Who Pays the Price For Power?

A Wealth Matters 3.0 Deep Dive on Currency Debasement, War, and the Erosion of Liberty with a Strategy for Maintaining Personal Agency and Avoiding Wealth Destruction.

TL:DR How governments devalue money and freedom through inflation and complex legislation, and what you can do to defend against it.

Introduction:

Currency debasement has long been a tool used by governments to manage financial challenges, often at the expense of economic stability and individual liberty. Throughout history, leaders have devalued currency to fund wars, public projects, and other state expenditures without raising taxes—a politically unpopular move. However, the consequences of debasement have frequently led to inflation (the hidden tax that we all pay), economic instability, and a loss of trust in government, creating conditions ripe for social unrest and even the rise of authoritarian regimes.

This issue of Wealth Matters 3.0 explores the historical practice of debasement, the socio-economic impacts that emerge from it, and seeks to empower you with the ways you can protect yourself in today's environment of fiat currency and reserve currency manipulation.

Historical Context: Currency Debasement through the Ages

1. Ancient Practices: Rome and the Origins of Debasement

The roots of currency debasement can be traced back to ancient times, particularly in Rome. Roman emperors, including Nero in 60 AD, began the practice of reducing the precious metal content in coins, effectively debasing the currency. Nero famously lowered the silver content in the denarius from 100% to 90%, allowing the minting of more coins to fund military campaigns and infrastructure projects without raising taxes. However, this was the beginning of a long downward spiral that would later contribute to Rome’s economic instability and eventual decline.

Photo Source: https://short-history.com/roman-inflation-c62923632b7a

2. The Great Debasement of England (1544–1551)

In medieval Europe, debasement continued as a tool to address fiscal crises. One of the most notorious examples occurred in England under Henry VIII and his successor, Edward VI, during what is known as the Great Debasement. Between 1544 and 1551, the silver content in English coins was drastically reduced to fund ongoing wars with France and Scotland. This led to severe inflation, causing public unrest and a loss of confidence in the monarchy. While the immediate goal was achieved—raising money for war—the long-term consequences were disastrous, with inflation and economic instability shaking the foundations of English society.

3. Weimar Germany and Hyperinflation

Perhaps one of the most striking examples of currency debasement leading to social and political collapse is Weimar Germany in the early 20th century. Following World War I, the German government printed massive amounts of paper currency to pay war reparations, leading to hyperinflation. By 1923, the value of the German mark had plummeted so dramatically that it took wheelbarrows full of money to buy a loaf of bread. The economic chaos paved the way for the rise of Adolf Hitler and the Nazi regime, as desperate citizens sought stability in the face of economic ruin.

Photo Source: https://short-history.com/roman-inflation-c62923632b7a

Economic and Social Impacts of Currency Debasement

1. Inflation and Erosion of Savings

One of the most direct consequences of debasement is inflation. As more money is introduced into the economy without a corresponding increase in goods and services, the purchasing power of currency diminishes. This erosion of value hits savers and those on fixed incomes the hardest while making asset owners exponentially richer. Over time, people’s savings lose their value, eroding their financial security while the income inequality gap widens rapidly. This inflationary spiral can lead to widespread economic distress and social unrest, as everyday goods become unaffordable for much of the population, and asset owners have more dry powder to invest than they can responsibly deploy without creating even more artificial asset bubbles. It also becomes the ultimate funding mechanism for conflicts and wars that would otherwise not be financially feasible while making the fixed debts borrowed possible to repay with the newly inflated and debased currency they were borrowed in.

In many historical cases, currency debasement has led to increased tension between the ruling class and the public, with citizens growing frustrated by their diminished purchasing power and the government's perceived failure to manage the economy responsibly.

2. Increased Government Control and a Dilution of Personal Agency

In response to the economic instability caused by debasement, governments often impose more complex regulations in an attempt to stabilize the economy and also dilute individual freedoms under the name of national security. These regulations can lead to increased government intervention in markets and a reduction in economic freedom. Historically, the move toward centralized economic control following debasement has been a common theme. In Rome, the government began imposing strict controls on trade and commerce as the value of the denarius plummeted, leading to a reduction in economic freedom and, eventually, social decay.

The centralization of power is another consequence (and intent) of debasement. By controlling the economy, governments can consolidate authority, suppress dissent, and limit individual freedoms. In many cases, totalitarian regimes have exploited economic crises—often caused or exacerbated by debasement—to centralize control and stifle opposition. This was the case in Weimar Germany and other historical examples.

