How Liberal Economic Policy Dilutes Your Dollars

The Ancient Greeks are responsible for some of humanity’s most important and transformative innovations.

From philosophy to mathematics to the concept of democracy itself, advanced human civilization simply would not have the foundation it does were it not for the brilliance of the Greeks of the age of antiquity.

However, along with some of the modern world’s most basic pillars, the Greeks inadvertently also gave us some of the most dangerous.

One in particular, pertaining to economics, is a problem they first discovered, and one we’re still struggling with today.

In the 5th century BC, Greece was facing an economic crisis brought on by indulgences that we today might find eerily familiar.

Too many wars and too many altruistic but utterly fruitless social programs had put the economy into a state of peril.

Backed by gold and silver, as almost all great economies had been even millennia before the Greeks, the overabundance of liabilities and undersupply of the precious metals had put the city-state of Athens on a path to ruin…

That is, until its economists came up with a brilliant idea to increase wealth without actually mining more precious metals.

The idea was simple: take the coins in circulation, melt them down, and recast those coins, but this time using an alloy consisting of 50% gold or silver and 50% copper or other lesser-valued metals.

Without too much effort, the Ancient Greek money supply could therefore be doubled, allowing for more trade, more social programs, more wars, and more of everything else that made that society function.

Money for Nothing

For a while it worked, but then they ran into a problem.

You see, while the ancient world respected gold and silver universally, the elaborate coins the Greeks used to trade had no intrinsic value.

They were worth their weight in gold or silver, and nothing else.

So when trade was done with other nations and those coins were inevitably melted back down, people quickly started to realize that those coins were not worth their face value.

The precious metal was diluted, and so, gradually, as news of the devaluation of the Greek drachmas spread, Greeks found themselves having to pay more and more drachmas for the goods and services they bought from foreign lands.

Over time, that devaluation, or inflation, as we now call it, spread to the Greek interior and began to affect the internal economic policies of the Athenian city-state itself.

No matter how much the mints tried to compensate, there was simply nothing they could do to bolster the economy.

And with their debts piling up and their expensive wars and failed social programs not returning on investment the way they were expected, the society collapsed.

It’s simple… it’s brutal… and it’s uncompromising.

History Repeats

When the Ancient Roman Empire rose to prominence in the last century BC, it was able to conquer just about every rival… until it ran into the very same problem.

When the silver content in Roman coinage dropped by a factor of 10 in an effort to pay for its costly campaigns and programs, that empire too went into decline and eventually, having lost its economic stranglehold over the Western world, collapsed as well.

You’d think the lesson would have been learned, but, as history shows, wisdom is rarely gained from the examples of the past.

We’d like to think that we grow wiser and learn from the mistakes of others, but, thanks to the hubris and shortsightedness of present rulers, we tend to just repeat past mistakes — usually on a progressively grander scale.

And that’s exactly what’s happening right now.

We no longer trade gold and silver coins. Today, our economies aren’t tethered to the gold standard at all.

The world’s universally respected, universally accepted currency for the last seven decades or so has been the dollar.

Since the early 1970s, when President Nixon took us off the gold standard in an effort to stabilize a rapidly declining economy, the dollar alone has played the role of gold on a global scale.

Over the course of the last eight years, however, the U.S. government, operating through the Federal Reserve, which controls our money supply, has been doing the exact same thing that brought the Greeks, the Romans, and every other major power to its knees over the course of the last 2,500 years: it’s been increasing the money supply.

History Repeats… Again

Since the world of 2008 valued the dollar unequivocally, printing more of those dollars worked just fine.

We financed more wars; we paid for more social programs; we made more promises and funded more projects using money that was rapidly increasing in volume but not in intrinsic value.

Our national debt went from $9 trillion to almost $20 trillion in just two presidential terms — an increase greater than the total debt incurred by the U.S. in the preceding 232 years.

But since there is always a lag time between the increase in money supply and the inevitable devaluation, people didn’t take much notice.

The stock market, aided by historically low interest rates and bull-headed institutional investors, rallied.

Everyone thought everything was great, that we were in the midst of a recovery.

It was, however, more of a calm before the storm than anything else.

With more than $80 billion in new cash entering the system every single month through a process we came to know as “quantitative easing,” the value of every individual dollar in your pocket and your bank account slowly faded.

Quantitative easing, despite its warm and fuzzy implied meaning, is just another word for inflation — on an unprecedented scale.

Now, as we approach a presidential election and are staring another Democratic administration in the eyes, it appears as if this runaway printing of money will continue.

Hillary, as most polls indicate, will become president… and what are her main platforms?

The Bigger the Promise… The Bigger the Liability

More entitlements (social programs); more taxes (on the biggest producers, to the benefit of the non-producers); more government spending on all things (which sounds good on the campaign trail but ultimately returns nothing on the investment).

The next president, to pay off the incurred debt, will have to tax every man, woman, and child in this country no less than $54,000.

That’s several times more wealth than actually exists. 

Which means the campaign promises Hillary made to solidify her status as heir apparent to the Oval Office WILL HAVE to be funded by more artificially created dollars — just like the Greek drachma and the Roman denarius.

Reality, backed by a 100% historical failure rate, will guarantee what happens next.

Major foreign economies, including China, Japan, Russia, and 30 others — even our northern neighbor, Canada — have already sealed bilateral trade agreements to do business in currencies other than the U.S. dollar.

They’ve taken these steps because, unlike the American voters, they see and understand what our government is doing and have zero interest in sharing in our inevitable collapse.

Once the dollar is finally supplanted by a new reserve currency — most likely the Chinese yuan, which, unlike our dollar, has a very strong gold backing — the last domino in this sad and catastrophic procession will finally fall.

What this will do to your savings — which, as is the case with most Americans, is stored in dollars — is almost too ugly to mention.

And the time to untether yourself from this sinking ship is growing short.

The only way to do it, in fact, is to get yourself away from the dollar and start making investments in assets that will not be affected by this suicidal economic policy.

Gold, real estate, foreign currencies… It’s where the smart money is flowing today, and it’s where the wealthiest individuals of tomorrow will see their fortunes expand.

Most Americans, however, have the underlying problem of not enough cash.

For that, there is a remedy, but it will only work if you take some critical steps now, before we see the other side of an economic transition that will make the Great Recession look like a Sunday picnic.

Click here for instructions on how to secure your wealth today and protect yourself from the dollar’s final failure.

Fortune favors the bold,

Alex Koyfman

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His flagship service, Microcap Insider, provides market-beating insights into some of the fastest moving, highest profit-potential companies available for public trading on the U.S. and Canadian exchanges. With more than 5 years of track record to back it up, Microcap Insider is the choice for the growth-minded investor. Alex contributes his thoughts and insights regularly to Energy and Capital. To learn more about Alex, click here.