Hidden Secrets of Money II – The 7 Stages of Empire

In a series of excellent educational videos, Mike Maloney who founded HiddenSecretsOfMoney.com explains everything one needs to know about the concept of money. He provides the basic insights in order to understand the shape of our economic, financial and monetary.

This second educational video uncovers the secrets of our money. Mike maloney looks back in time to discover a remarkable ressemblance of different empires. It appears that the Greeks had the first empire with this pattern. The key question of this video is how such a great society and civilization evolve and, especially, how it ended.

The short answer? Too much greed, too much war!
The long answer is in the video and requires 30 minutes of your time to watch it.

The parallels with the Greek empire are striking. This is how it went with Athens at the end of their empire:

  1. first Athens lost access to their gold and silver mines
  2. they paid armies that were away from Athens, resulting in their coinage leaving the city (i.e. deflation)
  3. next they debased their coinage by mixing copper into their existing pure gold coins (i.e. deficit spending)

An important factor in Athens’ downfall was the expenses for their war with Sparta, their debasement of their currency and the eventual inflation as a result of that. They minted their gold coins until they contained only copper. It marked the world’s first hyperinflation. It financially debilitated Athens to the point where they had to surrender to Sparta at 404 BC.

Astonishingly, this point was made by one of Greek dramatists at the time, by saying that “we make no use of the ancient [gold] coins and prefer those bad copper pieces quite recently issued and so wretchedly struck.” Even at that time, it was clear what a mistake it has been. Even more astounding is the fact that we are now some 2,500 years down the road and we can only observe that history has repeated itself over and over again. Today’s government policies are in no sense different than the Athenians have been doing: create additional currency for great public works and wars.

This leads to the recognition of a pattern that has marked the rise and fall of great societies throughout history. One of the hidden secrets of money is that each empire goes through 7 stages. It is a long term cycle that resembles a societal pendulum. It swings from quality money to quantity currency and back again to quality money. And here is the key: “It always ends with gold delivering a knockout blow to debased currencies.”

Stage 1. A country starts out with good money which is either gold or silver or backed by gold or silver.

Stage 2. As it develops economically and socially it begins to take on more and more economic burden adding layer upon layer of public works.

Stage 3. As its economic affluence grows, so does its political influence and it increases expenditures to fund a massive military.

Stage 4. Eventually it puts its military to use and expenditures explode.

Stage 5. To fund the war it steals the wealth of its people by debasing their coinage with base metals or by replacing their money with currency that can be created in unlimited quantities.

Stage 6. The loss in purchasing power of the expanded currency supply is sensed by the population and the financial markets triggering a loss of faith in the currency.

Stage 7. A mass movement out of the currency into precious metals and other tangible assets takes place. The currency collapses and gold and silver rise in price as they account for the huge quantity of currency that was created. This process transfers massive wealth to those who had the foresight to position themselves beforehand in real money, gold and silver.

As far as our situation is concerned, we are right now in the early phase of stage 7.

Monetary history in ten minutes

Still intrigued by the question why the price of gold has surged over the past decade? In order to understand gold, one needs to understand monetary history. In the video, starting at 14m12s, Mike Maloney explains the last 140 years of monetary history in a presentation of ten minutes. Need a hint? The following image says it all, it explains the difference between currency and money … at least for those who understand it.

dollar gold currency money money currency

Watch the video


Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing