The Neothink Society · Economics · May 2011
Money can be printed. Wealth cannot. Anyone who holds that distinction in view stops being surprised by what currencies do, because the entire pattern of inflation, debasement, and quiet confiscation follows from it. The Neothink mind reads money the way it reads everything else, by tracing it back to whether real value stands behind it.
History runs the same experiment over and over. The German mark of the 1920s collapsed into inflation, then hyperinflation. The lesson did not hold. Within a few years the Nazi state did much the same to the mark's replacement, the reichsmark. Beginning in 1933 it poured money into public works, including the autobahn construction project that employed over 100,000 labourers and served as propaganda at the same time. The funding came from somewhere. In its first four years in office the regime drew Germany's gold reserves down from 937 to 72 million reichsmarks. A currency was being spent into existence faster than any real value was being created to back it.
The Real Distinction A currency only measures value. It never creates it.
This is the meaning of the gold standard. A currency backed by a physical reserve of the metal restrains a central bank from expanding the money in circulation at will. Currency that is backed by nothing, fiat money, carries no such restraint. Expand the supply faster than value is created and the result is inflation, the slow transfer of purchasing power from the people who earned it to the institution that issued the new units.
The present runs on the same arithmetic. The Bank of England and the US Federal Reserve have, by a few keystrokes, taken the course once associated with a collapsing Weimar or a modern Zimbabwe. The comparison sounds extreme until the record is read plainly. The dollar has lost roughly 95 percent of its purchasing power since 1913, the year the Fed was established. Most of that loss followed 1971, when Richard Nixon severed the Bretton Woods tie to gold and removed the last restraint on issuance. In recent years both central banks have injected billions of newly created units into their economies. The public is told this is stimulus, or quantitative easing. Performed by anyone outside the institution, it would be called forgery. The central bankers have achieved what the alchemists only dreamed of, and the cost lands on every person holding the older, heavier units.
The Floor The value of money tracks the value created behind it. No printing press moves that floor.
Printed money measures wealth but never makes it, so the self-led person anchors prosperity in created value, the one form of money no central bank can debase.
A self-led person reads this without panic and without illusion. The value of money tracks the value created behind it; nothing a printing press does changes that floor. This is why the men and women of the Neothink Society anchor their prosperity in creation rather than in the units used to measure it. A skill that produces value, a business that solves a real problem, a contribution the world genuinely wants, these hold their worth while the measuring stick is debased around them. The mind that creates value is never at the mercy of the mint.
Real wealth is built by people who can tell the difference between a number on a note and the value that gives the number meaning. Membership in the Society sharpens that clarity. Membership is by application.
Common Questions
What is the difference between created money and created value? Created money is units a central bank issues into circulation. Created value is a real skill, product, or contribution the world wants. Money measures value; it does not produce it. When new money is issued faster than value is created, the units lose purchasing power while the underlying value stays exactly what it was.
What is fiat currency, and how does it differ from a gold-backed currency? Fiat currency is money backed by nothing but the authority of the institution that issues it. A gold-backed currency is restrained by a physical metal reserve, which limits how fast a central bank can expand the money supply. Fiat money carries no such restraint, so its quantity can grow without limit and its value can fall accordingly.
How does inflation transfer purchasing power? Inflation is the slow transfer of purchasing power from the people who earned the existing units to the institution that issues new ones. Each new unit dilutes the value of every unit already held. The earner did nothing wrong and produced real value, yet the measuring stick shrinks in his hands while the issuer spends the new units first, at the old value.
Why has the dollar lost most of its purchasing power? The dollar has lost roughly 95 percent of its purchasing power since 1913, the year the Federal Reserve was established. Most of that loss followed 1971, when the Bretton Woods tie to gold was severed and the last restraint on issuance was removed. With no metal reserve to limit expansion, the supply grew far faster than the value created behind it.
How does a self-led person read currency debasement? A self-led person reads it without panic and without illusion. He understands that the value of money tracks the value created behind it, so he watches what is actually being produced rather than the headline number on the note. He anchors his prosperity in creation, not in the units used to measure it, which keeps him steady while the measuring stick is debased.
Why does the Neothink Society anchor prosperity in value creation? Because created value is the one form of wealth no central bank can print or debase. A skill, a business that solves a real problem, a contribution the world genuinely wants: these hold their worth while currencies are diluted around them. The Society teaches members to build on that floor, so their prosperity rests on what they create rather than on what the mint decides the units are worth.
Further Reading
- Value Creation: why producing real value, rather than accumulating units, is the foundation of durable wealth.
- The Neothink Mind: the way of thinking that reads any system, including money, back to whether real value stands behind it.
- Self-Leadership: how a self-led person stays steady and clear when institutions debase the measuring stick.
- Prosperity And Wealth: how members of the Society build prosperity anchored in creation rather than in currency.
- Fiat Currency: the mechanism of unbacked money, inflation, and the transfer of purchasing power.