Fiat Money: Alchemy’s New Paradigm
by Alan Leishman
“…We scoff at the duped medieval serfs and many of the intelligensia as well who believed in Alchemy. But now 99% of the current western population today probably do believe that gold is a barbaric relic, and that fiat money is more valuable, because of media propaganda to this effect and lack of access to the alternative viewpoints…”
Throughout the middle ages, one of the driving zeals of mankind’s awakening intellect was that of Alchemy. Its two driving forces were the primordial desires to prolong life and to reduce toil and labour by creating instant wealth in unlimited quantities.
The search for eternal life…and untold riches
The Alchemist sought both the “elixir vitae” – or the water of life, the key to eternal or prolonged life of centuries rather than decades…and the “philosophers stone”, which would enable him to turn all metals, such as lead, into gold.
For example, the Greek ecclesiastics in Constantinople in the 4th century believed that all metals were composed of two substances; the one metallic earth, and the other a red inflammable matter they called sulphur. The pure union of these substances formed gold, but other metals were contaminated with foreign substances.
The object of the philosopher’s stone was to dissolve out these ingredients…by which process iron, lead, copper, and all metals would be turned into gold.
Fiat Money: Alchemy threatened the power of the state
Great alarm was felt lest an Alchemist should succeed, and ruin the state by providing boundless wealth to some designing tyrant, who would make use of it to enslave his country.
In England in 1404, an act of parliament was passed declaring the making of gold and silver illegal. But this law soon subsided and future kings issued patents and commissions to try and find the philospoher’s stone.
Some Alchemists made fortunes from sponsorship, while others dissipated their wealth in the pursuit of turning other metals into gold. Some were scoundrels, while others were able and intelligent men. George Agricola (1494-1555) for example, wrote “de Re Metallica” which survives in text and sketches, as the best archive record of mines, mining practices and metallurgy of his period.
But for other Alchemists in medieval times, they depended on conjurer’s slight of hand, or the spreading of rumours, to convince the superstitious public of their success in turning base metals into Gold.
Fiat Money:In 2004, gold is turned to a base metal
We scoff at the duped medieval serfs and many of the intelligensia as well who believed in Alchemy. But now 99% of the current western population today probably do believe that gold is a barbaric relic, and that fiat money is more valuable, because of media propaganda to this effect and lack of access to the alternative viewpoints.
Not only that, but thanks to a wonderful invention known as a printing machine, we can have unlimited quantities of paper money at almost zero cost, as outlined in a famous speech by the Fed Reserve’s Ben Bernanke entitled “Deflation: Making Sure “It” Doesn’t Happen Here.”
The new paradigm according to the Federal Reserve Chairman Alan Greenspan is evidenced in this quote:
“I have been quite surprised, and I must say, pleased by the fact that central bankers have been able to effectively simulate many of the characteristics of the gold standard by constraining the degree of finance in a manner which effectively has brought down the general price levels.”
So the “science” of Alchemy may have been brought up to date. But is the paper money system – which simulated the gold standard – now as good as gold?
All previous attempts at Fiat money systems (meaning paper not linked to gold) throughout history from John Law in France to the Reichsmark in Germany – to name only a few well known landmarks – have eventually failed and the value of each currency has returned to the value of the paper it was printed on…i.e. approaching zero.
Fiat Money:Forget lead! Turning paper into gold is easy today
If only those ancient Alchemists had discovered they were investigating the wrong materials in metals, and they should have been experimenting with paper! Or perhaps, looking at this from another angle and with the hindsight of history, the Alchemists were the unwitting predecessors of the Keynesian movement in the days before the invention of the printing press.
The jury is out on the judgement of this new paradigm. But history has always rhymed in the past, and every other fiat money system finally collapsed. What will happen this time? I don’t pretend to know, but take another very close look at the Emperor…
Is he really clothed in gold foil, or in paper, or is he really naked?
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Following a career in international commerce, Alan Leishman is now retired in Switzerland. A graduate in Chemistry from Edinburgh University, he has a keen interest in geology, mineralogy, and gemmology. His personal collection of minerals – put together visiting mines, mineral fairs and dealers in over 30 countries over a period of 20 years – was until recently on display at the National Museums of Scotland in Edinburgh. Now, Mr Leishman is a supporter of the Gold Anti-Trust Action Committee, and a regular contributor to Bill Murphy’s daily Midas column at Le Metropole Café.