The EUR Is Dead, Long Live Its Replacement - The Asian RMU

Tyler Durden's picture

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Vlad Tepid's picture

China suggests they call the RMU the "yuan."

Crisismode's picture

Call it whatever you want . . . . it's still going to be fiat trash.

Tense INDIAN's picture

this cant be HAPPENING....Just who the HELL is discussing these ideas??

Harlequin001's picture

That will be the same politicians who have no idea how to resolve the current crisis.

kick it down the road again...

Sudden Debt's picture

The same once that call for world peace (and I'm not talking about Miss Universe)

 

 

TheGreatPonzi's picture

The universal, unified money already exists. It is gold and silver. 

But maybe their goal is not economic progress ; maybe their goal is to have more paper holders in order to practice stealth inflation, and fill the pockets of the small elite which will control this fiat currency. 

PY-129-20's picture

You just hit the jackpot with possibility B.

Thunder_Downunder's picture

The problem with metal fever, is that not every nation has an adequate reserve of the stuff... we really only need one nation with a metal backed currency, everyone else can stay fiat... Just how do you keep that nation from looting the pot? 

 

Britain FAIL, France FAIL, Spain FAIL. Congrats USA you failed, NEXT!

TheGreatPonzi's picture

"The problem with metal fever, is that not every nation has an adequate reserve of the stuff"

Gold reserves? 

A country can adopt a gold standard with only 1 gram of gold in the whole territory. It would be stupid, but it would not cause any economic problem (you'd just have to use many decimals). 

Money is only a denominator. If there's not enough gold/silver/salt/sand/shells, prices and salaries will fall in synchrony. 

UGrev's picture

You just can't get some people to wrap their head around this concept. They keep thinking of G/S in terms of "now" and in dollars. 

Harlequin001's picture

The easiest way to demonstrate what you say is to use a very simple example. Assume we have two countries, A and B. Both have one gold coin in circulation as money and each produces and consumes one apple each year. As long as the supply of both remain constant then we have that elusive price stability.

Now assume that country A opens what everyone seems to want, a gold mine and produces one more gold coin. In country A the price of apples now rises to two gold coins but stays the same in Country B. A has inflation of 100% which is what no one wants. Not such a good idea having a gold mine eh.

Once we have an adequate supply of money we need no more, and the fact is that gold miners of old under a gold standard fulfill the same role as counterfeiters of today. Gold has a value based on the quantity of it in circulation, which must remain stable. By mining more gold you increase the quantity of it and prices of goods therefore rises.

Thunder_Downunder's picture

"Once we have an adequate supply of money we need no more, and the fact is that gold miners of old under a gold standard fulfill the same role as counterfeiters of today."

 

Let's not forget that in days of old, when this occured nation A also stopped making it's own apples, but instead bought them 'cheaply' from their neighbour, and for a while, needed no apple farmers to get fed. 

 

When the goldmine is plumbed dry, they were left with neither the capability to produce apples nor gold, and an economic and social collapse ensued...

 

Harlequin001's picture

That has got nothing whatsoever to do with a gold standard, or should I say, gold backing.

What you say is simple economic mismanagement...

Thunder_Downunder's picture

Yes, but how does a gold standard overcome this problem. Your simplified example presumes closed, static systems, which we both know they are not.

You cannot control the supply of gold, you cannot control the supply of goods, and you cannot control the supply of credit, within international markets. You can attempt constrain these things at the border, but that only negatively impact your own people.

This mismanagement is the cause of the discussion to discard paper, but gold is equally subject to this kind of mis management.

I would like to be convinced that there is an answer to the horrendous state of the world economy, but I have yet to see it.

Harlequin001's picture

Gold is not 'managed' by anyone other than real supply and demand, that is until you introduce an AM/PM Fix. If you increase your money supply by 10% each year then commodity prices will rise each year in terms of your fiat yet they will remain the same in gold. If the price of gold is rising by 10% each year in terms of fiat then that is your datum, the return that you as a banker must provide plus a premium to entice me out of gold and to take my risk of loss with you. It is the gold price that controls credit and that is set by the market, not CB's. They can try it for a while but that policy is now failing, badly...

TheGreatPonzi's picture

"When the goldmine is plumbed dry, they were left with neither the capability to produce apples nor gold, and an economic and social collapse ensued..."

Yes, and so what? 

If they're smart, they learn from their mistakes. I don't see the relation with gold. Nations who use salt or paper as money can do the same idiocy. 

Thunder_Downunder's picture

People don't learn from mistakes. Que incoming energy crisis

(hint, it will not be the first, second, or even third time we have plundered a resource without first finding a replacement, to our own detriment)

Thunder_Downunder's picture

"It would be stupid"

And totally unnecessary. Would kinda defeat the purpose metal backing wouldnt it (physical convertability, instead of labour based)? Besides, I could sneak 10kg of gold into this hypothetical nation and trash your monetary system.

I can see no reason why a domestic currency requires metal backing, provided that it can be traded against a common liquid trade unit that does have proper backing. Right now we have paper, backed with paper, which has led to the intentional mispricing of the common unit, in favor of the US.  

Of course, in the past the gatekeepers of the leprachauns pot have been totally unworthy. So, other nations amassed the metal to protect their own systems from the fingering of others.... and to allow them to exert their own pressure on trade. Why else did europe rush to stripmine south america?


Harlequin001's picture

'...in the past the gatekeepers of the leprachauns pot have been totally unworthy.' - A gold standard needs no gatekeepers because it is based on market based supply and demand as gold flowed through various markets. The problem with the gold standard was that it even existed, it is the AM/PM fix which sets gold prices globally in favour of the banking elite and prevents the free flow of gold through regional markets...

Thunder_Downunder's picture

Aww, come on. You can't really believe in free and fair markets.

If I'm a nation state, and I refuse to permit my reserves to physically circulate (which they'd be nuts to do), or I lie about my pledged reserves, then the market fails. I don't need to counterfeit it if I just lie about the quantities I hold.

You need a common, liquid, trusted unit. Physical gold cannot be that unless there is someone who is trusted to actually cite it's existence.

This whole premise relies as much on trust as fiat did, and that has never gotten us very far.

You're not going to see huge ocean going barges transferring the physical trade balance between nations....

TheGreatPonzi's picture

"If I'm a nation state, and I refuse to permit my reserves to physically circulate (which they'd be nuts to do), or I lie about my pledged reserves, then the market fails. I don't need to counterfeit it if I just lie about the quantities I hold."

That's what auditors and clearing chambers were created for in the first place.

If two Nations want to trade without physically exchanging gold, they just hire a common independent auditor like Deloitte. 

Really, I don't see where you're going. What are you pushing? The status quo? Keep using fiat paper? 

Thunder_Downunder's picture

Haha :) Not going anywhere in particular. My point, if I have one, is that as long as we have government, or rich people, or more then 1 guy with something to trade, someone is gonna get screwed. A gold standard or metal based trade looks like a solution, but it isn't. It can be gamed like anything else, unless or perhaps in spite of any controls that are put in place. It erks me to see people cheering for metal backing like it will fix the intrinsic corruption in the world... it won't.

 

If anything, I support the status quo because at least the system is known....

Harlequin001's picture

The we should agree that the economic system can only flip flop from one system to the other, and the benefit is gained from understanding what part of that cycle we are in...

I don't consider myself a gold bug, but I have invested in it for nearly 10 years now and have no intention to sell, yet.

But one day I will...

Thunder_Downunder's picture

I am bullish on PMs, but only as a speculative tool. I am not in the USA, so do not suffer the dilution of my labor and domestic asset values. If I was, I would certainly be using it as a hedge right now, at the very least. My primary concern with the PM markets, is that I have no idea how much leverage is deployed. It's all well and good to see the market set the price, but how many participants actually paid that price. I agree with Soros and his theories on destructive hot money as he calls it, tho I don't have the capacity to measure it's impact, hence I am skittish in trading commodities..

