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Category Archives: Money

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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Cashless Society?


[courtesy Google Images]

[courtesy Google Images]

Visual Capitalist created a graphic (below) entitled “The Shift to a Cashless Society is Snowballing”.  That graphic is interesting and informative. However, while there’s no doubt that there’s a trend toward a “cashless society” in the western world, I read that graphic as evidence that a truly “cashless society” won’t occur in the United States for a number of years.  The world is changing so rapidly that almost anything is possible.  Still, I’d be astonished if they could install a cashless society in less than three years.  I wouldn’t be surprised if it took more than ten.

Why?

If you take a close look at the upper left-hand corner of the graphic, you’ll see that the U.S. (actually, “North America”) is the world’s most “cashless” society.  A majority (about 52%) of North American monetary transactions already take place by means of some media other than cash.  That would certainly include credit and debit cards and probably includes checks and money orders.

For the rest of the world, the majority (even the vast majority) of monetary transactions take place by means of cash.

Even for the U.S., 48% of all of our transactions still take place with cash.

48%.

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Posted by on May 17, 2016 in Banking, Monetary policy, Money

 

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Speaking of Silver


Silver Eagle [courtesy Google Images]

Silver Eagle
[courtesy Google Images]

There’s a fascinating article at United States History entitled, “The Silver Question”.  It’s fairly short and I recommend you read it.

That article points out that monetary inflation isn’t new or unintended.  I was surprised to read that special interests have advocated that government adopt inflationary policies since the early 1800s.

But, what’s really surprising, is the article’s claim that physical silver coin was originally advocated as a means to inflate the gold-based monetary system.  The silver coin was added to the money supply for the purpose of increasing the money supply; thereby inflating and devaluing the gold-based dollar; and making it easier for debtors to discharge their debts by providing a mass of new, cheaper currency—silver coins.

This implies that silver has never been a true equivalent to, or substitute for, gold since silver was more inflationary than gold.

 

•  I’m going to pull one paragraph from that article and draw some inferences.

 

“Efforts to induce inflation into the American economy, the panacea of debtors, had been present from earliest times [in American history].  Some of this enthusiasm was devoted to paper money schemes, such as the land bank ideas of colonial times and the greenback agitation of the post-Civil War era.  Others hoped to lessen debtors burdens by enacting programs dealing with the nation’s coinage.”

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Are (Draconian) Capital Controls Coming?


Currency Controls:  "I'll give you one green one for three purple ones." [courtesy Google Images]

Currency Controls: “I’ll give you one green one for three purple ones.”
[courtesy Google Images]

Casey Research recently published an article entitled, “Capital Controls Are Coming”—but are they really?

In fact, some capital controls already exist as restrictions on how much cash you can take out of the country.  These capital controls exist at our physical and financial borders and concern international movement of dollars.

Other capital controls exist domestically.  I.e., you can’t deposit more than $10,000 into bank accounts in the U.S. without causing your bank to send notice to the national government.

Until A.D. 1934, we had $500, $1,000, $5,000, and $10,000 bills in circulation.  Now, the biggest bill we can use is $100.  That’s evidence that currency controls have been with us since A.D. 1934.

Article 1.10.1 of the Constitution of the United States (A.D. 1788) declares that “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts”. That’s a form of “money control” that amounts to “currency control/prohibition”.  Currencies other than gold or silver are prohibited or at least restricted within the States of the Union.

My point is that some form of “currency controls” have been with us for over 200 years.  I doubt that you can find a nation anywhere on earth that hasn’t engaged in some form of “currency controls” over the past century.

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Questions, We Get Questions


The "Sorcery" of End-Times "Babylon"? [courtesy Google Images]

The “Sorcery” of End-Times “Babylon”?
[courtesy Google Images]

A reader asked,

 

“So Al,

Q1)  What happens when the dollar crashes?

Q2)  “How will we then buy and sell?

Q3)  “Is this Revelation 18 in our faces?”

 

Al:  Our debt-based monetary system has produced a debt-based economy that is so strange and irrational that we’re now deep into “uncharted waters”.  As a result, no one really knows what might follow a dollar crash.

However, we can speculate.

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The World’s Money and Markets in One Visualization


Another view of derivatives [courtesy Google Images]

Another view of derivatives
[courtesy Google Images]

Interesting text and illustration from The Money Project:

 

“How much ‘money’ exists in the world? . . . [T]here are multiple answers to this question, and the amount of money that exists changes depending on how we define it. The more abstract definition of money we use, the higher the number is.

“In the following  data visualization of the world’s total money supply, we wanted to not only compare the different definitions of money, but to also show powerful context for this information. That’s why we’ve also added in recognizable benchmarks such as the wealth of the richest people in the world, the market capitalizations of the largest publicly-traded companies, the value of all stock markets, and the total of all global debt.

“The end result is a hierarchy of information that ranges from some of the smallest markets (Bitcoin = $5 billion, Silver above-ground stock = $14 billion) to the world’s largest markets (Derivatives on a notional contract basis = somewhere in the range of $630 trillion to $1.2 quadrillion).

“In between those benchmarks is the total of the world’s money, depending on how it is defined. This includes the global supply of all coinage and banknotes ($5 trillion), the above-ground gold supply ($7.8 trillion), the narrow money supply ($28.6 trillion), and the broad money supply ($80.9 trillion).”

 

You can see that derivatives dwarf all other forms of money.  Are derivatives extraordinarily dangerous because of their enormous magnitude?  Or, could it be that the sheer “mass” of derivatives is so enormous that that “mass” provides some sort of “ballast” and stability in an otherwise volatile monetary environment?  Does that “ballast” threaten to sink the monetary “ship”?  Or will that “ballast” help protect that “ship” from minor craziness taking place in silver, gold and stock markets?

Whatever the answer, it’s clear from the following illustration that we live in a time that is unlike anything else every before seen in world history.   The modern concept of derivatives may be roughly 20 years old, and yet the sum of those derivatives is over ten times greater than sum of all of the other forms of “money,” combined.

How could that have happened?

If you take time to consider the following illustration, you might find yourself beginning to gape.

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Posted by on December 23, 2015 in Debt, Derivatives, Money, Money Supply

 

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