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Central Bank Issues Stunning Warning: “If The Entire System Collapses, Gold Will Be Needed To Start Over”

Central Bank Issues Stunning Warning: “If The Entire System Collapses, Gold Will Be Needed To Start Over”

It’s not just “tinfoil blogs” who (for the past 11 years) have been warning that a monetary reset is inevitable and the only viable fallback option once trust and faith in fiat is lost, is a gold standard (something which even Mark Carney hinted at recently): central banks are joining the doom parade now too.

An article published by the De Nederlandsche Bank (DNB), or Dutch Central Bank, has shocked many with its claim that “if the entire system collapses, the gold stock provides a collateral to start over.”


Wow

Dutch National Bank goes ‘Big Reset’:

‘Aandelen, obligaties en ander waardepapier: aan alles zit een risico [..] Als het hele systeem instort, biedt de goudvoorraad een onderpand om opnieuw te beginnen. Goud geeft vertrouwen in de kracht van de balans van de centrale bank’.

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While gloomy predictions of a monetary reset are hardly new, they have traditionally been relegated to the fringe of mainstream financial thought – after all, as Mario Draghi stated on several occasions in recent years, the mere contemplation of a “doomsday scenario” is enough to create the self-fulfilling prophecy which materializes it. As such, it is stunning to see a mainstream financial institution open up about the superior value of limited supply, non-fiat, sound money assets. It is also hypocritical given the diametrically opposed Keynesian practices regularly engaged in by central banks and official institutions worldwide: after all, just a few months back, the IMF published a paper bashing Germany’s adoption of the gold standard in the 1870s as the catalyst for instability in the global monetary system.

Fast forward to today, when the Dutch Central Bank is admitting not only did gold not destabilize the monetary system, but it will be its only savior when everything crashes.

 …click on the above link to read the rest of the article…

Monetary failure is becoming inevitable

Monetary failure is becoming inevitable 

This article posits that there is an unpleasant conjunction of events beginning to undermine government finances in advanced nations. They combine the arrival of a long-term trend of rising welfare commitments with an increasing certainty of a global-scale credit crisis, in turn the outcome of a combination of the peak of the credit cycle and increasing trade protectionism. We see the latter already undermining the global economy, catching both governments and investors unexpectedly.

Few observers seem aware that an economic and systemic crisis will occur at a time when government finances are already precarious. However, the consequences are unthinkable for the authorities, and for this reason it is certain such a downturn will lead to a substantial increase in monetary inflation. The scale of the problem needs to be grasped in order to assess how destructive it will be for government finances and ultimately state-issued currencies.

Introduction

Water graph

Listening to recent commentaries about the repo failures in New York leads one to suppose there is insufficient money in the system. This is not the real issue, as the chart below of the fiat money quantity for the dollar clearly shows. 

The fiat money quantity is the amount of fiat money (in this case US dollars) both in circulation and held in reserve on the central bank’s balance sheet. Before the Lehman crisis, it grew at a fairly constant compound growth rate of 5.86%. Since the Lehman crisis, it has grown at an average of 9.45%, even after the slowdown in its rate of growth that started in January 2017. FMQ is still $5 trillion above where it would have been today if the massive monetary expansion in the wake of the Lehman crisis had not happened. If there is a shortage of money, it is because the process of debt creation to fund current expenditure is spiralling out of control.

 …click on the above link to read the rest of the article…

The End Game for Fiat Currency

The End Game for Fiat Currency

Predicting the inevitable demise of a fiat currency cycle is neither bold nor incendiary. For thousands of years, every fiat currency cycle the world has ever known started and ended the same way. It happened during the Roman Empire with the Denarius, in China during the 11th century with paper “flying money,” in France multiple times beginning with infamous central banker John Law’s Banque General, in the early USA with paper Colonials and Continentals, and perhaps most famously in Weimar Germany with the Mark after WWI. All fiat currencies eventually collapse, and largely for the same reason: the issuing government becomes over-indebted and abuses its privilege by debasing its specie or over-printing its money, which results in a logical collapse of confidence. Timing the ultimate demise is difficult, but having confidence in its inevitability is not.

