Tag Archives: Monetary debasement

Ron Paul: Forget About the Gold Standard, Let’s Talk About the Copper Standard

The melt value of old copper pennies (pre-19820 is three times their stated value of one cent. From Ron Paul at birchgold.com:

Forget About the Gold Standard, Let's Talk About the Copper Standard

Photo by Adam

Way back in 1982, two interesting things happened.

The first was the publication of the minority report fellow Gold Commission member Lewis Lehrman and I co-wrote as The Case for Gold. (I’m currently working with Birch Gold Group to release a new edition of this book in the near future.) Now, I understand that might not be as interesting to everyone as it was to sound-money advocates like myself.

I’m sure you remember the second interesting thing, though…

Here’s how journalist David Owen described it:

Several years ago, Walter Luhrman, a metallurgist in southern Ohio, discovered a copper deposit of tantalizing richness. North America’s largest copper mine – a vast open-pit complex in Arizona – usually has to process a ton of ore in order to produce ten pounds of pure copper; Luhrman’s mine, by contrast, yielded the same ten pounds from just thirty or forty pounds of ore.

The only problem was, Luhrman’s incredibly profitable copper mine wasn’t a hole in the ground. Instead of ore, Luhrman’s company Jackson Metals processed pennies. He’d figured out a way to melt them down and separate their 97.5% copper from their 2.5% zinc and sell the metal.

Since 1793, U.S. pennies have been made of copper (except for 1943 – when the U.S. Mint’s copper stockpiles went to the war effort). The amount of copper in each penny and its purity ranged from 88%-100%. All the way up to September, 1982.

That’s when inflation weakened the U.S. dollar to the point that, and I swear I’m not making this up, the price of the penny’s copper content rose above 1¢.

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Recession, prices, and the crack-up boom, by Alasdair Macleod

The two biggest interrelated economic stories are debt and the debasement of fiat currencies. From Alasdair Macleod at goldmoney.com:

Initiated by monetarists, the debate between an outlook for inflation versus recession intensifies. We appear to be moving on from the stagflation story into outright fears of the consequences of monetary tightening and of interest rate overkill.

In common with statisticians in other jurisdictions, Britain’s Office for Budget Responsibility is still effectively saying that inflation of prices is transient, though the prospect of a return towards the 2% target has been deferred until 2024. Chancellor Sunak blithely accepts these figures to justify a one-off hit on oil producers, when, surely, with his financial expertise he must know the situation is likely to be very different from the OBR’s forecasts.

This article clarifies why an entirely different outcome is virtually certain. To explain why, the reasonings of monetarists and neo-Keynesians are discussed and the errors in their understanding of the causes of inflation is exposed.

Finally, we can see in plainer sight the evolving risk leading towards a systemic fiat currency crisis encompassing banks, central banks, and fiat currencies themselves. It involves understanding that inflation is not rising prices but a diminishing purchasing power for currency and bank deposits, and that the changes in the quantity of currency and credit discussed by monetarists are not the most important issue.

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A Roman lesson on inflation, by Alasdair Macleod

When it comes to monetary debasement, history has repeated itself over and over again. From Alasdair Macleod at goldmoney.com:

“While it is the duty of the citizen to support the state, it is not the duty of the state to support the citizen” – President Grover Cleveland

After two centuries of debasement the Roman denarius ended up with no silver content. The decline of the empire was accompanied by increasingly costly bureaucracy, stifling the economy. It was a template for today.

There are differences. But we share suffocating bureaucracy and the lack of specie in our currency systems. As Rome did from Nero onwards, we have lost the plot. A general deterioration in our sense of purpose is an additional factor.

Perhaps Diocletian was the Joe Biden of his day. He was infamous for his edict on maximum prices, which basically shut down the production of goods. Will Joe Biden introduce a similar edict? Don’t rule it out…

Intervention’s slippery slope

The point President Cleveland made back in the 1880s was that individuals and vested interests had no rights to preferential treatment by a government elected to represent everyone. For if preference is given, it is always at the expense of others.

