Chapter 28 4. From the gold standard to fiat currency: a big change in the world view of bankers

Since the end of the nineteenth century, international bankers have once again achieved a major leap in their understanding of money. The original Bank of England model is to issue currency with national debt as collateral. Through the deadlock between the two, the government can borrow money and the bank can issue currency.To ensure that the scale of debt is getting bigger and bigger, thus guaranteeing the bankers' huge and growing income, under the gold standard system, bankers are firmly opposed to inflation, because any currency depreciation directly hurts the real interest income of bankers.This kind of thinking is still a relatively primitive method of lending money and earning interest. The main disadvantage is that the accumulation of wealth is too slow. Even if the partial reserve system is used, it is still not enough to satisfy the growing appetite of bankers.Especially gold and silver increase slowly, which is equivalent to setting an upper limit for the total amount of bank lending.

In Europe at the turn of the twentieth century, bankers had figured out a more efficient and complex fiat currency system.The fiat currency has completely got rid of the rigid constraints of gold and silver on the total amount of loans, making currency control more flexible and more secretive.Bankers became the most ardent supporters of fiat currencies when it became clear to them that the gains gained from increasing the money supply without limit were far greater than the interest losses on loans due to inflation.By rapidly increasing the currency, the bankers plundered the huge wealth of the savers of the entire country. Compared with the original method of banks forcing the auction of other people's property, inflation is much more civilized and encounters much less resistance from the people. imperceptible.

With the support of bankers, the economics of inflation was gradually led to the track of purely mathematical games. The concept of inflation caused by the issuance of additional paper money has been completely submerged in modern times by the inflation theory of price increases. At this time, in addition to the original partial reserve system and deadlock between currency and national debt, bankers added a more powerful tool: monetary inflation.Since then, bankers have achieved a dramatic transformation from gold's defenders to gold's sworn enemies. Keynes's assessment of inflation can be said to be to the point. In this way, the government can confiscate people's wealth secretly and imperceptibly, and it is difficult for one person in a million to detect this kind of theft.

To be precise, the method used in the United States is the private Federal Reserve rather than the government.