Tag Archives: Fiat currencies

When normality is exposed as a Ponzi, by Alasdair Macleod

Posted on March 5, 2022 | Leave a comment

Putin could crash the global financial system by demanding payment in gold for Russia’s oil and gas. From Alasdair Macleod at goldmoney.com:

Putin’s hubris, yes-men for generals, lack of fighting conviction among the men, poor logistics and strong Ukrainian leadership and determination have combined to turn the Russian invasion of Ukraine into a military quagmire.

Meanwhile, the West has upped the stakes in a financial war. The underlying assumption is that the Russian economy is weak and those of the Western allies are stronger. A few key metrics shows this is incorrect. The underlying resilience of the Russian economy and its financial system is not generally understood, and instead EU sanctions could end up undermining the whole euro system and the euro itself.

This article looks at how errors on the battlefield are likely to bring the financial and economic war between the West and Russia out into the open. By suspending access to them, the West has made the mistake of proving to Russia (and all other national central banks) the ultimate uselessness of currency reserves and the benefits of gold. As well as leading to the likely collapse of the entire euro system, this article explains how this financial war could end up with a de facto gold standard for the rouble and call an end for the entire fiat currency Ponzi scheme.

The destruction of the global fiat Ponzi scheme is a step closer

Being increasingly debased, western currencies serve to conceal deteriorating economic conditions, particularly in the US, EU, UK, and Japan. In China, less so perhaps. But China faces an old-fashioned property crisis which is sure to lead to further currency expansion and therefore, debasement of the renminbi. In this article about the state of the financial war between the US, UK and EU on one side, collectively the West, and Russia on the other, we focus on how the invasion of Ukraine is evolving into open financial warfare.

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Posted in Banking, Business, Collapse, Currencies, Debt, Economics, Economy, Energy, Financial markets, Foreign Policy, Geopolitics, Governments, History, Military, Privacy, Psychology, War

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When Fiat Currency Stops Being Money, by Daniel Lacalle

Posted on December 5, 2021 | Leave a comment

Will fiat currencies revert to their intrinsic value? History suggests they will. From Daniel Lacalle at mises.org:

Most emerging and developed market currencies have devalued significantly relative to the United States dollar in 2021 despite the Federal Reserve’s aggressive monetary policy. Furthermore, emerging economies that have benefitted from rising commodity prices have also seen their currencies weaken despite strong exports. As such, inflation in developing economies is much higher than the already elevated figures posted in the United States and the eurozone.

The main reason behind this is a global currency debasement problem that is making citizens poorer.

Most central banks globally are implementing the same expansionary policies of the European Central Bank and the Federal Reserve System but the results are disproportionately hurting the poor as inflation rises, particularly in essential goods and services, while fiscal and monetary imbalances are increasing.

Many emerging economies have implemented a very dangerous policy of boosting twin deficits—fiscal and trade deficits—under the misguided idea that it will accelerate growth. Now growth and recovery estimates are coming down but monetary imbalances remain.

Therefore, most currencies are falling relative to the US dollar. The policies implemented by global central banks are as aggressive or even more so than those of the Federal Reserve but without the global demand that the US dollar enjoys. If global nations with sovereign currencies continue to play this dangerous game, local and international demand for their currency will evaporate and dependence on the US dollar will rise. More importantly, if the Federal Reserve continues to put its global reserve status to the test, all fiat currencies may suffer a loss of confidence and a move to other alternatives.

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Evil Is the Root of All (Fiat) Money, by Egon von Greyerz

Posted on December 4, 2021 | Leave a comment

The title is not hyperbole, because all fiat money is essentially fraudulent. From Egon von Greyerz at goldswitzerland.com:

“So you think that money is the root of all evil. Have you ever asked what is the root of all money?”
-Ayn Rand

Money used to be a stable medium of exchange and a store of value but that was in the days when there were sound monetary principles, mostly backed by gold or silver.

Since 1913 and especially 1971 there is no discipline and no morals when it comes to the issuing of money as unlimited amounts of fake fiat money is printed at will.

In today’s fiat money world, there is only one answer to Rand’s question “What is the root of all money?”, namely:

“Evil is the root of all fiat money.”

