Month: April 2022

The Evolution of Money

How was money invented? Why do we need currencies? What is the best money?

In a previous article, I explained the differences in monetary theory between Mises (Austrian School) and Argentarius.
Recent discussions between me and proponents of Mises’s theory have shown me that there are several points that are not entirely clear. So today I would like to dive a bit deeper and show on practical examples, how and why money evolved and what good money is.
Furthermore, I will try to show exactly at which points the two theories diverge and where I see the problems with Mises’s explanation.

Throughout all our examples, we will use the four Persons A, B, C and D. You can see the goods they start out with, in the below picture.
The transaction we want to resolve is that Person B wishes to buy a pair of shoes from Person A.

Example 1

The First Example will be simple. Person A and B do a direct barter trade. So, A and B simply draft a contract. Since C and D are not involved in this trade, we will omit their balance sheets for now.

NOTE: Historically these types of trade were done verbally, so the contracts and balance sheets in Examples 1, 2 and 2a are only for visualization. Practically, they would usually be in memory only.

Once the contract is signed, the goods are exchanged. Once both have delivered, the debts from the contract are erased and the trade is done.

Example 2

In the next example, we increase difficulty. Person A now doesn’t want eggs, but rather grain, which only Person C can provide.
To facilitate this trade, Person A negotiates a three party barter contract.

To fulfil the contract, first A and B need to exchange goods, and then A and C exchange goods.

As you can see, arranging a three party barter trade is already rather difficult, and if not all goods are available at the same time, the Person facilitating the trade must take quite some risk, since they need to trust their partners and give them credit.

This method of trading gets impractical quickly once more than three parties are involved.

Example 2a

So, if Person A is not willing to set up a three-party contract, the other option for B is to acquire the goods A wants in a separate trade.

To reduce the risk of giving credit, the three parties meet at one place and goods are exchanged directly.

While this is a safer way to trade, it’s even less practical to arrange, the more parties and different types of goods are involved.

Example 3

To resolve this issue, humanity invented the balance sheet and the debt transfer.
Archaeologist have found clay tablets, showing such trades were done as much as 5000 years ago.

Let’s have a look how such a clay tablet trade works:

This is much more practical, but since clay tablets are not too easily edited, another trick needed to be invented.

Example 4

Instead of rewriting clay tablets to represent who owes who, we will now simply use a Coupon redeemable in grain, signed by Person C as medium of exchange.

To spice things up a little, we will assume now that A doesn’t want to redeem the grain coupon, but they rather want Gold, which is available from D who in turn wants grain.

Such a coupon system is already the beginning of a commodity money, slowly turning into a currency.

The main evolutionary step from coupons/commodities functioning as money to currency, is the market process by which a commodity—like gold—becomes so widely accepted that everybody accepts the commodity as payment, even without any intention to directly exchange it for a good they actually need.

Example 5

If we do the same exchange of goods like in Example 4, but with Gold as widely accepted medium of exchange, it will look like this:

As you can see, this is a way easier way to trade that does not require any balance sheets or tracking of debts.
With this system, it is also possible to have the commodity money—Gold—change hands thousands, even millions of times, before the commodity actually reaches somebody who wants the Gold as a commodity itself and not for the monetary function.

Up to this point, the theories of Argentarius and Mises agree. The differences begin, once there is a standard medium of exchange.

Mises would now argue that you can simply write the transaction from Example 1 as follows:

Argentarius however would argue we would still need to take the full chain into account as shown in Example 5. If this example was rewritten to just show Person A’s and B’s direct trades, it would look like this:

This way of looking at things may look like nitpicking to you, but it is crucial, once inflation and changing production methods come into play.
If you use the Mises style analysis in times of high inflation, you will be selling yourself poor.

As Argentarius records, during the Weimar inflation days, business owners accounted by simply adding a profit margin to their costs.
While this is quite a common practice and not necessarily harmful in times of low inflation, as soon as inflation becomes faster than your business cycle, it will lead to the “selling poor” effect.

What this effect means can be seen in the chart below. The grey line represents the material costs, which after 1 year of no inflation start to inflate at 10% per month.

The orange line is a merchant who has a 3-month production cycle and calculates his prices based on 30% margin on cost.

The yellow line is a merchant who calculates his prices after production by what he expects to be the next month material cost.

As you can see, at such high inflation rates, the orange merchant rapidly falls into the “selling poor” zone, where despite a 30% profit on paper, his stock dwindles, and he has to go out of business.

Of course, it is not always possible to accurately predict inflation and such high inflation rates are rare.

Nevertheless, this example highlights the differences between Mises and Argentarius.

Mises operates under the framework of Praxeology. While this is a great tool to evaluate economic processes, like any model it makes simplifications.
These simplifications are necessary to have any chance at analysis of complex systems.
In edge cases, such simplifications can lead to erroneous results, which is why you always need to stay aware of these assumptions.

As Rothbard explained, Praxeology, unlike Psychology, does only concern itself with how people act, not with why they act as they do.

This can be a problem, when it comes to analysing contractual relationships. A contract is nothing more than a declaration of what two parties want.
So, when judging the quality of a contract, it’s important to check whether all parties received the result desired from the contract.

Unfortunately, humans are not always fully aware of their intentions, so contracts can be written in a way that looks acceptable to all parties, but in fact turns out to have been contrary to the intent of the parties.

This can be clearly seen in the above example.

The merchant, who calculates 30% profit on cost, does so, not because he wanted to have the money, but because he wanted to restock, pay his bills and maybe save or invest a little.

Basically, he wanted to do a multi party barter trade. He intended not to have any money token or currency, but rather to exchange finished goods, for raw materials, factories, machine depreciation, etc.

He only used money as a placeholder, due to convenience. Since the money worked for a while, the merchant fell into the trap where he forgot that the money was not the good he actually desired and thus sold himself poor.

Money tokens were invented to facilitate multi party barter trades. Their function is just a placeholder. Thus, the best money token is the one that most accurately transports a barter “value” over time, space and party.

In the next article, we will discuss what this means for the engineering of sound money.

Rome Falls—Euro-Dollar Hyperinflation

When analysing the current macroeconomic environment, there seem to be two camps. One compares the current state of the Euro-Dollar system to the 1970s, the other to the 1940s post-war inflation.

In my not so humble opinion, both are wrong.

While the current situation is historically unique, as I have laid out previously, the only remotely comparable situation in history was the Fall of Rome.


If you give me a few minutes of your precious time, I will explain to you, why Rome is about to fall, again.

