In episode 2 of the Hidden Secrets of Money, Mike takes us to Greece to learn when, where and why currency became money. You'll also learn about one of the most predictable long-term economic cycles – the Seven Stages Of Empire. Then join Mike at a private meeting in London where he lets you connect the dots of the seven stages across the last 140 years of our own monetary history.

An understanding of the past gives us foresight. This is particularly significant when studying the rise and fall of markets. Monetary history is cyclical, a neverending process of currencies rising to prominence and then collapsing as the pendulum swings back and forth between quality money and quantity currency.

How does the cycle play out? It usually begins with a monetary system and economy based on a commodity like gold — the supply of which can increase slowly, as the economy grows. But, as time moves on, the system moves away from gold as the source of underlying value of its currency. Eventually, the system completely replaces gold with fiat money (e.g. paper money backed by nothing with any intrinsic value), which can be printed without restraint. Thus, the value of each unit of currency is debased over time, which ultimately leads to a market crash.

To better understand the currency cycle we must look to the Seven Stages of Empire as described by Mike Maloney, the founder of GoldSilver.

The Seven Stages
Sound Money: A country starts out with solid money of well-defined value, usually either gold or silver (or a proxy backed by gold or silver).
Public Works: As the country develops economically and socially, its government begins to build out infrastructure, adding layer upon layer of public works.
Massive Military: As national economic affluence grows, so does a government’s political influence and aspirations, and it increases expenditures to fund a massive military.

Perpetual War: Eventually it puts its military to use and expenditures explode.
Debasing of the Currency Supply: To fund the war, it steals the wealth of its people by debasing their coinage with base metals or by replacing their money with a currency that can be created in unlimited quantities.
Loss of Faith: The loss in purchasing power of the expanded currency supply is sensed by the populace and by financial markets, triggering a loss of faith in the currency.

Currency Crisis: A mass exodus out of the failing currency and into precious metals/other tangible assets takes place. The currency collapses and gold and silver rise sharply in price as their finite supply is relentlessly bid higher by the huge quantity of currency that was created.

Important! This process transfers massive wealth to those who had the wisdom to position themselves beforehand in real money – gold and silver.