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Category Archives: Fiat Currency

Letters From the Past I


Silver Certificate vs FRN [courtesy Google Images]

Silver Certificate vs FRN–which one is “money”?
[courtesy Google Images]

Most people suppose that the concept of “money” is easy-peasy. What more do you need to know besides how to count it?

Well, there’s a lot more to money than mere counting. If all you know about money is how to count it, you don’t really have a clue.

The relevant information is deep, obscure, profound and confusing. The confusion isn’t accidental. The Powers That Be don’t want you to understand the nature of money because, if you did, you’d know that your government is mostly a racket.

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What follows is an analysis of the first of three letters written to the Treasury Department from people who wanted to understand our monetary system.

In the 1990s, I had photocopies of these three letters allegedly written by officials of the U.S. Department of The Treasury discussing the nature of Federal Reserve notes (FRN’s). Those copies disappeared in a house fire. I can’t prove the photocopies were legitimate, but I have no doubt that they were. They were (and are) important because they helped fuel my interest in learning about the nature of money.

The dates on the first two letters were A.D. 1977 and A.D. 1982; the third letter’s date was unclear. Assuming these letters were legitimate and the statements they contain accurate, they offered some surprising insights into the realities of our current money system.

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What Can’t Be Paid, Won’t Be Paid


National Debt Creditors About to Lose their Assets [courtesy Google Image]

National Debt Creditors About to Lose their Assets
[courtesy Google Image]

I’ve argued for five years that the U.S. National Debt is too great to ever be repaid in full, or even by half.  My personal guesstimate is that at least 80%–and probably 90%–of the National Debt will inevitably be repudiated.  That repudiation will take the form of hyperinflation, express repudiation (“Sorry, boys–but we’re too broke to pay that debt.”), or perhaps even WWIII (a good war could wipe out virtually all memory and enforce-ability of the National Debt.).

Here’s a graphic that illustrates my argument.  If you take a few minutes to view the graphic, you’ll see the size of the U.S. National Debt is:

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1. Larger than the 500 largest public companies in America;

2. Larger than all assets managed by the world’s top seven money managers;

3.  25X larger than all global oil exports in 2015;

4. 155x larger than all gold mined globally in a year; and, my personal favorite:

5. Larger than all of the world’s physical currency, gold, silver, and bitcoin combined.
In other words, there’s not enough actual money and currency in the world to repay the U.S. National Debt.
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Foreign Currency Inflation Causes U.S. Dollar Deflation


Dangerous Deflation is Death to Debtors [courtesy Google Images]

Dangerous Deflation is Death to Debtors
[courtesy Google Images]

Forbes magazine recently published “Egypt Is About To Slash The Value Of Its Currency To Revive Its Flagging Economy”. According to Forbes,

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Egypt’s Finance Minister Amr El Garhy has said his country needs to move faster in dealing with its currency woes, opening up the possibility of a large and rapid devaluation of the Egyptian pound.”

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Big deal. Egypt is devaluing (inflating) the Egyptian pound. Who cares, right?

Q:  What’s the value of the Egyptian pound have to do with the U.S. dollar and U.S. economy?

A:  Actually, more than you might suspect.

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The “DEBT-based” Monetary System is a “RISK-based” Monetary System


Debt = Risk [courtesy Google Images]

Debt = Risk
[courtesy Google Images]

FORBES magazine recently published an article entitled “The Fed’s Monetary Monkeying Is Ruining Your Retirement And The Economy”. As often happens, excerpts from that article got me thinking. For example:

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• “Is there any way that NIRP (“Negative Interest Rate Policy”) make sense?

“ Maybe.

Central banks think NIRP will get people to take more risk.”

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What’s the Fed mean when it encourages people to take more risk? Drive without fastening their seat belts? Cancel their home owner’s insurance policy?

No. The Fed’s encouragement to take more risk is like telling a man to play Russian Roulette. However, in the context of this analogy, each “bullet” is an item of significant debt.

