Seven Stages Of Empire - Hidden Secrets Of Money Episode 2 - Mike Maloney
The world is going to have a new monetary system in this decade that we're in. We're going to experience this huge deflationary crash around the world. And people will just lose confidence in currency. And what do they always go back to throughout history time after time for the last 5000 years? Actually they always go back to gold and silver. We are entering a period of financial crisis that is the greatest the world has ever known. The wealth transfer that will take place during this decade is the greatest wealth transfer in history. Wealth is never destroyed. It is merely transferred. And that means that on the opposite side of every crisis there is an opportunity. The great news is that all you have to do to turn this crisis into your great opportunity is to educate yourself. I believe that the best investment that you can make in your lifetime is your own education. Education on the history of money. Education on finance. Education on how the global economy works. Education on how all of these guys, the central bankers, the stock market, how they can cheat you, how they can scam you. If you learn what is going on and how the financial world works, you can put yourself on the correct side of this wealth transfer. Winston Churchill once said that the further you look into the past, the further that you can see into the future. This program is all about creating your own crystal ball being able to gaze into the future, being able to change this crisis, the greatest crisis in the history of mankind, into your great opportunity. So it all started back in 1999 when my sister and I hired a financial planner to help my mother with her assets. And we gave him control of the family's assets. And in the next year and a half, he lost 50% of what she had. You know, he would come to us every six months. We'd have a meeting and he'd have this smile on his face, just ear to ear smiling. We did really well. The S&P lost 24% and you only lost 18. And so, I fired him. And I moved all of her assets to cash. And I dived into studying the financial markets which led me into setting the economy. And when you start reading about the global economy, the people that are concerned with trade deficits and budget deficits, it's the hard money advocates the gold community. And once I started reading them, they also write about monetary history. And then I really fell in love 'cause monetary history just repeats and repeats over and over again, echoing all the way back to the beginnings of civilization. Gold and silver have been the predominant currencies for about five thousand years but it wasn't until somewhere between 680 BC and 630 BC that they became money. that when they were melted in the coin of equal weights somewhere in Lydia where each coin was a same size and have a same weight. This made them interchangeable. It's called fungible. At that point they became useful as a unit of account and a measurement. You could price a good or a service in those gold or silver coins in a certain number of them. And it was always the same for anybody whenever they were buying that good or service but it wasn't until they made their way to the world's first free-market society. The prototype of democracy, the cradle of civilization: Athens, that they exploded in use. Suddenly money found its natural home: the free markets. Athens was the first society to have a working tax system and free markets. This enabled them to rise to the pinnacle of civilization. Their prosperity allowed them to create great works of art and achieve a level of architecture and engineering that the world had not yet seen. Here we are 2,500 years later, and people are still in awe of their achievements. it was truly a fantastic period in human history and the Athens star shone brightly for many years. So this begs the question: What went wrong? How did such a great and powerful civilization fall? The answer lies in the same pattern that we see throughout history: too much greed and too much war. It was when the Athenians got involved in the Peloponnesian wars but war with Sparta that their monetary problems began. First they lost access to their gold and silver mines. They were also paying armies that were on foot and they were miles and miles away from Athens. So as they paid their armies to buy goods and services from the local populations, a deflation occurs in Athens because they're sending all of their coinage out of the city. Then they started debasing their coinage to pay for the war. If you take in a thousand coins in taxes and then you melt those down those gold coins and you mix 50% copper into your gold now you can mint 2000 coins. so if you take in only a thousand coins but you spend two thousand coins, what is that called? That is deficit spending. Athens began to do that during this war with Sparta. They also had these great public works which were very expensive. And they finished the temple of Athena Nike during the truce in the middle. There was a six-year truce in the middle of this 27 year war. So they didn't stop there great public works and allow their market economy to heal from the expense of this war. As they debase their coinage, people would take the new debased coins at face value at