History tells us that money was a natural extension of the barter system. At one time men paid for things with livestock. Wealth was herded and penned. You could trade a cow for some rice or exchange a few goats for several pigs.

As with most inventions, money was a product of convenience. Bringing cows and sheep to trade was cumbersome. Dragging bags of rice and bushels of grain around was impractical. So somewhere back in Ancient China the idea was floated to swap something big and immovable for something small and portable. Money soon took the form of shells, beads, feathers, leather, metals, coinage and then perhaps the lightest and most portable form of all … paper.

The introduction of paper quickly changed money from a commodity system to a wholly representative one. While there were various attempts throughout history to “back” paper with something of inherent value, these attempts never lasted. The Silver Standard extended from the Fall of Constantinople in 1453 through the mid-1930’s. The Gold Standard is generally considered to have begun in the 1870’s and was abandoned in 1933 as the Great Depression caused massive gold hoarding. The relationship between the US dollar and gold was completely severed in 1971 when President Nixon officially ended the dollar’s convertibility to gold in a series of fiscal measures that came to be known as “Nixon Shock.”

So currency, as we know it today, is based on the infamous fiat system, a word that comes to us from Latin and means “let it be done.” It is legal tender “by decree.” Modern money is in essence transaction-related paper with a face value that is assigned by a central bank or state government. We assume that the issuing country and their respective economy will uphold the values they set forth. But, in a world beset by war, debt, recession, uprisings, invasions, coups, terror, and corruption ---- this has been a global invitation for disaster. Much as the old idiom suggests, central banks have been the foxes guarding the hen-house. History demonstrates that paper money neither holds its value nor lasts. The average life span of fiat currency is reported to be less than 40 years.

So did “cash” ever really ever have a chance? It is, after all, an honor system. We count on reserve banks to implement sound, monetary policy. We expect issuing countries to have stable governments. We trust that treasuries will not debase or devalue their money. But they have … time and time again. And unlike cheating on a diet or driving a few notches over the speed limit, when central banks cheat, the implications are far-reaching.

Sophocles said, “Money is the worst currency that ever grew among mankind. This sacks cities, this drives men from their homes, this teaches and corrupts the worthiest minds to turn base deeds.” Perhaps then, it is naïve not to expect volatility. After all, unbacked currency is a monetary leap of faith that mirrors the world’s flawed code of conduct.

So when it comes to the barter system, it seems mankind has come full circle. In times like these intrinsic value matters. Tangible assets are critical. Owning physical money like precious metals – which one can touch, feel and hold is essential. Gold is the best investment of 2016 precisely because fear and greed are part of the human condition and our savings and retirement should never rest on the trust of central banks, the integrity of government, or the honesty of men.