Harlequin001's picture

'My primary concern with the PM markets, is that I have no idea how much leverage is deployed' Well, according to GATA it is at least 100:1 at the LBMA...

MrPike's picture

Feels more like your a sophist.

Thunder_Downunder's picture

I hate waiting for ISM releases.. don't usually bother with forum spam, but tonight seems a good night for it.

I had to look that word up, I think I'll say thanks, and accept the earlier definition, rather than the latter...

Come on ISM....

Harlequin001's picture

'You need a common, liquid, trusted unit. Physical gold cannot be that unless there is someone who is trusted to actually cite it's existence.'

Thunder, that is precisely what the currency is supposed to do...

Thunder_Downunder's picture

Just forget for a minute our mistrust of bankers and politicians. Lets forget the competitive trade tentions between nations too.

In this world, where everyone plays fair, and does their job effectively, doesn't fiat perform the same task?

Isn't the principle problem with fiat that these forces can't be trusted?

So, given that those same forces would also be entrusted with a gold standard (as physical circulation is not practical even as a pipe dream), don't the problems remain the same under an equivalent metal backed system?

So.. why change? Sooner or later the someone is gonna hit the reset button the current regime. I agree that commodities are a great place to be hiding if/when this happens, but I don't see the system changing materially...

Harlequin001's picture

'In this world, where everyone plays fair, and does their job effectively, doesn't fiat perform the same task?' - no. You are always relying on governments to not increase the supply of it at will. With gold you aren't to the extent that it is not easily "produced".

Assuming today that the supply of dollars actually fell then commodity prices would fall as dollars became more valuable. Yet when you consider that the only money created when you take out a loan is the capital that you use to buy stuff, you can see that the interest on all debt outstanding today has yet to be produced, and if it isn't then the economy collapses regardless. This is why Fiat does not and has never worked; it is too easily replicated...

TheGreatPonzi's picture

"physical convertability, instead of labour based"

The current system is not labour based, it is based on nothing. 

"Besides, I could sneak 10kg of gold into this hypothetical nation and trash your monetary system."

That's true ; but (1) the Nation would acquire 10kg of intrinsic wealth (this would not be the case with counterfeit dollars) and (2) there would never be any hyperinflationary spiral and total loss of confidence in the money, because sooner or later, this spiral would hit a physical limit (not the case with printed paper). 

Besides, gold and silver were the only money in the world from 4000 BC to ~1920-1940, and it worked pretty well all that time. 

Thunder_Downunder's picture

Urm.. well I'm gonna have to disagree on that one. It is labour based, or more specifically, the perceived productive value of one nation labour force verses another. The USD is slightly different due to it's unique status, but even it is reverting to this intrinsic value.

"Besides, gold and silver were the only money in the world from 4000 BC to ~1920-1940, and it worked pretty well all that time. "

Urm.. no it didn't. This is a common rewriting of history. As far back as you can go there are examples of social collapse due to the boom-bust nature of metals discovery. Oversupply or under supply lead to people starving, just like today.

It existed because of the scarcity of the metal, and the fact that it was the only thing that could be stored without rotting and transported in reasonable quantities. They had no practical alternative. Thankfully, we have computers to store and transport things now. But we are still human, and corruption is still a part of our nature...

TheGreatPonzi's picture

"It is labour based, or more specifically, the perceived productive value of one nation labour force verses another."

It is not labour based, it is based on nothing. There is not one dollar emitted for one dollar of labor. 

"As far back as you can go there are examples of social collapse due to the boom-bust nature of metals discovery."

Such as?

"Oversupply or under supply lead to people starving, just like today."

