Blog: We Have Forgotten What True Money Is

A wise old fund manager once told me "never trust a man or woman under the age of thirty to manage your money; they ain't seen nothing yet."

elderly woman with financial advisor
Rolf Sjogren | The Image Bank | Getty Images
elderly woman with financial advisor

Ask most individuals their greatest fear about growing old and chances are most won't speak of wrinkles, or grey and thinning hair. I suspect most worry about the loss of their mental faculties.

I know I do.

Alzheimer's is an aging disease that promotes the loss of such cognitive ability. A form of dementia - it is an incurable, degenerative and terminal disease.

By 2050, researchers suggest 1 in 85 of the world population will suffer from this cruel affliction.

Sadly these past few decades the world populace has been suffering from another form of mental incapacity – "economic amnesia." Individuals have forgotten the rudiments of monetary supply and demand.

Too much money creates a rise in the price of a stable supply of goods and services. They forget this is also concomitant with a loss in the value of their day's earnings.

The introduction of an overbearing welfare system in most developed countries has robbed the masses of independent thought. Government has induced a powerful amnesia in us.

But there is good news: fish oils may ameliorate the decline of impaired thought, but the internet could likely prevent it entirely.

The internet never sleeps, but more importantly it will never allow us to forget. Never before has so much information been so readily accessible, and to so many - information that extols the truth, free of government propaganda.

Price Controls

The seminal events in the Maghreb are a testimony to the power of the internet.

The "Facebook" revolution in Egypt instigated the protests against an unjust regime. Such discontent reverberated across the net to repressed citizens of all nations. It is arguably of more significance than the fall of Communism, as edified by the Berlin Wall collapse.

From the early inception of "organized" government, officialdom has attempted to control their economies. In Ancient times, in the land of the Nile, the state regulated all grain production and distribution.

All prices were fixed by "fiat" – by decree. Back then, he who controlled the "bread" was in the possession of the ultimate power.

By controlling food prices, the Egyptian government thought it had ownership of the people. Today, government believes monopoly of the numeraire imputes control on the masses.

The profligate behavior of the state in fiscal and monetary policy has so distorted the true value of money that commodity and consumer prices have risen inexorably.

We will see yet more unrest around the world in years to come, ceteris paribus. Monopoly of the media of exchange, is the ultimate price control.

Price controls always distort the level of economic activity and cause disequilibria in prices and human behavior.

The irony is that MENA erupted on a wave of rising food prices. Modern Egypt had too lost the control of the "bread."

We have forgotten what true money is. Despite all the troubles, I am hopeful – the internet is curing our amnesia.

People now remember gold.
The author is Ben Davies, CEO, Hinde Capital