first until there were a whole bunch of those and there's something called Gresham's law where people tend to save, to keep the thing that's rare and they spend the thing that's common into circulation first. So all of the gold and silver coins started to disappear from circulation and become quite rare and it was just these copper coins. suddenly it took a whole bunch of copper coins to buy a gold or silver coin one of those old gold or silver coins. This is the first time that gold or silver ever had a price. Before that everything was measured in a weight of gold and silver. So a large factor in Athens downfall was the expense of war, the expansion of Empire, the debasement of their currency, the eventual inflation that was caused. You know, they minted these coins until they became nothing but flecks of copper. This was actually the world's first hyper inflation and what it did was it financially debilitated Athens to the point where in 404 BC they surrendered to Sparta and eventually they became nothing but a satellite of Rome. The thing that amazes me is how history just keeps on repeating and repeating and repeating and we never learn from all of our stupid mistakes. We just repeat the same stupid mistakes over and over and over again. Today we are doing the same thing that the Athenians did that caused the loss of their great culture. We're doing the same currency debasement, we're doing the same deficit spending, and it's for the same reasons: it's for war and it's for great public works. The interesting thing about the Peloponnesian War was how it started. I would say one of the interesting parallels is that it started really with Athens at its height and with a level of hubris that sent them down the road towards ruin. - Perhaps they felt that they were, you know,... - Superior. Couldn't make a mistake. They knew better. Exactly! And they ended up destroying their society. As a result. - It's a road that we're going down today, right? - I think absolutely. there was a play written shortly after the Peloponnesian wars about the worthlessness of the copper flecks that are where their coinage at the time. So we go from gold and silver very high value money to a currency that has a face value. And it's the first example that I can find in history where a war was... war and great public works were being funded through deficit spending. What you've just seen is the first recorded example of one of the most predictable hidden secrets of money: The Seven Stages of Empire It's a long term cycle that echoes throughout history right to this very day and is basically a societal pendulum that swings from quality money to quantity currency and back again to quality money. It always plays out in seven stages. It always ends with gold delivering a knockout blow to debased currencies and it goes like this... Stage One A country starts out with good money which is either gold or silver or it's backed by gold or silver. Stage Two As it develops economically and socially it begins to take on more and more economic burdens adding layer upon layer of public works. Stage Three As its economic affluence grows so does its political influence and it increases expenditures to fund a massive military. Stage Four Eventually it puts its military to use and expenditures explode. Stage Five To fund the war it steals the wealth of its people by debasing their coinage with base metals or replacing their money with currency that can be created in unlimited quantities. Stage Six The loss in purchasing power of the expanded currency supply is sensed by the population in the financial markets triggering a loss of faith in the currency. Stage Seven A mass movement out of currency into precious metals and other tangible assets takes place. The currency collapses and gold and silver rise in price as they account for the huge quantity of currency that was created. This process transfers massive wealth to those who had the foresight to position themselves beforehand in real money: gold and silver. You know, our monetary system basically steals from the poor and middle class and transfers the wealth to the banks. We see this throughout history and it's just repeating over and over again. What's happening in Greece right now is basically the same thing that was happening back in 407 BC. The deficit spending to fund all of these public works and the debasement of their currency supply caused them to become nothing but a satellite of Rome. Today, they're becoming nothing but a satellite of the banks. Well, the idea of Gresham's laws is simply that people are going to hold on to what's value and spend what is value. Way way back in my youth, I was 11 years old when we went from a silver based monetary system to a purely fiat system. People saw that silver was money, they got used to it, they didn't really think about it and in 1965 under President Johnson, he basically said little silver is too valuable to money, we're gonna just start putting out these substitutes which were what we call cupronickel coins. They were nickel copper plated with nickel at the time. And of course the metal value was far less. And I understood that as a kid. And yet very few adults really seemed to get the idea of what was really going on or a few and all it takes a few. And of course the