This website is an exploration of the history of money and considers the lessons that today’s investors can learn from the past.
It is a fusion of history, economics, money, precious metals, cryptocurrency and value investing.
The aim is to help you improve your skills as an investor by helping you build your historical knowledge.
Key to this is monetary history.
For much of human history, society has operated with a system of hard money, also known as sound money. Hard money refers to a monetary system where the creation of new money is difficult and therefore its supply is limited. Often this has been gold and silver.
Not only is hard money hard to create, it is subjectively valued by large numbers of market participants regardless of government decree. For example gold is considered valuable by the market for its monetary properties regardless of whether we are on a gold standard or not.
However, there are numerous examples where societies have abandoned hard money and have used fiat money instead. This fiat money, normally paper, is money issued by decree and is limited only by the decisions of the monetary authority. Because a fiat currency’s supply is not restricted this monetary system relies on people having faith in the currency and in those who administer it.
That’s not necessarily a problem. History has shown that almost anything can be money if society accepts it and if the confidence in the system remains intact. And a state has a legitimate sovereign right to issue money, so it’s their prerogative if they want to choose fiat currency over hard money.
In theory, a state could use paper money but pledge to limit its total supply or pledge to maintain a certain fixed level of supply increase. If it did this and kept its promises, this system would work.
However in reality, fiat money becomes a problem because authorities mismanage the currency. Human beings are fallible and history shows that the temptation to increase the money supply for short term gain is very seductive. The people eventually lose confidence in both the money and the monetary authorities.
While fiat money systems can last for a long time if managed well or a short time if managed poorly, history has shown that eventually they will fail.
We currently live in a world with a fiat paper monetary system. The world’s currencies have no tie to gold or any other hard asset, with the system relying entirely on confidence. So far that confidence has remained intact but it is gradually diminishing.
Central banks around the world have been inflating the supply of money gradually for decades, slowly eroding the purchasing powers of the world’s currencies. They stepped this up after the 2008 Financial Crisis and have continued to inflate at a rapid rate in the wake of the Covid 19 pandemic.
This inflationary environment benefits those who already own a significant amount of assets, especially those who purchased them with debt.
When asset valuations are very high and interest rates are very low it is much more difficult to either grow or protect your wealth. Safe investments that generate solid returns are rare and savers are punished because holding cash guarantees a loss of purchasing power through inflation.
When you cannot generate a decent return in a traditional savings account, you either accept the low returns or you are forced to invest in higher risk assets.
Whether you are a retiree trying to live off your income, a young person trying to save for a house or a family trying to get ahead, this environment is tough for you.
Understanding monetary history can help you bridge the gap. The more you understand about how our monetary system works, the better the investing decisions you will be able to make in this environment. You will have a greater chance of successfully growing and protecting your wealth.
It will help to know that societies have been in these situations before and that people not only got through, but those making the right investing decisions were able to thrive. The insight to realise that we have been here before will help you navigate the difficult financial circumstances we find ourselves in today.
The lesson of the past is clear. The best way to protect yourself in a inflationary situation is to hold much of your wealth in hard money and hard assets.
Hard Money History’s purpose is to provide educational information based on a sound understanding of monetary and investing history and the growth and preservation strategies that have stood the test of time.
Investors who understand history are better educated and more likely to be more successful because they understand:
- That not losing money is just as important as making money
- That technology and accessibility do not change the basics of money and investing
- That crashes do happen and “this time isn’t different”
- That markets are cyclical and conditions often repeat
- That psychology and emotions are natural parts of investing
- That patience is necessary to generate returns and investing is a long game
- That money can be made in a bubble as long as you recognise it is a bubble
- That value is more important than hype
- That risk needs to be appropriately balanced against reward
My investment philosophy is conservative, contrarian and based on value and market fundamentals. I buy and hold for the long term. I also believe that you can grow your wealth over time by patiently allocating the vast majority of your funds into traditional conservative investments, while generating good returns with a small portion of your funds allocated to speculative investments.