Finally, we found an artefact of France’s depression-era currency collapse while going through the contents of our father’s old Spanish chest. It’s a small, gold-looking coin. On one side it’s dated 1921 and says “Commerce” and “Industrie”. On the other it has a big “1” surrounded by the words Bon Pour and Franc. “Good for one Franc”. Where did it come from? What did it mean?
Our curiosity piqued, we went to the Google to see what we could find. At one coin site we read this, “This coin is indeed a French franc made of aluminium bronze (Br Al) and minted from 1920-28. It is a form of emergency money as there was a shortage of small value coins during this period of global economic depression. It actually says it is ‘Good for 1 Franc’. Dumard was the coin’s designer. Collector value depends on date, number minted, mint mark (if any), and condition of a coin, including amount of wear, any dents, scratches or cleaning. This one had a mintage of nearly 55 million and may be worth US$1 or less if it has any wear at all.”
If correct, this shows what all governments eventually do to your money. They inflate supply gradually so that each new unit worth less and less. This particular coin isn’t a franc…but it’s good for a franc. It might as well be a bottle cap. The government encourages you to treat it as if it were worth something. The melt value of the metals in the coin were probably more valuable than the coin itself.
Something like this has been happening to American money since 1974, when the quantity of paper money was de-linked with the gold in Ft. Knox. Left to their own devices, governments will print as much money as they can, until the market holds them accountable and the currency approaches its true value. Whether you believe in the ability of Ben Bernanke’s Federal Reserve to save the US dollar reminds us a little of Pascal’s gamble about the existence of God.
Blaise Pascal, the famous French mathematician, famously showed that the value of believing in God outweighed the value of not believing in him. If you believe in God and God is real, you’re saved. If you believe in God and God is not real, no big deal. But if you don’t believe in God and God is real, you’re doomed to hellfire and damnation. The prudent risk-management, Pascal reasoned, is to believe in God.
We would suggest that prudent risk management when it comes to money is to believe that, given enough time, the government will destroy the purchasing power of your savings. The value of believing in the eventual failure of central banking is infinitely greater than the value of believing in the success of central banks.
And really, what are the alternatives?
One the one hand, you can have confidence in the way the government manages your money. To do so, you’d have to ignore all the facts confirming the government’s active mis-management of the money and the money supply. But go ahead if you’d like.
What is the value of believing that paper money schemes always fail? Well, that one is simple. If you believe it, then you’ll take steps to prepare for the eventual collapse of the paper money system and its replacement by something else (probably by some other paper money system.)
What do you really risk by not trusting in the durability of government money? Your risk is that the historically inevitable collapse of fiat money which we here at the Daily Reckoning think you are witnessing…may never come in your lifetime.
The Daily Reckoning Australia
Would you put your faith in a paper money scheme? Leave a comment below.