Archive for the “Fiat ______” Category

Gas / Au / Ag / Cu: The Great Commodity / Currency Wars: What’s Up? What’s Down? What’s Really Up? What’s Going Down? (November 17, 2014)

Posted in "Fiat ______", Carbon Surcharge & Dividend, China, Debt/Deficits, Dollar - World's Reserve Currency, Football, Foreign Policy, Gold Standard, Middle East, Money, Peak Oil, Russia, Silver Standard on November 17, 2014 by

. . .

E1          “Today’s high-tech town criers, LED scoreboards broadcast the news from every street and street corner.  They proclaim that gas prices are down, gas prices are down, gas prices are down.  The most public and publicized scores in our economy are even more prominent than football scores.”

E2          “Is supply up because Saudi Arabia has strategically increased the supply?  Is demand down because the world is in recession?  What’s really up?  What’s really going down?”

E1          “What’s real?  The great trifecta is at play.  Saudi Arabia is advancing American political interests by undercutting Russian oil sales while also underpricing American fracking operators and undermining Iranian producers.  Prices now below about $80 a barrel undermine American competitors who are fracking the production of oil at a cost of typically $85 a barrel.  An American operator who cannot compete and goes down will not later reenter the market.  Saudi Arabia can effortlessly constrict supply and drive up the price.”

E2          “The Republicans will provide tax benefits and government subsidies for the frackers and increase the national debt.”

E1          “That’s for real.  If Russia and Russians can endure the very real impact of the sanctions and continue to circumvent the use of the dollar, they may end up prevailing in the ‘Cold Currency War.’  The public scoreboards provide daily clues to developments on the international battlefield.”

. . .

E2          “Now when the price of oil is down is the time to adopt a carbon premium and dividend program.”

E1          “Never happen.”

E2          “Nothing will happen until it is too late.”

E1          “Not when gas mongering SUVs are flying off the shelves.”

. . .

E2          “The PM markets for elements 79 and 47 are distorted.  Now that the physical quantities of Au and Ag are so tiny in comparison to the exploding paper market, the spot price is another illusion.  Sellers of physical quantities are setting prices that exceed the former ‘spot price plus markup’ formula to reflect the limited physical supply.  However, no generally accepted ‘physical spot price’ has emerged.  In a world of fraud, illusion and dishonesty, the ‘market price’ is not the ‘market price’ and another ‘market price’ must be concocted to provide realistic information.”

E1          “The market is unreal.  However, it is hard to fix the metals market when the metals market is fixed.  Information is sketchy, incomplete and possibly inaccurate.  China, Russia, India, Brazil and other governments and the Chinese, Russians, Indians, Brazilians and other citizens are amassing massive amounts of physical gold.  Manipulating the acquisition price of physical gold lower via machinations in the paper market facilitates the transfer of physical gold to folks who are not always happy with us.”

E2          “That may be the most counter-productive policy in recent memory.  Some countries are rallying around gold to provide a counterpoise to the dollar.”

E1          “That is surreal.”

. . .

E2          “Morgans were minted from 1878 to 1904.  Peace dollars from 1921 to 1935.  Even among those who are not interested in the numismatic value of a coin, the premium for George T. Morgan’s creation is more than the premium for Peace dollars.”

E1          “A hint of aesthetic sensibility among the junk metal set.  Morgans may have been minted again in 1921.”

E2          “One fellow said that he maintains 70 percent of his precious metals inventory in silver to serve as a medium of exchange and 30 percent in gold to serve as a store of value and secondary medium of exchange.  However, the dollar is still the unit of account.  Wonder what he knows.”

E1          “Metals perforce do not pay interest, yet when banks start charging interest to hold funds, metals become the non-interest burdened asset.  What percentage of his assets are in metals?  And why?”

. . .

E1          “The ISIS or ISIL or Islamic State or whatever is proposing to issue their own currency by minting real gold dinars and real silver dirhams.”

E2          “The IS is also in the business of selling oil on the black market at reduced prices which lowers the world price.  Another factor in the analysis.”

E1          “And the scoreboard up ahead proclaims: ‘Unleaded – 3 dinars and 99 dirhams per liter; Diesel – 4 dinars and 49 dirhams per liter.  Free oil check and window washing.’”

E2          “A mecca for the gold bugs.”

E1          “‘27 inch flat screens from China for 99 dinars.’”

E2          “If gold is denominated in dollars, the dollar is king.  If gold is denominated in gold, then gold is king.”

E1          “Aren’t they obligated to field a football team first?”

. . .

