More than just the ultimate inflation hedge, the wealth of Nature—gold, forests, land, agriculture—and the cautious stewardship of these tangible assets over easily-inflated government “IOU’s” is what distinguishes wealth from riches…

When King Louis XII, in the year 1499, formed the project of taking the Dukedom of Milan, to which he thought he had a claim, he one day asked in the State Council of the Condottiere Gian Giacomo do Trivulzio, a Milanese who had entered his serve, what preparations were necessary for this great enterprise—Trivulzio, who as Condottiere had the most exact information on this head, answered him, “Most Gracious King, three things must be ready: money, money, and once again money!”  —Richard Ehrenbach, Das Zeitalter der Fugger (1896)

“The world that disappeared in 1914 appeared, in retrospect, something like our picture of Paradise,” wrote the economist Cecil Hirsch in his June 1934 review of R.W. Hawtrey’s classic, The Art of Central Banking (1933). Hirsch bemoaned the loss of the far-sighted restraint that had once prevailed among the “bankers’ banks” of the West, concluding that modern times “had failed to attain the standard of wisdom and foresight that prevailed in the 19th century.”[1]  That wisdom and foresight was once upon a time institutionalized throughout an international monetary culture—gold-based, wary of credit, and contemptuous of debt, public or private. This world included central banks including the Bank of England, the Bank of France, the Swiss National Bank, the early Federal Reserve, the Imperial Bank of Austria-Hungary, and the German Reichsbank. Yet the entrenched hard-money ideology of the time restrained all of them. The Bank of Russia, for example, which once required 50 percent to 100 percent gold backing of all notes issued, possessed the second largest gold reserves on the planet at the turn of the twentieth century.[2] “The countries that were tied together in the gold standard system represented to a not inconsiderable degree a community of interest in and responsibility for the maintenance of economic and financial stability throughout the world,” recounted Adolph C. Miller, member of the Federal Reserve Board from 1914 to 1936, in his The Proceedings of the Academy of Political Science, of May 1936. “The gold standard was the one outstanding symbol of unity and economic solidarity which the nineteenth century world had developed.”

It was a time when “automatic market forces,” as economists of the day referred to them, prevailed over monetary management. Redeemability of money in (fine) gold ensured, within limits, stability in foreign exchange rates. Credit was extended only as far as reserve ratios would allow, and central banks were required to keep fixed reserves of gold against notes-in-circulation and against demand deposits.

Gold flows regulated international price relationships through markets, which adjusted themselves accordingly: prices rose when there was an influx of gold—for example, when one country received a debt payment from another country (always in gold), or during such times as the California or Australian gold rushes of the 1870s. These inflows meant credit expansion and a rise in prices. An outflow of gold meant credit had been contracted and price deflation followed.

The efficiency of that standard was not impeded by the major central banks in such a way that “any disturbance of economic or financial character originating at any point in the world which might threaten the continued maintenance of economic equilibrium was quickly detected by foreign exchanges,” Miller, the Federal Reserve board member, noted in his paper. “In this way, the gold standard system became in a very real sense a regime or rule of economic health, a method of catching economic disturbances in the bud.”

The Bank of England, the grand master of them all, was the financial center of the universe, whose tight handle on its credit policies was so disciplined that the secured the top spot while not even holding the largest gold reserves. Consistent in its belief that protection of reserves was the chief, and only important, criterion of credit policy, England became the leading exporter of capital, the free market for gold, the international discount market, and international banker for the trade of other countries, as well as her own. The world was in this sense on the sterling standard. The Bank of France, wisely admonished by its founder, Napoleon, to make sure France was always a creditor country, was so replete with reserves it made England a 500 million franc loan (in 1915 numbers) at the onset of the World War I. Switzerland, perhaps the last “19th-century-style” hold-out today with unlimited-liability private bankers and strict debt-ceiling legislation, also required high standards of its National Bank, founded in 1907. By the 1930s, that country had higher banking reserves than the US; the Swiss franc was never explicitly devalued, unlike nearly every other Western nation’s currency, and the country’s domestic price level remained the most stable in the world.[3] For a time, the disciplined mindset of these banks found its way across the Atlantic, where the idea of a central bank had been long the subject of hot debate in the US. The economist H. Parker Willis, writing about the controversy in The Journal of the Proceedings of the Academy of Political Science, October 1913, admonished: “The Federal Reserve banks are to be ‘bankers’ banks,’ and they are intended to do for the banker what he himself does for the public.”

At first, the advice was heeded: In September 1916, almost two years after its founding on December 23, 1913, the fledgling Fed worked out an amendment to its gold policy on the basis of a very conservative view of credit. This new policy sought to restrain “the undue and unnecessary expansion of credit,” wrote Fed board member Miller, in an article for The American Economic Review, in June 1921. Alas, this kind of disciplined mindset was not to endure as the prevailing Western mentality.


