Tag Archives: Currency debasement

A Trillion Here, a Trillion There, by Clifford F. Thies

You get nothing of real value by inflating your currency. From Clifford F. Thies at aier.org:

The late Everett Dirksen, a long-serving Minority Leader of the Republicans in the U.S. Senate, is famously quoted as saying a billion here, a billion there, and soon we’re talking real money. That was back in 1969. At the time, a billion dollars was about one-tenth of 1 percent of GDP.

What about today?

During 2020, the federal government provided a total of $3.2 trillion of Covid relief, starting with a mere $8.3 billion, then adding $104 billion, then adding $2.2 trillion, and finishing off the year with another $900 billion.

We’re now three months into 2021, and the federal government has provided yet another $1.9 trillion in Covid relief; and, the Biden administration has just asked for $2 trillion for infrastructure.

To put these amounts into perspective: A trillion dollars is today about 4 percent of GDP.

Back in 1969, Ol’ Everett was being funny when he referred to a billion dollars. Back then, a billion dollars was already real money. In 1969, the newest nuclear-powered aircraft carrier, the USS Enterprise, cost $451 million, not even $1 billion. The cost of the Apollo 11 mission to put the first man on the moon wast $335 million, not even $1 billion. Only two companies made more than $1 billion in profits (General Motors $1.7 and Exxon Mobil $1.3). A billion dollars, representing one-tenth of 1 percent of GDP, was a fantastic amount of money. Ol’ Everett’s statement that a billion here and a billion there and soon we’re talking real money was a wild understatement.

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The World Needs a Gold-Backed Deutsche Mark, by Patrick Barron

One gold-backed currency would force the rest of them to shape up. From Patrick Barron at mises.org:

The seeds of sound-money destruction were sown at the 1944 Bretton Woods Conference, which established that US dollars could be held as central bank reserves and were redeemable for gold by the US Treasury at thirty-five dollars an ounce. This was the so-called gold exchange standard, but only foreign central banks and some multinational organizations, such as the International Monetary Fund (IMF), enjoyed this right of redemption. The system depended upon the solemn promise by the US that it would refrain from issuing unbacked dollars. The watershed event that ushered in a new malignant, pure fiat money era occurred on August 15, 1971, when the US abandoned the gold exchange standard in order to stop the drain on the US gold stock.

American money printing had begun in earnest in the previous decade in order to finance Lyndon Johnson’s “guns and butter” policy. The Fed monetized government debt to fund LBJ’s Great Society welfare programs while the government fought a war in Southeast Asia at the same time. Dollar claims in the form of government bills and bonds built up at central banks around the world. At the recommendation of French economic advisor Jacque Rueff, a free market economist and gold standard proponent, French president Charles de Gaulle ordered the Bank of France to redeem 80 percent of its US dollar holdings for gold, per the solemn promise made at Bretton Woods. Thus began a run on the US Treasury’s gold reserves that culminated in President Nixon taking the dishonorable action of abandoning the gold exchange standard. This set the course of unfettered fiat money expansion that has led the world to the precipice of monetary destruction.

This end to the Bretton Woods system—itself already deeply flawed—ushered in the age of competing fiat currencies worldwide. We are now headed toward the chaotic destruction of this system as well.

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Nixon Closed the Gold Window and All I Got Was This Lousy National Debt, by Michael Maharrey

Money backed by nothing goes to its intrinsic value—nothing. FromMichael Maharrey at schiffgold.com:

 

This year will mark the 50th anniversary of President Richard Nixon severing America – and the world – from its last tie to the gold standard. The rapid devaluing of the dollar is the most obvious result. But another consequence has been an enormous national debt that continues to grow at a staggering pace. Most people don’t realize it, but this is a direct and intentional result of the current fiat money system.

In 1971, Nixon put the final nail in the coffin of the gold standard, but President Franklin D. Roosevelt put us on the path. On April 5, 1933, Roosevelt signed Executive Order 6102. It was touted as a measure to stop gold hoarding, but it was in reality, a massive gold confiscation scheme. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.

This infamous executive order was just one of several steps Roosevelt took toward ending the gold standard in the US.

With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes have 40% gold backing. But the Fed was low on gold and up against the limit. By stealing gold from the public, the Fed was able to boost its gold holdings.

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Currency Wars Are Back, by Daniel Lacalle

The winner of a currency race to the bottom is inevitably the biggest loser. From Daniel Lacalle at dlacalle.com:

The biggest mistake the Biden administration can make is to follow the siren calls of its competing economies to massively devalue the US Dollar, print endlessly and go full-MMT (Modern Monetary Theory), which is not modern nor a theory. Destroying the currency’s purchasing power to finance bloated government spending has been used for centuries with the same final effect: Collapse of the economy.