Cycles are a basic natural phenomenon and are thus unavoidable. For money, the cycle always begins with “hard” currency containing or backed by a physical asset, typically a valuable commodity like gold, copper or silver. Users of the currency have confidence in its value because they know it is or represents a certain amount of something tangible. The medium of exchange is trusted, transactions occur, the system runs smoothly and the economy grows. Eventually, the issuing government becomes over-confident in its success and grows tired of dealing with the constraints this hard-exchange requirement places upon its ability to borrow, spend and expand.

Enter fiat currency.

It is at this point in the cycle that the issuing government decrees by fiat (“let it be done” in Latin) that its currency is no longer exchangeable for any tangible asset or commodity, but is instead backed by a promise that the government is “good for it” via its taxing authority or other means. Thus, the money transitions from hard currency to “legal tender” fiat currency, with no intrinsic value beyond the word of its issuer.

 …click on the above link to read the rest of the article…

Fiat Money Cannibalization in America

Fiat Money Cannibalization in America

An Odd Combination of Serenity and Panic

The United States, with untroubled ease, continued its approach toward catastrophe this week.  The Federal Reserve cut the federal funds rate 25 basis points, thus furthering its program of mass money debasement.  Yet, on the surface, all still remained in the superlative.

S&P 500 Index, weekly: serenely perched near all time highs, in permanently high plateau nirvana. [PT]

Stocks smiled down on investors from their perch upon what Irving Fischer once called “a permanently high plateau.”  As of the market close on Thursday, the Dow Jones Industrial Average held above 27,000, the S&P 500 above 3,000, and the NASDAQ above 8,000.  401k accounts, to the delight of working stiffs of all ages, origins, and orientations, are swollen beyond expectations.

Below the surface, however, the overnight funding market was subject to much weeping and gnashing of teeth.  Sometime between Monday night and Tuesday morning the overnight repurchase agreement (repo) rate hit 10 percent. Short-term liquidity markets essentially broke.

After several technical glitches, the Fed executed its first repo operation in a decade – $53 billion – to keep the interbank funding market flowing.  Zero Hedge documented the chaos real time.  

This was followed up with additional repo operations on Wednesday and Thursday – at $75 billion a pop, and both oversubscribed.  Perhaps Fed repo operations will be a daily occurrence, at least until the Fed launches QE4.

US overnight repo rate – as Fed chair Jerome Powell remarked: “Funding pressures in money markets are elevated this week”. Evidently, nothing escapes his eagle eyes. [PT]

At the same time, the effective federal funds rate – the upper range limit of the federal funds rate – continues to push above the rate the Federal Reserve pays on excess reserves (IOER).  In other words, the Fed’s primary tool for price fixing credit markets is not behaving according to plan.  Greater Fed intervention will be needed to keep things in line.

 …click on the above link to read the rest of the article…

Peter Schiff: The Next Crash Could Bring Down the Fiat Money System

Peter Schiff: The Next Crash Could Bring Down the Fiat Money System

Peter Schiff appeared on RT Boom Bust on Tuesday (Sept. 17) to talk about interest rates, gold and the dollar. Peter said the fiat currency system may not survive the next recession.

The conversation started focusing on the repo operations conducted by the Federal Reserve early in the week, Peter said the financial media and Wall Street are being much too complacent about what’s going on.

Their instinct is to sweep it under the rug as no big deal, but I think it really is a harbinger of what’s to come.”

Peter noted that the Fed has been artificially suppressing interest rates, particularly since the 2008 financial crisis.

