Chapter 100 Do dollar bills hold their value?

what is moneyWhat is wealth?This question is the first question to recognize the nature of the dollar.An important feature that distinguishes great thinkers is that they have special sensitivity and deep thinking about important things that ordinary people are familiar with and turn a blind eye to. "Apple falling to the ground" is an extremely ordinary phenomenon that people have ignored for thousands of years, but in Newton's mind, it inspired a great understanding of universal gravitation. The concept of "time", which is so ordinary that it cannot be more ordinary, has endless aftertaste in Einstein's mind, which eventually led to the birth of the theory of relativity.For thousands of years, people have lived in a money society. How many people have been busy making money all their lives can calm down and think carefully about what is "money"?

There is no doubt that there are really some people in this world who have conducted in-depth discussions on what money is.It is a pity that these discussions not only failed to produce a great financial and monetary theory comparable to the law of gravity and the theory of relativity, but became more and more confused.Because money is different from purely physical concepts such as "time" and "gravity", it is largely affected by the difficult-to-measure variable of human greed.Scholars have put forward all kinds of monetary theories, which are incompatible and full of contradictions.However, the bankers took advantage of the opportunity to fish in troubled waters, and gradually led the entire Western financial system astray from theory to practice, so that in the end it went mad and induced the whole world to a huge financial crisis.

The concept of money in the classical sense is fairly clear.Money is a special commodity that already exists, has stable value, and is convenient to be used as a medium of commodity exchange.It has the following characteristics: limited quantity, easy to measure, easy to exchange, not easy to forge, recognized by the market, and can be stored for a long time.Many commodities that meet the above characteristics can be "money".Commodities that best meet the above definitions and characteristics are the best "money".Gold and silver are the incomparable and best "money" chosen by people from different countries, cultures and regions in ancient and modern times, after thousands of years of repeated comparison and practice.Because they all have specific intrinsic value, and are waterproof, fireproof, anti-corrosion, wear-resistant, and can be stored for a long time, they can be used as a store of value.Because they are easy to carry, divide and measure, and difficult to counterfeit, they can become the most convenient and reliable medium of commodity exchange.Since their value is stable and easy to measure, they are the most suitable measure of value.And because they are already existing commodities with real value, they are the most reliable "money" that do not require any guarantee, do not require any coercion, and will not be invalidated by various force majeures such as government replacement, legal change, economic crisis, natural disasters and man-made disasters. ".And the more turbulent it is, the more gold and silver become the "Noah's Ark" for people to protect their wealth.As the saying goes, "Only when the sea is flowing, can the true qualities of a hero be revealed."Because of this, gold and silver are the highest form of "money", and are well-deserved "kings of currency" supported by all peoples.

What is wealth?The essence of wealth is all kinds of commodities created by people through labor.Currency represents a "claim" on the fruits of these labors.Everyone in society should obtain the "right to claim" the fruits of others' labor by selling the fruits of their own labor.When this "claiming right" is transferred, it acts as a "means of payment"; when a certain "claiming right" is generally accepted, it becomes a "transaction medium"; if the person holding the "claiming right" chooses When cashing out is delayed, it realizes the function of "wealth storage"; when this "claiming right" is finally required to be cashed, it can obtain the equivalent labor fruits of others intact, then this "claiming right" is excellent. "Measure of value".These four factors together constitute the perfect correspondence between money and wealth.In fact, among the four major functions of money, the core is the function of "wealth storage".The more intact the currency with the ability to delay the cashing out of wealth, the more important it is to realize the important role of "value measure", the more popular it is in the market, and the easier it is to circulate, thus becoming a high-quality "transaction medium" and "payment means".The complete abolition of the commodity attribute of currency will lead to the disorder and imbalance of the "wealth storage" function.Any currency, once it breaks away from the iron law of the commodity attribute of currency, will eventually be unable to escape the end of continuous depreciation.The "classic money" represented by gold and silver is the highest state pursued by money.

Historically, when the empire was in a cycle of rising power, its economy was developed, its trade was active, its military strength was at its peak, its borders expanded, its currency purchasing power was stable, its currency circulation domain expanded, and its loan interest rate was low.With the corruption of the ruling class, the internal contradictions of the empire intensified, the production capacity declined, external wars continued, fiscal expenditures increased sharply, and tax revenues gradually became insufficient, resulting in an increasing overall cost of maintaining the empire.At this time, the empire often starts by devaluing the currency first, trying to reduce financial pressure.The monetization of fiscal deficits, whether it is the gold content of ancient dilute currencies or the modern "quantitative easing" of currencies, is the root cause of inflation.

