Thoughts

Our foundations

Money:

Most people still believe that our species evolved from a barter society to one that used money to conduct business. Most therefore do not understand the true nature of money. In fact, many recent anthropological studies have discovered that barter was not used within local markets at all, and was very rarely used in non-local trade. The problem of a lack of double coincidence of wants has always been a practical setback to the barter theories, but anthropology has revealed that money was introduced not for trade, but to account for debts, and barter is a myth invented by relatively modern economists. Notable debts in ancient times were debts to religious institutions, tributes to a King or Emperor, or to your fellow citizens (for example a dowry). As an example, this image shows an ancient stone promissory note:

Promissory note tablet, Mesopotamia

This image shows a current form of money:

20-pound-note

We encourage you to ponder: in the images above, are you viewing money itself? Or a record of money? Do either of these forms of money represent full and final settlement between debtor and creditor?

Some thoughts for you to consider regarding this issue:

If you hold some of your wealth in the form of banknotes in a box under your bed, to what extent is that wealth real? Should you consider counterparty risk for these banknotes? Who would be your counterparties? Similarly, money held in the form of bank deposits is considered by most to represent their savings or wealth. Is it anything more than just multiple layers of debt owed to the saver? Throughout mankind’s long history of using money, are all debts always paid in full on the due date, or are they frequently defaulted? Does the fact that your money is issued by a stable central bank in a rich developed country give you confidence that these debts will always be paid? Finally on this point, a quote from Alan Greenspan, under oath during testimony to the US Senate Banking Committee in 2005:

‘I believe that we should maintain the principles of Social Security, but I think the existing structure is not working. Until we construct a system that creates the savings that are required to build the REAL assets, so that the retirees have REAL goods and services. We don’t have a system that is working. We have one that basically moves cash around and we can guarantee cash benefits as far out and whatever size you like, but we cannot guarantee their purchasing power. Do we have the material goods and services that people will need to consume, not whether or not we pass some hurdle with respect to how legal financing occurs. Financing is a secondary issue and it is a means to create the REAL wealth, not an end into itself.’

Mr Greenspan was Chairman of the Federal Reserve at the time of this statement. Was he your counterparty if you saved in dollars? If you answered yes, please think again, we would humbly suggest you would benefit from a deeper view.

Evolution:

Does mankind constantly evolve? Over a long enough timeframe we believe the answer is clearly ‘yes’. However, over relatively short timeframes (100-200 years), we see evidence that evolution in certain areas of our lives can stand still, or even take a backward step. Indeed, we also believe that in the monetary area, mankind has at best stood still for thousands of years. Until very recently. Is evolution driven by the masses, or by the brightest amongst our species?

Consider the rise and fall of great empires through the ages. How many of them remain today? What about their money? Do we still use Greek or Roman money, or Prussian money, or that of the Ottoman empire? We do not, as all of these empires have collapsed, and their money with them. What of today’s empires? Well, the British was the latest empire to collapse, although its currency is still around. We will leave you to ponder Britain’s national debts, its citizens’ debt levels, and its trade deficit, and perhaps where that will all end. Similarly, today’s great empire, America, is still exerting influence all around the world, but would you agree that its influence has been on the wane for over 40 years? Have you ever considered how America funds its empire these days, and the sustainability of that funding? If your thoughts turned to the US treasury markets at that point, we weren’t actually referring to monetary funding, but instead to the real goods and services that America buys each year, and the size of their trade deficit.

It is apparent from our research that empires come and go, and their currencies die with them. Mankind has not evolved in this area. But today a change is underway. Evolution is happening as you read this. We elaborate on this key point in our client meetings, it is THE big light-bulb moment for those able to see beyond consensus mainstream views.

Orthodox thinking

Do you consider yourself to be broadly supportive of socialism, or would you consider yourself to be a free-market advocate? Perhaps we can challenge those views a little. Were you supportive of the actions taken by central bankers and governments back in 2008 and 2009 that halted the credit crunch and rebooted the world economy? Did those actions safeguard your job or your business? Or your pensions and other investments? If you answered yes to any of those then you have more than one foot in the socialist camp. If you answered no, congratulations, please feel free to join us in the free market camp.

It is orthodoxy these days for the populations and businesses of the world (especially the developed world) to be spared any undue hardship or suffering, as politicians respond to the cries from their electorates and lobbyists for more help, in fighting unemployment, inflation, and recessions. Politicians and the media are merely mirror images of the population and current orthodox thinking, reflecting modern views and customs. Be under no illusion, modern customs and views are about as far removed from a free-market as we have ever been as a species (except, at present, in one key region of the world). We view the move to restrained markets as perennially dangerous to economic and market stability, as capital is continually misdirected and destroyed, or more likely is misdirected and saved by the authorities.

We recognise that evolution has stopped in this regard. We view the free-market as evolution itself; the means by which mankind learns from its mistakes and strives to improve its standard of living through innovation and trade. Fortunately, we are not alone in that view, and a giant leap forward is developing right now, unseen by the orthodox mainstream and by supposedly enlightened minds. This leap forward, driven by powerful organisations, is already having a positive impact few can see, even though it is happening in full view of the world’s media, the world’s investors and the world’s governments. Perhaps in 20-30 years historians will see it, but we certainly feel blessed to see it happening in real time.

We help our clients to see past orthodoxy at events happening now, so that they can better plan for the future, where once again mankind’s evolution via free-market capitalism will be freed from the socialist-leaning constraints of the past 70-100 years.

If most of the thoughts above are a mystery to you, we humbly suggest that our services would be of great benefit to your medium and long-term planning.