To understand what is currently going on, we need to have a look at which economic and cycles are currently converging.
The first such cycle is the civilizational cycle, which lasts around 1 to 2 millennia and is accompanied by large shifts in how society is structured.

The last such cycle began with the rise of the Greek and Roman empires and ended when Rome fell, so one could say that cycle ran about from 600 BC to 600 CE.
Since this turning point, humanity has been busy recouping the losses in knowledge from Antiquity and in many areas we have now managed to be near the heights of Roman civilization, in others we are already beyond and declining.

While the sociological implications of this cycle are very intriguing, for clarities’ sake, we will focus on the purely economical aspects today.

The great rise of Rome was possible, thanks to a hard currency on a gold and silver bimetallic standard. The most important coin was the Denarius, which was a Silver coin which was the backbone of Roman and international trade, until it began to be debased and was literally copper with silver traces by the end of the third century CE.

By Nicolas Perrault III – Own work, CC0,

Later, the Denarius was accompanied by the smaller Sestertius and the golden Aureus. The Sestertius was launched as a silver coin, but after the Roman Republic had become the Roman Empire, within a few generations of Imperators, it quickly became a brass Fiat coin.

Let us pause history here for a moment and draw some parallels and highlight some differences:
Like in Rome, the Dollar also started as a gold and silver currency and later became devalued.
In Rome, the authoritarian push that allowed for the devaluation was the power grab of Julius Caesar and his successors, who ended democracy. In the US, it was the establishment of the undemocratic FED and thus the slide into oligarchy.
The FED devalued the Dollar, by artificially expanding dollar supply, through fractional reserve banking (with an ever decreasing backing). Up to the point, where countries who had entrusted the US with their gold reserves got nervous and requested their money back. Being unable to actually fulfil the gold promises on the circulating Dollar notes, Nixon had to pull the plug and turn the Dollar into an outright Fiat currency in 1971.

The most significant difference between ancient Rome and the modern Euro-Dollar system, is that the Dollar is a “world reserve currency”. In contrast, the Denarius, Sestertius and Aureus certainly were accepted and held by major traders all around the then known world, international trade was largely done based on the metal content of individual currencies, however. The actual backbone of the financial system were precious metals.
The Dollar, on the other hand, was forced upon the world in 1944 at Bretton-Woods. A condition by the USA, who then held the other Allied Nations in their hands, as only they had the economic and military power to defeat Hitler.

This led to the unique situation that in the 1970s, with the Dollar now a Fiat currency, the IMF launched a crusade against gold, thus leaving us, for the first time in history, with a purely Fiat world.

Back to ancient Rome.

After Rome had slipped into currency debasement, the government played a hypocritical game. While they paid their soldiers and trade partners in Fiat as much as they could, taxes would be collected in gold and silver.

This is again a move that can be seen today, where Russia will accept only a gold pegged Rouble, gold, or Bitcoin as payment for their energy, while trying to keep their citizens from holding either.
The same can be seen in Ukraine, where the government begged international donors to donate to them, gladly taking Bitcoin, but trying to hinder their citizens from rescuing their savings from the war into Bitcoin.

In Rome, the Fiat system, coupled with the bimetallic tax system, eroded the morals, infrastructure, and power of the Roman Empire. Something that could be seen again—in a fast-forward mode—during the Weimar Hyperinflation.
This ultimately lead to Rome being invaded several times and the Empire ultimately breaking into two, where the Western Part completely dissolved, while the Eastern Part lasted for a while longer in the form of the Byzantine Empire.

Why the difference?

The Byzantine emperor Constantine was smart enough to copy the Aureus and launch a gold currency in the form of the Solidus. This made Byzantium one of the most powerful trade hubs until well after the year 1000, when the solidus was again debased.

Can you already see the pattern?

The long civilizational cycles tend to be synchronized with the shorter cycles of empires by the debasement of currency. The main difference between the cycles being that when an empire falls, this is largely contained in the nation and its colonies, while the demise of an era like the Greco-Roman age of philosophy, throws back human culture around the world.

One of these 100+ year cycles is also coming to an end now, due to the US Empire loosing its grip on their debt colonies.

The next smaller cycle converging with the others is the 4-generational cycle, called “Fourth Turning”. Such a cycle is often aligned with a smaller cycle of monetary and currency rise and decline, as laid out by Argentarius.

Finally, a fourth economic cycle is currently coming to an end, namely the boom-and-bust cycle induced by Keynesian economics. These last usually about 7 to 10 years, but after the financial crisis in 2008, the central banks around the globe have warped the economy with quantitative easing.

As real economists have warned the Keynesian clowns for years, QE does not solve any crisis, but rather only delays and multiplies the negative consequences.

Having laid out the parallels and differences, let’s start conjecture time… How will the Fall of Washington likely go?

From my perspective, the demise of the US hegemony is already in full swing. And the attack of Russia on Ukraine, as well as the lockdowns in China, are part of the East stealthily launching economic war (as I laid out → here).

These attacks, combined with the already disrupted global supply chains, are poised to bring about the worst economic disaster in recorded history. I fully expect Western economies to decline at rates comparable to the Great Depression this decade, while at the same time, one national currency after the other will fall and go into hyperinflation.

What makes this process so hard to predict, is that—as I explained above—a world without gold currencies is unprecedented. Normally, the harder currency nations raise severe tariffs against the debasing states, thus draining their adversaries of intellectual property and capital.

Under a Fiat to Fiat system, this is not as straightforward, but it turns out that the biggest loser is the reserve currency nation. Having the reserve currency is called an “exorbitant privilege” because initially the world needs your currency. So for the first years the US was able to export their worthless paper and get back real goods and services.

If you stop there, it really may seem like a great deal. You just have to print, and others will work for your painted paper. This is a common error that even economists as great as Ludwig von Mises have made. (See my article about this → here)
Money tokens or currencies, are never the actual ends desired by market participants, even if the market participants aren’t aware of this. As Argentarius correctly stated, every transaction ultimately gets settled in goods or services.

In Weimar Germany, the nation exported cheap goods, to get enough gold to pay their war debt, which led to other nations exploiting the weak Mark and purchasing German stocks, real estate, etc. at dumping prices.
For the US, it has been China who sent them worthless junk in exchange for worthless Dollars, which the Chinese then sold for Gold, US and EU company shares, as well as real estate.

This process can be expected to pick up speed, as more and more nations dump their Dollar reserves on the market to diversify their holdings, as can be seen in Israel. Secondly, since the US stock and real estate market are already in a Bubble, China and Russia are bound to focus more on doing the same attack on the Euro. This strategy has, of course, been hampered by the Western sanctions on Russia, among other things by the freezing of Russian foreign currency assets.

