Category Archives: Currencies

The Global Inflation Nightmare That You Have Been Warned About Is Here, by Michael Snyder

Inflation means inflation whatever passes for the money supply. Inflation has varying effects on the general price level and on specific prices. That said, if you inflate the money supply like developed world governments and their central banks have been doing the last year, it’s a pretty good bet that it will drive up most prices. From Michael Snyder at themostimportantnews.com:

If you thought that authorities all over the planet could print, borrow and spend money like there was no tomorrow without any consequences, you were being delusional.  Since the beginning of the COVID pandemic, we have witnessed the greatest monetary binge in world history.  Of course that was going to cause enormous problems.  Of course that was going to cause nightmarish inflation.  Anyone with an ounce of common sense should have been able to see that.  When the value of money is tied to nothing, “more money” is always such a tempting solution for those in power.  But as history has demonstrated over and over again, going down that path almost always leads to tragedy.

In our case, it will be the poorest people on the planet that suffer the most.  According to Bloomberg, basic food staples are dramatically spiking in price all over the globe…

Global food prices are going up, and the timing couldn’t be worse.

In Indonesia, tofu is 30% more expensive than it was in December. In Brazil, the price of local mainstay turtle beans is up 54% compared to last January. In Russia, consumers are paying 61% more for sugar than a year ago.

And as Albert Edwards has pointed out, annual inflation in cereals has hit 20 percent, which represents “the highest annual rise since mid-2011 when the Arab Spring was in full flow!”

If prices continue to rise like this, it is just a matter of time before we see widespread food riots all over the globe.

Continue reading→

The Dangers Lurking behind a Digital Euro, by Thorsten Polleit

A digital fiat currency is still a fiat currency, with all the drawbacks of a fiat currency without a fiat currency’s one virtue: cash. From Thorsten Polleit at mises.org:

Neosocialist China does it, Sweden does it, and many other states want to do it, too: to issue digitized central bank money for everyone. The European Central Bank (ECB) is also working on such a scheme. It wants to launch “digital euro central bank money” as soon as possible. Many economists praise the project as an “innovation,” as an important and indispensable step in an increasingly digitized world.

The ECB is also keen to make its intentions known, declaring that a digital euro will be accessible for everyone, robust, secure, efficient, and compliant with applicable law. However, it should be clear that the path to becoming a surveillance state regime will accelerate considerably if and when a digital euro is issued. But let’s not get ahead of ourselves.

A digital euro is not “better money” than the euro that is already in circulation today. The planned digital euro is fiat money, just as much as euro cash and euro bank balances represent fiat money: they are all created “out of nothing” by the ECB, which has the monopoly of euro production. Just as is the case with the existing euro, the quantity of digital euros can be increased at any time, it is backed by nothing, and the digital euro carries a 100 percent risk of devaluation. As noted earlier, a digital euro would be a fiat euro.

The digital euro can either be “account based”—you keep it in an account held with the ECB—or it can be “token based”—money users receive a “token” that can be transferred from smartphone to smartphone via an app. Hoping for “anonymity” in payment transactions would be futile in both cases, one has to fear.

Continue reading→

Oil and Debt: Why Our Financial System Is Unsustainable, by Charles Hugh Smith

Energy is and will always be the dominant variable. From Charles Hugh Smith at oftwominds.com:

How much energy, water and food will the “money” created out of thin air in the future buy?

Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.

Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.

Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are about 3% of all energy consumed, with hydropower providing another few percent.

There are unavoidable headwinds to this appealing fantasy:

1. All “renewable” energy is actually “replaceable” energy, per analyst Nate Hagens: every 15-25 years (or less) much or all of the alt-energy systems and structures have to be replaced, and little of the necessary mining, manufacturing and transport can be performed with the “renewable” electricity these sources generate. Virtually all the heavy lifting of these processes require hydrocarbons and especially oil.

Continue reading→

Doug Casey on Rapidly Rising Taxes and 3 Other Imminent Dangers to Your Wealth

Broke governments are going to be even more unbelievably rapacious than they are now. From Doug Casey at internationalman.com:

dangers to your wealth

International Man: President Biden’s Treasury Secretary—and Obama Fed Chair—Janet Yellen recently floated the idea of taxing unrealized capital gains through a “mark-to-market” mechanism.

What is going on here?

Doug Casey: When you tax unrealized capital gains—as they do with foreign stocks in a number of countries, like New Zealand, where it made my life expensive and miserable while I was living there—any stock market assets that you have are marked to market annually. This is a big disincentive to own them because whether you sell the asset or not, you’re going to pay taxes as if you’d sold it.

