Dedicated In Honor To The Memory Of Ferdinand Lips,
An Honest Man Who Fought For Honest Money

Introduction

Paradigms are models and examples that represent fundamental views of large groups of people, as in societies, nations, races, and civilization itself. They are the expression of how man perceives himself and the world about him; and his interaction with his fellow man, and the world around him. Obviously, we are not talking minor issues here, but major issues.

Paradigms are the basic belief structures of society by which man gives meaning and understanding to his existence. One example would be the belief that all men die. Another would be the belief that the world is round; although at one time it was believed that, the world was flat.

This last example illustrates that paradigms can and do change. Changes in paradigms are not simple affairs of little consequence. They are major invents that affect how man views himself and the world. Thus, they can and do have a large impact on man’s behavior.

A change in paradigms is referred to as a paradigm shift, moving with the slowness and power of a colossal glacier, it changes the landscape across which it travels.

Paradigm Shifts

A paradigm shift is a radical change in a major belief structure or worldview. Examples are: the belief that the world was flat, to the belief, the world was round; the belief that the earth was at the center of the solar system, to the belief that the sun is at the center. As is evident, these are major changes, with far reaching consequences.

The above illustrations are examples of paradigm shifts in one particular field of study or belief systems. Paradigms, however, exist in all major aspects of life – they are the major belief systems of life. Paradigms exist in economics, medicine, physics, music, and even in monetary theory.

An example of a paradigm shift in economics is the belief in direct exchange or barter, to the belief and use of indirect exchange and money – the common medium of indirect exchange.

Life is alive with a steady flux as it constantly changes. It is a fluid process of motion. Time is the measurement of change. Consequently, man’s paradigms change as his awareness of himself and the world about him change. This is true in all of the many and varied aspects of life, and man’s awareness and understanding of such.

Monetary Paradigms

As has been shown by many writers, man first used direct exchange or barter to trade goods with one another. Hence, direct exchange was a paradigm. At the time of its use, man believed it was the best method to exchange or trade for the physical necessities of life: food, clothing, shelter, water, etc.

As man and society grew more complex, so too did the need for a different method of exchange evolve, as society and the trade that sustained it was becoming more complex and involved. Consequently, indirect exchange developed along with the use or need of money to facilitate the indirect exchange.

Throughout the ages, silver and gold coins were used as money, the medium of exchange by which indirect exchange took place. For a detailed discussion, see GOLD: Sovereign of Sovereigns.

Even though the use of silver and gold coin has an ancient history of thousands of years, dating back hundreds of years before Christ, during the sixteenth and seventeenth century another paradigm shift took place.

Man developed the idea of using paper money that was backed by silver and gold. The supposed reason being that it would allow for a more elastic money supply. This radical shift had major ramifications and consequences as evidenced by the many examples of monetary imbalances it caused, and the resulting episodes of economic depressions, deflations, hyperinflation, and the total debasement and destruction of currencies.

But as all of life is in a constant state of flux, so too were the beliefs in how paper money should best be issued. Another paradigm shift took place, one that changed from paper money being backed by silver and gold, to the belief that it need not be backed by anything but the promise to pay – as if such would be enough to stem the tide of financial and monetary debasement.

Debt was now in vogue. Payment was out. The new age of borrow, borrow, borrow – so that you can shop to you drop. Buy first, worry about paying later. Not a very sound practice, to say the least. But it is making someone wealthy. Cui bono?

The Age of Fiat

The age of paper fiat blossomed during the twentieth century. Granted it had started much earlier, but the advent of the Federal Reserve in 1913 was the defining moment in the annals of paper fiat money. The Fed and an elastic money supply of paper fiat go hand in hand, like death and taxes.

But the belief in paper was not limited to just Federal Reserve Notes as circulating currency or cash. Paper took on a life of its own, as paper represented the extension of credit or money substitutes – fiduciary money. Unfortunately, with the extension of credit and money in paper fiat land, debt expands just as fast.

First their were notes, bills, and bonds, mortgages of different types, then interest only loans and principal only loans, collateralized loans, futures, options, swaps, derivatives, and sdr’s. They are fast using up the letter combinations of the alphabet as names for the paper investment vehicles conjured up by the wizards of finance.

The Latest Paradigm

History can be seen to be full of change, a fluid process whereby the past flows into the present, the present into the future. Man has experienced many paradigm shifts throughout the ages. And we may just be beginning to enter upon one of titanic proportions.

As stated earlier, man progressed from direct exchange to indirect exchange. Eventually another shift occurred from the use of silver and gold as money to paper bank notes as money; first backed by specie, to eventually not being backed by anything except promises – to pay; sometime in the future, the means unknown.