3. Legislative Complexity and Reduction of Liberty

As governments attempt to mitigate the effects of debasement, they often introduce complex financial regulations and laws to stabilize the economy. The ruling class often uses their asymmetric wealth to fund candidates who will take their orders and are not experts in these financial forces and levers, so while these lawmakers may be well-intentioned, they often pass legislation they are directed to by their oligarch overlords, versus the wishes of the people they represent and this leads to a reduction in personal and economic liberties. Citizens may find themselves subject to stricter controls on their financial transactions, savings, and investments. In the long run, this increased regulation can stifle economic innovation and personal freedom while giving even deeper monopolistic power to the few who pull the strings until the national or global monetary and social order eventually collapses and needs to be reset. This has typically happened in modern times with a global war.

4. The Transition to Fiat Currencies: Modern Implications of Debasement

With the move away from commodity-backed currencies (such as gold in 1971) to fiat money (currency-by-decree and not backed by anything but a large defense budget to enforce), governments now have more flexibility to manipulate the money supply. This flexibility can be a double-edged sword. While it allows governments to respond to economic crises more swiftly, it also opens the door to potential abuse.

The dissolution of the Bretton Woods system in the 1970s marked a significant shift in global monetary policy. Under Bretton Woods, currencies were tied to the U.S. dollar, which was in turn tied to gold. The end of this system allowed for the widespread adoption of fiat currencies—money that has no intrinsic value and is not backed by a physical commodity. While this system offers more flexibility in monetary policy, it also increases the risk of inflation and debasement.

5. The Role of Central Banks

In the modern era, currency debasement often takes the form of inflationary monetary policies. Central banks, such as the Federal Reserve (Read The Creature From Jekyll Island), play a crucial role in managing the money supply. When central banks increase the money supply through mechanisms like quantitative easing, they risk debasing the currency. While these policies can provide short-term economic stimulus, they also increase the risk of long-term inflation.

Centralized control of monetary policy has also led to concerns about the erosion of economic freedom. With central banks wielding so much power over the economy, there is a growing fear that individuals and businesses will have less control over their financial futures. In response, many have turned to alternative forms of currency, such as cryptocurrencies like Bitcoin, as a hedge against fiat currency manipulation.

Side note: Bitcoin is more than a hedge against inflation or speculative invesstment. Bitcoin is the single most powerful (yet peaceful) protest you can make against to ensure you have freedom of speech and non-custodial power over some of your wealth. More on this in my web1-web5 post here. Now back to our regularly scheduled programming…

The Broader Erosion of Rights Through Complexity

Currency debasement offers a metaphor for a broader societal trend: the watering down of fundamental rights through complexity. Just as debasement dilutes the value of money, complex legal frameworks and bureaucratic policies can erode personal agency and dilute the protections offered by constitutions.

Stability manifests from simplicity and chaos comes from complexity.

In many cases, constitutional rights are designed to be straightforward, offering clear protections for citizens. However, over time, these rights can be undermined through complex legal interpretations, excessive regulations, and opaque governmental processes. Just look at the U.S. Tax Code, for example.

The erosion of privacy rights granted in the U.S. Constitution’s 4th Amendment in the digital age has occurred not through outright repeal but through a labyrinth of data-sharing agreements, surveillance laws, social media network effects, consumerism, and corporate practices. As an example, your Apple ID and Google ID (which are the only proxy you have to the smartphone remote control by which you live your life) have no such guarantee of privacy and protection against seizure but now make up the totality of your real-world identity as far as intent and action are concerned.

This gradual erosion can lead to a loss of personal agency, just as inflation reduces purchasing power. Citizens may find it harder to navigate legal systems or defend their rights, especially as laws become increasingly convoluted. In both cases—currency debasement and the erosion of rights—complexity serves as a tool for exerting greater control over the population.

The Broader Trend of Debasement: Watering Down Fundamental Human Rights

When it comes to unchecked power, currency debasement is not an isolated tactic but reflects a broader trend of governments gradually eroding fundamental rights through complexity. Just as governments debase currency to manage economic problems, they also dilute the effectiveness of constitutional rights through complex regulations and laws that make it harder for citizens to exercise those rights fully and then gaslight and brainwash you to forget those rights over time all together through the social pressure of conformity in the name of national security or social justice.

1. Erosion of Privacy
   In many countries, privacy rights have been eroded through the passage of complex surveillance laws. These laws often appear innocuous at first but gradually expand the government’s ability to monitor and control its citizens. Just as inflation reduces the value of money, this creeping surveillance reduces the personal agency and freedom of individuals .

2. Restrictions on Free Speech
   Similarly, free speech is often curtailed through complex legal frameworks that impose restrictions in the name of security or public order. Over time, these restrictions grow more burdensome, limiting the ability of citizens to express dissent or engage in open debate without fear of reprisal. The gradual erosion of free speech is analogous to the slow debasement of currency—it happens incrementally, but the long-term effects are profound. Does this sound familiar today?

   

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An Illustration of Currency Debasement:

If you earned $500,000 per day since the completion of the Great Pyramids and never spent a dime of it, you still would be 1.2T short of paying down the U.S. National Debt (debasement lever) that we created in the last 12 months (Sept 2023-Sept 2024).