– Egon von Greyerz

On the IMF (International Monetary Fund) website there is an article stating that “Money is something that holds its value” – Hmmm…..

The meeting of bankers and politicians on Jekyll Island in November 1910 laid the foundations for the Federal Reserve Bank. Three years later in 1913 the Fed was founded.

From that moment on, private bankers were running the US monetary system including the printing of money. But the British pound, backed by gold until 1931, was the global currency of choice until then.

CURRENCY SYSTEMS ARE EPHEMERAL

The Bretton Woods Agreement in 1944 established a new currency system based on the dollar. From that time, all major currencies were pegged to the US dollar and the dollar itself was pegged to gold at $35 per ounce. The dollar thus became the world’s reserve currency bolstered by big gold reserves. These were accumulated gradually from the early 1900s to the late 1940s. The US received payment in gold during WWII from its sales of arms and other supplies.

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Posted in Banking, Business, Currencies, Debt, Economics, Economy, Governments, History, Money

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The dollar’s debt trap, by Alasdair Macleod

Posted on August 20, 2021 | Leave a comment

How debt kills fiat currencies, from Alasdair Macleod at goldmoney.com:

On the fiftieth anniversary of the Nixon Shock, this article explains why fiat currencies have become joined at the hip to financial asset values. And why with increasing inevitability they are about to descend into the next financial crisis together.

I start by defining the currencies we use as money and how they originate. I show why they are no more than the counterpart of assets on central bank and commercial bank balance sheets. Including bonds and other financial issues emanating from the US Government, the individual states, with the private sector and with broad money supply, dollar debt totals roughly $100 trillion, to which we can add shadow banking liabilities realistically estimated at a further $30 trillion.

This gives us an idea of the scale of the threat to asset values and banking posed by higher interest rates, which are now all but certain. The prospect of contracting financial asset values is potentially far worse than in any post-war financial crisis, because the valuation base for them starts at zero and even negative interest rates in the case of Europe and Japan.

I focus on the dollar because it is everyone’s reserve currency and I show why a significant bear market in financial asset values is likely to take down the dollar with it, and therefore, in that event, threatens the survival of all other fiat currencies.

Introduction

Dickensian attitudes to debt (Annual income twenty pounds, annual expenditure twenty pounds ought and six, misery) reflected the discipline of sound money and the threat of the workhouse. It was an attitude to debt that carried on even to the 1960s. But the financial world changed forever in 1971 when post-war monetary stability ended with the Nixon shock, exactly fifty years ago.

Micawber’s aphorism was aimed at personal spending. It was advice given to a young David Copperfield, rather than a recipe for life. But since money’s transmogrification into pure fiat and as soon as youngsters in the fiat-currency world began to earn, Micawberism no longer held. Figure 1 shows the decline in purchasing power of fiat currencies in which earnings are paid relative to the sound money (gold) that had underpinned the post-war Bretton Woods agreement.

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Why Big Government Statists Despise Gold, by MN Gordon

Posted on August 13, 2021 | Leave a comment

Statists and other government types hate any form of money they can’t debase. From MN Gordon at economicprism.com:

Did you get a 5.4 percent raise this year?

If you answered no, then your income is being systematically diminished by the federal government’s coordinated policies of dollar debasement.

You see, according to the Bureau of Labor Statistics, consumer prices increased 5.4 percent over the last 12 months.  So if your income didn’t increase by a commensurate 5.4 percent, then you are earning less than you were just one year ago.

The fact is price inflation acts as a hidden tax.  It’s the government’s underhanded way to increase spending without overtly increasing taxes.  Yet the tax still takes place, as the dollars in your biweekly paycheck become worth less and less.

The primary culprit of rising prices is the over issuance of federal reserve notes by the Treasury via deficit spending.  This debt based money enters the economy through government transfer payments and other spending programs.  There, it competes with the existing stock of money to buy goods and services.  Prices rise, accordingly.

Through the first 10 months of Washington’s fiscal year, which ends on September 30, the federal government has run a budget deficit of 2.54 trillion.  Of this, $800 billion – or about a third – of this debt was purchased by the Federal Reserve with credit created from this air.  If you recall, since July 2020, the Fed has been buying $80 billion of Treasuries per month.