And by keeping interest rates artificially low, they have created a bubble that’s much bigger than the one that popped in 2008. And what happened this morning is you could see the air coming out of that bubble, because the market is trying to bring interest rates higher because we have no real savings in this country. We have enormous debt. Everybody is levered up to the max — government, the private sector, business, consumers — because rates have been so low, we’ve borrowed so much money. The market wants interest rates to be higher but the Fed doesn’t want that to happen because the road back to normal interest rates is a very bumpy one because it’s going to take us right through another financial crisis. So, the Fed is trying to keep interest rates artificially low and they almost lost control of it this morning. “

In effect, the Fed created about $50 to $70 billion out of thin air to supply the liquidity that the market needed.

 …click on the above link to read the rest of the article…

FIAT CURRENCY ENDGAME: You Will Not Like This ONE BIT!

FIAT CURRENCY ENDGAME: You Will Not Like This ONE BIT!

No One Comes Back From This Uninjured. In one word, the devaluation is set to ESCALATE.

In fact, I term it Competitive Devaluation. There are several countries that will be the pioneers of it, but it will eventually reach the United States of America. In Europe and in Japan, we are closer to seeing it happening; in the next 2-5 years, you’ll hear about governments’ first official plans to do this.

They will NOT alert the media to notify the public to own gold and silver. They haven’t thus far (and they won’t going forward, either), and meanwhile they’ve been accumulating them at the fastest pace in more than half a century.

The central banks want to buy gold, uninterrupted. Since they do not buy silver, the mania that will ensue in that niche market will be huge.

Not just gold and silver stand to gain from devaluation; companies that are able to increase prices and not lose consumers will be great winners as well. These are the world-dominators with pricing power, and I will profile my top-5 holdings for the Endgame Decade (2020-2029) in a Special Report due to be published by September 30th.

Real estate prices in metropolitan areas will also continue to rise; these are hard assets that are difficult to increase in supply, but my analysis is that of the three – world-class companies, precious metals, and real estate, silver will be the BEST PERFORMER.

Courtesy: U.S. Global Investors

Central banks are not able to inflate the real debt levels away. The most extreme case of this is Japan, whose central bank has done ALMOST everything under the sun to relieve the country of its deflationary spiral and has failed miserably. 

 …click on the above link to read the rest of the article…

Why Silver Is Better Than Gold

Why Silver Is Better Than Gold

While the surging gold price has received most of the spotlight in the market, silver will outperform the king monetary metal over the longer term.  Key fundamental factors make silver the more attractive asset and investment to own versus gold when we look closely at the data.  However, that doesn’t mean precious metals investors shouldn’t own gold.  Investors need to own both precious metals, but I believe silver will provide better returns than gold in the future.

Now, there is this notion put forth by many precious metals analysts that central banks will be forced, at some point, to back their currencies by gold.  Thus, the idea is that gold will reset at a much higher price.  While that is a possibility, backing debt-based currencies with gold will not solve our coming energy crisis.  And, let me tell you, it’s an energy predicament that we have no real solution.

You see, it doesn’t really matter if we back fiat money with gold.  The REAL ISSUE has always been ENERGY. The massive increase in debt and derivatives are a symptom of the Falling EROI (Energy Returned On Investment) of oil.  Basically, while gold may solve certain issues in regards to “Confidence” in money, it doesn’t fix our energy problems.

I touched on this briefly in my newest video, Why Silver Is Better Than Gold.  However, most of the video explains new charts that show fundamental factors on why silver is a better investment than gold as well as some key price levels for the short term.

One of the more important charts in the video shows the amount of “Identifiable” physical gold and silver investment stocks.  Interestingly, according to the data from the World Gold Council and the World Silver Surveys, there is just about the same amount of physical gold investment as there is silver.

 …click on the above link to read the rest of the article…

Here’s a dirty secret few people know about gold

Here’s a dirty secret few people know about gold

In 1962 in a picturesque setting in Santa Barbara, California, two local entrepreneurs opened a low-cost, roadside inn where the nightly room rate was just $6.