I don't see your point. If there is not enough gold, prices of bread fall, and salaries too. If there is too much gold, prices of bread go up, and salaries too. 

" Thankfully, we have computers to store and transport things now."

I don't say gold is the best system, just that it is better than fiat ; BitCoin, for example, can be interesting too. 

Harlequin001's picture

Thunder - 'Thankfully, we have computers to store and transport things now' - Computers don't store or transport anything as I am sure you stated in error, they merely record what was done very quickly and over long distances but that has nothing to do with the underlying issue of using gold as a medium of trade...

Thunder_Downunder's picture

Well, scrip then I suppose. But it all net's out in the end.

If I wired you $50AUD, and you received $49USD, $46 after transfer costs, in your bank account, would you not agree that as an individual, you have received something of value? Something that you can now use to either consume (sustaining your personal capacity) or deploy labor of your own (invest expand productive capacity).

You could of course send it right back, and i'd recieve perhaps $43AUD. But now 20% has been lost in cost of transport... and even if we did nothing at all, I would now need to work to be in the same position I was when I first sent it to you.

I realize that it is actually slightly more abstract than this, in that it would affect the purchasing power of the AUD against the USD. After all, I transmitted a pledge on my labour that your banking system accepted, and translated into your domestic terms. I'm out of pocket $50, I either worked to create that value, or pledged to create it in the future, in order to have the right to send it to you. So what if it takes me 10 minutes to create that level of value, but it takes you a year? We'd have a wealth disparity.... What if your bank arbitarily changes the exchange rate between our nations, has the difference in our wealth changed?

I'm sticking to my guns on fiat currency being labor based.

Harlequin001's picture

'If I wired you $50AUD, and you received $49USD, $46 after transfer costs, in your bank account, would you not agree that as an individual, you have received something of value?  -

Thunder -  No, I would say I have received someone else's promises which might be exchangeable today but might not be tomorrow. Something of value is something I can store in lieu of buying goods today that will still be worth the same later on because it is valuable i.e. scarce.

Something that you can now use to either consume (sustaining your personal capacity) or deploy labor of your own (invest expand productive capacity).'

Yes I can use it today because it is exchangeable today at that rate but then that is my point, I might not be able to use it tomorrow or by even next meal time. It is not the same; it is not valuable, only exchangeable...

Thunder_Downunder's picture

You presume that the 'system' would cease to honor your pledge.

I agree that the risk of this event, lends intrinsic value to the metal. And this risk makes the fact that it is easily defined and non perishable valuable beyond the value of its consumption. But without that risk, it would lose that premium, and be no different from any other commodity. And the most basic value of a commodity is the amount of value it adds to someone(s) life, above the 'cost' of extracting it.

But this value is still only realisable on exchange, in the same way that fiat is. So, if I have a very large pile of gold I can affect the domestic realisable value of your store of value. Once again, if I am seen as trustworthy or powerful by the market, I can lie, and artifically change the realisable value of your gold.

Alternatively, if I have the right to dilute a domestic currency base under a fiat regime, I can affect the same thing.

Life is finite/perishable, therefore there is a degree of scarcity to the available labour of a human life (hence the importance of population and productivity to wealth creation in aggregate). If it was not, I could work infinitely long time and accumulate all of the available metal, making it increasingly scarce, and myself exponentially more wealthy. However, everyone else would too, and we'd live in a static world.

I still don't see the difference, if I am powerful, and I lie or cheat you get screwed either way, gold or paper, because I can affect the value of exchange...

Harlequin001's picture

'..this risk makes the fact that it is easily defined and non perishable valuable beyond the value of its consumption. But without that risk, it would lose that premium, and be no different from any other commodity' - Thunder I couldn't have said it better myself.

'And the most basic value of a commodity is the amount of value it adds to someone(s) life, above the 'cost' of extracting it.' - Gold is not a commodity like apples, it is a money, used for different purpose and for different reasons. To compare it to a consumable is to misunderstand it entirely...