The failure of these dollar debasement policies to support a balanced and healthy economy is grossly evident.  Asset prices have been inflating for over a decade.  At the same time, wages have generally stagnated.  This has resulted in a massive wealth gap.

Still, for the control freak central planners, operating within the monetary constraints of a stable money supply and the fiscal constraints of a balanced budget are out of the question…

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Posted in Banking, Business, Civil Liberties, Crime, Currencies, Debt, Economics, Economy, Government

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Farewell to Yet Another Failed Monetary System, by Egon von Greyerz

Posted on August 5, 2021 | Leave a comment

All fiat money systems have failed and will always fail. From Egon von Greyerz at goldswitzerland.com:

The beginning of the end of the current monetary system and currency collapse started exactly 50 years ago. In the next few years the world will experience the end of the end of another failed experiment of unlimited debt creation and fake fiat money.

Economic history tells us that we need to focus on two areas to understand where the  economy is going – INFLATION AND THE CURRENCY.

These two areas are now indicating that the world is in for a major shock. Very few investors expect inflation to become a real problem but instead believe interest rates will be subdued. And no one expects the dollar to collapse or any major currency collapse at all.

But in the last two years money supply growth has been exponential with for example M1 in the US growing at an annual rate of 126%!

Von Mises defined inflation as an increase in money supply. The world has seen explosive growth in credit and money supply since 1971 and now we are seeing hyperinflationary increases.

Hyperinflation is a currency event. Just since 2000 most currencies have lost 80-85% of their value. And since 1971 they have all lost 96-99%. The race to the bottom and to hyperinflation is now on.

Currency values over time.

As I will explain in this article, history is telling us that the explosion of credit and money supply will lead to rapid increases in inflation and interest rates and an even faster fall of the US dollar.

When it comes to monetary events, inflation and the currency are totally interdependent.

Normally an economy will be sound when the currency is sound. And the currency is sound when the economy is sound.

Sounds pretty simple doesn’t it. But then why has no currency ever survived in history? And why has every economy collapsed when there is an underlying currency collapse?

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Fiat Money Economies Are Built on Lies, by Thorsten Polleit

Posted on July 21, 2021 | Leave a comment

They don’t call it funny money for nothing. The only guarantee you have of fiat money’s value is the promise from the government not to print up too much of it. That’s a sucker bet. From Thorsten Polleit at mises.org:

Now and then, it pays to take a step back to get a broader perspective on things, to look beyond the daily financial news, to see through the short-term ups and downs in the market to find out what is really at the heart of the matter. If we do that, we will not miss the fact that we are living in the age of fiat currencies, a world in which basically everything bears their fingerprints: the economic and financial system, politics—even people’s cultural norms, values, and morals will not escape the broader consequences of fiat currencies.

You may not notice it in your daily use of fiat currencies—that is, for instance, when receiving wages, buying goods and services, paying down mortgages, depositing money with the bank for saving purposes—that something is terribly wrong with fiat currencies, be it in the form of the US dollar, the euro, the Chinese renminbi, the Japanese yen, the British pound, or the Swiss franc. However, the truth is that all these fiat currencies suffer from severe economic and ethical flaws, which are actually not difficult to understand.

Fiat currencies are produced by central banks and commercial banks’ credit expansion. In fact, central banks in cahoots with commercial banks increase the outstanding money supply by extending loans to firms, private households, and government entities. It amounts to money creation from thin air or—in a way—counterfeiting money. Issuing new fiat currencies sets into motion a boom, an illusion of prosperity. Consumption and investment expand, the economy enjoys higher corporate profits, increased employment, rising stock, housing prices, etc.

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The Real Russian Threat,by James Rickards

Posted on June 25, 2021 | Leave a comment

Slowly but surely, the dollar is losing clout, and eventually it will lose it’s place as the world’s reserve currency. From James Rickards at dailyreckoning.com:

I’ve written for years about different nations’ persistent efforts to dethrone the U.S. dollar as the leading global reserve currency and the main medium of exchange.

At the same time, I’ve said that such processes don’t happen overnight; instead, they happen slowly and incrementally over decades.

