Learning from history

December 4th, 2006

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To our dear readers, you may be wondering whether we are unduly pessimistic, cynical and strange advocate of doom and gloom. Haven?t the global economic system been running fine for a long time like a well-oiled machine? So far, have any of our nightmare scenarios turn out to be true? Weren?t there plenty of alarmists and scaremongers before us who turned out to be completely wrong and a waste of everybody else?s time? Haven?t the global financial system bounced back from crisis after crisis before and turned out stronger? Has the world ever ended?

But make no mistake about this: most of us did not exist during the 1929 Great Depression. We are sure none of us existed during many of history?s litter of financial disasters. When we look at the past millenniums of human history, we see plenty of economies breaking down before in the ancient past. We see plenty of nightmare scenarios when ancient civilisations rose and fell. We see many astute thinkers and prophets who warned of impending disasters and we marvelled at how the majority could have missed the evil omens. We see many instances of ancient nations and dynasties breaking down and never rise again. We see many poor souls of the ancient past who saw their world had ended. Indeed, we take heed at the wisdom of this ancient writer:

What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun. Is there a thing of which it is said, “See, this is new”? It has been already in the ages before us. There is no remembrance of former things, nor will there be any remembrance of later things yet to be among those who come after. (Ecclesiastes 1:9-11)

We believe that despite the vast strides of humanity, one thing never changes: human nature. When we look at history, we see humanity repeating the same mistakes over and over again. We see how people of the past got into a frenzy of price bubbles that eventually burst and bring about serious losses to many (Issac Newton was one of those). Today, the same happened all over again, from the bubbles of real estates to bubbles of Internet stocks.

At present, the world is using a fiat currency system. But this is not the first time the world had experimented with fiat money. Just look at ancient Chinese history and you will find plenty of attempts at making fiat money work?all the time it failed. We would dare to assert that so far in all of human history, there was not once when fiat money works. Thus, with history on our side, we would rather bet that today?s fiat currency system will eventually break down. We suspect that we will live long enough to see the day when it happens. Meanwhile, we will be stockpiling gold.

Learn from history. It will do you good.

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