It’s common for the world’s most powerful country to issue a currency that becomes adopted around the world as the standard for international trade but whenever that country reaches a point of epic, terminal decline, and especially when it rapidly debases its currency, the rest of the world seeks an alternative. [This article outlines the history of the rise & fall of “world” currencies over the centuries and then comments on what the future likely holds for today’s “world” currency – the U.S. dollar.]
The above introductory comments are edited excerpts from an article* by Simon Black (sovereignman.com) entitled These guys used to issue the world’s reserve currency too.
The following article is presented courtesy of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Black goes on to say in further edited excerpts:
The U.S. has been enjoying this special privilege for decades now and, while these changes never happen overnight, it’s clear that the dollar is quickly losing this status.
The U.S. dollar is the most widely used currency in the world for international trade…[but recently there has been a call] for a ‘rebalancing’ of currencies in global trade settlement. The British, French, Canadians, and Swiss are all on board with this trend as are, clearly, the governments of Russia, China, and India.
Below is a history of “world” currencies over the ages:
For hundreds of years the Byzantine Empire coined the most popular reserve currency in the history of the world called the “solidus”, and was introduced by Constantine I in 312 AD.. Merchants all over Europe, the Mediterranean, the Middle East, and further, used it in trade for centuries.
The solidus held steady at 4.5 grams of 24-carat gold for nearly seven centuries. Hence its Latin name – ‘solid’. The durability of its purity is nearly unprecedented in the history of money.
Its weight, dimensions and purity remained constant until the 10th century when the government began to debase it. The debasement was gradual at first, then accelerated rapidly and, in a matter of decades, its gold content was reduced to almost zero as the Byzantine Empire was scrambling for cash to finance its numerous wars.
Emperor Alexios I Komenos drastically overhauled the Byzantine coinage system in 1092 and introduced a new gold coin, the hyperpyron but, it too, was soon subject to gradual debasement and by the mid 1200s the hyperpyron’s gold content fell drastically again.
As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me” so when the rest of Europe…saw the gold content in the hyperpyron fall, they quickly lost confidence.
As the Byzantine Empire became weaker…several small kingdoms in Italy were rising in prosperity, especially Florence, Genoa, and Venice.
The Florentines and the Genoese took up the task and minted a new gold coin called the “florin”, which at 3.5 grams of pure gold was the most wildly circulated trade currency in Europe and around the Mediterranean for a while.
The Venetian “ducat” gained wide international acceptance in the 1400s. The ducat contained 99.47% of fine gold—the highest metallurgical purity possible at the time – and, as the Venetian merchants traveled far and wide, the ducat became an internationally accepted trade currency throughout the world.
Even though he didn’t live in Venice, for example, Leonardo da Vinci was paid by the King of France in Venetian ducats—exactly 400 ducats per year, which in today’s dollars equals to roughly $56,000 (and he didn’t pay any tax…)
The Real de a Ocho
The ducat was ultimately supplanted by the Spanish “real de a ocho”, or Pieces of Eight) with the onset of the Age of Exploration and became so widespread in international trade that they were legal tender in the United States until the mid 19th century.
The clear lesson here is that, while These guys used to issue the world’s reserve currency too, this stuff changes.
Nearly the entire world understands such trends – everyone, it seems, but the United States government – and they’ll be the last ones left in the room after nearly everyone else has headed for the exit, oblivious to their own destruction.
People who understand this shift and get out in front of it will make fortunes. Those who play Ostrich, stick their heads in the sand, and keep all of their eggs in one frail basket, are taking the gamble of their lifetimes.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://www.sovereignman.com/trends/these-guys-used-to-issue-the-worlds-reserve-currency-too-14845/ (© 2014 Blacksmith PTE LTD – All rights reserved)
Frustrated with what they viewed as being ignored by the West and not having a prominent role in institutions like the World Bank and the International Monetary Fund, Brazil, Russia, India, China and South Africa (also known as the BRICS countries) have held their second summit…[and declared war on the U.S. dollar. Let me explain.] Words: 572 Read More »
The American dollar will be overthrown…in as short a period as 5 to 10 years says one analyst while another believes it will happen as early as 2015, 2016 latest. Here’s why. Read More »
The U.S. Dollar’s status as a reserve currency seems to be a perennial concern for many people these days. I think this concern is often dramatically overstated. Here’s why. Read More »
I came to the conclusion several years ago that it was just a matter of time before the world realized that the relative functionality of the U.S. dollar was about to go belly up – to collapse. [Below is an explanation as to why I have come to that conclusion and what I think it would mean for the well-being of the world.] Words: 881
The American dollar will be overthrown…in as short a period as 5 to 10 years says one analyst while another believes it will happen as early as 2015, 2016 latest. Here’s why.
Today, more than 60% of all foreign currency reserves in the world are in U.S. dollars – but there are big changes on the horizon…Some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade…[and this shift] is going to have massive implications for the U.S. economy. [Let me explain what is underway.] Words: 1583
The mother of all collapses is still in front of us. Below are my reasons why that is the case and how to protect yourself financially from such an eventuality.
Government fiscal policy – profligate spending, leading to debt crisis, leading to currency crisis, leading to…the fall of the U.S. dollar – is the major cataclysmic endgame that is going to befall the U.S.