They called it Motel 6.

And today the chain has grown to over 1,400 locations.

If you want the most straightforward explanation for why you should own gold, consider your local Motel 6.

It’s noteworthy that, today, the very same Santa Barbara location now rents its rooms for nearly $90 per night.

That’s a 15x increase in 57 years, an average increase of roughly 5% per year.

Are the rooms 15x bigger, or 15x nicer? Not really.

The reason the price has increased so much is because of inflation– the gradual erosion of the US dollar’s purchasing power over the past several decades.

This is why it’s important to have a conversation about gold.

Unlike paper currencies, gold has a 5,000 year track record of keeping up with inflation.

In fact, when priced in gold, a room at the Motel 6 has actually gotten cheaper.

Back in 1962, an ounce of gold would buy you about 6 nights at the motel. Now, despite the 12-fold increase in the price of a room, one ounce of gold will buy you 21 nights there.

That’s because the price of gold has largely outpaced the rate of inflation and the decline in the purchasing power of the US dollar.

Gold is a fantastic long-term store of value. It’s also an insurance policy– a hedge against paper currency, systemic risk, and uncertainty.

And there’s plenty of those in the world.

But there’s also a number of catalysts emerging right now that could send gold prices substantially higher in the near future, so it may be worth considering gold right now as a speculation.

 …click on the above link to read the rest of the article…

Truth is the Ultimate Black Swan

Truth is the Ultimate Black Swan

Truth is the ultimate black swan. All other black swans are a myth. Financial websites are littered with articles written by people trying to predict the next black swan event that will usher in the implosion of the global Bubble of Everything, even though, by definition, a black swan is as unpredictable an event as Jeffrey Epstein’s suicide should have been. In reality, truth is the ultimate black swan because though financial truth remains hidden from the masses, it is always there, and no one can predict the exact timing of when the public will awaken from the stupor of delusion created by the world’s political, academic, and banking leaders to embrace the truth. The realization of the truth about sham economic conditions, labeled by the ignorant as “robust”, built on the fragile foundation of relentless Central Banker creation of trillions upon trillions of fiat currencies out of thin air, is the only true unpredictable event. The eventual collapse of the Bubble of Everything, as was the onset of the 2008 global financial crisis, certainly is predictable. 

What will be the trigger point at which truth implodes the Bubble of Everything? Will the trigger point be realization of the truth by 5%, 8%, or 20% of the population? Recent anthropological studies conducted with birds illustrated that when birds were able to observe another bird solving a puzzle box to receive a reward of a hidden mealworm, they increased their puzzle solving skills  by 14% a day versus a control group that was not provided with a “teacher” bird. At this rate, except for the small percentage of birds in the observation group that were simply incapable of learning by observation, nearly all birds in the observation group would have been able to solve the puzzle box and receive their reward of a hidden mealworm within a week’s time.

 …click on the above link to read the rest of the article…

In The Fed We Trust – Part 1

In The Fed We Trust – Part 1

This article is the first part of a two-part article. Due to its length and importance, we split it to help readers’ better digest the information. The purpose of the article is to define money and currency and discuss their differences and risks. It is with this knowledge that we can better appreciate the path that massive deficits and monetary tomfoolery are putting us on and what we can do to protect ourselves.   

How often do you think about what the dollar bills in your wallet or the pixel dollar signs in your bank account are? The correct definitions of currency and money are crucial to our understanding of an economy, investing and just as importantly, the social fabric of a nation. It’s time we tackle the differences between currency and money and within that conversation break the news to you that deficits do matter, TRUST me. 

At a basic level, currency can be anything that is broadly accepted as a medium of exchange that comes in standardized units. In current times, fiat currency is the currency of choice worldwide. Fiat currency is paper notes, coins, and digital 0s and 1s that are governed and regulated by central banks and/or governments. Note, we did not use the word guaranteed to describe the role of the central bank or government. The value and worth of a fiat currency rest solely on the TRUST of the receiver of the currency that it will retain its value and the TRUST that others will accept it in the future in exchange for goods and services. 

