is debased, and just pays their taxes in these new “sorry brass” coins, what’s the point of debasement?
Not everyone catches on at the same time. In ancient times, imagine the government pays its employees with these newly-minted, “sorry brass” coins. What would they do? Well, they’d run right out and spend them! As quickly as possible! Before the rest of the city catches on that this new money isn’t “gold or silver, each well minted,” but rather “sorry brass.”
See, there’s always a delay between the act of debasement and its recognition. There’s a brief window where bad coins buy just as much as good coins.
That brief window still exists. As I wrote not long ago, in the context of additional billions of dollars to be transferred from U.S. taxpayers to Ukraine:
Bloomberg reported earlier this summer that inflation is costing the average American household more than $5,200 this year. Inflation is a tax on middle class and poor Americans. The wealthy – like those who run Raytheon and Lockheed Martin – always get the new money first, before prices go up. The rest of us watch as the dollar buys less and less.
When our government engages in deficit spending, essentially (to quote myself) “money created out of thin air by the Fed and appropriated by Congress,” they’re breaking our trust. They’re deliberately choosing to sacrifice the purchasing power of every U.S. dollar in the world to further their political goals.
Just like the Roman emperors, the heads of state in D.C. have no hesitation to trade the financial wellbeing of every American family for their own special interests.
In fact, there are only three things the U.S. dollar is still good for!
- Paying your taxes
- Handy bookmarks
- You can still swap them for real, sound money in the form of physical gold and silver (for now)
Physical precious metals are “trustless” money
Ray Dalio explained this principle very well in his recent Principles for Dealing with the Changing World Order:
…money being “hard” is important because no trust—or credit—is required to carry out an exchange. Any transaction can be settled on the spot, even if the buyer and seller are strangers or enemies… When you receive gold coins from a buyer, you can melt them down and exchange the metal and still receive almost the same value as if you had spent them, unlike a debt asset like paper money, which is a promise to deliver value (which isn’t much of a promise, given how easy it is to print)…
So gold (and, to a lesser extent, silver) can be used as both a safe medium of exchange and a safe storehold of wealth.
The world no longer runs on “hard” or sound money. We’ve replaced gold and silver coins with “paper money, which is a promise to deliver value.”
Ask yourself these questions:
Whose promise to “deliver value” is this?
Should you trust them?
Have they ever kept their promises before?
Have a long, hard think over those questions. If, like me, you don’t like your answers, if you don’t trust the American government to suddenly start making good on their promises, well, maybe it’s time to learn more about what Dalio calls “a safe medium of exchange and a safe storehold of wealth.”
Right now, you can reach out to Birch Gold Group and learn how to exchange some of those “promises to deliver value” for real, physical gold and silver. If you’re saving for your retirement, this is especially crucial. As fast as inflation is rising today, how can you have any idea how big a pile of paper dollars you’ll need to survive? Two million? Ten million? There’s no way to know!
That’s a huge reason to consider uninflatable, tangible physical precious metals for the long term. Because remember, the more dollars they print, the more dollars you’ll need to buy the same ounce of gold.
Ron Paul is a medical doctor, a retired Captain of the U.S. Air Force, an author who’s published 21 books and former twelve-term U.S. Congressman representing the state of Texas. He’s emerged as one of the leading voices challenging government’s addiction to deficit spending and the Federal Reserve’s wealth-destructive monetary policies. He works with Birch Gold Group to educate Americans about the threats to their financial futures, and how to protect themselves and their families.2022, Featured, gold as money, inflation, ron paul