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Monetary Madness Part II—Perpetual Bonds


The Cure of Economic Calamity: Looney Tune Economics [courtesy Google Images]

The Cure for Economic Calamity:
Looney Tune Economics
[courtesy Google Images]

As seen in the previous article, the total value of negative-interest rate bonds has jumped from nothing to $13 trillion in just two years.

Although governments issuing negative interest rates bonds don’t have to pay interest on those bonds, they still have to repay most of the principal.

What a bummer. Wouldn’t it be great if someone invented a government bond that not only didn’t have to pay interest (as with negative interest rate bonds) but also didn’t even have to repay the principal?

Well, folks, they appear to have done just that. They’re called “perpetual bonds”. They’re hot off the press, and the concept seems straight out of Looney Tunes.

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Last month, Gold-Eagle.com published an article entitled “Gold and the Perpetual Bonds Era”. The subject was “perpetual bonds”–a concept I’d heard of for the first time only about a week earlier.

Judging from what I’d already heard and the Gold-Eagle article, it’s apparent that “perpetual bonds” are—like “consumerism,” debt-based currency, sub-prime loans, fractional reserve banking, deficit financing, negative interest rates, market manipulation, and “helicopter money”—just another manifestation of the madness that’s inherent in the concept of fiat, debt-based currency—and of government’s desperation to do something, try anything, that might work to avoid or postpone a coming economic collapse.

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Monetary Madness Part I—Negative Interest Rates


Negative Interest Rates-- Heading for Hell? [courtesy Google Images]

Negative Interest Rates–
Taking us towards Hell?
[courtesy Google Images]

The fundamental premise underlying negative-interest rate bonds is that lenders pay government borrowers for the “privilege” of lending to government. Based on this premise, governments receive loans at less than the face value of the bond. For example, if you loaned $100,000 to the government on a negative-interest loan, you might only receive, say, $98,000 when you redeemed that bond. You’d lose $2,000 for the privilege of lending to the government.

In all of world history, I doubt that there’s ever before been a time when lenders paid borrowers for the privilege of lending money.

The world is embracing negative-interest rate bonds for the first time. That fact is not evidence of economic creativity and financial innovation so much as evidence of desperation and the financial madness that lies at the heart of debt-based monetary and economic systems.

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A few facts about negative-yield bonds:

According to Bank of America Merrill Lynch, the global amount of government bonds having negative yields is now $13 trillion,.

Just two years ago, there were virtually zero negative-interest rate bonds. The subsequent, two-year rise to $13 trillion is unprecedented.

In February A.D. 2015, the total amount of negative-interest debt was $3.6 trillion.

By February A.D. 2016 that negative-interest debt had nearly doubled to $7 trillion.

In the five months since February, A.D. 2016, the amount of negative-yielding bonds nearly doubled again to $13 trillion.

The spread of negative-yielding bonds is unprecedented, fantastic and accelerating.

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Teeter-Totter Relationship Between U.S.$ and Foreign Currencies


USDX [courtesy Google Images]

USDX
[courtesy Google Images]

The “Group of 20” (G20) includes the world’s 20 biggest industrial and emerging economies. G20 finance ministers and central bank chiefs met in China on Saturday and Sunday (July 23-24, A.D. 2016).

According to the AFP (“US Warns Against Devaluation Ahead of G20 Finance Meeting”), on the Thursday before this G20 meeting:

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US Treasury Secretary Jacob Lew said that top economies should refrain from competitive currency devaluations–a message likely directed at China.

According to Secretary Lew, “The global outlook . . . underscores our focus on the commitment made at the last G20 in Shanghai to consult closely with one another on [currency] exchange rate policy, and to refrain from competitive devaluation.”

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First, the term “competitive currency devaluations” is misleading insofar as “competitive” signals something civil like a genteel, after-dinner game of Whist in the parlor. In fact, these “competitive currency devaluations” are almost as potentially serious and lethal as nuclear war.

(More, it’s conceivable that China’s “competitive currency devaluations” just might be enough to trigger naval conflict between China and the U.S. or even Japan in the South China Sea.)

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