After an unprecedented increase in debt and government spending, many countries face the almost inevitable prospect of more currency devaluations, which has triggered pre-emptive responses all around the world. A currency war?

What is a currency war? A currency war is a conflict between nations trying to artificially devalue their domestic currency in order to be more competitive internationally but also to hurt their opponents. Using the currency to make the other nations less competitive while at the same time weakening their power.

It is based on a myth. That devaluation helps competitiveness and that having a strong currency is negative. Devaluation is not a tool for exports, it is a tool for cronyism, and destroys the purchasing power of salaries and savings to benefit low productivity sectors and the government. It is a transfer of wealth from citizens to the government.

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Global Inflation watch, by Alasdair Macleod

Currency debasement is inflation, and governments and central banks are debasing their currencies with abandon. From Alasdair Macleod at goldmoney.com:

his article posits that fiat currencies are on the path to hyperinflation and looks at the evidence in the prices of financial assets and commodities. So far, gold has notably underperformed, which indicates that the early signals of hyperinflation are confined to the cryptocurrencies, whose participants broadly understand fiat debasement, to equities reflecting the desire not to maintain cash and deposit balances, and in international trade, where commodity prices of all stripes have risen in price.

Given that the early warnings of hyperinflation of money supply are here, the article then looks at the qualities required of a sound money to replace fiat currencies.

Introduction

Figure 1 shows how prices have moved from the Friday before the Fed’s announcement on 23 March that it would go all-in on its support for the US economy with unlimited quantitative easing. It amounted to a commitment to hyperinflate the money supply if needed. Before the Fed cut its funds rate to zero on 16 March nearly all these prices were falling.


Screen Shot 2020 11 27 at 7.04.52 AM
Since late-March every category has seen increases in prices. Sector and specialist analysts will always claim that there are identifiable reasons why prices for an individual category or commodity have risen. But the fact is that with the exception of the dollar and the other fiat currencies listed in the table all prices have risen. This cannot happen without the dollar and these currencies losing purchasing power.

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How the U.S. Government Debased My Coin Collection, by James Bovard

Governments, being corrupt institutions, corrupt their money. From James Bovard at libertarianinstitute.org:

Nnc Us 1907 G$20 Saint Gaudens (arabic)

Old coins vaccinated me against trusting politicians long before I grew my first scruffy beard. I began collecting coins when I was eight years old in 1965, the year President Lyndon Johnson began eliminating all the silver in new dimes, quarters, and half dollars. LBJ swore that there would be no profit in “hoarding” earlier coins “for the value of their silver content.” Wrong, dude: silver coins are now worth roughly fifteen times their face value.

History had always enthralled me, and handling old coins was like shaking hands with the pioneers who built this country. I wondered if the double dented 1853 quarter I bought at a coin show was ever involved in Huckleberry Finn–type adventures when “two bits” could buy a zesty time. I had a battered copper two-cent piece from 1864, the same year that Union general Phil Sheridan burned down the Shenandoah Valley where I was raised. Some of the coins I collected might now be banned as hate symbols, such as Indian Head pennies and Buffalo nickels (with an Indian portrait engraved on the front).

In the era of this nation’s birth, currency was often recognized as a character issue—specifically, the contemptible character of politicians. Shortly before the 1787 Constitutional Convention, George Washington warned that unsecured paper money would “ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”

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Fake Money’s Face Value Deceit, by MN Gordon

The Federal Reserve has destroy about 96 percent of the value of the dollars since it was entrusted with preserving the value of the dollar back in 1913. From MN Gordon at economicprism.com:

hane Anthony Mele stumbled off the straight and narrow path many years ago.  One bad decision here.  Another there.  And he was neck deep in the smelly stuff.

These missteps compounded over the years and also magnified his natural shortcomings.  Namely, that he’s a thief and – to be polite – a moron.  Recently the confluence of these two failings came together like a sewage spill to a river draining through the center of town.

Mele made a dishonest mistake.  He failed to recognize that he’s not the only dishonest soul operating in a dishonest world.  That is, he failed to comprehend the difference between face value and real value.

So it was, with dishonest intentions, that he burgled a rare coin collection with no clue what it was that he’d taken.  To his soft and greedy mind all he saw was a hoard of coins with a face value of One Dollar.  Thus, he redeemed them for cash.  Zero Hedge offers the details:

“After stealing a rare coin collection from an elderly and disabled retiree, Shane Anthony Mele, dumped what their owner said was at least $33,000 worth of collectible coins down a Coin Star machine at a Florida supermarket and collected their face value, receiving about $30 – enough for a couple of 12 packs.”

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