Alchemy and Currency
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Kerby Andersonnever miss viewpoints

Three years ago, a presenter at an international conference compared the printing of currency to alchemy. Although I didn’t hear the message, I read enough about it to see the connection.

If you are not familiar with the term, it points to alchemists who tried to turn cheap “base” metals into gold. The idea goes all the way back to Aristotle, who believed that all matter combined the four elements of earth, air, fire, and water. He guessed that these elements could be changed by the action of heat and cold, or dampness and dryness.

Why did alchemists want to create more gold? Gold has been a store of value for thousands of years and has been used as money in so many civilizations. The science of the alchemists was flawed, but so was their economics. If they had been able to create gold, they would have ruined its value because it would no longer be scarce and would decline in value.

The story of gold and alchemy is an apt illustration of what central banks and governments have been doing for centuries. Instead of creating gold, they have been creating currency out of thin air. Although we talk about cranking up the printing presses and printing more dollars, the reality is that the Federal Reserve or the US Treasury merely changes numbers on computers.

You know the result: inflation and a devalued dollar. In previous commentaries, I have posted a picture of the declining value of the dollar since the creation of the Federal Reserve in 1913. A dollar back then purchased what today would be considered $26 of goods and services.

Now that Congress has suspended the debt ceiling, expect the devaluation of the dollar to continue. Alchemists tried all sorts of experiments to create gold. The modern-day alchemists create currency instantaneously with no cost.viewpoints new web version

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