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Shortage and Hyperinflation Lead To Total Misery, by Egon Von Greyerz

The nothing so individually heartbreaking nor economically counterproductive as rapidly depreciating money. From Egon Von Greyerz at goldswitzerland.com:

At the end of major economic cycles, shortages develop in all areas of the economy. And this is what the world is experiencing today on a global basis. There is a general lack of labour, whether it is restaurant staff, truck drivers or medical personnel.

There are also shortages of raw materials, lithium (electric car batteries), semi-conductors, food,  a great deal of consumer products, cardboard boxes, energy and etc, etc. The list is endless.

SHORTAGES EVERYWHERE

Everything is of course blamed on Covid but most of these shortages are due to structural problems. We have today a global system which cannot cope with the tiniest imbalances in the supply chain.

Just one small component missing could change history as the nursery rhyme below explains:

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a
horseshoe nail
.

Cavalry battles are lost if there is a shortage of horseshoe nails.

The world is not just vulnerable to shortages of goods and services.

BOMBSHELLS

Bombshells could appear from anywhere. Let’s just list a few like:

  • Dollar collapse (and other currencies)
  • Stock market crash
  • Debt defaults, bond collapse (e.g. Evergrande)
  • Liquidity crisis  (if  money printing stops or has no effect)
  • Inflation leading to hyperinflation

There is a high likelihood that not just one of the above will happen in the next few years but all of them.

Because this is how empires and economic bubbles end.

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A Look Back at Nixon’s Infamous Monetary Decision, by Antonius Acquinas

Fifty years ago this month President Nixon stopped the dollar from being convertible to gold for anyone. The consequences have been monumentally tragic. From Antonius Acquinas at antoniusacquinas.com:

A half century ago one of the most disastrous monetary decisions in U.S. history was committed by Richard Nixon.  In a television address, the president declared that the nation would no longer redeem internationally dollars for gold.  Since the dollar was the world’s reserve currency, Nixon’s closing of the “Gold Window” put the world on an irredeemable paper monetary standard.

The ramifications of the act continue to this very day.  America’s current financial mess, budget deficits, the reoccurring booms and busts, the decline of living standards (particularly the middle class), all have their genesis with Nixon’s infamous decision in August, 1971.

Abandoning the last vestiges of the gold standard was the culmination of a long-term goal of the banksters, politicians, financial elites, and deceitful economists.  The first step was the establishment of the Federal Reserve in 1913 whose primary purpose was to allow its member banks to inflate the money supply without fearing the consequences – bank failures/panics, bank runs, recessions/depressions.  The Fed could, and still does, through the control of the money supply enrich itself, the government, and its aligned financial elites at the expense of the public at large. Continue reading→

2020—2022 versus 1929—1932, by Alasdair Macleod

If the earlier period is an analogue, then we’re headed for a severe depression. From Alasdair Macleod at goldmoney.com:

Current levels of equity markets are not only divorced from their underlying economic and business realities but are repeating the madness of crowds that led to the Wall Street crash of 1929—1932. The obvious difference is in the money: gold-backed dollars then compared with unbacked fiat today.

We can now begin to see how markets and monetary events are likely to develop in the coming months and this article provides a rough sketch of them. Obviously, the financial asset bubble will be burst by rising interest rates, the consequence of rising prices for consumer essentials. Fiat currencies will then embark on a path towards worthlessness because the monetary authorities around the world will redouble their efforts to prevent interest rates rising, bond yields rising with them, and equity values from collapsing; all by sacrificing their currencies.

The ghost of Irving Fisher’s debt-deflation theory will soon be uppermost in central bankers’ minds, preventing them from following anything other than a radically inflationary course regardless of the consequences.

Current views that tapering must be initiated to manage the situation miss the point. More QE and even direct purchases of bonds and equities are what will happen, policies that will certainly fail.

Anyone seeking to survive these unfolding conditions will be well advised to put aside some sound money — physical gold and silver.


Introduction

In the past I have compared the current market situation with 1929, when the US stockmarket suffered a major collapse that October. With memories short today, many will have even forgotten that between 12 February and 23 March last year the Dow Jones Industrial Index fell 38.4% top to bottom in less than six weeks, paralleling the 66% fall between 4 September and 13 November 1929 on an eerily similar timescale. Figure 1 shows the Dow of ninety years ago superimposed on top of that of today, shifted so that November 1929 coincides with March last year.

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