A move that surprised me and probably also Russia, it being a de facto declaration by the US and several EU countries that both the Euro and Dollar are IOUs that can be voided arbitrarily and instantly.
To this day, I am uncertain whether this move was out of hybris or sheer incompetence. No matter which is the case, in the mid- to long-term, this will likely turn out to be one of the biggest blunders the Euro-Dollar governments could have possibly made.

Russia promptly took advantage of this mistake by simultaneously asking for their energy to be paid in Roubles and coupling the Rouble to gold at a fixed rate.

This essentially puts Germany—which is highly dependent on Russian gas—in the same trap, as the Weimar Republic was in due to the Versailles treaty. The difference being that this time, Germany is coupled to the rest of Europe via the Euro.

Thus, the ECB is in the worst catch any central banker can imagine. On the one hand, Germany is subsidizing Southern Europe and stabilizing the Euro with its strong economy. Something that is only possible due to low interest rates and ECB asset purchases.
On the other hand, the energy price inflation thanks to the gold-pegged Rouble can quickly grind Germany’s economy to a halt. Which needs to be addressed with higher interest rates and a stop to asset purchases.

As we will see later, there is a way out with Bitcoin, but I doubt the EU will take it.

Rather, I expect the ECB to first continue on their suicidal printing spree, well into a German depression and then steer back too hard, crushing the whole EU economy. The end game for the Euro will probably be another 180° swing towards QE and a Euro hyperinflation.

Before the Euro hyperinflates, however, I expect weaker currencies to be crushed in a similar manner. The Turkish Lira is already bordering on hyperinflation, many others will follow. The interesting thing will be to see, if the Bank of Japan manages to hold out longer than the Euro, but I doubt it.

Historically, the only way a nation can get out of hyperinflation is a monetary reform. Such a reform only works lastingly, if it is towards a gold or silver standard.

This time there is a another, even harder currency to turn to—Bitcoin.

While Bitcoin will still be a bit too young to have the same trust as gold, when this global monetary crash plays out (most likely this and next decade), there are many reasons for nations to prefer Bitcoin to gold.

The first is simply that Bitcoin is a better, harder currency. Some may even argue that it is the hardest theoretically possible currency.
The reason most countries will be led by is more of a practical nature. Most nations have gold reserves that are smaller than their share of the global economy. If they switch to a gold standard, they are thus at a serious disadvantage against a China or Russia, who have over proportionally much Gold.

The nation worst of are the United States themselves.

They had to declare gold bankruptcy already in ’71 and since then, the US has dumped so much physical gold onto the market to stabilize the dollar that I fully expect the national and international reserves in Fort Knox and co. to largely exist on paper only.

To make matters worse, Nixon didn’t really end the gold peg, he only “temporarily” paused it. This means, if the Dollar was to return to a gold standard, creditors of the US would likely demand to get the old value. Something that probably all the gold on the planet wouldn’t suffice to do.

The big chance the US (and other gold poor nations) have is to use Bitcoin. At about one Trillion Dollar market cap, BTC is still cheap enough that a government can easily acquire a large stake.

The first big nation to announce that they have a stack of 5+ Mio. Bitcoin and declares it legal tender, will be the dominant economic force of the century, if not the millennium.

If the US does this, before the Dollar hyperinflates against a gold backed Chinese currency, then they can avoid a lot of the pain they otherwise get and simultaneously rid themselves of most of their debt.

They could simply declare that a Dollar is henceforth exchangeable for Bitcoin at one Dollar per Satoshi (or 100,000,000 Dollars per Bitcoin). This would leave creditors with the choice to either accept the Bitcoin valuation and take the hard money, or take the dollar and sell it before it reaches that valuation by sheer self-fulfilling prophecy and US economic power.

The biggest danger for the US is, if China should manage to acquire more Bitcoin than the United States and pegs its currency to it (or maybe a double gold and Bitcoin peg). If this happens, the Dollar will soon enter hyperinflation and the US Empire will be over.

If the latter happens, we can only hope that the consequences are not as devastating as when Rome fell. Unfortunately, I expect that, if China wins, we will enter a very dark age of global surveillance and totalitarianism.

Next time we will take a deeper look, at how the best case for the US might go on a Bitcoin standard. If you don’t want to miss it, please consider subscribing to my Newsletter.

China declared economic war and no one noticed*

*This is of course just my conjecture. I do not say that it can’t all be an innocent accumulation of accidents. I am just trying to see if there is maybe another explanation better fitting to the James Bond principle:

“Once is happenstance. Twice is coincidence. Three times is enemy action.”

Ian Fleming, Goldfinger

The year 2022 may turn out to be one of the most significant years in history. Even though it is not even a full four months old, this year has already changed the world forever.
With Russia invading Ukraine, the West declaring economic war on Russia and the (hopefully) final waves of the Covid-19 pandemic, this is definitely one of the “[…]weeks when decades happen” sort of years. 
So, with all these once-in-a-lifetime events happening in just a few short weeks—after two years of wild geopolitical crises—it’s almost no wonder that the public seems to have missed the biggest event of them all:

Quietly, China has started the largest economic attack in recorded history. 

While all the mainstream media focussed on the double whammy of Corona and the invasion of Ukraine, China launched the economic equivalent of a nuclear first strike.
Under the guise of Zero-Covid, the Chinese authorities began to systematically mine and torpedo the already weak global supply chains.

First, the Chinese government halted the semiconductor industry because of “power shortages”. A woe that the communist leaders had intentionally provoked, when they declared Bitcoin mining to be illegal, which had been the economic backbone for much of China’s more rural power plants. 

“Wait a minute”, you may think, “Chinese government cracking down on Bitcoin is just them wanting control.”

You may be right, but what’s ringing my alarm bells is twofold:
The first part is that the crackdowns came under the pretence of power shortages, but the large scale power shortages and shutdowns of factories only occurred after the miners had left the country. 
Secondly, there were many articles popping up about Chinese hydro-power plants going bankrupt soon after the BTC mining ban, which quickly were purged from Google.

Let’s recap:
Strike one—China shuts down Bitcoin mining, creates severe power shortages (happenstance).
Strike two—China shuts down critical wafer and semiconductor fabs in an already disrupted semiconductor supply chain situation, due to Covid-19. (coincidence)

So far, so bad. And there is more…

One aspect to look into further is the origin of the novel Coronavirus itself. Whether or not the virus leaked from the Wuhan lab or occurred naturally, the Chinese response certainly hints at the CCP having had plans ready on how to turn this thing into an economic and political weapon. (Strike Three—Enemy Action!?!)