Gresham's law took effect, so the currency came out of circulation rapidly. It's very interesting to be, you know, knowing monetary history fairly well is there always, you know, put out in silver looking or gold looking form and in most cases, you'll have in fact they look rather interesting and some of them are like silver on the inside and gold on the outside WITH THE LOOK. They have no value at all, really other than melt value of pot metal. To me it's sort of subconscious level. Why are they making them gold colored? Why are they making them silver colored? I think there's an inherent knowledge in the human species that knows that gold and silver have value so if they look in their pocket and they see something gold colored or silver colored it makes it give them kind of a warm fuzzy feeling and it's like, oh yeah, you know, but there's no value in these coins really. The next question is how does this affect you? My next stop was in London where I had been asked to give a presentation to a group of businessmen. They wanted to understand the reason that gold had surged recently and I explained to them that to understand gold you have to understand monetary history. Once you see where we've come from, you can get a much clearer understanding of how the 7 Stages of Empire are playing out right now. We weren't allowed to show their faces but we were allowed to film my presentation. So here it is. The last hundred and forty years of monetary history condensed into just ten minutes. Keep the 7 Stages of Empire in mind. And as you watch this, see if you can recognize the signs. Everybody thinks the US dollars still as good as gold and it hasn't been since 1971. This is the world monetary systems. From 1873 when Germany went on the Classical Gold Standard where each unit of currency is backed up by an equivalent amount of gold in the Treasury in the United States. $20 bill - $20 gold piece in the vaults. Go into any bank, slap down your currency which was a receipt for money, a claim check on money ask for your money (gold and silver) and they would give it to you. So this shows this is currency, this is money. Otherwise there was no reason for any government to store gold in their vaults and then print this currency that was backed by gold. This is what gives confidence in that. And it gives governments the ability to start this scam in the first place where they print these receipts for gold and then they can print more of them than gold that exists. And that happened when we got to World War I. And all the combatants stopped redemption rights? You could no longer go on the bank and trade your pounds, lira, marks, francs no longer redeemable in gold. And they lit up the printing presses and started printing like crazy. Then between the wars they went on something called the Gold Exchange Standard where currencies would be backed partially by gold. So in the United States under the Federal Reserve Act of 1913, the Federal Reserve was allowed to put $50 worth of claim checks on gold currency in circulation backed up by only $20 worth of gold So it was a 40% reserve ratio. For every $20 gold piece in the vault They could put $50 in circulation. We're the dollars of the nation on parade We're the biggest batch of dollars ever made Oh we used to march by millions but now we march by billions and maybe we'll be trillions before you're dead! Then we get to 1944. Now during both wars, Europe paid the US with gold. During World War I, the US didn't get into the war until the very end of it. We didn't really have troops on the ground here in any quantity until the last six months of the war. So for the first four years or so, you're selling you, all of, you know... You take all of your young men off of the farms and turn them into soldiers. You take your factories that make toasters and they start making machine guns. Your factories that made cars are now building tanks. And so you turn your economy toward war. And all of your consumer goods and your grains had to be imported from the United States. And you paid us with gold. Then in World War II, Hitler starts saber-rattling in 1936, annexes Austria in 1938, invades Poland in 1939. Pearl Harbor wasn't until the end of 1941. We didn't have troops on the ground until I believe August of 1942. So again, it's like 6 years where you're paying us with your gold and we're selling you stuff. This is where Americans have this myth that war is good for the economy. War is good for the economy if you are not in it and you're selling them the tools of the trade. Yes. The American national income gets bigger and bigger. In 1943, it was a hundred and forty two billion dollars. That was double the 1939 figure, triple a figure for 1933. But by the end of World War II, the US had two-thirds of all the world's monetary gold, the central bank gold, and the rest of the world had to share the other third and Europe had none. So the world monetary system was no longer going to work. It would collapse. But we had made all these loans of dollars to Europe so Europe was flooded with dollars. And so representatives from around the world met at Bretton Woods, New Hampshire in 1944. They come up with a new world monetary system called the Bretton Woods system where every currency on the planet with the exception of