Thursday, September 27, 2012

Modern PhD vs ancient Kings

Think modern central bankers and economists and PhDs are better managers of our money than their counterparts who lived 2000 yrs ago? Think again. I have compiled a few examples. It's difficult to get data from ancient times but what I got so far is striking. 

(rough estimates of currency value vs real goods):
US Fed -> 1913-2011 (abt 100 yrs). The USD has lost over 95% of its value 
Singapore MAS -> 1970-2011 (abt 40 yrs). The SGD has lost over 90% of its value 
UK BOE - 1900-2011 (abt 100 yrs). The GBP has lost over 98% of its value
Swiss SNB - 1945-2011 (abt 60 yrs). The Swiss franc has lost over 65% of its value

Info on ancient price systems are hard to find, but here're 2 of them:

Roman Republic - 3rd century BC-1st century BC (over 200 yrs). The Silver Denarius maintained 100% of its value.
Byzantine Empire - AD 498 - AD 1030 (over 500 years!). The Gold Solidus maintained 100% of its value.

Of course, eventually, these currencies also failed, for the same reasons as all currencies after that: Debasement.

In our modern world, it's called Money-printing (or more euphemistically - "Quantitative Easing", "Operation Twist", "Lowering the interest rate", "Currency devaluation to help exports", etc). Why debase money? Politicians over-promised and overspent (along with other reasons due to the intricacies of the modern monetary system).

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