 …click on the above link to read the rest of the article…

How Asset Inflation Will End–This Time

HOW ASSET INFLATION WILL END — THIS TIME

Life after death for asset inflation: this is what happens when “speculative fever” remains high even after monetary inflation has paused. This may well have been the situation in global markets during 2019 so far. But history and principle suggest that life after death in this monetary sense is short.

Readers may find it odd to be talking about a pause in monetary inflation at a time when the Fed has cancelled programmed rate rises and the ECB has embarked (March 7) on yet further “radical” policy moves. Moreover, the “core” US inflation rate (as measured by PCE) is still at virtually 2 per cent year-on-year.

Yet we know from past cycles that in the early stages of recession many market participants — and, crucially, central banks — mistakenly view a stall in rate rises or actual rate cuts as stimulatory. Later with the benefit of hindsight these policy moves turn out to be insufficient to prevent a tightening of monetary conditions already in process but unrecognized.

Even had monetary conditions been easing rather than tightening, it is highly dubious whether this difference would have meant the powerful momentum behind the business cycle moving into its recession phase would have lessened substantially.

(As a footnote here: under a gold standard regime there is no claim that monetary conditions will evolve perfectly in line with contracyclical fine-tuning. Both in principle and fact monetary conditions could tighten there at first as recessionary forces gathered. Under sound money, however, contracyclical forces would emerge strongly into the recession as directed by the invisible hand.)

Under a fiat money regime, monetary tightening can occur in the transition of a business cycle into recession, despite the opposite intention of the central bank policy-makers, due to endogenous factors such as an undetected increase in demand for money or a fall in the underlying “money multipliers.”

 …click on the above link to read the rest of the article…

Fiat World

Fiat World


That’s a still photo from the Netflix documentary “Behind the Curve”, a really good movie about the Flat Earth movement. I’ll come back to this in a minute.

But first … I was going to save this email for the Mailbag, but couldn’t resist using it now.

Hey There Ben    You and your contributors seem to be continuously complaining, whining and expressing a kind of morose discontentment. Why are you all so unhappy and dissatisfied? Maybe take a few of your intellectually earned dollars and buy yourself and each of your contributors a surfboard, mountain bike, snowboard, and climbing gear, with the proviso, all must be put to use. Then see if the tenor of future essays will have changed. Who knows, maybe action speaks louder than words. — By the way, the idea of Joining a Pack is very unappealing. — Anyway, Cheers and Aloha from the North Shore, Charles

I mean, Charles is an ass. But he’s not wrong.

And then I came across this gem (h/t Bloomberg Radio’s Lisa Abramowicz):

https://www.bloomberg.com/news/articles/2019-03-05/u-s-credit-card-debt-closed-2018-at-a-record-870-billion

Sixty percent of that record credit card debt (per this survey) is for daily expenses (food, utilities, rent, etc.) and retail purchases. When asked what they would be willing to give up to get out of debt, only 6% would give up their smartphone. Of course, 13% said they would give up their right to vote. [Pro tip: you already have.]

I thought about this record credit card debt, mostly comprised of food and rent and clothes, when I paid $4.99 per lb for organic, boneless/skinless chicken breasts at Stop and Shop last night, because it was the cheapest chicken breasts they had for sale. I am not making this up.

 …click on the above link to read the rest of the article…

The Massive Increase Of Central Bank Paper Assets Warns Of Financial Danger Ahead

The Massive Increase Of Central Bank Paper Assets Warns Of Financial Danger Ahead

By purchasing increasingly worthless paper assets, we can thank the central banks for propping up the global economy for the past decade.  Since the 2008 financial crisis, the top central bank’s have acquired $13 trillion worth of assets on their balance sheets.  While the central banks label these balance sheet items as “Assets,” they are nothing more than glorified Paper IOU’s.