Instead, another kind of mindset was to take root—that of the credit-addicted modern economy. Here, we begin with the story of the destruction of the German mark during the hyper-inflation of Weimar Germany from 1919 to its horrific peak in November 1923, one that is usually dismissed as a bizarre anomaly in the economic history of the twentieth century. But no episode better illustrates the dire consequences of unsound money or makes a more devastating, real-life case against fiat-currency: where there is no restraint, monetary death will follow. “It matters little that the causes of the Weimar inflation are in many ways unrepeatable; that political conditions are different, or that it is almost inconceivable that financial chaos would ever again be allowed to develop so far,” wrote British historian and MP Adam Fergusson in his 1975 classic, When Money Dies. “The question to be asked—the danger to be recognized—is how inflation, however caused, affects a nation.” The US Federal Reserve of 2014 was not the Reichsbank of 1914. Yet today’s policy mindset is dangerously reminiscent of the attitudes that helped to exacerbate the economic downfall of inter-war Germany. These include: the unrestrained financing of budget deficits under war and post-war conditions; the unaccountable creation of the money supply by a central bank; the creation of undisciplined credit linked to this expansion of the money supply; the aggressive inflating of asset values; the discounting of short-term treasury bills and notes in practically unlimited amounts; rapid currency depreciation, and a ratio of federal debt to GDP over 100 percent. Prior to World War I, the German mark, the British shilling, the French franc, and the Italian lira were all valued around the same—about four each to the dollar. By the end of 1923, the rate for the mark was one trillion to a dollar—one million-millionth of its former self. In mid-1922, a loaf of bread cost 428 million marks, while the entire equity capitalization of Daimler Corporation bought the equivalent of 327 of their cars. In November 1923, that which before the war could have purchased, in theory, 500 billion eggs could, that infamous month, procure but one egg.

Former Prime Minister Henry Lloyd George, writing in 1932, remarked that words like “catastrophe,” “ruin,” and “devastation” were not enough to describe the situation, given the common usage into which such words had fallen. Looting, vandalism, theft, the rise in prostitution, famine, disease, the consumption of dogs; people robbed of their clothes on the street—all were routine events of the “bourgeois” social quotidian. The constant threat of civil war loomed, as did neighboring Bolshevism. Bavaria had to declare martial law. The price inflation had begun slowly. In 1914, there was a minor increase in the wholesale price index. That index, with a base of one in 1913, had increased to 2.45 by the end of 1918. Beginning in 1919, the speed of the inflation increased, advancing to 12.6 in January 1920; 14.4 in January 1921 and 36.7 in January 1922. By the second half of 1922, that index stood at 101 in July; it was 74,787 in July 1923 and 750 billion on 15 November 1923. The 100 trillion note was then issued and the presses of the Reichsbank were printing money to the record tune of 74 million million million marks a week. Rather than stop this madness, the Reichsbank continued to print more money, claiming that it was keeping employment steady, and promising the population that relief was always just around the corner. An atmosphere of civil chaos reigned.

The Versailles Treaty was not the main culprit: it only worsened a bubble-blowing monetary policy in place prior to the war. Before 1914, the credit policy of the Reichsbank dictated that not less than one-third of the currency issue had to be covered by gold. But once paper currency became legal tender in Germany in 1910, such currency became a reckless expedient. By the outbreak of war, most of the world had given up the gold standard and had gone over to paper money. The commodity was withdrawn from circulation and was largely piled up in the vaults of a few central banks, but mainly that of US: from August 1913 to August 1919 the US stock of monetary gold in the US increased by sixty-five percent. Back in Germany, massive bond issues were sold appealing to mass patriotism in order to pay for the war. Private fortunes were transferred into paper claims on the state as the Reichsbank suspended the redemption of notes into gold. Loan banks were established that printed money at will and banks gave out unconstrained credit to advance money for war-bond subscriptions. The most ominous measure for the future was that which allowed the Reichsbank to include three-month treasury bills in its currency coverage such that unlimited amounts could be rediscounted against banknotes.

In contrast, Great Britain handled financing the war far more prudently: London met the cost of war by raising taxes aimed primarily at those industries and groups that best stood to profit from the war. In Germany, gold was depleted paying for war reparations and as a result of the French invasion of the Ruhr. Yet only gold provided occasional relief to citizens at large when a handful of industries were able to issue small gold marks to pay employees. Höchst Dye Works, for example, paid workers from the 400,000 Swiss francs it had stashed in Swiss bank reserves. At the breaking point, monetary policy was taken out of the hands of the Reichsbank via what was effectively a coup d’etat by Chancellor Gustav Stresemann. All loans to the government were canceled. Monetary policy was decentralized. The state was rigorously separated from economics.