The dollar displaced sterling as the leading reserve currency in the twentieth century, but it took thirty years, from 1914 to 1944, to happen. The decline started with the outbreak of World War I and the UK’s liquidation of assets and money printing to finance the war.

It ended with the Bretton Woods agreement in 1944 that cemented the dollar’s link to gold as the new global standard.

Even after the gold link was broken in 1971, the dollar standard remained because there was no good alternative. Then the 1974 deal with Saudi Arabia (along with other OPEC cartel members) to price oil in dollars created increased global demand for the dollar.

Because of the deal, dollars would be deposited with U.S. banks, so they could be loaned to developing economies, who could then buy U.S. manufactured goods and agricultural products.

This would help the global economy and allow the U.S. to maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need dollars to buy oil.

By the way, behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force.

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The Road to Authoritarianism is Paved with Fiat Currency, by Ron Paul

Posted on June 22, 2021 | Leave a comment

Don’t forget there are two primary tools in the totalitarian tool kit: force and fraud. The biggest fraud is fiat currency. From Ron Paul at ronpaulinstitute.org:

Last week, the Federal Reserve announced it will maintain an interest rate target of zero to 0.25 percent for the rest of 2021. The Fed said it will also continue its monthly purchase of 120 billion dollars of Treasury and mortgage-backed securities.

Some Fed board members are forecasting a rate increase by late 2022 or 2023, though with the rate still not reaching one percent. The Fed will neither allow interest rates to rise to market levels nor reduce its purchase of Treasury securities. A significant increase in interest rates would make the government’s borrowing costs unsustainable.

The Fed also raised its projected rate of inflation to three percent, although it still insists the rise in prices is a transitory effect of the end of the lockdowns. There is some truth to this, as it will take some time for businesses to get back to full capacity. However, the Fed began taking extraordinary measures to prop up the economy in September of 2019, when it started pumping billions of dollars a day into the repo market that banks use to make short-term loans to each other. The lockdowns only postponed and deepened the forthcoming Fed-caused meltdown.

Germany’s Deutsche Bank recently released a paper warning about the Federal Reserve continuing to disregard the inflation risk caused by easy money policies designed to “stimulate” the economy and facilitate massive government spending. Germans have reason to be sensitive to the consequences of inflation, including hyperinflation. Out-of-control inflation played a major role in the collapse of the German economy in the 1920s, which led to the rise of the National Socialists.

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Posted in Banking, Civil Liberties, Collapse, Debt, Governments, History, Law, Politics, Tyranny

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Gold’s Middle Finger to Lying Currencies, by Matthew Piepenburg

Posted on June 2, 2021 | Leave a comment

Fiat currencies are crashing to their intrinsic value (zero) and gold will pick up the pieces. From Matthew Piepenburg at goldswitzerland.com:

Sensationalism, like central bankers and policy makers, has many faces, views and voices.

This may explain why so many want to hold their ears, hug their knees and beg the heavens for a beacon of guiding light amidst a 24/7 fog of info-cycle pablum masquerading as information.

Facts in a Fog of Sensationalism

With so many opposing ideas, movements, policies, parties, and personalities buzzing galvanically for attention, dollars or votes (in a world rightly or wrongly brought to its pandemic-accelerated knees), it’s becoming increasingly difficult to believe anything or anyone.

And this is likely because just about everything and everyone (from defective Fed chairmen to defecting royal princes and politicized prompt readers) has become, well—sensationalized.

Yet perhaps perspectives like mine are no exception. The title of my 2020 best-selling Amazon book on global markets, “Rigged to Fail,” sure sounds sensational, doesn’t it?

Was it just another doom & gloom scare-book with a catchy title for profitable “info-tainment”? Just another sensational voice joining the choir of omni-present crazy?

I’ll admit it’s a fair question.

But what if…

What if… these markets truly are rigged, and what if they (and economies) truly do fail? What if the evidence, rather than just the title, of that multi-chaptered observation is objective rather than, well…sensational?

Cynics (and I’m one of them) could say I’m plugging a book or exploiting a meme.

Fair enough.

But facts are stubborn things, and as Goethe wrote long ago: Some books are meant to show off what an author thinks he knows, while others (thankfully) are simply meant to be useful.

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Posted in Collapse, Currencies, Debt, Economy, Governments, Investing

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