A pillar of freedom - lost

Good money by government decree

From ancient Greece onwards the accumulation of enormous riches has usually followed from inspired political structures which released people to make use of their own energies and resources.

But economic domination eventually made the Greeks, and later empires, lazy. Each of them gave up looking to trade overseas because the money there was low quality, and instead they concentrated on serving domestic markets, where prices were high and the money was best.

Meanwhile energetic outsiders were eager to export; and welcome too because their goods were cheaper. This is the pattern which attacks a trade surplus and diminishes the power of a mighty trading nation's currency.

The reaction of government is typically to demand loyalty to the currency by law, where previously no such law was required. The Spartans outlawed gold and decreed that citizens 'should use the [iron] currency that had long obtained'. The Chinese ordered that 'this paper shall be treated as if it were metal', and in France the king required that the banknotes of the Royal Bank 'should hold a premium of 15% over coins'.

Blowing the whistle

Of course the state lacks the power to look over the shoulder of the merchants, who go happily about their business ignoring such edicts. But still in France they ended up arresting anyone who attempted to take gold coins out of the country. In those days it was inn-keepers who could rely on a healthy reward for exercising their civic duty and dropping an unsuspecting guest in a deep pit of trouble. They were paid handsomely for reporting out-bound coaches to the local government inspector.

It was because monetary laws were used to bring the entire French nation to heel that the idea of constitutional banking confidentiality was born. The state was put in its place. Since it couldn't be trusted to know who had money without almost always making a grab for it everybody else agreed that it should permanently forego the privilege of knowing.

Banking confidentiality was to become a mainstay of freedom throughout the West for 200 years. But in an allegedly significant move against terror networks (though one possibly not proven effective) modern governments now require your bankers to scrutinise, suspect and report large movements of your money. In this regard the banks bear a growing resemblance to those French inn-keepers.

The seventeenth century French travel industry went into a bit of a decline, mostly because people had no money, but also because those who did have money chose to avoid inns. Soon the only industry in significant growth was incarceration. So inn-keepers became steadily outnumbered by gaolers. The natural ratio would finally have been restored by the guillotine.

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Swiss Banking

Moving back to the modern day you continue - for the moment - to be able to own gold offshore. It is currently perfectly legal to buy it and store it in, for example, commercial Swiss vaults, where a subtle position is adopted by the authorities.

After some pressure from their neighbours and the global financial community the Swiss agreed to lift the veil of offshore secrecy whenever a customer is suspected of involvement in serious crime - for example rackets associated with drugs or violence.

Here the Swiss are walking a careful line to protect their foreign custom. On the one hand they do not want to antagonise their neighbours and trading partners by hiding the money of career criminals. On the other hand they refuse to recognise tax issues as serious crime.

They are right to do so because there is a long tradition - back to the French and beyond - of distressed governments raising taxes through the likes of inn-keepers, and in such a way as to turn into criminals all their citizens who have savings. The Swiss continue to deny the right of banana republic governments to grab private money from their banking system. This is their unique contribution to personal liberty.

Sadly a Swiss bank account has mostly been a privilege of the international wealthy. They usually cost two or three thousand dollars a year in minimum account charges. One of the key features of BullionVault is that it lets you store wealth in Switzerland at an entry level price of $48 per annum. We regard this is one of our proudest achievements.