This is the background text of my Keynote Speech given yesterday to European Gold Forum yesterday, 13 April.
To explain why fiat currencies are failing I started by defining money. I then described the relationship between fiat money and its purchasing power, the role of bank credit, and the interests of central banks.
Undoubtedly, the recent sanctions over Russia will have a catastrophic effect for financialised currencies, possibly leading to the end of fifty-one years of the dollar regime. Russia and China plan to escape this fate for the rouble and yuan by tying their currencies to commodities and production instead of collapsing financial assets. The only way for those of us in the West to protect ourselves is with physical gold, which over time is tied to commodity and energy prices.
What is money?
To understand why all fiat currency systems fail, we must start by understanding what money is, and how it differs from other forms of currency and credit. These are long-standing relationships which transcend our times and have their origin in Roman law and the practice of medieval merchants who evolved a lex mercatoria, which extended money’s legal status to instruments that evolved out of money, such as bills of exchange, cheques, and other securities for money. And while as circulating media, historically currencies have been almost indistinguishable from money proper, in the last century issuers of currencies split them off from money so that they have become pure fiat.