I met breakaway Republic of Georgia's President last night and quizzed him on the countries currency. Was the Lari Commodity backed by Gold, Silver etc or was it a 'Fiat' paper Standard unbacked currency? Also was Gold and Silver legal tender in Georgia to complete the acid currency test?

The President quickly and briefly replied that it was indeed a 'Fiat' paper currency, albeit a very stable one and there were no plans to make gold and silver legal tender. It was telling that this was his shortest reply to a question all evening.

President Saakashvili, still only 42, and reminiscent of what you would imagine Gordon Brown's handsome, younger brother to look like, went through a difficult war with Russia in 2008 in order to gain Independence. Hundreds died and there was a lot of intense fighting. Georgia was known as the most corrupt country in the region if not the whole of the hemisphere. The President recounted stories of how you would have to pay the police every few miles or so just to drive down the road. You would have to bribe your way into Schools, the Doctors, Hospitals and Government bureaucracies. Under Saakashvili, Georgia went from being 100% corrupt and impossible to do business with, to Zero corruption and standing third in the World Banks league table of 'easiest to do business with'. (Not that I pay heed to what the World Bank Says. I just study closely what it has done in the past and is has in store for all of the World in the Future). Eradicating corruption meant sacking 200,000 bureaucrats and the entire Police force(!). Months of protests followed, then waned. Saakashvili went from Hero to Zero and back to Hero with plenty of YouTube clips For and Against. His giant leap towards a Free Market Low Tax Limited Govt Economy is nearly complete and the results have been remarkable and an inspiration to the Overtaxed and Bureaucratically burdened economies of the World. He is a shining beacon of how the Individual and not Government will innovate our way out of this recession if we are prepared to vote for common sense.

President Saakashvili's Liberty Act is to enshrine into a Constitution the following key points:-

No Central Government controlled or owned Bank - thus interest rates are left to the Free Market

Limited Government set at 30% of GDP - Britain is 47%! I would like 20% to be safe..

Budget Deficit set at 3% - Britain is a huge 12% of GDP

Public Debt capped at 60% of GDP - Britain's is 59.9%

Personal Tax set by referendum - I would like to see all personal tax abolished. The fruits of your labour are your own otherwise you are a Tax Slave.

See Georgia's The Liberty Act here...

My concern is that without a Commodity backed currency, Gold and Silver becoming legal tender, together with a 'basket of rival currencies' - plus individual Banks being allowed to issue their own Legal Tender notes, the Government will be tempted to print money to finance its expenditure as a remnant of Keynesian Deficit Spending. At the moment Georgia has a Hybrid Keynesian/Free Market Economy. This a bit like having DOS as the basis for super computers of the future! My other concern was that George Bush and Condoleeza Rice visited and supported him. Any port in a storm I suppose. Then there was the shift towards a service based Economy and the shrinking of its Agricultural base. Peter Schiff gave a great picture of what a service economy was. 'A fat American (add any other Western nationality here), lying on the beach with 5 Asians running around making things and looking after him..' - What happens when the big boys money gets tight?

A move away from growing and making products could be a big mistake. When hyper Inflation kicks in for the rest of the World, due to the Federal Reserve and other Central Banks printing huge amounts of money out of thin air, commodities like wheat will hit the roof and its not good to be a year behind the harvest trying to play catch-up.