This is why very few Kiwis own foreign stocks. They’re liable to be taxed on gains, whether or not they sell and actually pocket the gains. I presume that’s what Yellen is talking about. It would make it pointless to buy a stock like Berkshire Hathaway and just hold it for decades to escape capital gains taxes. But the bright side is that if this law was in force, Warren Buffett would no longer be able to whine about the injustice of paying fewer taxes than his secretary.

I question whether the proposal will be enacted, though, simply because it’s so stupidly destructive. It’s clear that Yellen needs to collect on some more six-figure speeches to gain a proper understanding of it and get off that hobby horse.

Continue reading→

Can Governments Stop Bitcoin? by Alex Gladstein

Governments probably can’t stop Bitcoin, and some of them may not want to. From Alex Gladstein at quillette.com:

Since its creation more than 12 years ago, Bitcoin is undefeated. Its price has leaped from $5 to $50 to $500 to $5,000 to now past $50,000. The number of global users has eclipsed 100 million. The system’s network security, number of developers, and new applications are at all-time highs. Dozens of companies including Tesla and Square have started to add Bitcoin to their corporate treasuries.

This worldwide success doesn’t mean that people haven’t tried to stop Bitcoin. The digital money project has in fact survived a variety of attacks which in some cases threatened its existence. There are two main vectors: network attacks on the software and hardware infrastructure, and legal attacks on Bitcoin users. Before we explore them and consider why they failed, let’s start at the beginning.

In January 2009, a mysterious coder going by the name of Satoshi Nakamoto launched Bitcoin, an open-source financial network with big ambitions: to replace central banking with a decentralized, peer-to-peer system with no rulers. It would use a programmable, highly-fungible token that could be spent like electronic cash or saved like digital gold. It would be distributed around the world through a set-in-stone money printing schedule to a subset of users who would compete to secure the network with energy and in return, get freshly minted Bitcoin.

Initially, most were understandably skeptical, and very few paid attention. There had been attempts at creating “ecash” before, and all had failed. No one had been able to figure out how to create a decentralized, incorruptible mint, or how to grow a system that couldn’t be stopped by governments.

Continue reading→

Anatomy of a Bubble and Crash, by Charles Hugh Smith

Bubble markets generally crash back to their point of lift off, which can mean an over 90 percent drop. From Charles Hugh Smith at oftwominds.com:

Needless to say, few are expecting bubble symmetry to manifest now, because, well, of course, “this time it’s different.” Indeed. It’s always different and yet always the same, too.

Let’s indulge in some basic logic:

1. All speculative bubbles pop, regardless of source, time or place. (100% of all historical evidence supports this.)

2. The current “Everything Bubble” is a speculative bubble.

3. Therefore the current speculative bubble will pop.

Now that we got that out of the way, the question becomes: how will the crash play out? There is no way to forecast precisely when or how the current speculative bubble will crash, but history offers a few potential templates.

The dot-com bubble offers a classic example of bubble symmetry and scale invariance. (See chart below.) Note how the bubble arose in two legs of X duration and it crashed in two symmetrical legs of X duration. In both legs, the crash returned to the same levels from which the bubble took off.

Scale invariance: this same symmetry is visible in bubbles that soar and crash in 6 days, 6 months or 6 years. The symmetry also holds whether the instrument soars from $1 to $5 or $100 to $500, or whether it is in index, commodity or equity. (See charts of Cisco Systems (CSCO) in 2000 and Tesla (TSLA) in 2020 below.)

Continue reading→

Some clear thinking on $50,000+ Bitcoin, by Simon Black

An attempt at an objective analysis of Bitcoin, which evokes strong emotions, even hysteria, from both its detractors and its proponents. From Simon Black at sovereignman.com:

There are famous stories that come out of the Great Depression in which very astute financiers sold all of their stocks just before the big crash of 1929.

Joseph Kennedy famously dumped his portfolio after receiving stock tips from a shoeshine boy. And Bernard Baruch, one of the wealthiest financiers on Wall Street, said after the crash,

Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me [stock] tips. . .”

Now, these comments make it seem like taxi drivers and shoeshine boys don’t have financial sense. And that’s wrong.

Someone’s profession and their level of financial sophistication don’t necessarily go hand in hand; there are plenty of astute janitors, and plenty of idiot fund managers.

But I did think about Baruch’s remarks recently when an Uber driver started talking to me about cryptocurrency.

Again, his opinions are just as valid as anyone else’s. But what I found remarkable is that the only thing he knew about his portfolio was how much he’s ‘up’.

