The Future of Money: Fool Me Once, Shame on You. Fool Me Twice…
This article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
I recently attended the Freedom Fest Conference in Las Vegas this past month. During a panel discussion that included a number of Austrian School economists, it was remarked with certainty that the United States dollar (USD) would eventually collapse. This invited the inevitable question: “Since the USD is the world’s reserve currency, what will replace it once it collapses?”
A conventional view out there – one espoused by many free-market economists even – is that just as the US displaced the United Kingdom as the world’s superpower and the dollar displaced the pound following World War II, a similar course of events is bound to take place. The consensus seems to be that China is waiting in the wings and will eventually emerge as the world’s next superpower, with the yuan displacing the USD.
Another popular view is that once the fiat dollar collapses along with all the other major currencies (after all, each and every one of them is a fiat currency derivative of the USD), the International Monetary Fund’s (IMF) Special Drawing Rights (SDRs) would become preeminent.
There is a major problem with this view. That is the old saying: “Fool me once, shame on you. Fool me twice, shame on me.”
Over the past 100 years and change, the world has gone from a relative gold standard (pre-1913), to a world reserve currency linked to gold (Bretton Woods), to a basket of world currencies that have no link to physical gold whatsoever. People have gone from owning and holding real, physical, trustworthy money (gold and silver) to entrusting the world’s bankers with taking care of and protecting their money. The results have not been pretty. People have watched their savings and purchasing power melt away, endured many economic bubbles and market crashes, all while the global banking elite enriched themselves more than ever before.
Of course, the worst is yet to come. Before long, the USD and all other world currencies will collapse in spectacular fashion. America’s financial landscape will start to resemble that of present-day Greece: capital controls, bank holidays, long lines at ATMs to get cash, massive currency devaluation and the re-emergence of a barter economy. When this happens, do you really think people will readily accept bankers’ and politicians’ solutions of yet another fiat currency?
People will be glad to hear: “Sure, the dollar has collapsed and you have lost all your savings, but the Chinese yuan is really the place to be now. They’ll take better care of that currency this time around!” Or: “Well, yes, I know you’re upset. But now the IMF has things under control. Your dollars have been exchanged for these wonderful new SDRs!”
I highly doubt it. My guess is that after this current massive house of fiat currency cards comes crashing down, the people will not take it anymore. They will no longer trust bankers and politicians to take care of their money. They have been fooled once. They have been fooled twice. They won’t be fooled again. (At least for a good while!)
In short, people will reject any new fiat currency regime being foisted upon them. Instead, they will “opt out” and demand a money they can trust — a money that cannot be manipulated and exploited by bankers and politicians and which carries zero third-party risk. There is only one money in existence that really fits this criteria, and it has been around for thousands of years. This money, of course, is physical gold and silver.
It goes without saying that those who figure this out now and allocate their wealth in this direction stand to be in very good financial shape when the day comes.
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This is wishful thinking. The vast majority of people are clueless about the nature of money and will take whatever they can pay their taxes with. Look at how many times the Mexican Paso and Soviet Ruble were revalued, traded in for new money at a fraction of the value and calling it the same thing.
That’s a good point. Maybe I am giving Americans too much credit. But I just don’t think everyone’s going to swallow a massive devaluations and then a new “world reserve currency” without a fight.
May i ask you this , i heard someone say that there cannot be a real gold standard because today is a lot different to many years ago , population for one and the simple fact there is not enough gold to do that.
Is it like 1 or 2 olympic swimming pools would engulf the whole worlds gold ?
I partially agree that people tend to forget easily, but only partially.
We pay taxes in pesos, we use it for small transactions. In Argentina 90% of savings are NOT in Argentina’s pesos but in dollars, real estate ord other hard assets and always trying to be out of reach of politicians. Even after 15 years of last big crise. I agree with the idea of the article.
Nicely written Addison,
But I believe you could have a gold-backed yuan, which will be easily convertible. So , we are going back to a gold-standard .
Same as it ever was… The implication is that the memory of these times will guide the righteous. Not. The collapse will “farther than it appears”, per the Opposite Side View Mirror Syndrome. Memory, root cause understanding and logic will not pervade. But perhaps not. Perhaps a collective understanding will prevail and guide a Revolution. The masses of sheep will likely not partake. Too busy herding.