Calculation 1:

1. Completion date of the Great Pyramid:
   The Great Pyramid of Giza was completed around 2560 BCE

2. Number of days from completion to 2024:

   • From 2560 BCE to 2024 CE is approximately 4,583 years

   • Accounting for leap years: 4,583 * 365.25 ≈ 1,673,941 days

3. Total earnings:
   $500,000 per day * 1,673,941 days = $836,970,500,000

Calculation 2

1. Debt in September 2023:
   As of September 30, 2023, the federal debt was $33.2 trillion

2. Most recent debt figure:
   As of August 2024, the US government debt was $35,256,057 million (or approximately $35.26 trillion)

Increase in debt:
$35.26 trillion - $33.2 trillion = $2.06 trillion

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How To Defend Yourself from Currency Debasement

For investors, navigating the risks of currency debasement requires careful planning and a diversified approach to asset allocation. With inflation and debasement threatening the value of traditional fiat currencies, many investors are seeking alternative strategies to preserve and grow their wealth. Here are some key strategies to consider:

1. Diversify into Hard Assets

One of the most reliable ways to protect against currency debasement is to invest in tangible assets like gold, silver, and real estate. Historically, these assets have retained their value during periods of inflation and debasement, making them a safe haven for investors.

2. Consider Cryptocurrencies and Start With Bitcoin

Cryptocurrencies, particularly Bitcoin, have emerged as a popular hedge against fiat currency debasement. With a limited supply and decentralized nature, cryptocurrencies offer a level of protection against the inflationary policies of central banks. Bitcoin, for example, has a fixed supply of 21 million coins, making it immune to the kind of inflationary pressures that fiat currencies face.

3. Foreign Currency Investments

Investing in stronger foreign currencies or foreign-denominated assets can provide a hedge against domestic currency devaluation. By diversifying into currencies that are less susceptible to inflationary pressures, investors can protect their portfolios from the risks of debasement.

4. Focus on Inflation-Protected Securities

Inflation-protected securities, such as Treasury Inflation-Protected Securities (TIPS), are designed to protect investors from the ravages of inflation. These securities adjust their value based on inflation rates, ensuring that investors' purchasing power is preserved.

5. Invest in Commodities

Commodities, such as oil, natural gas, and agricultural products, often rise in value during inflationary periods. By investing in commodities, investors can take advantage of the upward price pressure caused by debasement and inflation.

Pitfalls to Avoid

1. Holding Excess Cash

One of the biggest mistakes investors can make during periods of debasement is holding too much cash. As inflation erodes the value of fiat currency, holding large amounts of cash can lead to significant losses in purchasing power. Instead, investors should focus on assets that appreciate in value or provide returns above the inflation rate. Having cash on hand in a vault to cover 6 or 12 months of your living expenses and banks are making it harder than ever to get out of your bank account (which they own and you don’t) so start doing this now and get ready to fill out forms and have a proctology exam when you do by the teller.

2. Long-Term Fixed Income Securities

Long-term bonds can be particularly vulnerable to inflation. As interest rates rise in response to inflation, the value of long-term fixed income securities tends to decline. Investors should be cautious about overexposure to these assets in a debasement-prone environment.

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If you’re concerned about the long-term implications of currency debasement and inflation on your wealth, now is the time to take proactive steps. Diversify your portfolio, consider alternative investments like Bitcoin, and avoid the pitfalls of holding too much cash or long-term fixed income securities. Please share Wealth Matters 3.0 with a friend or two and help me grow our readership community!

Happy Monday and thank you for reading! Good luck out there :)

Sources referenced for further research:

1. "What Is Monetary Debasement? Examples, Effects and Solutions" - Bitcoin Magazine

2. "So Why Do Governments Debase the Currency Anyway?" - Glint Pay
   

3. "The Effect of Debasing Currency and Taking Out Loans Should Be Switched" - Reddit
   

4. "Deficits, Debt, and Debasement" - Cato Institute
   

5. "What Is Currency Debasement, With Examples" - Investopedia
   

6. "Currency and the Collapse of the Roman Empire" - The Money Project

7. "Gresham's Law" - Wikipedia

8. "Currency Debasement and Social Collapse" - Mises Institute
   

9. "How to Avoid a Currency War" - Carnegie Endowment for International Peace
   

10. "How to Protect Your Wealth Against Currency Debasement" - Master Investor
    

11. "Intervening in Currency Markets: The Poverty of Dollar Devaluation" - RSM Insights
    

12. "Debasement and the Decline of Rome" - University of Warwick

Disclaimer:
The content provided in this article is for informational and educational purposes only and does not constitute financial, investment, or legal advice. Always conduct your own research or consult with a qualified financial advisor before making any investment decisions. Chris J Snook and the publisher are not responsible for any financial losses or risks incurred from actions taken based on this information.