'But this value is still only realisable on exchange, in the same way that fiat is.'-  and there the similarities end. Fiat is no store of value.

'I can lie, and artifically change the realisable value of your gold' - That's fraud, for which someone should go to jail, and to have an entire economy built atop it does not make it right, nor change the ultimate outcome one single jot. The entire derivatives system is is fraudulent which can only result in the loss of my wealth, which a real money is supposed to prevent, which gold does and fiat never can, because we/they will always print more of it to cover the lie...

Sean7k's picture

Urm..well, I'm gonna have to disagree on this one. Value has never been labour based, unless you live in a marxian utopia. That theory has bedeviled every economist since Adam Smith, because the amount of labour has nothing to do with value- it is perceived value, by the individual, that creates value or price.

Gold and silver have always worked well, except when there were manipulations: debasement, set values, refusal to redeem in specie. While the occasional oversupply of a metal has affected it's value- these events have always been temporary and resulted in the flow of metals away from the originator causing a new equilibrium. This is how markets function.

Computers and paper will never work, because people will always create more money to take advantage of the current value versus the value of the currency as it works through an economy. It fails to reflect the actual production of goods and services in real time.

There is only one discipline for currency- gold and silver. 

Thunder_Downunder's picture

There have always been manipulations, and there always will be. You can't read this site and believe that people won't fudge physical reserves, lie about mine outputs, and create derivatives to leverage off known values/relationships.

If I have a bar of gold, are you going to deny me the right to lend it to my friend, for a little extra bread? And what if he knows someone who's willing to spot him a little extra bread, above and beyond what he gave me, are you going to begrudge him the right to lend it to the 3rd guy? And this third guy only needs it for a day, because an auditor is coming past to check the quantity of gold in his vault...

Using a gold bar, did I just mess with the intrinsic value of exchange, because someone else needed it right now, whereas I could do without it for a little while?

Harlequin001's picture

'If I have a bar of gold, are you going to deny me the right to lend it to my friend, for a little extra bread? And what if he knows someone who's willing to spot him a little extra bread, above and beyond what he gave me' - But that's the point, to claim to have gold if you don't because you've loaned it or sold it to someone else and for any reason can't retrieve it is fraud.

And you can't return it if he has loaned it to someone else.

Thunder_Downunder's picture

:) and my point is people are dishonest :)

Harlequin001's picture

and my point is that I still need a store of value when the entire system is dishonest...

Thunder_Downunder's picture

haha :) Fair enough :)

 

ISM is out, I've got work to do. Has been fun :)

PaperBear's picture

Creating yet another fiat paper currency ? What folly. Every fiat paper currency eventually reverts to it's intrinsic value - ZERO.

Harlequin001's picture

Even if they did they would only do so if they could devalue it straight away.

Asia exports to the West. That is its economy. To think that they can now suddenly stop and have a common currency of any worth is ludicrous.

Thunder_Downunder's picture

I'm calling BS on this. It will  attain a meaningful status a week after the Amero does...

 

There is far to much disparity between political regimes and economic enviroments.

Fred123's picture

Asians will copy anything Western.....good luck with the 'Chinese Century".....rofl.....

Zero Govt's picture

the Asians are trying to go to 1 (monopoly centralised) Currency?

...the Asians have shown a wonderful ability through the Centuries of developing into advanced sophisticated cultures and then shooting themselves in the foot. China was once the most advanced nation on Earth until the central command began stiffling their rich trading nation in red tape and authoritariasm.

It led to the Europeans nicking most of their great ideas and dominating the world for centuries as the Chinese leaders strangled the private sector to death with endless directives and mis-management. 

They're at it again by centralising, monopolising and politicising the currency... looks like Asian history of pig-ignorant political authority structures, instead of the free market and private enterprise, is repeating itself again. Don't underestimate Asian leaders to be any more competent or less destructive than the dross we have in the West, history teaches you they're all the same sack of shit