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Chart Of The Day: Currency Devaluation, Old School Style
Our chart of the day comes courtesy of Dylan Grice, and his fascinating "Hyperinflation in Japan" presentation given at the CFA annual meeting in Edinburgh which we will shortly share with readers, which shows that currency devaluation is not a Ben Bernanke, nor even a central bank, phenomenon. As the chart below shows, and as most monetarists know too well, it was the Romans who engaged in the first act of voluntary currency devaluation-cum-dilution, by progressively reducing the silver content (yes, even back then currencies were backed by precious metals: and guess what - no CDOs squared, cubed, or quadratic, were conceived by the local office of Goldmanus Sachus) until such time as it hit zero... and the Roman empire was no more. Ironically, the nearly 100% devaluation of the currency in Roman times took just over 2 centuries. This compares somewhat favorable to the 97% drop in the purchasing power of the US currency since the inception of the Federal Reserve.
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Sounds like a pretty good deal. What were the stores you bought from?
Los Angeles... more local store, Gillio & Associates, in Toluca Lake, CA at $1.60 above spot.
Store closer to my son and a bit bigger business, Wilshire Coin Exchange in Santa Monica, CA at $1.20 over spot. The Wilshire store also has a pile, read 100's, of tarnished 1 oz mini silver bars on display with a sign that says, $1.30 over spot.
No connection to either store... Happy Dip Buying....
Thanks.
More proof that silver can be easily obtained throughout Los Angeles at reasonable prices.
All these guys who claim that silver is running out and premiums are sky high are delusional.
lol, now you are claiming that scratch and dent bars carry the same premium as 1 oz coins. L O FUCKING L.
And that premium was UNHEARD OF on a scratch and dent bar just two weeks ago. They were $1 per oz at worst. Now, even at $2 premium per oz, they are doing brisk business. Approximately 1000 oz per day on APMEX.
You fucking moron. You try getting Eagles or Maples for $2 over spot and tell us how your ass got laughed out of the store. The MINIMUM premium on large quantities (ie a monster box) is $5 per oz, IF they have non-numismatic ones. APMEX only has numismatic Eagles in monster boxes left.
You are in for a big fucking shock should you try to go buy back your silver, you damned fool.
No, the real delusion lies in those who believe that their Lululemon stock --- a paper claim to own a share of a frivolous, consumption-based fad business, held in one's name by a third party brokerage account --- somehow trumps the personal possession of physical precious metals during a time of monetary upheaval and financial collapse.
Go back tomorrow and see if they are still there.
Scratch and dent silver on APMEX sells at a rate of ~1000 oz per day over the last week and a half of dips. All the dealers in my own town are OUT of silver, and have been since the middle of last week. They have practically been begging me to sell when I come in. You wouldn't believe the premiums they offer me--premiums I used to only get for Eagles.
Interesting this shows that the coinage took 200 years to be almost completely debased. I wonder how long it takes the average paper currency to go to zero (or to just slightly above the material cost of ink and paper for the unit).
Everyone talks about Weimar and Zimbabwe, but there have been many currencies that have gone to zero (or practically so) in the last 50 years (I forget the stats, but these can be found in the excellent book "A history of fiat currency," by Ralph T. Foster - see the chart in the back). Hyperinflation is vastly preferred over Government default as a means to take care of crushing debt, so much so that there have been very few defaults historically. But hey, the Timster and Congress may prove to be such knuckleheads that this comes to pass, let's keep our fingers crossed for this Monday. Just because something has such negative consequences, doesn't preclude it from coming to pass.
Weimar and Zimbabwe relied on US dollars to use as the stable currency. That obviously won't work in our case.
So we can either use sea shells, or gold and silver. Take your pick.
I've heard it claimed that no paper currency has ever lasted more than 90 years. I've never seen a source to back this claim up, however.
Find one that has, and I will gladly retract the statement.
The longest that I have been able to find is the Chao--the "flying money" described by Marco Polo. http://en.wikipedia.org/wiki/Chao_(currency)
I was looking more for an actual list and history of fiat currencies. Wikipedia is poor in this regard. I saw one elsewhere, in a semi-offbeat MSM article. Which, like a fool, I didn't save, as it was the best that I've seen since.
That, btw, is where my quote came from. I don't recall you saying that, but I don't dispute it either. Sorry if improper attribution was made.