While I certainly cannot decidedly tell, if the mounting evidence that there indeed was  a cover-up by high-ranking healthcare officials in the US, means China released a virus on purpose, the background on the cover-up—which supposedly was due to the research jointly funded by the USA and China—is more than just a little suspicious in light of how well the pandemic played into China’s cards.

It’s hard to create a better Sun Tzu style move than to lure your enemy to conspire with you and then having him hide the fallout of what is to become your first strike.

Especially if these moves also help you hide the preparations of an all out war, as well as the first skirmishes.

Let us examine how China used Covid-19 against the West:
To do so, we need to go back to early 2020, when videos of people collapsing dead in the streets leaked out of China. 
After two years of a global pandemic, we can say with a high degree of certainty that these videos were staged to create panic. Had these been real videos, we would have seen this happening all over the globe. A virus may affect countries differently based on the national demographic and healthcare system, but not with entirely different symptoms. 

So, if the CCP staged these videos, what was their goal?

In my opinion, the goal was trifold:
One, they wanted to create fear, to get their own population back in line, which had been getting a bit nervous over Xi’s plans to stay in power indefinitely.
Two, the CCP wanted to create a justification for their crackdowns on their population, so the West would keep quiet.
And finally three, the long-term plans of the CCP had matured to a point, where they felt powerful enough to attack the US of A, but not quite daring enough to do so in the open.
Thus, if they could carefully guide the West to destabilize itself, they could bring their economic troops into position undercover.

And this plan—if it indeed was planned—worked out perfectly. Under the pretence of Corona, stoked with fear from the exaggerated messages out of China, the Western leaders were encouraged to copy China’s response and launch ever more authoritarian counter measures. 

No matter if this was all Xi Jinping’s plan, a Klaus Schwab conspiracy or mere happenstance, in its Covid-19 response, the West laid the groundwork for its own economic demise.

The constant mumbo-jumbo of lockdowns, travel restrictions and quarantines, thoroughly scrambled up the delicate global supply chains.
Something Europe and the United States depend on, while China and its allies are largely self-sufficient.

With natural disasters like earthquakes in Japan or human made disasters like a ship blocking one of world’s most important channels (Maybe Strike Four???), the “First World” in later 2021 suddenly became looking more and more like the Soviet Union in 1988. Shelves were barren, borders closed. People were locked in or out of countries, sometimes even their home countries.  

Unfortunately for authoritarians worldwide, the Omicron variant of the virus appeared and quickly drove out the other, more lethal variants.
With a virus less deadly now than the flu, it became harder and harder to justify the extensive human rights violations.
So, after a final propaganda push, trying to declare the winter of 21 to 22 a “winter of severe illness and death” for the unvaccinated, almost all countries lifted the restrictions during Q1 of 2022.

This came at a terrible time for China.  They had been increasing the pressure on Taiwan for a while, likely hoping to use the global chaos to find some excuse to take over. Which would have given them control over some of the most important semiconductor fabs in the world. 

What to do now?

If the CCP waits, fabs in construction around the world would get finished, making both China and Taiwan less critical as semiconductor suppliers. If they move now, they would likely receive a hefty response from the NATO.

“Luckily”, Vladimir Putin came to the rescue and invaded Ukraine. This not only pulled the media attention and wrath to Russia, it also allowed China to shine, simply by not openly declaring support for Russia. Furthermore, it made Russia dependent on China to launder its goods and money.

As a cherry on top, Russia and Ukraine combined are the world’s top suppliers of e.g., Gas, Oil, Grain, and Neon. The last being especially important, since it again affects the crucial semiconductor industry. (Come on, this is definitely another strike!?!)

If all of this wasn’t enough, China decided to still treat the milder Omicron, as if it was the “people dropping dead in the streets” plague they had first portrayed it as. In fact, the recent shutdowns in Shanghai are even more hardcore and influential than what they originally did in Wuhan.
Shanghai is one of the most significant industrial hubs in the entire world and one of the busiest harbours. With the measures taken by the CCP in this region, they can not only again halt semiconductor factories, but also automotive manufacturers and many other industries. 

Port of Shanghai Vessels – April 19 2022

On top of these factory closings, the seemingly random openings and closings of parts of Shanghai, lead to trucks and ships piling up around the metropolis, leaving the thin global supply chains short of containers, staff and other essentials.

This could lead to a supply shock of a very different kind in many industries, again, especially semiconductors.

While many suppliers right now ask their customers to place orders for chips on the entire 2023 demand, some even well into 2024, more and more chip customer’s factories have to stop production. In China due to Covid-19, in Ukraine due to the war and in Europe, due to parts missing from either of the aforementioned countries. 

If this chaos continues, automotive Tier 1 and Tier 2 subcontractors, will soon be forced to cancel or delay semiconductor orders. This will lead to a bizarre situation, where we have simultaneously a shortage of chips and chips stacking up in warehouses.

If you think inflation is bad already, wait what this will do to the CPI.

And China is not done yet. They want to lock down more and fight out their Zero Covid fight to the max.

To sum this long article up:
China has found a way to break global supply chains, drive Western economies into a historically unique combination of double-digit inflation and depression. In short, the economic equivalent of nuclear winter.

So, how do we tell, if this was all just a series of unlucky coincidences or an evil master plan?
We will probably never know for sure. But if one or more of the following things happen over the next few years, we can be rather certain:

  1. China taking control over Taiwan
  2. China adopting a gold standard (more on this in my upcoming article on hyperinflation)
  3. More proxy wars breaking out

Monetary Theory—Argentarius vs. Mises

What is money? Many economists have tried to define this omnipresent tool of human trade. Few have come close to a comprehensive analysis. The two men who in my opinion did the best job so far were Ludwig von Mises and Alfred Lansburgh (better known under his pen name “Argentarius”).

Mises as one of the most famous representatives of the Austrian School is of course more well known than Lansburgh, but while I greatly admire the man, this time I need to side with Argentarius.

The two theories are rather close and not entirely incompatible, but a few key differences exist, and I think they are due to Argentarius seeing what Mises overlooked. Let me explain…

While Mises traces money back to the value of the underlying commodity (Regression theorem), Argentarius adds another layer to the analysis. He does not dispute the history, how commodities became monetary tokens, he rather claims that the concept of money is entirely separable from the underlying commodity and much older.

While I cannot lay out in a few lines, what Lansburgh explained in an entire series of books, let me try to rephrase how he claims money evolved.

Why are money tokens even necessary?

