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Curmudgeon's Archive. The Dollar
Is...? Posterity's
Debt To Me 1932 EMAIL:
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April 25, 2018 Aren't we aware the tide of money inflation is strengthening? Sure.
Not as bad as the double-digit price infltion of the 1970s, but brisk
enough to warrant some speculation about what the future will dump in
our laps. The
yield on the 10-year U.S. bond has climbed above 3.00 percent.
The U.S. dollar has strengthened just a bit against the euro and other
currencies, which in turn has led to a dip in silver and gold dollar
prices. All this has made stock gamblers a wee bit nervous.
Low or moderate inflation rates create the illusion of a sound economy,
but invariably get out of hand. It usually runs out of control when the
federal government runs heavy budget imbalances over long periods of
time - which is present policy. The Age of Inflation is programmed to expand, and the shrewd citizen will beware.
In the Letters section of the Wall Street Journal Tuesday, Bill
Baumgarten of Houston, Texas, writes about his concern for the poor
among us. "Very few
individuals possess what it takes to accumulate wealth. It's
certainly not a matter of intelligence....it's more a matter of being
future oriented and and being resilient in the face of adversity. Even
when coached about the benefits of discipline, most Americans would rob
their own futures for a new iPhone today. Any successful program that
would lift people out of poverty must cointain stakes of merit and
self-sacrifice. Otherwise it's another handout to be abused."
Well! Mr. Baumgarten will be pelted with plenty of criticism for his views. But he's right. Hocking one's future for present material satisfactions does not lead to the accumulation of monetary wealth we all dream of. This applies to nations as well as individuals. At the moment the U.S. government is robbing the economic future by plunging ever deeper into debt. It does so by spending far beyond its incoming revenues. How and when will the staggering multi-trillion dollar debt be paid? No one knows, but the ancient words of Publilius Cyrus still echo through the corridors of time. "All debt is paid. Either by the borrower or the lender." (Makes one wonder about the safety of all those government * * * * * * * * * * * * * * * *
PULLING UP STAKES
For all of its life (about 25 years) this little blog has operated from
the same place. But we're pulling up stakes later this week and
will set up shop in a new physical location. For us, it's like leaping
into the unknown. There may be some technical glitches along the
way. Bear with us.
The $ is out, the € is in. (From the Middle East Monitor:)
Iran’s leaders have been threatening for some time to
ditch the dollar for a different currency. What
does this mean for Americans? Not much initially. But it's another
negative for the status of the dollar as the world's trading currency.
If gold is only a "barbarous relic" why do nations hoard
it?
Turkey is the latest nation to announce plans to move its gold hoard from under the streets of New York City into the coffers of its own central bank. The N.Y. Federal Reserve Bank has played a major role through the years as custodian of a hefty amount of the world's official government gold stash.
There's some speculation the United States doesn't actually hold more
than eight-thousand metric tons of gold and demands have been made to
have the hoard inspected. The demands are routinely ignored. Disdain for gold ran high in Britain in the late '90s when the Treasury Department began auctioning most of its gold holdings. The Brits received about $275 per ounce on average. Today the yellow metal fetches about $1,350.00. It's not surprising to see France listed at #5 with more gold in hand than Russia or China. The French have been fond of gold since suffering two terrible bouts of paper money inflation in the 18th century. In fact, after World War 2 French president Charles de Gaulle ordered the French gold in New York shipped home. It raised a lot of eyebrows at the time. (One of de Gaulle's famous remarks was "Politics are too important to be left to politicians.")