The most essential "invention" of contemporary Western monetary theory is to use debt as collateral to replace real money such as gold and silver that will not lose value due to debt default.First of all, through war or opium trade, they looted all the silver in the countries that used silver as the main currency in the world, thus abolishing the silver standard.Then it took the method of linking the currencies of various countries with the US dollar, and the US dollar with gold, and initially established a world currency exchange system.Then the dollar was decoupled from gold, thus abolishing the gold standard.Let the legal currency represented by the U.S. dollar become a world reserve currency that is not bound by gold and silver.The U.S. dollar we use now is a currency without any definition of real value. This currency is called "currency" in English, and its basic meaning is liquidity.It is just a medium that facilitates the "flow" of goods.The medium itself has no value.It could be paper money, a check, or even a number in a computer.It is a voucher that is temporarily redeemed for value.Its essence is an IOU, and it cannot guarantee that the original value will be 100% exchanged in the future.Because it is an IOU, if others default, the IOU becomes an IOU.Nowadays, when people have gradually forgotten that gold and silver are the most reliable real money for thousands of years, they often confuse the two concepts of credit currency IOU and money, thinking that this IOU is money.To earn money is to earn this kind of IOU, and to save money is to save this kind of IOU.In fact, under the credit currency system, the IOUs that people earn and save that can be cashed have full value when the IOUs are not in default, and have only partial value when the IOUs are partially in default. When it defaults, it's worthless.

Experiments with pure paper money often have surprisingly good initial results, but eventually the paper money degrades back to its original value, which is the cost of the paper!The system of pure paper money is, by its very nature, an experiment to the greedy nature of man.Regardless of whether the right to issue currency is in the hands of the government or private individuals, and regardless of the social system of the country that implements monetary policy, these cannot change the essence of the problem, which is whether the inherent greedy nature of human nature is trustworthy or not. !The entire history of mankind shows that greed, ignorance, and hatred are the essence of human nature that cannot transcend itself. If we carefully observe the performance of babies who have not had time to be polluted by social atmosphere, we will find that the inner qualities of greed, hatred, and ignorance are actually early. There are clues.

This is why we have never been able to find any banknotes that can preserve value in the history of human civilization. In Jiaozi in the Northern Song Dynasty, from 1023 to 1160 AD, the currency issuance reserve was reduced from 1/3 to 1/60.By the end of the Southern Song Dynasty, the inflation rate was as high as 20 trillion times!The finances collapsed completely, the country's ability to mobilize for war was exhausted, and the dynasty collapsed. The Jin Dynasty issued paper money for more than 70 years, and prices rose by 60 million times. In the end, people's hearts were in chaos and wealth creation disappeared. It is also the currency system that collapsed before the empire.

Only 20 years after the Yuan Dynasty began to issue banknotes, the currency was devalued to 1/10 of its original value.At the end of the Yuan Dynasty, the price of rice rose to more than 60,000 times that of the early Yuan Dynasty. The treasure banknote system collapsed completely. The Yuan government was unable to control finances and taxation. The Ming Dynasty continued to experiment with the pure paper currency system for another 150 years. By 1522, the Ming Bao banknote was devalued to 2‰ of its original value, and inflation was raging.The Ming government finally "followed the convenience of the people" and was forced to abandon the paper currency system and restore the silver currency. The empire was able to maintain itself until 1644.

In 1716, the first John Law’s paper money experiment in France led to the bankruptcy of France 4 years later; in 1790, the second paper money experiment after the French Revolution, the inflation rate reached 13000% after 5 years, resulting in chaos among the people, leading to Napoleon the third pure paper currency experiment in 1937, and the franc depreciated by 99% in 12 years.The French can only laugh at themselves and say that the French have two traditions: one is that they surrender very quickly; the other is that the currency depreciates very quickly. The banknote mark experiment of the Weimar Republic of Germany, from 1 dollar to 12 marks in 1919, to 1 dollar to 4.2 trillion marks in 1923, came to the end of its life in 4 years.

If the greedy nature of human beings has not changed, today's dollar is just repeating the mistakes of history.