A parallel banking structure was organized by a prominent non-governmental economist-maverick who came up with a new currency scheme first backed by rye-bread—the most coveted value at the time—and later gold, once that commodity could be procured again.[4] Those “gold-backed” notes, the Rentenmarks, were guaranteed by mortgages on landed property and by bonds on German industry in the amount of 3 billion gold marks. In reality, there were practically no gold reserves left. Yet, the incalculable social and psychological effect upon the population in announcing a return to currency with gold parity on a one-to-one basis calmed social tensions and jump-started economic stabilization immediately.

“The genius of the Rentenmark is that it released the Reichsbank from having to finance the government,” writes Fergusson. Rigorous discipline of state expenditure followed, as well as the refusal of further credit to the government, and the eventual return of the mark to parity between gold and the dollar. For many years afterward, gold mark clauses in long-term obligations were characteristic of the German capital market. Today’s conditions are not Weimar conditions. But there are unsettling parallels in terms of monetary policy and the inflation money and credit. Since President Nixon abandoned the gold exchange standard in 1971 up through 2003, the supply of money in the US increased by 1,100 percent. The Fed’s balance sheet, that weird witches’ brew of print-on-demand money policy, ballooned from $500 billion in 2000 to about $4.5 trillion at the end of 2017—all the result of money printing.

“In a few years’ time, most of the world will be as sick of managed paper currencies as it was twelve years ago. The main trouble will be that popular ignorance and lethargy, coupled with selfish special interests, forces politics into the management of economics and the management of economics into politics. Politically speaking, the world is yet far from being ready for managed paper currency standards.”

These words were written in 1932 by the American economist Edward Kemmerer, one among the clearest arguments against fiat-currency ever written. “No gold, No printing” history tells us: The most important monetary lesson that central banks, once upon a time up through the present day, refuse to learn.


Around this time last year, a double magnum bottle of 1947 Cheval Blanc—the pride and joy château of Bordeaux’s fabled St. Emilion wine region—was auctioned at Sotheby’s for $105,000. It was the latest in a series of record-breaking auctions of fine wine at houses in New York, London, and Hong Kong over the course of 2017, capping just over a decade of multi-million dollar sales of vintage treasure derived from Nature’s premier gustatory wonder. Cases of Château Mouton-Rothschild and Château Margaux reached record sales in 2014. The 2009-2013 auction of an esteemed Bordeaux and Burgundy collection totaled $55 million and in 2010, three standard-sized bottles of 1869 Château Lafite went for $232,692 each. In February 2007, a magnum bottle of Château Mouton-Rothschild sold for $310,900, while a case of 1982 Mouton-Rothschild went for $1.5 million a year prior in 2006. A superstar Burgundy such as a 2001 Domaine Romanée Conti is going for about $17,000 a bottle and a 2001 Domaine Henri Jayer Vosne-Romanée Cros Parantoux Premier Cru for a more reasonable $12,000 a bottle, with those “Golden Coast” (Côte d’Or) wines hitting all-time highs. Even contemporary wines are flourishing: The excellent, as connoisseurs deem it, 2015 vintage marked “a rebirth” for the Bordeaux region and in 2016 the wine trade celebrated its biggest revenues since 2010.

Nature as wealth—land, gold, precious metals, agriculture, and yes—vineyards and their staggeringly overpriced offspring—are forever. The relationship of land to wealth, of Nature to Fortune, may evolve and mature in dollar terms as slowly as a fat, languid Pauillac, but that relationship was and remains the most fundamental principle of wealth, one that is strikingly consistent throughout history. If money is time made material and land is its inexhaustible resource, then it is land that creates wealth beyond time—virgin forests turned into financial energy; the “slumbering spirits of gold,” in Oswald Spengler’s beautiful formulation, “awakened in enterprise.” Or, as an astute European statesman once remarked: “Timber, salt mines, gold, silver, quicksilver, copper and iron—Nature’s gift to the Intelligent,” as the ultimate example of that timelessness.

The history of this outlook is indeed fascinating. In summing up the “The True Source of American Wealth,” an excellent article of 1895 published in The North American Review, historian Ben F. Clayton concluded: “Man must furnish labor and nature must furnish all the material upon which labor is expended.” Of this elegant truth, Clayton further noted that it was the wealth of land, before that of commercial industry, that originally set the American economy on fire. “The American people gained more wealth from 1870 to 1880 than Great Britain had gained in all her previous history,” Clayton wrote. “Per capita increase in wealth went from $205 in 1820 to $1039 in 1890, while the wealth of the nation increased from $1,960,000,000 to $65,027,000,000 and since increased to $70,000,000,000.” In answer to what caused this phenomenon, he argued: “We answer that our success is due to two agencies both of which the American people possess in the highest degree. Namely, labor and its intelligent application to the richest natural resource of any country.

