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28/July/2011

Quacks and quackery through the ages. A 'divertimento'.

Hugo Salinas Price

Cortez conquered the Aztec Empire, in August 1521 (490 years ago, next month). When the war was over, the Spanish began to investigate the culture of the conquered people and found, to their amazement, that the people of what is now Mexico possessed a vast body of medical knowledge based on the curative qualities of plants.

The Spanish filed reports and sent back to Spain drawings of the plants with their Aztec names together with information about their curative powers.

The reaction of the doctors in Spain was immediate. They scoffed at the value of the supposed medical knowledge of these newly-conquered “barbarians”. Their argument was: “These primitive people have no medical theory to support their medical claims. They do not know that the human body is governed by four humors or liquid spirits in the body: the choleric, the phlegmatic, the sanguine and the melancholic humors. These humors are affected by the planets, the Sun and the Moon. When there is no balance of these humors in the body, then the body is sick. The Aztecs have only experience upon which to base their medicine; our medicine is vastly superior because we know the true theory of health, and we deduce our medicine from the theory. All that medicine from New Spain (Mexico) is nonsense.”

There is a curious anecdote from the 16th century; an Aztec was summoned before a court of medical doctors, because he was practicing medicine without a license. Faced by an accuser, he pulled out a cutting from an herb from a little bag he was carrying. He asked the accuser to smell it, which he did. The accuser’s nose began to bleed uncontrollably, it was a veritable hemorrhage. Nothing could stop it. The Aztec was implored to stop the bleeding. He pulled out another herb from his bag and gave it to the bleeding man to smell. The hemorrhage stopped immediately. The case against the Aztec doctor was dismissed.

Such is the world, and such it will ever be. Today, Ph Ds in Economics infest the landscape. They are supposed to know a lot more than the rest of us, who refer to experience in our critical view of the world’s illness, and point out what is wrong. However, we are not to be taken into account, like the Aztec doctors, because we do not know the all-important theory. We only have the experience of centuries, or millennia, to back up our considerations, and that of course, cuts no ice: no diplomas and no TV time for people who refer to historical experience; diplomas and kudos and respect are for the theorists, as possessors of arcane knowledge.

Of course, all of us have preconceived notions about everything, we couldn’t manage life without them; but some people are able to see past important preconceived notions, especially those who have spent many years looking at facts and attempting to make sense out of them. Others can look at facts and never really see anything, because they are intellectually lazy or because they just don’t care to set aside generally accepted opinion and decide for themselves. It’s so much easier to go with the flow!

Take the case of the Dutchman Antony van Leeuwenhoek (1632-1723). He became wealthy as a cloth merchant. In his youth, as an apprentice to a cloth merchant, he first saw a magnifying glass, which was used by such merchants to examine their goods more closely. Later on, he developed a fascination with lenses; he began to make his own lenses and to apply them to looking at tiny things which had never been examined before. In 1674 he sent a report to the Royal Society for the Advancement of Science in London, about some tiny “animalcules”, invisible to the naked eye, which he had seen in pond water. He wrote to the Royal Society believing them to be open-mined and interested in his work. Well, the Royal Society disbelieved his account of these microbes – the first any man had seen! So he had to send them a letter signed by eight distinguished persons – parsons, doctors and lawyers – who testified that they had seen the “animalcules”. The Royal Society, to their credit, did finally take great interest in Leeuwenhoek’s work, and he sent them 300 letters describing his incredible discoveries.

He was the first man to see human spermatozoa and he realized that what he saw was the seed which serves to reproduce all mammals – a fact which he knew was quite at odds with the “scientific” opinion of his times.

Leeuwenhoek’s work was not appreciated by many, who criticized his “lack of scientific preparation”: he had no Ph D. He was only a retired cloth merchant. What could he know?

Then again, we have Galileo, who first saw the moons that circle Jupiter, which convinced him that the Earth circles the Sun – an opinion hateful to the Catholic Church at that time. He barely escaped burning at the stake, a fate which ended the life of Giordano Bruno in 1600, who postulated an infinite Universe and the multiplicity of worlds. An emissary from the Inquisition visited Galileo in his home. Galileo urged him to look through his telescope and see the moons of Jupiter for himself. The official refused to look through the telescope. Theory or dogma had to take precedence. The facts are irrelevant if they do not confirm the theory or dogma. This attitude prevails to our day, and will always prevail as long as human nature is what it is. We see it today, in the rejection on the part of the astrophysics establishment of the new and fascinating theory of the “electrical universe”.

The experience of the Wright brothers is illuminating with regard to the Media. The Wright brothers had been flying their airplane on the outskirts of Dayton, Ohio, for five years before the local newspaper decided to send a reporter to investigate – the idea of a heavier-than-air machine taking to the air was unthinkable, why bother?

Now we have the 9/11 delusion. The vast majority of people do not really see with their own eyes: they “see” what they are told to see, and will swear by it. Competent civil engineers, observing (with sound “off”) the collapse of the Twin Towers and of the almost ignored WTC -7 - a forty seven story building – immediately identified the event as, unquestionably, a programmed demolition. However, hundreds of millions of individuals all over the world attribute the collapse of these buildings to the fact that they were struck by two airplanes, and they will get angry if you suggest that the buildings could not have collapsed as a result of those airplanes crashing into them; the fact that WTC-7 collapsed on its own footprint, like the Twin Towers, and no airplane struck it is – well, beside the point for these people. Facts are supposed to confirm a theory; if they do not – then the facts must be shelved.