Credit, debt, and money morphed into one basic entity. The age of paper fiat was born – the paradigm of debt servitude as a way of life was born.

But people are beginning to question the validity of such belief in paper fiat debt-money, and the enslavement thereof. The United States has gone from being the largest creditor nation in the world to the largest debtor nation in the world. Why? The answer is most obvious – debt.

Now two parents have to work to provide a living that used to be had by one parent working. The purchasing power of the dollar bill has lost 95% of its value since the Federal Reserve took control of the monetary reigns in 1913.

It doesn’t take a rocket scientist to know that something is amiss. Opinions are starting to question the old regime. Belief in debt is beginning to be doubted. A shift in awareness is commencing.

A paradigm shift from the belief in paper debt
To the belief in real assets such as gold and silver is at hand.

If the existing problems within society are going to be corrected, such correction takes hard work and effort. Hard work and effort requires an honest system of money to allow for the means of honest savings to provide honest credit, so that all can have the honest accumulation of wealth. Some call it honest and true progress.

Selling the future of our children and their children, to be condemned to a life of work to pay off the debt that we are presently accumulating is not progress; it is the antithesis of progress.

If we are going to correct the problems of the world and make the world a better place, then a system of Honest Money is imperative, as all of physical life is based on the money used to exchange for the necessities of life.

A return to the Honest Money of the Constitution of Silver and Gold Coin is crucial if true progress is to be had. Otherwise, we are condemning our children to a life of perpetual bondage, debt servitude, and slavery. The time for Honest Money is now.

Paper Proof

How can we be sure that such monumental change is at hand? Are there any warnings or signposts to guide us through the night? How is our paper fiat dollar faring? Is it getting stronger, and hence more sound, or weaker and thus unsound? Let’s look at a picture, a chart of the dollar – to see the direction of the trend or path it is on.

U.S. Dollar Index Chart


Courtesy of Stockcharts

The direction of the trend is unquestionably down. This is a technical snapshot of the performance of our currency. Also, remember that the dollar has lost 95% of its purchasing power since 1913 – an undeniable downtrend, more like falling out of bed.

And the fundamental aspects for a sound dollar are even less inviting: trade deficits, budget deficits, record debt levels, warfare on several fronts, fiscal ineptitude, reliance on foreign entities to sustain our debt addiction, and a net international investment position of –3 trillion dollars and growing, which equals 25% of our gross domestic product.

Tangible Proof

And what other evidence might there be that physical assets, real goods, and basic commodities are starting to be in vogue, as opposed to paper debt? Let’s look at a chart of the commodity research bureaus (CRB) index to see in what direction its path is on.

CRB Index Chart

Courtesy of Omega Research

Definitely looks like an upward rising slope, which means that commodities have become dearer and more costly, as reflected in their price or quantity of dollars it takes to exchange for them.

Gold Proof

Lastly, we will consider the sovereign of real, tangible, hard assets – gold. Gold is not only valued as a commodity, which it is; but also as the ultimate form of money or currency – which it is and has been for thousands of years, throughout the ages of man.

Whenever any other form of money fails to be accepted, and no long retains any value, gold is always ready, vigilant, remaining steadfast, unflinching in the face of all opponents – the true sovereign of sovereigns. So, let’s look at its chart to see the direction of its path.

Gold Chart of London PM Fix

Chart Courtesy of Kitco

Another rising slope, the trend clearly upwards. And the above is in gold priced in U.S. Dollars. Presently gold is trending higher in most major world currencies.

Why? The reason is obvious – a paradigm shift is taking place, people are beginning to realize that paper fiat debt-money is becoming worth less and less, and is on its way to worthlessness.

And people are beginning to realize that gold, the sovereign of sovereigns,
remains fearlessly resolute undaunted
in the task before it – to take on the false prophets of Lucre

Make no mistake about it, change is afoot – the times they are a changing. Align yourself accordingly. Be on the side of Honest Money.

© 2005 Douglas V. Gnazzo
Editorial Archive

 FSO Web Note 
Ferdinand Lips was a guest on Financial Sense Newshour in 2003. He discussed his book, "Gold Wars: The Battle Against Sound Money as Seen From a Swiss Perspective" with Jim Puplava. His real audio / mp3 interview is available as well as a transcription of the interview.

About the author: Douglas V. Gnazzo is CEO of New England Renovation LLC, a historical restoration contractor that specializes in restoring older buildings that are vintage historic landmarks. He writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).