E1          “If I couldn’t make light of it, it would get too heavy.”

. . .

[See the related e-commentary earlier this year at “Texas Votes To Secede From U.S. And Join Mexico; Russia Blows Up World In Response (March 17, 2014)“, “NATO: Nations Aggressively Taking Over (March 31, 2014)“, “Distrust But Verify (July 21, 2014)” and “World’s Reserve Currency War I = Cold War 2.0 = WW III (?) (September 8, 2014).”  See also the background e-commentary at “The Silver Standard: The Value Of (Sort Of) Real Money (July 15, 2013)“, ““Fiat Gold” / Fool’s Gold (May 2, 2011)” and “Is The Gold Standard Really The Gold Standard? (January 18, 2010).”

Bumper stickers of the week:

He who has the dollars has made the rules; he who has the gold will make the rules.

Folks (and governments) will use Fe and Pb to acquire and protect Au and Ag.

We seek stasis, we get entropy.

Money “In The Bank” Or “Under The Mattress” (October 8, 2012)

Posted in "Fiat ______", Economics, Gold Standard, Hyperdive Economic Collapse, Journalism, Newspapers on October 8, 2012 by

. . .

$          “They say that something is ‘money in the bank’ if it is a sure thing, but you must wonder whether ‘money in the bank’ is really ‘money in the bank.’”

C          “Or money in the credit union.  The Federal Reserve can create electrons but it cannot quickly create hard dollars.  The time will come when enough citizens simultaneously conclude that the financial system is a rigged chimera with a false facade.”

$          “Like the week of September 15, 2008.”

C          “Exactly.  With so few physical dollars in the bank to respond to demands for dollars, a financial institution will need to limit withdrawals to a small sum per depositor, perhaps $100.  Assurances that the funds are insured will not be reassuring.  The typical depositor does not want to hear that the account is insured when he or she wants to withdraw money from the account.  That event either will be the Big Jolt or will be caused by the Big Jolt that will lead to a collective loss of faith.”

$          “The news outlets will be forced to take a short break from the stories about rescuing kittens from trees to relay stories of angry depositors.”  

C          “And the populace will come to realize that money does not grow on trees.  So your money is only money in the bank if it is under your mattress.”

$          “The alternative is to leave the money in the bank and get .0000001 percent interest on the funds that you may never see again.”

C          “Seems that a few dollars in the pocket are not a bad idea.  After a Big Jolt, inertia and habit will incline others to accept dollars in the transition for some time.”

$          “Both paper dollars and gold may lose their luster at the same time.  The stuff does not offer much heat whether measured by calories or B.T.U.s.”

 . . .

[See the “e-ssays” titled “Is The Gold Standard Really The Gold Standard? (January 18, 2010)” and “Fiat Gold” / Fool’s Gold (May 2, 2011).]

Bumper stickers of the week:

“I will use my Fe [guns] and my Pb [bullets] to protect my Au and my ETOH.”

“I will use my skills and resources to develop a sustainable supply of clean H2O and to provide enough cals. [heat inside the body] and B.T.U.s [heat outside the body] to sustain me, my family and my community.” 

Standing Up In America (December 5, 2011)

Posted in "Fiat ______", Bailout/Bribe, Banks and Banking System, Courts, Credit Unions, Crime/Punishment, Housing, Kleptocracy, Law, Locke Gary, Perjury/Dishonesty, Politics on December 5, 2011 by

. . .

L          “We now learn that while he was Secretary of Treasury, Henry Paulson tipped off some of his hedge fund buddies of the Fannie Mae bailout.  Everyone in power is quick to proclaim that his statements and actions are not illegal and declare that nothing can be done.  His statements and actions are illegal, but those in power refuse to enforce Title 18, the criminal provisions of the United States Code, because they do not want to bring charges against their compatriots in power even their competitors in the other party.”      

O         “They cop out and refuse to send the cops out.  Because otherwise someone could bring charges against them some day.  The Great Ruling Class Truce.  And no one asks any follow-up questions or demands answers.”

L          “However, a federal judge in New York, Jed S. Rakoff, took a stand from his seat on the bench and rejected a settlement between the Big Banks and the SEC that would have let the Big Banks substantially off the hook.” 

O         “I read a blurb that the state attorney general in Massachusetts, Martha Coakley, took a stand and demanded that the Big Banks follow standards.  The lawsuit may put the Big Banks on the hook.”

L          “And in developments overseas, America’s standard-bearer in China, Gary Locke, is America’s stand-up guy in China.”

. . .