So if anyone has a good history on the subject, that would be greatly appreciated.
And it is VERY annoying that historians are just so incredibly blind to the importance and impact of economics. It is that which finished the Western Empire, IMO. And, I strongly suspect, is why China built, and later destroyed, their great fleet I strongly suspect. Which also destroyed their chance for global domination seven hundred years ago. And bad economics has finished off many another empire. Yet historians have mostly been blind to this.
I have said it, but the conclusion was drawn from my own research into the subject. It does not lend itself to posting on the internet.
The records are hard to interpret as well, as the Yuan Dynasty was in decline for decades. Not sure if you count those or not, since the usurping dynasty used mostly cash and coin (cash being a form of metal currency, and the source of the English word, I might add). Though they did briefly experiment with paper money, it was quickly abolished, and their dynasty lasted much longer for it.
I agree that historians tend to be highly inept. There is a strong tendency for them to overemphasis the importance of governments, since it is governments that leave behind the "grand monuments" that are in reality nothing but wasted capital. Christ, can you imagine if the effort put into building the pyramids had gone into expansion of irrigation, or the building of a canal across Suez (by a series of locks, of course), or to developing ironworks? We might just all be typing in advanced Demotic script now.
I've heard various claims for the lifetime of fiat currency. From 40 years through 90. Repetition does lend itself to propagating on the Internet. The actual publication to back it up though, is sorely missed and needed. I would encourage you to publish yours. A definitive reference and history would be valuable.
That's an excellent point about the Suez. Though the Romans built a canal further down the Nile to facilitate trade to India and beyond. It makes one wonder if the Egyptians had one previously, which inspired the Romans? Or whether they just built on top of it?
After a bit of searching I stumbled on this thread which yielded some interesting links:
http://www.chrismartenson.com/forum/whats-half-life-fiat-currency/16200
Early in the thread, these three were put forward which summarize some currencies in history and duration:
http://dailyreckoning.com/fiat-currency/ - A bit basic, covers some well-known ones.
http://www.gold-eagle.com/editorials_04/greene032104.html - Covers more countries.
http://www.kwaves.com/fiat.htm - US History Based.
And an interesting search result using a few terms in Google here. Not sure if the histogram charts the currencies mentioned, or correlates to the stories below - but has a lot of data.
http://goo.gl/ebbKO
Hope that is useful.
Thank you. I had seen some, but not the others.
It's surprising that the answer to such an important question hasn't been thoroughly answered. Generally, the listings are incomplete at best, and wrong at worst.
And yet, the concept of a finite lifetime to fiat is an incredibly strange concept to nearly everyone. One which effects the lives of all significantly. It's a strange world we live in.
The longest one in modern times that I can think of off the top of my head is, ironically, the post-Revolution Russian ruble, which lasted around 73 years before going into hyperinflation and experiencing revaluation (~1921 to 1994ish).
Edit: Just remembered that the British pound has survived 80 years since it lost its direct link to the gold standard, however.
It, along with most (all?) other world currencies were members of the gold exchange standard, until Nixon closed the gold window in 1971. A few maintained the link to gold longer than that (specifically, the Swiss Franc, which was the longest holdout, severing the link to gold only in 2000).
NOTHING has lasted more than 90s at full fiat. In reality, the Chow went through 3 boughts of hyperinflation during its life, and had to be reissued, with the longest lasting issuance being the first one--at 60 years.
Though in reality, now that I think about it, they actually had a gold exchange standard as well. Foreigners leaving China could change their Chao for gold at the border. Marco Polo did this. Funny thing is, literally NOONE back in Italy believed his tales of paper money in China. He was labelled a liar, with his only compensation being the truly vast fortune he returned with.
Perhaps this will be of use.
Excuse me while I finish reading it myself.
http://www.marketoracle.co.uk/Article8100.html
Edit: No mention of which currencies were strictly fiat for their duration.
Thank you. That's worth saving.
WHAT!!!
WAIT ANOTHER 102 YEARS FOR $FRN TO ARRIVE AT ZERO
Bread and Circus sounds so much better than SNAP and TV.
Quite a few outside closes on the dailies. Two days before were inside closes.
Did some one drink some bad CURD? Currency: Undirected:Redistribution on Distribution day(Tbills &Bund spreads)?
Read this: http://en.wikipedia.org/wiki/Antoninianus