Whenever you trade with other people or render them services, one side will inevitably need to grant the other side credit at some point. Few goods can be exchanged one to one at the spot.
If you pay for a pair of shoes with eggs, for example. It will neither be practical nor helpful, if you deliver the payment of a thousand eggs at once in exchange for the shoes.

Rather, you will make a deal with the shoemaker, where either you deliver 1000 eggs first, in household quantities, over say a year (i.e., you give the shoemaker credit) or you get the shoes first and then pay off the debt with eggs over time (the shoemaker gives you credit).

In ancient human history, such debts were either remembered by people or chalked down. We know that as much as 5000 years ago, people would use clay tablets to record ledgers of such commodity debt contracts, e.g., in Mesopotamia.

This debt is what Argentarius calls “money”. Or more precisely, the debt that results from a contract that has been partially fulfilled. Looking at archaeological findings, it seems that Argentarius is indeed correct, and these ledger-based debts go back further than commodity money.

Of course, we need to note here, that what we colloquially call “money” is different from Lansburgh’s definition. In day to day life, we usually equate the money tokens or currency with “money”.
So, when we compare the different theories, we need to keep in mind that Argentarius calls the virtual debt “money” and the physical currencies “money tokens”.

Why and how did humans even switch from a virtual, ledger-based debt “money” to token money?

The answer lies in the growth of civilization. While, a debt denominated in individual goods and services and recorded in virtual or physical ledgers, may work for a city or even a state, the bigger and wider trade networks become, the less practical it becomes—especially for small transactions.

Just imagine either a harbour innkeeper having to know all his customers and remember their tabs, or a central national clay-tablet database recording every beer drunk in the nation and not yet paid for.

Thus, tradesmen started to seek for a standardized medium of account, similar like kings standardized length measurements to multiples of their foot. The problem with value is that it is subjective, however.
As Mises correctly points out, all humans rank their possessions hierarchically, but cannot quantify them because there is no SI unit for “value”.

Your kid is hopefully more valuable to you than a donkey you own, but if you had to put a numerical value on either, you wouldn’t be able to. Unless, of course, you compare it to a good or service you need right now that is of equal or greater value to you.

If there is a famine, you will probably first sell your donkey for grain because the grain is more valuable to you than the donkey. And the grain and donkey are both less valuable than your kid, so you don’t even consider selling the kid at first.
If the famine continues, however, you may come to a point, where you start to think about how much food you could get—for you, your wife and your four eldest children—if you sell the fifth and youngest kid.

I know, this example may sound cruel to us today, but it was a tough choice people often faced historically and even in Central Europe as recent as 150 years ago children were still occasionally sold to feed families.

So, how exactly do we calculate values, prices, debts in a standardized way then?

How many money tokens equal one child, and how many money tokens equal one loaf of bread? If we want to express values comparably, we need to develop a solution to this, we need to find a common denominator.

This is especially important for an economy, since something as valuable as a child, is worth more than a single merchant can supply in useful goods. If we wish to trade extremely high-value goods, for relatively low-value ones, we need a standardized way to express value and debt, so we can defer a transaction in party.

What do I mean by that?

In our example, even if the grain merchant offers you 5 tons of corn for your child, this will not help you feed your family. You are unable to transport and store 5 tons of grain, and you will need other goods, like drinkable water, basic shelter etc. that the corn trader cannot deliver.

A good money token thus needs to allow not only for the monetary functions of the historical ledger-based money (transferring a transaction in time and place), but also to transfer a transaction in party, i.e., a way to collect debts from another person than the one you are directly trading with.

One way this has been achieved is that traders of staple commodities, like grain, would give out coupons redeemable for their good instead of the good itself.

In our example, this means that instead of 5 tons of grain, the father receives 5000 coupons redeemable for 1 kg of grain each.
With these coupons, the father can then pay the shoemaker for new shoes, the well owner for some drinking water etc. This works because all of these merchants also need grain.

While this coupon money, solves the problem of transferring a transaction in party to some extent, it still does not solve the issue of a universal medium of exchange. Only people needing grain and trusting the merchant issuing the coupons will accept the coupons as payment.
(Of course, some will also just trade the coupons, but for brevities’ sake, we will exclude this from our analysis here.)

Furthermore, the validity of such coupons will be limited geographically. A merchant 500 miles away, is not likely to take a coupon he can only redeem by travelling to a far away city and redeem with a merchant, he does not personally know.

Thus, the market found a solution in money tokens which had some market value independent of the exchange value guaranteed by some central entity. Historically, precious stones, cowrie shells and metals like Gold and Silver were chosen. Why and how specific goods were favoured over others, is explained brilliantly by Mises, so I won’t go into it here.

Once a money token or commodity money gets dominant in a region, either by market choice or by government decree, it finally evolves further into a “medium of exchange”. This means nothing more than that the money token (e.g., a gold mark or paper mark) is universally accepted as a placeholder in transactions and every good or service over time establishes a “market price”, denominated with the token.

The market price of a good or service, is the closest approximation one can objectively make to the subjective concept of “value”. This does not mean that every person values the same good or service at this market price, but rather that on average the marginal utility of both sellers and buyers of the commodity meet at this price, under current conditions.

So with the “market price” a medium of exchange finally allows us to express the “value” of things in a standardized, quantifiable manner and transfer transactions in time, space and party.

In a nutshell, this means that whatever good or service you are trying to exchange for whatever other good or service, you can just use the dominant money token instead.

The implication of this being that instead of having your employer pay you for your work in shelter, food, clothing, etc. You can receive your salary in the money token and then exchange the token for the desired goods at any merchant.

Up to this point, Mises and Argentarius largely agree, even though they place their emphasis on different aspects of the process.

Let us recap:
Argentarius traces the history of money back to “contractual debt”, tracked mentally or on clay tablets, which then became coupon money and then commodity money and then by choice or decree a medium of exchange.
Mises, on the other hand, traces the evolution of commodity money, by a free market process. Defining this type of money token as “money” if it is used as “universally employed medium of exchange”.

Both economists agree that a monetary token dominant in a given market/country becomes a universal medium of exchange. They disagree in the core definition of money.

To Argentarius, “money” is an abstract concept. A placeholder for a debt in an open transaction. Money gets born when somebody renders someone else a service and has not yet received the compensation. As soon as the transaction is completed, i.e., the debt is paid, the virtual money disappears. A money token in this context is used only to represent and quantify the abstract money.
The implication of this is that any given transaction is only finalized, once both parties have received the actual goods and services desired by the transacting individuals.