[Henry Paulson:]

[Jed S. Rakoff:]

[Martha Coakley:  See the “e-ssay” titled Fire Your Attorney General (November 7, 2011)]

[Gary Locke:  See the “Category” denoted “Locke, Gary”]

Bumper stickers of the week:

America Is Exceptional / When America’s Exceptional

Take a stand

Take a few fiat dollars out of your credit union and put them in your pocket for safe keeping.

Our “Fiat Future” (June 13, 2011)

Posted in "Fiat ______", Banks and Banking System, Debt/Deficits, Economics, Gold Standard, Peak Land, Peak Oil, Spending on June 13, 2011 by

. . .

Y          “So we live in an economy driven by ‘fiat money.’  Should we use the money to buy a Fiat car?  You know it is an acronym for ‘Fix It And Trade’?”

X          “Our fiat currency rolls along, but it is not a convertible vehicle.  I would like to fix it and trade, but we are just trading it.  A ’fiat’ is an order and a directive.  The United States Government orders and directs the citizens to accept ‘fiat money’ or ‘fiat currency’ or ‘fiat dollars’ for ‘for all debts public and private.’  The order and directive are backed by the ‘full faith and credit’ of the United States Government.  See, no worries.”

Y          “But I’m worried.  The credit of the United States government on paper is non-existent.  Why take its paper?  Who has even ‘half faith’ in its credit?”

X          “Only fools and citizens.  Only you and me.”

Y          “Why have faith when the empirical evidence is so clear and so clearly to the contrary?”

X          “Think about it this way.  I will accept the dollar if and because you will accept the dollar.”

Y          “Well then I will accept the dollar if and because you will accept the dollar.”

X          “That is the rationale.  It has worked and it works, but it may not work.  I don’t know if I want to accept the dollar.”

Y          “If you want to get rid of them, I will take them off your hands.”

X          “I will use them for the time being if and because you will accept them.  Half of the physical dollars are in circulation outside the United States and serve as the de facto currency in some countries and regions.  At the same time, the banks and financial institutions in America may have one tenth of one percent of the physical dollars necessary to cover the deposits in the banks and financial institutions.  Our fractional-reserve banking system is fractured, but it has not yet fractured.  A run on the banks, for rational reasons or irrational whims, would confirm what no one denies.”

Y          “So is the refusal to raise the debt ceiling a rational or an irrational triggering event?”

X          “An understandable reaction, but an irrational and dangerous response.  In a country awash in electronic dollars, there are no real dollars and not even enough fake dollars.  When the populace resorts to gold, everyone will discover that it is ‘fiat gold’ even if we are not ordered and directed by the government to accept it.”

Y          “The government took gold out of the equation decades ago.  And if you want to get rid of any gold, by the way, I will take it off your hands.”

X          “Others have put their full faith and credit in gold.  And then fail to see the irony in denominating the value of gold in . . . ‘fiat dollars.’”

Y          “So the dollar is not backed by gold, but gold is backed by dollars.”

X          “Seems to be.  However, there is no fiat bread.”

Y          “So when everyone realizes that the government ‘bread’ is stale, we will yearn for real bread.” 

X          “Bread is the real bread.  But we can’t print it.”

. . .

Bumper stickers of the week:

Bake Bread

Know how to bake bread

He Who Has The Gold Makes The Rules

“Fiat Stock”: Taking Stock Of The Stock Market (May 16, 2011)

Posted in "Fiat ______", Middle East, Stock Market on May 16, 2011 by

. . .

?          “Let me get this right.  Once the stock is initially offered, typically to a few connected individuals and institutions on the Inside, the company does not receive any of the money from any subsequent stock sales?”

!           “Right.  The shares are bets by individuals and institutions.  The holder of the stock may receive some dividends that are taxed as ordinary income.  However, the holder of the stock is gambling on the market decreeing that the stock is worth more because the company is somehow worth more.  Some individuals and institutions on the Inside get information called ‘inside information’ that allows them to buy the stock before those on the Outside learn that something happened earlier that makes the stock more valuable now.  The holder of the stock is counting on a pension fund or endowment or widow or other Outsider being there to buy the stock at a higher price.”

?          “To get the dividends?”

!           “At least a dividend is something.  The big score is to sell the stock at a higher price to someone who did not have the ‘inside information’.”

?          “But what is the stock really worth?”

!           “Who knows.  The government and the Fed could double the supply of money/money electrons and give the stuff to those on the Inside to spend.  Then the aggregate stock prices would roughly double.  That is particularly true today when there really are no other viable competing investments.”