The United States abandoned the last vestige of gold as backing for the
dollar in August, 1971. Not many Washington politicians have any
interest in re-connected the dollar to the discipline of gold but there
is enough buzz about the depreciating fiat currency to keep in mind the
nearly 6,000 year history of gold (and silver) in the role of money. We
will one day have to revisit the question. Let;s hope the U.S. really
has more than eight-thousand metric tons of gold stashed away. Von Greyerz is not a "gold bug." Could'a fooled us! We've been calling Egon Von Greyerz a "Swiss Gold Bug" for a very long time, but in a recent column from Switzerland he claims otherwise: "It might appear that I am a gold bug but that is far from the case. We bought gold in 2002 to protect against the colossal risks we saw in the world economy and financial system. We are not in love with gold but believe that it is the best protection you can buy and own today. At some point gold will be overloved and overvalued. Then we will recommend to our investors to sell some of their gold or swap it against other assets which are unloved and undervalued. But I expect that time to be quite a few years away." ~Von Greyerz Aha! He's a contraian. There's something to be said for that. The ancient stock market advice "Buy low and sell high" is a form of contrarianism. Von Greyerz gives these reasons to consider stuffing a few Krugerrands in your sock drawer: WE
BUY PHYSICAL GOLD BECAUSE:
It has been money for 5,000 years It is the only money which has survived throughout history. It guarantees stable purchasing power over time. It is scarce – It cannot be printed. (Unlimited paper gold creation will soon collapse.) It is durable – All the gold ever produced still exists. It is nobody else’s liability – Thus no counterparty risk. It is held and traded outside a fragile financial system – Thus gives independence. It is the ultimate wealth preservation asset and insurance against a rotten world economy. Today an ounce of gold fetches some $1,350.00 which - in turn - will buy an excellent man's suit, plus first rate accessories. Sound money must store wealth over long periods of time...and gold does that. Making Money Valuable
By October, 1932, there was a general scramble for dollars in the
USA. The burden of economic depression had descended in the
months following the great Wall Street crash of 1929, and, try though
he did, President Herbert Hoover was unable to do anything about
it. He lost the November, 1932 election by a landslide.
Franklin Roosevelt breezed into office.
On October 8th journalist Garet Garrett tried to explain to his readers a simple fact about circulating currency: "If money is plentiful enough , it is not valuable enough; and if it is valuable enough, it is not plentiful enough." Garrett could have stopped right there, for his sentence conveys all that needs to be said. But to be sure he added this: "All schemes of reform, the mad and the sane together, propose that money shall be both constantly plentiful and constantly valuable at once and forever. Who shall measure and determine [what is plentiful]? The debtor or the creditor? What is valuable? And who should measure that?" These words were written almost 86 years ago. The argument is still valid. Were the government to step on the money inflation throttle (as it is presently doing) the result is an uptick in general consumer prices, including demands for increased wages. Some years ago a college intern in a TV newsroom in which we worked remarked, "Why can't we help solve the poverty problem by just printing more money?" She was a very bright young lady who could not grasp the concept of a flood of debt-based currency causing consumer price rises. At the beginning of the 20th century one could enter a tavern a buy a mug of beer for 5¢. Over the past century there has either been a fantastic increase in the value of beer or a huge drop in the purchasing power of the U.S. dollar. Clearly, it's the latter. Inflation has taken a brutal toll on the dollar and there's no way Washington's continuing monetary inflation can solve the problem. Politicians should be forced to discuss it in the upcoming campaigns.
The
bewildering Middle East conflict 'twixt Sunnis and Shi'ites. We wrote this in 2006: "No Sunni or Shi'ite in his right mind in Iraq is going to back an American-style democracy. What these people want is a theocracy dominated by the religion of their choice. Americans will be dragged to the poorhouse trying to pay for the installation of a working secular democracy in Iraq, and they don't see it coming. Add to the mix the millions of "reluctant Muslims," the Kurds, who want to be left alone, and you have the makings of a religious war that will splatter blood all over the landscape. In a way, the Kurds have an edge because they have been in business a lot longer than the Sunnis and Shi'ites who didn't begin to adopt their present views of the supernatural until after their prophet died in 632. (Kurds lean toward Zoroastrianism, a much older style of religious faith.)" RELIGIOUS VIOLENCE
What has changed since 2006? Not much. Sunnis and Shi'ites
are still battling over such divisive questions as whether or not a
Muslim will be able to SEE Allah after death. American military
might cannot resolve such questions.
Now comes columnist Pat Buchanan wondering how long we should stay in
the Middle East trying to settle ancient religious differences. "The Shiites in 1979 overthrew a shah our CIA installed in 1953. "The Shiites control Iraq because President Bush invaded and overthrew Saddam and his Sunni Baath Party, disbanded his Sunni-led army, and let the Shiite majority take control of the country. "The Shiites are dominant in Lebanon because they rose up and ran out the Israelis, who invaded in 1982 to run out the PLO. "How many American dead will it take to reverse this history? "How long will we have to
stay in the
Middle East to assure the permanent hegemony of Sunni over
Shiite?" THE
WAR PARTY
DEBT
as CURRENCY.
Jeff Thomas, of International Man fame,
sounds like another Chicken Little in this article about the U.S.
dollar and other world currencies. From our own pursuit of monetary
history we must agree that the future of the dollar is shaky - perched
as it is on nothing tangible.It is backed only by promises and abundant
faith.
