BEST OF JOHN PUGSLEY

September 18, 2008

HOW THE WORLD’S GREATEST PONZI SCHEME HAS

BEEN ROBBING INVESTORS FOR OVER 2000 YEARS

Plus, the Few Investments to Buy to Finally Beat these

Money Schemers at Their Own Game

Stories of financial loss and economic confusion fill the media. Around the world stories of rising price inflation, falling GDP, plunging real estate prices, and failing financial institutions abound.

The American mortgage market is a disaster. Industry giants Fannie Mae and Freddie Mac revealed losses close to US$5 billion. Banks and financial firms are even worse. These once venerable financial institutions have reported nearly US$500 billion in write-downs since last year.

We are inundated with completely unrelated explanations. The Media is blaming corporate greed, lack of regulation, failure to monitor balance sheets, short selling, speculation, naïve borrowers.

But in reality: It’s all nonsense.

The source of the problems has nothing to do with corporate greed or any speculative frenzy. The problem has one source. It’s the most important commodity on earth: Money.

In the Beginning, Before Dollars,

Pounds and Euros…

In the beginning there was no money. People bartered. They exchanged things they found or made for things they needed. But unfortunately, bartering became impractical as populations grew and the variety of goods increased.

Ultimately, societies started using a few useful things as commonly accepted items for trading. These items evolved as "commodity money."

The Aztecs of Mexico used seeds or beans from cacao fruit to buy everything from fruits to gold jewelry, weapons, and even slaves. In Mongolia, they bought their necessities with bricks made of pressed tea. Guatemalans used corn, Ancient Babylonians used barley. They used almonds in certain parts of India. Native Americans used ‘wampum’ (seashells).

You can even trace your own money back to this bartering system. A dollar is known as a ‘buck’ because the first Americans used deer hides, or buckskins, for money. The word ‘salary’ comes from ancient Rome when soldiers received salt for their services.

In ancient times, cultures around the world also used cattle as money. In fact, the word ‘pecuniary’ is derived from the Latin word for "cattle." The term ‘shekel’ first appeared in Mesopotamia around 3000 BC, and referred to a certain weight of barley.

Metals Become the Latest Money Fashion

As time progressed, metals emerged as the most practical medium of exchange. Ancient people appreciated metals for their rarity, divisibility and durability. Over 6,000 years ago, the Sumerians began using iron and silver bars as money. The Egyptians picked up on this idea, and used gold bars instead.

Then around 650 BC in the kingdom of Lydia, coins appeared. First they were just lumps of iron. Then they used silver stamped with the mark of the monarch. Next coinage spread to Greece. The Greeks used their rich silver mines from the Athenian Empire to create their new money.

From there, the technology spread to Rome.

Ancient "Money Magicians"

As individuals began accepting gold, silver, and copper coins as money, the Roman emperors discovered they could control the coin’s production, and slyly tax the population. In 64 AD, Emperor Nero collected the existing silver and gold coins and re-minted them, issuing new coins that contained less silver or gold.

By slightly reducing the silver denari’s size, the same pound of silver that produced 84 coins now produced 96. In the same way, a pound of gold that minted 40 golden aurie, now created 45 new aurie.

Subsequent emperors continued this money-tampering game. By the time of Marcus Aurelius, the denarius had only 75% silver left. By 260 AD, the denarius had become the antoninianus, a coin that contained less than 5% silver. Just 200 years later, the silver it took to mint a single denarius now produced 150 denarii.

The result? In The History of Money, anthropologist Jack Weatherford tells us of the consequences: "…as the silver content decreased, the price of goods increased in direct proportion. Wheat that once sold for one-half a denarius in the second century now cost 100 denarii a century later, a two hundred-fold increase."

The First "IOU Nothings"

From the earliest appearance of metallic money around 3000 BC, it took roughly five millennia for the great technological disaster in money creation: the invention of paper currency.

A thousand years after the Chinese invented paper, the country’s rulers learned that citizens would accept the Emperor’s paper IOUs for gold and silver.

In 1311, just 75 years after they invented paper money, Kublai Khan’s flood of notes created the first hyperinflation. This idiotic policy caused financial and moral collapse of the Yuan Dynasty.

Since the Chinese invented paper money 700 years ago, every government has engaged in the swindle. Ever since, it’s been the same result: the financial and moral collapse of hundreds of nations.

Money used to be a tangible, useful good. Then it evolved into a receipt for a useful good. And then, thanks to the artful deception of politicians around the world, paper money became an IOU for nothing at all.

Real commodity money like copper, gold, silver, barley, buckskins, salt, and even seashells, no longer back any currency on earth. Money truly is backed by nothing except supply and demand and the market’s "faith" in a particular currency.

Financial organizations like Bear Stearns, Fannie Mae, Freddie Mac and IndyMac, default on their IOUs because their assets backing their IOUs are other IOUs. And those IOUs are backed by other IOUs, backed by the government’s "word" in their IOUs. It’s the ultimate Ponzi scheme, carried out for over 2000 years.

What can you do to defend against the financial and economic disasters filling the media? To every extent possible, build an asset base around the equivalent of commodity monies. Hold assets that have true value by themselves, like commodities.

As for currencies, the only way to truly profit is to speculate on which currency will lose value most rapidly against another currency. And The Sovereign Society can show you how.

John Pugsley founded the Bio-Rational Institute