Archeologist Michael Cremo has written a thick book, “Forbidden Archeology” which is crammed with facts proving that Man has existed upon this earth in his present form, for many millions of years. However, these facts contradict Darwinism, and Darwinism and Evolution are regarded with religious reverence by today’s archaeology. So the uncomfortable facts that archeologists come up with are filtered out of their reports. In their field of investigation, theory comes first, and only facts which agree with the Darwinian theory of evolution are reported. Other facts are discreetly ignored.

But the ultimate delusion prevailing in the world for the last forty years is fiat money. This delusion is so powerful that only a tiny minority among the close to 7 billion human beings on Earth is aware that it is a delusion, that all the money being used in the world as money, is in fact not money, but a simulation of money. Fiat money is now rapidly destroying the world, but in spite of all the signs pointing to fiat money as the cause, the foremost brains of the world refuse to acknowledge the fact. Their theories, which they were taught in prestigious schools and universities, take precedence over the fact of collapsing economies. As James Grant, publisher of The Interest Rate Observer points out, we are on a “Ph D Standard” – and the Ph Ds are taking the world down with their theories. I suspect that if these Ph Ds were injected with a “truth serum”, they would confess that they don’t actually believe their theories, but that for personal reasons, they prefer not to question them publicly.

To conclude, I present “Prologue for Our Times” which I have written for a Spanish translation of Andrew Dickson White’s masterpiece, “Fiat Money Inflation in France”.

* * * * *

Whoever wishes to understand what is taking place in the world today would do well to read this small but highly important book, which we have translated into Spanish: “Fiat Money Inflation in France”, by Andrew Dickson White, a former President of Cornell University, at one time in the diplomatic service of the United States, a student of economic and social affairs and author of numerous books. This book was first published in 1896, and reprinted in 1933.

This book places before us a microcosm of our present world.

What happened in Revolutionary France in the years 1790 to 1797 is precisely what is taking place in the whole world in 2011. The world is living in a process of monetary degeneration which began, explicitly, with the outbreak of World War I in 1914, though its origin lay in a series of previous financial malpractices dating back years before World War I; the disastrous conclusion of that process is approaching.

The fiat money inflation in France, whose birth and death took place in the short span of seven years, originated in a typically “revolutionary” idea held by the French lawmakers of the period: that human intelligence can dispense with the permanent and immutable laws that govern human action and can substitute them with schemes devised by the intellect, in order to achieve prosperity in the short term without the bothersome need to exercise the “bourgeois” virtues of savings, honest work, prudence and patience. 

The lawmakers, impatient to resolve the problem of economic malaise which the Revolution itself had caused, decided to take a short-cut to stimulate the economy. Faced with popular unrest which cried out that “There is no money!” they proposed to remedy the supposed lack of money (a mere symptom) by creating money out of nothing.

Deaf to the warnings of men with financial experience, they confirmed to one another the supposed validity of their fallacious reasoning; convincing themselves of the viability of their monetary scheme, the lawmakers carried forward a project based on fiat money – money irredeemable in gold or silver.

In spite of the negative results which this policy soon produced – a steadily falling purchasing power of this fiat money, reflected in the rising prices of all goods - they insisted on pressing forward on this mistaken road and attributed the bad results to everything but their policy of inflation with fictitious money. That invariable law of finance with regard to fiat money, the law of the acceleration in the issue of fiat money and its concomitant accelerated depreciation, took possession of the French legislature.

Seven years later, France was totally ruined. Manufacturing had closed down. Unemployment was pervasive and consequently the stagnating salaries for labor brought enormous hardship for the poor, amid rising prices of food, clothing and fuel. Unemployment was only relieved by the military drafts which sent millions of Frenchmen to their deaths in the foreign wars. Morals suffered a precipitous decline. All business activity became a game of chance. Speculation enriched unscrupulous men and at the same time swept the poorer classes of the population into misery. Famine forced the government to dole out bread to the population.

What is perhaps most noteworthy in this fateful French experiment is that not one of those responsible for the disaster ever acknowledged having been mistaken. What took place in France, under the régime of fiat money, is precisely what is happening in our world today. The same phenomena observed in France in the 18th century can be seen all over the world, today.

Those responsible for the huge world crisis of the present time insist on continuing down the path that led to this disaster. Not one of those responsible is willing to recognize that they have all been mistaken. They insist, as did the French revolutionaries, on applying greater doses of fiat money: if enough money is created, they say, the problems of the crisis will be resolved.

The destruction of France took only seven years. The same policy that destroyed France now operates around the world. Therefore, the moral and economic destruction has taken longer, since the whole world is the theatre of this tragedy, and not only one country.

The fatal outcome of this experiment with fiat money will arrive, sooner or later; it will have worldwide effects and it will take a century, at least, for the world to regain economic health.

And when this tragic conclusion shall have arrived, the readers of this little book may be quite sure that not one of those responsible for the catastrophe will ever admit that he had been mistaken.

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Hugo Salinas Price, World Riba Conference, Kuala Lumpur, Malaysia, Nov. 26, 2012.
Hugo Salinas Price, World Riba Conference, Kuala Lumpur, Malaysia, Nov. 26, 2012.
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