Cash beats electronic money

All wars cost heaps of money. They are so expensive that to raise the full cost from honest taxes alone would cause a revolt.

The monetary watershed was World War I, which saw governments mobilise all community resources to the war effort. Money printing plus ration cards were their main tools. Money creation destroyed currencies everywhere.

The cost of the war destroyed the German currency and the replacement papier mark was subject to the terrible German inflation of 1923 which paved the way for the rise of the Nazis.

Even the mighty pound sterling was fatally weakened by wars and the discipline of the gold/silver standard was gradually destroyed. The British gold sovereign, first minted by Henry VII in the 16th century, disappeared from circulation at the height of the Great War in 1917. The British pound became a fiat currency in 1931 and silver started to disappear from British and Australian currency in 1945 after the Second Great War. Even the mighty US dollar started on the road to ruin during the Vietnam War and gold convertibility was suspended by Richard Nixon in 1971.

We have seen the death of much of the world's funny money in just the last 50 years. For example, in Peru, one million Intis would buy a modest home in 1985; five years later it would not buy a tube of toothpaste. Brazil had so many new banknotes they ran out of heroes to print on them.

In Vietnam in the 1980's, factories had to hire trucks to carry the bags of dongs to pay the Tet (New Year) workers' bonuses. In 1997 in Zaire, it took a brick-sized bundle of 500,000 notes of the local currency to pay for a meal - no one bothered to count them. On the Yugoslav border in 1989, tourists foolish enough to change "hard" currency for Yugoslav dinars got 14 cubic metres of dinars. "Dinars can no longer be measured in millions or billions, but only in cubic metres". It had become a cubic currency. These grim records were eclipsed in November 2008, when Zimbabwe suffered inflation of 98% PER DAY.

Most governments are good at destruction - concentration camps, gulags, dictatorships, genocide, mob rule, world wars and . . . the destruction of sound money. Fiat money is their underhand method of official larceny and few people realise that the robbery is happening until it is too late.

Future generations will look back in wonder at modern monetary madness. Words like peso, rouble, rupiah, baht, won, rouble, ringgit, inti, dinar, tolar, ostmark, dong, lira, zloty, cordoba, sole, cruziero, and yuan will join "shin-plaster" as descriptions of worthlessness. Most world currencies are on the same slide to oblivion (the Australian dollar has lost over 90% of its purchasing power in the last 70 years).

"You can't print gold or store it in computers."

Real money is always measurable by weight, such as pounds, grams, pennyweight and ounces of gold and silver, or carats of gemstones. It cannot be counterfeited or corrupted easily.

But fiat money relies for its value on the honesty and openness of the rulers. Even a monetary fool such as Fidel Castro could see what caused Cuba's inflation. In 1993 he stood up at a rally and declared: "There are nine billion too many pesos in Cuba".

Yesterday's Optus money crisis in Australia is a harbinger of the future.