Back a few centuries, Europe’s first billionaire, the sixteenth century “Catholic weaver from Augsburg” turned gold and silver magnate Jakob Fugger, once out-negotiated with Holy Roman Emperor Charles V and astute Liechtenstein princes for the ownership of iron ore, copper and silver mines in the Ore mountains of Bohemia—ownership that would make him the wealthiest man on the continent in his day. Like forestry, mining was considered a prestige enterprise, with copper as the “noble commodity” and the mining of silver, that most esteemed royal accessory, having just reached a peak in Saxony, Bohemia, and Slovakia. Mining had a whiff of the mythological in the day, as the variety of metals was said to reflect the legend of the four ages of man as consisting of gold, silver, bronze, and iron—the raw stuff of wealth and, hence, of civilization. Fugger, a man so rich Charles V allowed him to circulate his own currency throughout Europe, wanted to control the Bohemian basin, just as the Liechtenstein nobility controlled the forests of that region—”forests made rich by metal.” Yet, when over the course of these discussions the emperor spoke of the “economic re-organization” of his lands, Fugger took out one of his imperial majesty’s state bonds and tossed it into the fireplace, then roaring with flames (and, in the German tradition, the scent of cinnamon). In a word, there could be no wealth on paper where there was not any direct wealth from the land and in the hand. Fugger prevailed, and later took control of Tirolean mines that consolidated his wealth and his status as the richest man of his times.

In ancient times, Nature and commerce were also seen as one—a cross-fertilization of man “commanding yet obeying” his environment in a way that fascinates to this day. In writing of the rise of Mediterranean wealth in the ancient world, historian David Magie echoed the view of nearly all historians, ancient and modern, of that great age and its economic expansion: “It would seem as through Nature herself had ordained that the Western seaboard of Asia Minor should become a land of rich and powerful cities. The excellent harbors, the highways which led up the river valleys into the interior; the abundant natural wealth of the country all contributed to the development of great seaports.” Speaking of rich seaboards, one cannot forget the influence of the English market in its commercial dominance over Bordeaux. Astonished by the success, no less than John Locke went to visit the vineyards of Chateau Haut-Brion, (the first estate to sell wines under its own estate name rather than as an anonymous church parish owing to its self-proclaimed superiority), the philosopher remarked: “The vine of de Pontac [in reference to the region] so esteemed in England, is but white sand mixed with a little gravel, which one would think would bear nothing…”

Today, this awesome alchemy of how the dirt beneath one’s feet can convert into wealth beyond one’s dreams remains the mainstay of a long-term outlook, as it has for centuries. As an analyst of U.S. land prices noted recently, the key to the strength in today’s land market is that there is a great deal of local capital and local demand. For example, in 1995, the average Iowa farmland value was $1,581. By 2000, the value was up to $1,940 per acre and in 2017, the average value was about $8,100. Another predicted that fortunes will be made in agriculture “and when an industry breaks full faith, even mediocre people make a lot of money” in that sector. Historically, farmland, like forestland in continental Europe or Latin America, has been a unique asset class demonstrating low-correlation to traditional asset classes, and which performs well as inflation rises.


More than just the ultimate inflation hedge, the wealth of Nature—gold, forests, land, agriculture—and the cautious stewardship of these tangible assets over easily inflated government “IOU’s” is what distinguishes wealth from riches. For, Time is the soul of money, the long-view—its immortality, and “Nature’s gifts to the intelligent” are always in style, always in demand, even when destroyed by the cataclysms of history. It is the outlook that perpetuated the most competent and powerful aristocracies in continental Europe and the early economic organization of this country; it lives on today to a certain degree in the old heritage banking culture of Switzerland, nicely private and free of mobile apps. It is in this spirit that one must celebrate the wisdom of the fundamental difference between money and Value, and to those who are wise enough to understand why this difference is, and always will be. 

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[1] Rothbard, Murry “The Monetary Breakdown of the West.” Mises Daily Articles (March 7, 2018).

[2] Patton, Eugene “The Banking Systems of the Netherlands, Russia, and Japan.” Proceeding of the Academy of Political Science in the City of New York. Vol. 1, No. 2, The Reform of the Currancy (January 1911), pp. 442-448.

[3] Mayer, Robert “Swiss International Investment Trusts.” Financial Analysts Journal. Vol. 20, No. 3 (May – June, 1964), pp. 137-148.

[4] Polleit, Thorsten “90 Years Ago: The End of German Hyperinflation.” Mises Daily Articles (November 15, 2013).

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