just a few, they would be backed by the US dollar, and the US dollar would then be backed by gold at $35 per ounce. This gave confidence to all currencies. so this gave the world stability and it pegged all the world's currencies to each other through the dollar to gold. So there was no such thing as the forex. Currencies didn't float, the exchange rates were fixed year after year. And this helped to make world trade boom. Then the Dollar Standard starts because we kept on printing dollars. Under the Bretton Woods system, there was no reserve ratio established where the US actually had to have a certain amount of gold for how many dollars we created. So we had done a bunch of deficit spending for Korea, for Vietnam, for Johnson's Great Society and expanded the currency supply, the amount of paper dollars in circulation, and exported them all over the world. And then in the 1960s, Charles DeGaulle, President of France, realizes that we don't have the gold to back up the dollars. The fact that many countries, accept as a principle, dollars being as good as gold lead Americans, to get into debt, and to get into debt for free... at the expense of other countries. Because what the US owes them is paid, with dollars they are the only allowed to emit. We consider it necessary, that international trade, be established, as it was the case, before the great misfortunes of the world, on an indisputable monetary base, and one that does not bear the mark of any particular country. Which base? In truth one can't see, how one could really have... any standard criterion other than GOLD! And he starts asking, France acts asks for their gold and trades and the dollars. And at that point, other countries saw this and started jumping on board. And the US lost 50% of its gold from 1959 to 1971 but we still had in 1971 about 12 times more dollars that we had created than there was gold and this run on the bank basically. The US now being the bank. This is a giant worldwide bank run because the US for the second time had committed a fraud and created more receipts for gold than there was gold. It's...it's that simple. Then finally the markets sort of sense this. And Nixon was forced to take us off the gold standard because if he had paid out gold until it got to zero, once we couldn't pay on some of those dollars, the entire worldwide monetary system would have collapsed. I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the United States. In full cooperation with the International Monetary Fund and those who trade with us, we will press for the necessary reforms to set up an urgently needed new international monetary system. And on August 15th 1971, all the world's currencies became fiat currency I don't know why the rest of the world didn't rush out and hang him but they didn't, they just all went along with this. To our friends abroad, I give this assurance: The United States has always been and will continue to be a forward-looking and trustworthy trading partner. There have been thousands upon thousands upon thousands of fiat currencies throughout history and there isn't one that survived. It is a 100% failure rate. And we started this experiment where all the world's currencies would be fiat currencies simultaneously in 1971. But what we have here: 30 to 40 years different monetary system, 30 years, 28 years, 39 years plus. What's next? The world is going to have a new monetary system in this decade that we're in. We're going to experience this huge deflationary crash around the world. the world will probably end up on some sort of new monetary system probably after governments try and print their way out of this and cause hyper inflations of all the currencies. And people will just lose confidence in currency. And what do they always go back to throughout history time after time for the last 5000 years? Actually they always go back to gold and silver. In a world of floating currencies and that's what all national currencies are today, they bob up and down relative to each other but they're all syncing relative to gold, that includes the Dollar as well as the Euro and the British Pound and all the others. They're going to continue to lose value, continue to lose purchasing power. Personally I don't think there's any way of avoiding what is coming. There's no way to fix it right now. There's only a way to either let it wipe you out or to benefit from it. And I want to make sure that it's not just all, it's not just a few of the big investors in the world that are ending up with all the cookies. So I want to make sure that there's as many small investors as possible that are benefiting from it because that's what makes society run: middle class, small investor. One of the biggest challenges for human beings is that physiologically we are designed to operate in recency. It's the fight or flight response. It's literally in my cells. Literally. And so that when I'm in the wild, it's about I need to look for something to eat or make sure I don't get eaten. And how that translates into the modern world is that we think only about what's happening immediately in front of us. And so we think a long time is last week. In the world of YouTube and Facebook and instant messaging, we think three seconds is a long time like: Did you get the post already? I