So, in the case of the shoemaker, it does not change the transaction, whether the shoes are paid for in eggs or whether the eggs are sold for a money token and then the shoes bought for such a token. The transaction is only finalized once the shoemaker in turn has exchanged the money token for eggs.

Mises, on the other hand, attests the monetary token a marginal utility of its own, reflected in the market prices of all goods and the monetary premium the token has over the commodity it consists of.

Here I see the flaw in Mises’s argument.

If a monetary token is accepted as payment for its own sake—as a commodity—and not to be re-traded for something else, then in this case it has not acted as “money” at all, but as common barter.

When a money token is used as a placeholder in a transaction—to transfer a transaction in party—it is not valued by the parties for its commodity value, but exclusively on its monetary premium.

This monetary premium arises not by the market pricing of the underlying commodity, but rather by the act of capturing the market price of the desired goods.

We do not use a money token because we want to own it, and we don’t price it for its own sake, rather we use the money token because we want to buy something that our trade partner cannot deliver, and we expect the token to have the same “value” as the good we desire.

So, why is the view of Mises—namely that a transaction is finished once a money token has been handed over for a commodity—problematic and factually incorrect?

To see this, we need to study an extreme example:
Let’s say two people, called Alice and Bob, want to do a barter trade. Alice exchanges a Picasso painting for a serial-number-one sports car of Bob’s.

The Picasso is delivered to Bob, but Bob’s wife hates it and immediately trades it for a van Gogh. The sports car is put on a lorry and shipped to Alice.
Unfortunately, the truck has an accident and the car is damaged beyond repair.

Now Bob is in a difficult situation. He does not have the one of a kind commodity he owes, and he also doesn’t have the one of a kind commodity he received, for the transaction to be reversed.
Naturally, Bob offers Alice the van Gogh painting, since to his family it had the same value as the Picasso. Unfortunately, Alice hates van Gogh as patently as Bob’s wife hates Picasso.

How does Bob pay his debt?

The common way to resolve such a dispute is to involve a mediator, often a court. Given that the two parties are unable to agree on a fair substitute for the car, the judge will need to get an appraiser who determines the “value” of the lost vehicle.

According to Mises’s school of thought, this price should be denominated in the dominant medium of exchange of the area, while Argentarius would call for the money token dominant or decreed for the area.

If the two parties come from regions which have different media of exchange, the customary thing to do would be to use Alice’s medium of exchange, for she is the one who is the creditor.

If I explained this case well, you, dear reader, will have probably come to the conclusion that in most cases the two schools of thought will arrive at the same monetary token and valuation in this case.

Yet, the two cases could not be more, different. The problem I see is both of a philosophical and practical nature.

Let us start with the philosophical problem:
Under Mises’s doctrine, a free market process should be completely voluntary. Since he furthermore attests a marginal utility to the monetary token itself, the only way to view a court’s decision as “just” is, to ask Alice whether the marginal utility of the money token is equal or greater than the marginal utility of the lost car. If Alice does not value the possession of the money token itself, the marginal utility of the token is zero and Alice has, in fact, been robbed by the court.

If Alice, however, attributes a value to the money token solely based on the expected resale value, this means that she does not really attribute any marginal utility to the token itself, but rather values the token based on the marginal utility of what she expects it to buy her.

So in the first case, a “just” solution is impossible. In the second case… well, in the second case Argentarius was right all along.

Now, philosophical and moral implications aside. What are the practical issues with Mises’s theory?

To understand the significance, we need to first call to our attention, why economic theories are important.
Over the past few centuries humanity’s standard of living has been rising steadily, thanks in large parts to the advancements of science. If you have a better understanding of how the world works, you can create better products to enable you to satisfy your basic needs easier and to also address higher order needs, otherwise unsatisfied.

In economics, one of the most important pieces of understanding required, is how scarce goods can be best allocated. The best process discovered for this so far is the “free market”. The free market according to Hayek is so good at this because the market price effectively is an aggregate of the knowledge and information possessed by the market participants. With billions of people participating in a free market, it seems obvious, why this process must be better informed than any group of central planers.

But what if market participants are missing a piece of information or collectively share a piece of wrong information?

The inevitable consequence is a misallocation of goods and services. Sub par products will win out over better products, and many innovations will never come to fruition.

This is particularly devastating to humanity, if the error lies in the very tool itself used to express market prices, namely the monetary tokens.

With Mises’s theory of money, you can understand what a “good” token is only to the extent at which it is accepted by market participants as a commodity.
Failing to see the function of a monetary token to quantify and standardize the underlying abstract concept of “money”, it is likely that suboptimal tokens are chosen by market participants and that better tokens only emerge by accident or not at all.

The key difference in the two theories thus is that Argentarius requires a “good” token to be stable in “value” from the time a contract is made to the time it is finalized, which in this case is not the moment the token is handed over, but rather the moment the token itself is redeemed.

Let us look at an example of where the fatal consequences of Mises’s theory become visible, namely the Weimar Hyperinflation.

As early as the year 1921 Lansburgh saw that the majority of people in Germany were confusing monetary tokens with “money”. They bought and sold goods using money, thinking the transaction was finalized when they handed over the Mark bill and overlooked that in reality their intention was not to have a Mark bill, but to spend it.

The consequence of this error was what Argentarius calls “selling themselves poor”. Shopkeepers and industrialists priced their products in Marks, based on the current market value of the Mark, instead of on the expected market value of the Mark when they needed to restock.

Thus, shops often found out only after they had sold their whole inventory that the Mark had fallen so much in value that they couldn’t afford filling up their shelves and had to go out of business.

Enough for today.

Thank you, dear reader, that you stayed with me for this long. In one of the following issues, I plan to go deeper into what a “good” money token is and why the Euro-Dollar system is currently going into hyperinflation.

About the coming hyperinflation

Jack Dorsey earned himself a lot of push back, when he spoke about hyperinflation coming to the US a while ago. Recently, Bavarian politician Markus Söder has stated a similar thing for Germany and the media barely reacted.
So, is hyperinflation coming or not?

As I explained in my last article, the current economic situation is historically completely unprecedented and only slightly comparable to the fall of Rome, which means that all I will say below is my pure conjecture.

With that said, let’s look at why I think widespread hyperinflation in the Euro-Dollar System is the most likely scenario.

Before we can go into why hyperinflation is likely to come, we need to first understand what it even is. Common definitions describe it as an inflation that has surpassed 50% per month (or some say per year), while inflation in that context means increase in CPI (consumer price index).