Continue reading→

Calling the Holdings of Central Banks “Assets” Is a Travesty, by Egon von Greyerz

Central Banks are holding trillions of dollars in fiat debt instruments issued by governments that will never be repaid. From Egon von Greyerz at goldswitzerland.com:

Akhlys, the Greek goddess of Misery and Poison, is exerting a major influence on the world currently. And sadly the dosage of misery and poison will increase in coming months and years.

What is now crystal clear is that this excess dose of fake assets and fake liabilities will totally poison the financial system and the world economy.

As Paracelsus, the renowned 16th century Swiss physician said; “all things are poison, it is the dosage that makes it either a poison or a remedy.”

When a world already in trouble was hit by a severe financial crisis in September 2019, the dose of debt was already excessive. But as the Fed and the ECB opened the money spigots fully, they filled the world with poisoned or fake money. The BY team (Biden & Yellen) will now be certain to finish this process with their profligate spending plans.

MAJOR CENTRAL BANKS BALANCE SHEETS UP 6X SINCE 2006

The financial system has been poisoned for decades by governments’ excess spending and central banks’ prodigal printing of toxic and worthless money.

And now, with Covid, they have the perfect excuse to senselessly create trillions of dollars, euros, yuan or yen. The world doesn’t realise that this money, fabricated by pressing a button, is no different from the Monopoly board game money.

Continue reading→

Robinhood Thursday and the Washington Idiots at Work, by David Stockman

Central banks’ profligate production of fiat debt liquidity is behind the Gamestop fiasco and stock market valuations completely untethered from underlying economic value. From David Stockman at David Stockman’s Contra Corner via lewrockwell.com:

Today, especially, the “idiots at work” sign should be flying high over Capitol Hill.

We are referring to the boisterous congressional hearings about who is to blame for the crash of GameStop, the alleged nefarious machinations of the hedge funds and Robinhood and the purportedly innocent victims in mom’s basement who thought call options were the greatest new video game since Grand Theft Auto IV.

But among today’s silly foibles, the incessantly repeated idea that the Reddit Mob was a victim of a “pump and dump” scheme surely takes the cake. If these people were stupid enough to think that the value of a company dying in plain sight (i.e. GME) could go from $400 million to $23 billion in less than six months while its reported finances continued to deteriorate, they deserve to loose every dime of the stimmy money they threw into the Robinhood pot.

Still, the fact that the greedy, dimwitted Reddit Mob got its just desserts isn’t the half of it.

What was really on display Thursday in the recently christened (since January 6th) Holy of Holies of American Democracy is the utter cluelessness on both sides of the political aisle with respect to the financial elephant in the room: Namely, that the Fed has transformed Wall Street into a giant, destructive gambling den, which is now sucking a growing share of the populace into the pursuit of instant get-rich speculations that have no chance of panning out.

Continue reading→

The future of money is gold, by Alasdair Macleod

If the future of money is gold, the future may be golden. From Alasdair Macleod at goldmoney.com:

This article explains why the successor money to failing fiat is gold, not cryptocurrencies. Cryptos can only act as stores of value so long as fiat exists. I describe how a world transacting with monetary gold and properly constituted gold substitutes works. It explains how and why unbacked bank credit expansion, which in natural Roman law was ruled to be fraudulent 1,800 years ago, can and should be eliminated in a post-fiat world, thereby ending destructive credit cycles.

Gold exchange standards, which are comprised of gold-backed money administered by the state, worked extremely well when properly implemented, and it is the siren songs of inflationism that are at the root of the current crisis. If the transition from worthless fiat back to gold standards is handled properly, an initial recovery to fully functioning economies need not take more than a year or so.

The pressure on future governments to reject inflationism in favour of free markets and sound money should not be underestimated. It is not rocket science. All we need are politicians in whose interests it is to see the light and have the determination to take their electorates with them. It will require them to hand back to individuals the responsibility for their own actions, enabling the requisite cuts in government responsibilities and expenditures to be made.

That child of fiat money, the welfare state and all the government actions to protect it will have to end, with the exception of the absolute basics.

The politicians to facilitate these changes do exist, though their voices are not heard. But the moment fiat collapses, we have good reason to believe they will re-emerge from under the misguided consensus they had been elected to deliver. It will be in their clear interest to do so, and monetary collapse giving birth to civil disruption can be avoided.

Introduction

While there is a growing consensus that the days of fiat currencies are finally drawing to a close, the debate about their successor is misinformed due to a lack of understanding about the qualities required of money. This growing consensus is still a minority view, triggered by cryptocurrencies and bitcoin in particular, with enthusiasts claiming bitcoin to be the money of tomorrow.

Continue reading→