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Agcapita Partners June 25 2012 - Experience is the Teacher of Fools

Agcapita Partners June 25 2012 - Experience is the Teacher of Fools

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Published by Capita1
Erasmus is purported to have written "experientia magistra stultorum" or for the rest of us who successfully avoided even rudimentary latin instruction "experience is the teacher of fools". What he meant was that a wise person was capable of analyzing the world and avoiding obvious mistakes but that a fool could only learn the hard way - by experience.
Erasmus is purported to have written "experientia magistra stultorum" or for the rest of us who successfully avoided even rudimentary latin instruction "experience is the teacher of fools". What he meant was that a wise person was capable of analyzing the world and avoiding obvious mistakes but that a fool could only learn the hard way - by experience.

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Published by: Capita1 on Jun 25, 2012
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06/27/2012

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Agcapita Partners
#250, 120 Country Hills LandingCalgary, Alberta T3K 5P3Phone: 587 887 1541Fax: 587 887 1537E-Mail: info@agcapita.comWeb: www.agcapita.com
June 25, 2012 Letter
 
June 25, 2012
page 2
Erasmus is purported to have written
"experientia magistra stultorum" 
or for the rest ofus who successfully avoided even rudimentary latin instruction
"experience is the teacher of fools" 
. What he meant was that a wise person was capable of analyzing theworld and avoiding obvious mistakes but that a fool could only learn the hard way - byexperience.
 
According to an interesting study of the 775 fiat currencies that have existed 599 are nolonger in circulation. The median life expectancy for the defunct currencies? Fifteenyears. Perhaps the author was being unfair by focusing solely on the failures. Sadly no,the average life expectancy of all fiat currency is running at a truly underwhelming
34
 years. Only a select few have managed anything approaching old age. The Britishpound sterling is one such example at over 300 years and counting. Before we get tooexcited by this apparent example of longevity, at inception the pound was defined as 12ounces of silver. The pound is now worth less than 0.5% of this original value and ofcourse there is no silver involved anywhere. In other words, the most successfulcurrency in existence in terms of life-span has lost more than 99% of its value.The study also found that 1 in 5 fiat currencies have failed outright through hyper-inflation - a percentage that I must admit surprised me as I was under the impressionthat hyperinflation was a much less common occurrence. The following is an excerpt ofsome of those hyper-inflationary episodes. Full details of each example withprecipitating causes can be found here.
 
Angola (1991-1999)
 
Argentina (1975-1991)
 
Austria (1921-1922)
 
Belarus (1994-2002)
 
Bolivia (1984-1986)
 
Brazil (1986-1994)
 
Bosnia-Herzegovina (1993)
 
Bulgaria (1991-1997)
 
Chile (1971-1973)
 
China (1939-1950)
 
Ecuador (2000)
 
Greece (1944-1953)
 
Georgia (1995)
 
June 25, 2012
page 3
 
Germany (1923-1924, 1945-1948)
 
Greece (1944-1953)
 
Hungary (1922-1927, 1944-1946)
 
Israel (1979-1985)
 
Japan (1944-1948)
 
Mexico (2004)
 
Nicaragua (1987-1990)
 
Peru (1984-1990)
 
Poland (1922-1924, 1990-1993)
 
Romania (2000-2005)
 
Russia (1921-1922, 1992-1994)
 
Taiwan (late-1940s)
 
Turkey (1990s)
 
Ukraine (1993-1995)
 
United States (1812-1814, 1861-1865)
 
Vietnam (1981-1988)
 
Zaire (1989-1996)
 
Zimbabwe (1999-2007)Regardless how it happens, it certainly appears that fiat currencies have a pronouncedtendency to fail in
de jure 
or at the very least
de facto 
terms with time being the onlyrelevant variable. Some argue that fiat issued by a dominant economic/military power isthe exception to this rule - eg the pound Sterling and the US dollar. While such statuscertainly seems to extend the life span of a fiat currency, this conclusion surely missesthe point that a relentless loss of purchasing power (even if in the currency of thedominant economy) is just a failure in slow motion.Since one of the key requirements of money is to act as a store of value and fiatcurrency seems abysmal at this function why do we persist in its use and moreimportantly who benefits? The answer is obvious - fiat currency is extremely useful tothe banking and political classes and so it persists.For politicians printing money acts as a stealthy tax - a tax for which few voters are likelyto blame the political class. Secondly, by reducing the value of the currency, theeconomy's "measuring stick" so to speak, politicians are able to deceive the voters that

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