This definition is misleading, for two reasons:
Firstly, inflation historically meant the increase in uncovered money supply. Under this definition, inflation really showed the potential for price increases in all markets and functioned as an early warning sign.
With the new definition, focussed purely on consumer prices, it’s become a useless lagging indicator.

Under a credit money, inflation hits the economy via the Cantillion effect. Persons, companies and industries closest to the source of new unbacked money get access to new currency tokens first. This means nothing else, but that the first effects of money stock inflation, hit closest to the dollar fountain.

So, initially creating money causes the prices of stocks, bonds, derivatives and real estate to go up. Since this is an effect seemingly enriching the rich, so it is welcomed by The Elites™.

Creating money out of thin air can stay confined to the financial markets for a very long time. Only once it has reached a critical level in inflating asset prices, especially real estate, will inflation break the first dam and flow from the financial economy to the B2B economy.

The cause of this dam break moment usually is twofold:

  1. Prices of resources and real estate get speculated up alongside bonds and co., making it necessary for companies to either increase prices or run at a loss.
  2. The spiral of paying for debt with new cheaper debt reaches a velocity when the normal business of companies and banks becomes insufficient to ever pay off the debt, so production becomes just a charade to justify ever higher loans.

We saw the first point happening before the financial crisis in 2008, and it was the number one reason for the crash to occur. Unfortunately, instead of letting companies fail or increase prices, the government forced them to resort to point 2. Thus, after a short correction, housing prices got bid up even harder.
Central banks dropped rates to zero and real rates significantly into the negative. Some central banks, like the ECB, even had negative rates on retail bank deposits, effectively punishing banks that did not leverage to the max and lend out everything they can.

Now, before you shake your fists at these evil bankers, consider that the only reason, this has not blown up completely, was the actual decency of the retail bankers.
They refused to go onto the relentless lending spree the central banks wanted them to. Especially during the height of the Covid-19 crisis, when central banks lowered reserve requirements to effectively zero, bankers explicitly kept some remnants of reason in their credit policy.

Sadly, their restraint was far too little and much too late, for we can see the second dam of inflation cracking now.

When the B2B sector cannot compensate the increases of asset prices, resources and real estate any longer nor hide them under fake money, eventually the consumer prices will rise.

This is something that we can see happening since 2019.

Now, rising consumer prices alone don’t cause hyperinflation. There is another factor that needs to come on top, to turn inflation into hyper mode.
This is where the second misleading part of the “50% of CPI” definition comes into play.

Hyperinflation is not merely fast inflation. There is a significant difference between the two. Inflation is when prices increase because the money stock gets inflated. Hyperinflation occurs, when people lose faith in a currency and start to flee.

This fleeing a currency happens in lockstep with the breaking of the dams. First, the banking sector stops using the money tokens to get more money tokens, but rather to get assets. This is when real estate and stock bubbles begin to form.

In the second stage, companies lose faith in the currency and stop focusing on their production, but rather on inflating their share price, buying back stocks, etc.

The third and last stage starts when consumers lose faith in the currency and stop using it for saving. Usually, this begins with the richer citizens, who reduce their cash holdings and invest more into stocks and housing. Then the middle-class follows suit. Finally, the poor people try to flee the collapsing money system, but being unable to afford the better hard assets, they resort to immediate consumption.

Once this stage has started, we get close to the point of no return, after which a collapse of the currency is unavoidable.

As you can see, nowhere in this process did I even mention the CPI inflation numbers and in fact, during Covid-19, we quietly entered stage three before official CPI had even passed 5%.

Thus, a much better indicator of impending hyperinflation is to closely monitor the behaviour of banks, businesses and ordinary people. Which unfortunately means one needs to use the art of praxeology on the data, instead of trying the Keynesian “one number indicator” approach.

To recap, so far, we have analysed the path of inflation approaching hyperinflation up to about December 2021. The interesting question is now, what 2022 and beyond will bring.

If we want to make an educated guess about the future, the only way to do so is to look at historical patterns. Especially the Weimar Hyperinflation of 1923 and the Great Depression of 1929. For a more profound understanding of the first, I recommend reading Argentarius.

When the third stage of inflation is reached, a government and its central bank have three options. The first is to continue the money creation. This is the scenario that inevitably leads into hyperinflation.

The point of no return in this case is crossed, once the money tokens lose their ability to defer a transaction in time. Signs of this happening are, when people relentlessly spend every pay cheque promptly. This is often accompanied by the so called wage-price spiral. Wages and prices race each other to ever higher levels, stores cannot keep up, with relabelling, workers demand salaries to be paid weekly, then daily, then upfront and so on.
Another sign is, when factories and stores go bust do to what Alfred Lansburgh called “selling themselves poor”. This occurs, when prices go up so fast that a factory cannot replenish their supplies because the earnings of the last batch cannot make up for the rising prices in raw materials. Stores in this situation cannot restock their warehouses because wholesale prices are suddenly higher than the resale price they charged for the old stock.

Indicators for a “selling ourselves poor” market are -besides the aforementioned bankruptcies- an increase in barter transactions and state regulations against “usury”.
At the time of this writing, in early April 2022, the Turkish economy has already crossed this line and Germany as well as other EU countries are uncomfortably close to it, with politicians openly discussing price controls.

After this point of no return, a monetary system cannot be saved. A currency reform is inevitable, and every day delay further destroys a nation’s infrastructure and capital stock.

So, what can a government do to prevent this point of no return to be crossed? Obviously, the easy answer is:
“Do the monetary reform NOW!”

Unfortunately, I know of not one case in history, where a government was forward-looking and wise enough to choose a little pain now, over a lot of pain later. I guess, there is no glory in prevention and leaders who aren’t concerned about glory are rare.

One way out is to let people chose their preferred medium of exchange on their own. This usually leads to people reverting to a gold standard. The downside of this approach is that it leads into the so called “deflationary” crash, like in 1929. People, realizing that their gold or gold-backed alternatives are worth significantly more than the qualitatively poor products the inflation has born, resort to saving as much as they can and crunch the inflation economy to a halt.

If the government allows this crunch to happen, the aftermath will be short-lived and the economy will quickly detox and recover.
If the government resorts to interventionism to soften the fall, the effect is the opposite, leading to perpetual crisis that can be resolved only by reform or war. Historically, governments had unfortunate tendencies to resort to the latter.

So now that we have understood why a hyperinflation or a “deflationary” crash are the only probable options, let’s explore, why I consider the first to be the more likely.

I could take the easy way out and end this article, by stating that Keynesianism is the government-backed economic doctrine and that it is afraid of nothing more than deflation, so for this reason alone, hyperinflation must be the outcome.

