Abandoning the gold standard (pt2)
This is an excerpt from a large resource named Money, Bitcoin, and Time by Robert Breedlove.
Incapable of resisting the temptation of wealth expropriation by tampering with the money supply, banks soon began issuing more notes than their gold reserves could justify, thus initiating the practice of fractional reserve banking. This banking model facilitated the creation of money without any skin in the game. Governments took notice and began to gradually take over the banking sector by forming central banks, as this model enabled them to engage in seigniorage, a method of profiting directly from the money creation process.
The ability to control this process was too tempting for governments to resist. Total control over the money supply gave those in charge a mechanism to continually extract wealth from its citizenry. The virtually unlimited financial wealth the printing press provided gave those in power the means to silence dissent, finance propaganda and wage perpetual warfare. It is a fundamental economic reality that wealth cannot be generated by tampering with the money supply, it can only be manipulated and redistributed. Civilization itself relies on the integrity of the money supply to provide a solid economic foundation for free trade and capital accumulation. With a firm grip on the prevailing monetary order established, the next logical step for central banks was to begin moving away from the gold standard altogether.
Last updated