Politics
With the many elections that have taken place around the world this year, there has been considerable excitement in the media over who our next leaders should be. On the other hand, however, many roll their eyes when people mention politics. The issues can create much conflict as people draw proverbial swords over their differences in opinion.
Power
Some may ask why politicians are so powerful, especially when it is difficult to identify with many of them as people.
Ultimately, the source of their power comes down to the rules and laws they make on our behalf, as I discussed in my previous newsletter, Bitcoin & Politics. This collective organisation of power also gives them access to powerful resources. i.e. our money gathered through taxation.
Taxes
There is a famous saying that people can only guarantee two things: ‘Death and Taxes’. However, the form taxes take varies considerably over the years and has always been a point of conflict between those who collect them and those who pay them.
Tithes
Initially, in the UK, the landed gentry were required to pay tithes to the ruling monarch. Indeed, around the time of Henry VII, the first monarch of the Tudor dynasty’s ascension to the throne. The laws he created, and his levies and fines became quite ruthless as he attempted to assert his authority over the newly conquered population.
A lord who fell out of favour could have his entire fortune stripped from him, which would be devastating.
Of course, at this time, the monetary system was still based on monetary metals (silver and gold), a relatively easy system to steal from with a powerful army, which gave a monarch the ability to do this.
Assets
Over time, there has been considerable pushback against such harshness, with outcomes no longer dependent on the whims of a single individual, nevertheless, by having a system that depends on a third-party entity to store your wealth, such as our current banks. It will always leave a vulnerability that a third party can remove those assets.
For centuries, resources have gravitated to the most crafty and skilled at winning kinetic battles. As the battles became more extensive, however, and the monarchs became less competent in their roles, the leadership of countries evolved into our modern concept of government.
Rejection Of The Monarchy
An uprising against the monarchy occurred in England during the English Civil War (1642-1651), shortly followed by the establishment of the Bank of England in 1694 (See Bitcoin and Banking).
By significantly reducing the monarchy’s power, the landed gentry finally believed they had a say over who ruled them and the rules made to govern them. They also had some say over how much of their money was collected and spent. In addition, the establishment of the Bank of England, in concert with a puppet monarch, allowed them to take out loans, with the responsibility for paying the interest on these loans contracted to the British taxpayer.
Initially, the government managed interest payments on such loans through lotteries, land taxes, and trading taxes.
Debt
However, the unfettered spending allowed by this new system caused an explosion of debt. In four years, it rose from the initial loan of £1.25 million to set up the Bank of England to £16 million, and this was just for the wars fought by their convenient new king, William of Orange.
By 1711, the costs for running the government had exploded to an additional unaccounted-for £9 million that parliament had no means of paying. This reckless spending created an unsustainable debt load that politicians attempted to fix by setting up the Southsea Company.
As my newsletter outlines, Bitcoin and the Southsea Bubble, this company’s abysmal failure resulted in a massive financial crisis.
The Southsea Bubble
The debt generated by this crisis was ultimately split between the East India Company and The Bank of England until it was consolidated by Gladstone in 1844, officially transferred to the British Public with the nationalisation of the Bank of England following the Second World War in 1946, and finally repaid by George Osbourne in 2015. All the while, the British Public were responsible for paying the interest on this debt. Three hundred years of interest payments!
Therefore, it was not long after the rejection of the monarchy in the 1600s that the government became susceptible to precisely the same corruption, if not worse, that they had complained about with their previous monarchs.
However, This irresponsibility with the nation’s finances did not end with the Southsea Bubble of 1720.
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