already posted it. And the reality is that if you look at history, I don't mean a week, I don't mean a month, I mean decades, I mean a hundred years, I mean a couple of hundred years, I mean more than a couple hundred years. You can start to see some patterns, you can see some things that are going on because history repeats itself there are some trends and there are some movements that you can learn from. And you literally have to go outside of your your human instincts to look at history because we just want to focus on right now, because I said that's about either eating or being eaten. So we're gonna go beyond that and that means not just focusing on the hair now but learning some real powerful stuff and what's happened because they just might be some indicators there as what's gonna happen in the future. Now, the 7 Stages of Empire just as a reminder started with sound money and then a country adds layers of public works and social programs and then develops a massive military and then puts that military to use and to pay for the war it debases its currency supply which causes a loss of faith in the currency which then leads to a currency crisis and gold does an accounting of the expansion of that fiat currency supply that happened over all those years of the first five stages. We are in the sixth and beginning the seventh stage. Gold started the accounting in the year 2001, it was 250 dollars then but we're still in the very early stages of this. Well, that's right. I think one of the problems with gold is people just don't understand it. I mean for one thing it's sort of been banished from the curriculum for 35 years. We have going on two generations of academics and scholars who have never studied gold unless you're a specialist in economic history, you can go back and look at it now. When I was in university and even when I was in graduate school in economics, we were still on the gold standard, in some form it was fairly attenuated. But when you studied the IMF and you looked at how they present the finances of a country and they break down the reserves and you know, the capital accounts, gold was a line item in the capital account. He had to understand how it, what role had played and how it, you know, could equilibrate in terms of balance of trade. Well, that's gone. The IMF, Nixon went off the gold standard in 1971. And bright young economic students just don't understand gold. They think it's a joke or they think it's maybe a commodity trade, a momentum trade. They don't understand that it really is money parks loss. So now we've learned that money was born in roughly 630 BC when it became fungible. It was free markets and sound money that led to Athens great prosperity. But debasement of their money for deficit spending on war and public works played a large role in their demise. Over the past 140 years, we've based our own currencies to the point where two generations of scholars don't even understand gold. We learned about Gresham's law and that Bad Money Drives Out Good. In recent history there has been a new monetary system roughly every 40 years. And we've learned that we are in the 6th stage of the 7 Stages of Empire. So that's it for this episode. Join us next time when we learn more about the chaotic state of the US Dollar Standard and how it's going to affect you no matter where you live on the planet. When I wrote my book I said that we're coming into an era that is going to be the greatest wealth transfer in the history of mankind therefore it's the greatest opportunity in the history of mankind. I've made it my mission to help as many people as possible get through this crisis and to come out on the best side of the wealth transfer. I've just finished filming an exclusive presentation titled "How The 7th Stage Will Unfold" where I detail what I'm doing personally to prepare for a range of scenarios. It's available at hiddensecretsofmoney.com as part of your free information toolkit. So my challenge to you for this episode is to try and find a single example in all of monetary history of a crisis that was brought on by too much deficit spending, too much debt and too much currency debasement being solved by more deficit spending, more debt and more currency debasement. Until then, good luck and I'll see you at the bonus presentation at hiddensecretsofmoney.com. Thanks. You bet, there's no other, there is no other side. you're either silver and gold or you're doom. That's exactly the way the world is always working. That's the way it's working right now. Turn on television. Watch what the price of gold because the dollar going down, gold going up, silver going up. That's exactly the way it's always working. It's always working that way. And it's working that way now. Why is anyone surprised? Why is it surprised? It's always working like that. 5000 years, it's always working exactly that way. It's happening that way now. They're "Woo! Wait a minute..." Weird! Beyond weird!!! Mike Maloney's hidden secrets of money is made possible by the clients of goldsilver.com. Your continued loyalty and support allows us to educate the public on how to both protect themselves and benefit in the turbulent times ahead. To all goldsilver.com customers, thank you. Hidden Secrets of Money would not be possible without you.