And these trillions of dollars worth of paper IOU’s can only get their value from the burning of energy… a critical factor overlooked by mainstream financial analysts.  Without growing global oil production, most of these “supposed” assets would see their values plummet.  Unfortunately, the world is heading towards a collapse of global oil production due to the Falling EROI – Energy Returned On Investment and the Thermodynamics of oil depletion. 

Yes, the disintegration of the global oil industry is now speeding up.  Here are a few headlines that should provide some clues on how the situation is rapidly deteriorating:

Wall Street Loses Faith In Shale

Saudi Aramco’s Ghawar field produces 1.2mbpd less than expected

NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer

Fracked Shale Oil Wells Drying Up Faster than Predicted, Wall Street Journal Finds

THE BLOODBATH IN U.S. SHALE STOCKS CONTINUES: Worst Is Yet To Come

US Shale Companies Facing “Catastrophic Failure” over Ballooning Debt

EXXONMOBIL U.S. OIL & GAS FINANCIAL TRAIN-WRECK: Producing Shale Is Destroying Its Bottom Line

As you can see, most of the articles are on the U.S. Shale Industry.  We must remember, the majority of the increase in global oil production over the past decade (80+%) is due to ramping up of the U.S. shale oil and Canadian oil sands operations.  U.S. shale oil production has surged by more than 7 million barrels per day (mbd) since 2008:

 …click on the above link to read the rest of the article…

The Demise of Physical Money: A Retail Worker’s Perspective

The Demise of Physical Money: A Retail Worker’s Perspective

Something I have come to realise about money is that the more you come into direct contact with it, the less alluring it becomes. That may sound like a hollow platitude, but when your history of paid work has predominately involved handling thousands of pounds through face to face transactions and back office duties, the worthlessness of fiat currency burrows into your psyche.

That is not a fatuous comment. I recognise that the entity I proclaim to be worthless is the same entity that allows me to eat and to sleep with a roof over my head. Nevertheless, it is not as simple as surmising that it is the intrinsic value of money that grants the ability to exchange funds for goods. Money has no intrinsic value as I came to discover.

This time two years ago I secured a job working in the cash office of a UK supermarket. It was an opportunity that came about just as I had begun to question the true nature and value of money.

My perception of cash changed on coming across a postcard pack published by the Bank of England called, ‘Your Money: What the Bank Does‘. The pack is no longer available through the bank’s revamped website, but fortunately I downloaded a copy before it was taken down.

Contained within the pack is a section titled, ‘Banknotes and the Promise to Pay‘. Here, the bank offers up a compelling question:

What gives modern banknotes their face value, when they cost only a few pence to make?

The answer may or may not surprise you:

 …click on the above link to read the rest of the article…

How Individuals Can Reset The Financial System

How Individuals Can Reset The Financial System

We have often heard the predictions that the currency system will be reset at some point when the bankers can no longer keep the current ponzi scheme going. The current scheme involves the ability of the bankers to convince the population that pieces of paper rolling off a machine or digits created on a computer screen are real wealth. The education system has been successful in that regard. 

Very few people actually understand what real wealth is or anything about economics. They have been led to believe that these things are too complicated for them to understand and it should be left to the experts. These same experts get richer as everyone else gets poorer. That is the way they have rigged the system. 

Resetting the system and taking these con artists out of the loop can be as easy as refusing to accept paper or electronic money and only accepting gold and silver for payments. This sounds crazy on the surface but it is not impossible to do and it must be done before they can transition completely into electronic payment systems. Once they transition into electronic payments they will be able to control everything you do and buy. 

If they do not want you to own guns or ammo they can simply ban all of these types of transactions. If they do not want you to buy gold or silver they can ban those transactions. If they do not want you to stockpile food they can limit how much you buy from week to week. With no way to buy outside of the electronic system, you will be totally under their control even more than you are now. 

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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