Monday, October 5, 2015

ALWAYS austerity which has been the precursor to revolution.

Austerity or Hyperinflation. Which is the Precursor to Revolution?

QUESTION: Mr, Armstrong;
I recently read an article claiming to be a case study that it was somehow the French hyperinflation that led to the revolution. It seems that as you say they are again mixing facts to support a rise in gold with hyperinflation. I am a collector of French monetary history and the paper money came after the revolution not before. Unquestionably, there was austerity prior to the revolution and that seems to be repeating in Europe once again. Would you care to comment on this issue for it seems they are distorting history once again to sell gold.
Your debut here in Paris was super. It has really made some impact starting a discussion.
ANSWER: Yes you are correct. The French hyperinflation came after the French Revolution for they defaulted on their national debts accumulated by the crown and then confiscated the property of the Catholic Church to try to back their post-revolutionary currency. The nation went into hyperinflation because the revolution defaulted on all prior debt and they were then hunting the rich, taking everything they had, and beheaded them. This was not an atmosphere that promotes CONFIDENCE.
These people try to claim the hyperinflation is caused by paper money rather than revolution which results in hunting the rich. The German hyperinflation was the same sequence. It was a communist revolution in 1918 which also defaulted on the national debt of the prior government. It is not the paper money, it is the default that distinguishes both hyperinflation events for CONFIDENCE simply collapses and the economy implodes. By attributing this to “fiat” paper they then assume that we must go into hyperinflation simply because we too have paper money. That is just an unsupported analysis which distorts the entire sequence of events. This analysis is highly dangerous and amounts to consumer fraud.
The French Revolution erupted not because of fiat money, but because of the debt default and hunting the rich which destroys the economy just as does communism. The hyperinflation began instantaneously. We have had a paper money system in the USA federally since 1863. There is no comparison. This is like saying do not eat a carrot since everyone who has ever eaten one has eventually died.
Louis-XIV-2The Royal French debt rose due to war, that is true. It was Louis XIV who on his deathbed said he feared he loved war too much. We have the same problem today with the bureaucrats deeply involved in the military establishment who are bred with a single focus of war. All they do is see war behind everything. Every word is analyzed within the frame work of war.

Law-JohnWhat is typically overlooked has been the event of 1720 was the French Mississippi Bubble. It was this event that really sets the debt in motion that accumulates and leads to the French Revolution. This financial crisis of 1720 was one of the first major banking bailouts in history. A few months later, that financial crisis was a contagion and spreads to London unfolding there as the South Sea Bubble. The collapse of the Mississippi Bubble became a political event because it had attracted capital from around Europe. When the bank failed, the French government guaranteed all the losses. That set in motion the AUSTERITY that followed. It had nothing to do with fiat; it was a debt crisis that raised taxes to support the debt creating AUSTERITY and collapsing the French economy. The  Mississippi Bubble led to raising taxes to cover the cost of the bailout since the experiment that was set in motion by John Law was usurped by government and distorted by corrupt government officials necessitating the bailout.
The French Revolution was caused by AUSTERITY and tax increases that created a shrinking economy. Raising taxes to pay debts had always led to revolution. This is why the American Revolution prohibited direct taxation and Jefferson stood against a national debt.
The French hyperinflation was not the CAUSE, but the result of the revolution. The hyperinflation unfolds because of the collapse in CONFIDENCE in government. Unable to tax, unable to borrow, governments irresponsibly just printed money but it was the lack of CONFIDENCE (trust) that creates the hyperinflation. The rich hoard, do not invest, and withdraw all funds from banks sending unemployment soaring and the economy collapses. It is the collapse in CONFIDENCE that leads to the hyperinflation, not the mere fact that it is fiat money since all money is fiat.
In China and Japan, money was always fiat. There was no tangible value. The value was simply declared by the Emperor who was considered to be the hand of God. ChiCHINAPAP-2na issued the first formal paper money and even when the Mongols conquered China, they retained the paper money in circulation so it did not depreciate nor did it move into hyperinflation. Because the emperor was assumed to be God’s representative on Earth, that meant that God must have sanctioned the conquest by the Mongols and thus CONFIDENCE was not destroyed.
If it is fiat alone that causes the hyperinflation, then China as well as our own current monetary system should have collapse in 1971 and the world should not function at all. So there is something more to this simple one to one relationship.
Even ancient Egypt never used coins and money was effectively receipts for grain. They never issued coins until they were conquered by Alexander the Great. They had the longest paper money type system in history for more than a thousand years. It is unfortunate, but these people draw erroneous conclusions simple because of the existence of paper money which prevents them from understanding what really is money to begin with.
It seems that society cannot handle complexity and always tries to reduce it to a single cause and effect. Therein lies the confusion since nothing is a single cause but always complexity.
US Colonial Hyperinflation
DepressionScrip-1 (2)It is ALWAYS austerity which has been the precursor to revolution. Hyperinflation is the effect of revolution, not paper money. In America, King George III imposed taxation to pay for wars and demanded gold and silver in payment but whatever trade flows from Britain to America were paid in copper. The King knew that Americans could get silver and gold from trading with the Spanish. This extraction of taxation depleted the money supply and that led to the introduction of paper money – the shortage of coinage. During the 1930s, the austerity then nearly led to revolution for more than 200 cities began issuing their own paper money due to the lack of coinage. This did not lead to hyperinflation.
There is more to this than just blaming paper money and concluding that we will see hyperinflation without comprehending the real causes. It is the lack of in-depth research that produces this nonsense all because someone is trying to sell something who is biased and has a self-interest.

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