Fundamental philosophy determines the course of societies throughout history. For example, if it is widely held that man is an imperfect, sinner doomed to suffer a hellish subsistence on earth until he finds salvation in the afterlife, you will likely get something like the Dark Ages (or modern
Obviously, treatises can be written about such topics but for some quick historic precedent to place the modern
What brought about the decline of the empire and the decay of its civilization was the disintegration of this economic interconnectedness, not the barbarian invasions. The alien aggressors merely took advantage of an opportunity which the internal weakness of the empire offered to them. From a military point of view the tribes which invaded the empire in the fourth and fifth centuries were not more formidable than the armies which the legions had easily defeated in earlier times. But the empire had changed. Its economic and social structure was already medieval.
…The showdown came when in the political troubles of the third and fourth centuries the emperors resorted to currency debasement. With the system of maximum prices the practice of debasement completely paralyzed both the production and the marketing of the vital foodstuffs and disintegrated society’s economic organization.
Ludwig Von Mises, Human Action
Not long after the Bank of England was formed in the 1690’s to finance the monarchy, the notorious John Law “urged the establishment of a national bank [in France] to create and increase instruments of credit and the issue of banknotes backed by land, gold, or silver.”
An ambitious Scot, a convicted murderer, a compulsive gambler and a flawed financial genius, John Law was not only responsible for the first true boom and bust in asset prices. He also may be said to have caused, indirectly, the French Revolution by comprehensively blowing the best chance that the ancien regime monarchy had to reform its finances. His story is one of the most astonishing yet least well understood tales of adventure in all financial history. It is also very much a story for our times.
The Ascent of Money, Niall Ferguson
The following quote offers some more detail.
In fact, once the bank earned the people’s trust, it began to issue banknotes far exceeding deposits on hand and to extend loans against deposits. The quantity of bills in circulation increased very rapidly, and as is logical, a significant artificial economic boom resulted. In 1718 the bank was nationalized (becoming the royal bank) and began churning out even more bills and granting more loans. This encouraged stock market speculation in general….By 1720 the absurd proportions of the financial bubble had become clear. Law tried desperately to stabilize the price of the company’s stock and the value of his bank’s paper money: the bank and trading company were merged, company stock was declared legal tender, coins lost part of their weight in an attempt to restore their relationship to bills, etc. However all was in vain and the inflationary bubble burst, bringing financial ruin not only to the bank but also to many French investors who had placed their trust in it and in the trading company. The losses were so heavy and the suffering so immense that for over a hundred years it was even considered a faux pas in
to utter the word “bank”, a term which for a time was synonymous with “fraud.” The ravages of inflation plagued France again a few decades later, as evidenced by the serious monetary chaos during the revolutionary period and the uncontrolled issuance of assignats at the time…. France
Money, Bank Credit, and Economic Cycles Jesus Huerta
During the inflationary chaos of the French Revolution, shopkeepers were imprisoned and executed for raising their prices. (see Fiat Money Inflation in
In the wake of World War I, a combination of massive war time debt, reparations bills, reckless spending and a belief by “Germany’s financial elites” that a “runaway currency depreciation would force the Allied powers into revising the reparations settlement, since the effect would be to cheapen German exports relative to American, British and French manufacturers" led
“By the end of 1923 there were approximately 4.97 x 1020 marks in circulation. Twenty billion mark notes were in everyday use. The annual inflation rate reached peak of 182 billion per cent. Prices were on average 1.26 trillion times higher than they had been in 1913.
Unemployment soared to, at its peak, a quarter of trade union members, with another quarter working short time. Worst of all was the social and psychological trauma caused by the crisis. ‘Inflation is a crowd phenomena in the strictest and most concrete sense of the word, ‘ Elias Canetti later wrote of his experience as a young man in inflation-stricken
. ‘[It is] a witches’ Sabbath of devaluation where men and the units of their money have the strongest effects on each other. The one stands for the other, men feeling themselves as bad as their money; and this becomes worse and worse. Together they are all at its mercy and all feel equally worthless. Frankfurt
Worthlessness was the hyperinflation’s principal product. Not only was money rendered worthless; so too were all the forms of wealth and income fixed in terms of the money…
The Ascent of Money, Niall Ferguson
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls…become ‘profiteers’, who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished not less than of the proletariat. As the inflation proceeds…all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism become so utterly disordered as to be almost meaningless…
In 1933, Adolph Hitler would become Chancellor of
What will be written about the United States?
The Federal Reserve system created in 1913 and other statist economic policies leads to economic collapse called America's Great Depression. The