But where would be the fun with that? Especially since Keynesians have caught themselves in an epic catch-22.
On one hand, they say that in times of recession, the monetary policy must be relaxed and interest rates lowered. On the other, if inflation is running hot, interest rates must be increased and monetary policy tightened.
What their handbook does not say, is what to do when you have both. Recession and high CPI numbers.

Unfortunately, we are entering Q2 of 2022 not only with a beginning recession and CPI inflation around the world approaching double digits, we also have some once in a century crisis scenarios piling on top of each other.

Incompetent government responses to a virus, a ship stuck in the Suez Canal, earthquake in Japan, power outages in China, a war in Europe. It’s hard to imagine a more complete list of “How to destroy global supply chains” than this. So with news like this, the obvious thing to do for a government is to further exasperate the situation. Governments can get really creative with this, maybe locking down some of the most important industrial cities in the world or stopping energy trades with one of the top suppliers of oil and gas.

In this macro environment, if you are one of the economists who still forecasts a growth in the world economy for this year, please send me a sample of whatever it is you are smoking.

To me, it’s clear that by the end of autumn 2022, we will be in a recession like we have not seen in at least half a century. In 2023, we will likely have double to triple digit price increases across almost all product groups, paired with great depression era and beyond declines in GDPs.

This will bring any government under pressure to do something, and the easiest thing to do for a government in that situation is to print money like there is no tomorrow.

And so, the hyperinflation will begin…

Now, the burning question you may have, is:
“Historical hyperinflations always happened in countries competing with a gold standard, so how will a Fiat vs Fiat hyperinflation look?”

More on this… next time.

A dire warning to real estate investors*

Those who have been following me for a while know that I love investing in real estate, especially affordable housing projects.
So, it might surprise you that, even though I’m long real estate and expecting the Dollar and Euro to devalue against houses at an ever-increasing pace, right now, I have to warn you.

If you are highly leveraged (60%+ debt to current valuation), I would try to deleverage, if I were you. Sell properties at the absurd valuations we have right now, until you can survive a 30% to 40% crash.

Why do this now?

While central banks will very likely have no choice, but to keep flushing liquidity in the market, many signs signal a shake-out.
One such signal is the US 30-year fixed mortgage rate, which has been really shooting up recently.


What this means is that all investors who need to refinance, need additional mortgages or simply have no long-running mortgage rate agreement need to pay more. Which for many people who invested in the last three years can easily surpass the thin margins and make them go bust.

Another even more worrying signal has just emerged here in Germany. The Sparkasse Banks are a group of local banks, who finance a high percentage of homeowners mortgages.

Over the past 5 years, if you had a high credit score, they would lend you 100% sometimes even up to 125% of a property valuation, with little to no down payment. All the while, interest rates were often below 1%.

This has suddenly changed now.

Many Sparkasse Banks now charge over 2% even for top credit score clients, and are unwilling to accept less than 30% down.
Some even go so far, as slashing the value of properties-as-collaterals to 65% of the market value or less.

This means that these banks are pricing in a significant drop in prices. And their evaluation might very well become a self-fulfilling prophecy.

If banks do not lend as readily and at higher rates, this alone puts pressure on the housing market.
If moreover the banks discount collateral, this can be fatal.
Normally, a change in rates and prices mostly affects people currently buying or selling or whose mortgage rate is not fixed. This is changing now.

Over the past few years, with banks lending 100% and more to the value, they now have relatively little collateral against their loans. This is critical for two reasons:

Number 1:
Central banks here in Europe and around the world had a moratorium on how much collateral banks need to hold, in some cases dropping the requirement to zero. These have expired or will expire soon. So banks need to increase their collateral to liabilities ratios.

Number 2:
When market prices even drop slightly, this gets leveraged by the new collateral requirements and the discount banks apply to the market value.

The potential impact is that not only will it get harder to find buyers solvent and creditworthy enough in the housing market. Even existing loans that get paid diligently can get under pressure.
When banks decide or are forced to decrease property valuations, they need to increase their collateral. And basically every mortgage contract contains a clause that—should the bank need to revaluate your property and securities—they can ask for additional down payment or deposits.

In a normal market, this is not a problem. Most investors in real estate historically purchased with 80% debt or less. Furthermore, housing prices went up most of the time and if down, it was only minor fluctuations.
This time, the macroeconomic situation, the COVID-19 policy fallout and the real estate hype of the past decade, may become a deadly mixture.

If liquidity drops enough to draw prices down even by just 5%, the chain reaction, of banks panicking, central banks doubling down on their errors, etc. can easily exasperate the drop into a 30% to 40% crash.

For liquid investors, this will be a great buying opportunity, but for new and highly leveraged investors, this will be disastrous. Many will be forced to sell their properties at a loss and get stranded with a lot of debt, without any means to pay it off.

Don’t be one of them.

So with China’s real estate sector crumbling, the US housing market looking worse than in 2008 and the historically rock solid German real estate market showing cracks, why am I still bullish long-term?

Simple. We are currently in an unprecedented macroeconomic environment. Collapses of Fiat money have happened many times, but to find the last time a Fiat currency comparably strong as the US dollar, you have to go down all the way back to the third and fourth century Mediterranean.
And even with the collapse of Rome, there are differences that make today’s situation completely unprecedented in my view.

First and foremost, the Roman Denarius always competed against Gold and Silver currencies. A total Fiat world economy like today is historically unique.
Secondly, the fall of Rome was playing out in centuries. The fall of the US empire is playing out in mere decades and accelerating.

So while all of this makes the future less predictable than ever, there are historical patterns that likely apply. One of them is that enemies of the collapsing empire will first resort to hard currencies to drain the struggling foe of resources and capital.
This can already be seen, with Russia de facto coupling the Rouble to Gold and asking for energy deliveries to be paid in Roubles.

Another process that is going on, is the breaking free by the de facto colonies of the United States, which in this case may be called “de-globalisation”. And since the US hegemony is built upon debt and (mostly) not military occupations, the virtual colonies around the globe, will get a relatively easy way to shake off their chains. By means of the rapid devaluation of Fiat currencies, their national deficits are easily paid off, if they own gold or Bitcoin, which I expect to reach astronomical exchange rates vs the Dollar in the next decades.

If history can give any indication for the future, then the most likely scenario (my estimation ~60% likely) is a 6 to 24 month severe draw back in the housing market, followed by a price explosion and potentially hyperinflation.

More about hyperinflation… next time.

*none of this is financial advice. It all depends on your personal situation, so do your own research, make your own decisions.