"We’re now living in the era of the greatest level of debt mankind has
ever created," writes Thomas.
"In fact, we’ve come to regard it as 'normal.' Most
governments are far beyond broke. And they won’t be saved by
confiscation or taxation, as their people and corporations are just as
heavily in debt. For this reason, a collapse is inevitable. And, since
the severity of a collapse is invariably directly proportional to the
severity of the debt, when it arrives, it will be a collapse that
eclipses all previous collapses." DEBT/CURRENCY
Innocents and
Money
Mark Twain meets the Portuguese reis. Mark
Twain’s “Innocents Abroad” is the fascinating journal of his travels
with a party of seventy-six Americans wandering Europe and the Middle
East in 1867.
This
is admittedly a puzzling chart and the article from which it comes is
profoundly boring. Yet we found some nuggets worth pondering. For
instance - the fact that it is increasingly difficult for the young
generation to support the quickly increasing elderly dependent
generation looms large among population data. It's very much like a
ticking time bomb in the view of sociologists/demographers. "Significant depopulation of the young is a given while elderly populations continue exploding," comments a writer at ECONIMICA. "Only through this lens can one understand the true problems facing an economic system premised on economic growth. We are at the end of an epoch and, hopefully, the beginning of another...." The
"minus Africa" remark in these data will be considered racist but readers should examine
the author's explanation before jumping to that conclusion.
This article should particularly interest Baby Boomers who are now
signing up for Social Security at the rate of around 10,000 a day. At
what point will a shrinking workforce of Gen Xers and Millennials
decide their FICA taxes are too high and put pressure on politicians to
do something about it?
Inflation Forever. People naturally count on periodic increases in wages and salaries to meet the ever increasing cost of living. That's an outcome of a debt-based economy. It allows us to plunge into debt without shame. ("Everybody does it! ) Thanks to decades of inflating the money supply the result has been a steady uptick in the general price level. In our lifetime we have seen the price of a nickel cup of restaurant coffee rise to more than a dollar, and a humble dwelling which sold for five or six thousand dollars now fetches $150,000.00 or more. (In San Francisco closer to a million dollars.)
Not many people alive today in the United States have experienced a
sharp deflation.
But after years of driving the value of currency down (inflation) a
correction becomes inevitable. No one is sure when or how it will
happen. But it is damned inconvenient when it does. The usual progression is for steady inflating to run out of contol and explode into hyperinflation. (See Venezuela.) That's always a disaster that ends badly. Congress and the administration are hellbent on setting the country up for a blowup by running trillion dollar budget deficits. They are saying, "We are no longer capable of running balanced budgets or of even paying off a little of the stup; endous public debt we have already
accrued." Bottom line: The use of debt can be a good thing to carry us over emergencies like war, but consistently spending beyond one's means is foolish and leads to disaster.
Thus endeth our sermon for today. . . . Swedes rethink the "cashless society". Sweden is quite far along the road to cashlessness. But an opinion poll has revealed unease among Swedes, with almost seven out of 10 saying they wanted to keep the option to use cash, while just 25% wanted a completely cashless society. Technical experts point out the vulnerability of digital cash systems.Fraudsters have already learned how to exploit the the system's idiosyncrasies to trick people out of large sums of money, even their pensions. Kontantupproret.
The War on Cash has dropped out of the headlines. Instead, media
are devoting much of their attention to political drama, bad weather,
and reports of social disorder. A trade war with China has also
risen in the headlines and the long-running political distress in the
Mid-East is also given daily attention by journalists.
Economic news coverage consists mostly of reports of the ups and downs
in the financial marketplace. Nothing much is discussed of such
topics as "Cash vs. Digital Currency", "What is a Dollar?", or "What
happens after inflation runs out of steam?". LIVING ON CREDIT
"Life is good, but it’s being lived on credit and reality will
eventually have to dig in," writes Michael Scott in a piece called "The
American Dream is Drowning in Debt." He worries about maintaining
the good life on the credit card. "Nationally, U.S. interest payments on debt could quadruple in a decade to more than $1 trillion a year, according to CNN, as tax cuts and record spending contradict each other. That means it will take $7 trillion over the next decade just to service this massive debt.
"That’s the macro picture. The micro picture is a mirror image:
Individual Americans are drowning in debt, too." American
Dream
We've
heard every opinion in the book about immigration.
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