?          “But what is the stock really worth?”

!           “Does it really matter.  You’re on the Outside.  Don’t ask too many questions.  Play along.  Just because it is your future does not mean that it is not a game.  The key is knowing when to hold ‘em and when to fold ‘em.”

?          “While you only have ‘outside information’ to guide your gamble?  And then if you actually win anything, you convert the stock into ‘fiat money’?”

!           “Or convert it into ‘fiat gold’ or ‘fiat silver.’  It’s that simple.”

?          “But what is it really worth?”

. . .

Bumper stickers of the week:

Trust Me

Have Faith

George Mitchell Resigns ; Middle East Hopeless

“Fiat Gold” / Fool’s Gold (May 2, 2011)

Posted in "Fiat ______", Depression, Dollar - World's Reserve Currency, Economics, Gold Standard, Recession on May 2, 2011 by

. . .

F          “Remember that back in 1933, President Franklin Roosevelt confiscated all gold, devalued the dollar and decreed that the United States no longer allowed U.S. citizens to convert dollars into gold.  On August 15, 1971, President Richard Nixon decreed that the United States no longer allowed for the convertibility of the dollar into gold.  At the same time, federal spending and dollar creation grew and continues to grow exponentially.  Gold is an unworkable and irrational benchmark and restraint, yet it was a brake.”

G          “You still believe that the rest of the world will decree that the dollar is no longer the world’s reserve currency.”

F          “Don’t lose faith.  In time, it is only a matter of time.  Even with careful explanations, the public will not understand the consequences.  If there is a ‘slinky slide’ rather than a sudden drop, ‘fiat dollars’ may be accepted for a few months or perhaps longer if there is still some residual faith in the greenback.  The buck is familiar and will be readily available, but it may stop here.  Some members of the public will shed their habit and shift their faith from ‘fiat dollars’ to gold and silver.”

G          “Moving from money to Morgans.”

F          “Then the Great Revelation will be revealed when they discover that they are now holding ‘fiat gold’ and ‘fiat silver.’  The half life of the fascination with the shiny stuff may be two or three months.  Then everyone will discover that the stuff is generally useless, although gold may be useful for some electrical connections and silver for our electrical devices.”

G          “And maybe the stuff is not really as necessary if there is limited delivery of electricity.”

F          “A garden shovel will be much more valuable than a golden bar.”

G          “And knowing how to use a garden shovel.”

F          “And being physically able to use a garden shovel.”

. . .

[See the “e-ssay” titled “Is The Gold Standard Really The Gold Standard? (January 18, 2010)”]   

Bumper stickers of the week:

Why is gold always priced in . . . dollars?

Fiat = Fiat = ?

All that glitters is not a medium of exchange, a store of value, and a unit of account. 

Is The Gold Standard Really The Gold Standard? (January 18, 2010)

Posted in "Fiat ______", Economics, Gold Standard on January 18, 2010 by

. . .

G          “We need to go back to the gold standard.”

M          “Why?”

G          “To stop the government from printing fiat money.”

M          “Why gold?  Why not some other metal or something else that also has some more practical use?”

G          “The government can’t print gold.”

M          “You can’t eat gold.  It does not keep you warm. Gold has been alluring through the ages and does have some practical uses, yet it is only as valuable as it is because we ascribe value to it.  Fiat gold is not much different than fiat money or fiat currency.”

G          “We can’t trust the government.  If the government cannot issue fiat money unless it has an equal amount of gold reserves, we would not have economic problems.”

M          “The gold supply is not connected in any way with or to the desirable money supply or level of economic activity.  What if the government tried to tie the amount of fiat money to the total quantity of goods produced and to be produced and services performed and to be performed?  The ‘goods and services standard.’”

G          “You can’t trust the government.  The government will simply print as much fiat paper as it wants.”

M          “There is not enough gold in existence today in the possession of the U.S. government to begin to back even a reasonable supply of money.  What is to stop the government you can’t trust from asserting that it has enough gold reserves to support whatever paper it puts into circulation?”

G          “That’s it.  You can’t trust the government, so you need the gold standard.”

M          “Advocating for a gold standard represents a yearning for governmental responsibility.  That is understandable.  I agree.  However, the gold standard is not the gold standard.  It is the fools gold standard.  We need a ‘goods and services standard.’  The fiat money supply must be tied to the goods and services in the economy with the goal of promoting price stability.”

. . .

Bumper stickers of the week:

The Gold Standard is not the Gold Standard.

The Au Standard is the FeS2 Standard.

Adopt the “Goods and Services Standard.”