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Red Money - (Conspiracy Theory #11)

Bruce Krasting's picture




 

A muse on a hot day.

I was having a drink at a swell bar in the city the other night. The
place was packed. My friend and I had a laugh about an old story that
crossed our lives many years ago. The story of Red Money. Some time
later, as we were leaving, a well-healed guy comes to me and says a bit
conspiratorially, “ I believe in Red Money too”.

I am not sure where this story originated. It has been around forever.
The reason it has stood the rumor mill test of time is that it is so
fundamentally believable.

It goes like this. One morning we wake up and the Treasury has made an
announcement that it is going to convert all US currency from green to
red. The process will commence immediately and continue for a period not
to exceed four months. Very few would be impacted. If you had money in a
bank, money fund or brokerage account it would make no difference. If
you had some green cash you would either spend it or deposit it into
your account. It would not influence the value of the holdings of
foreign reserves. That is all “electronic” money. Red money would only
impact cash money.

The Federal Reserve reports that there is approximately $1 trillion of
US coinage outstanding currently. That number is up from $570b in 2000
and $260b in 1990. As a percentage of economic activity it has risen
from 4.5% of GDP in 1990 to 7% today.

For as long as I can remember the Federal Reserve has always had this
disclaimer on the Coinage Outstanding line in the reported balance
sheet:

16. Estimated.

In this case “estimated” could mean anything. It might be something
reasonable like +/- 10%. But if you are inclined to believe in Red Money
you might also be inclined to believe that this estimate could be off
by 100%.

What might happen if we woke up to a red money world?

-Again, for all electric money and most of the actual cash holders this
would mean nothing. The next time you went to an ATM it would come out
red. The new and old would be equally acceptable. As old is spent it
would work its way through retailers and Banks with no problem. After
the four months money could still be changed. But it would require
disclosure.

-US money is in every corner of the world. When the word gets out that
it can’t be used after a given period of time it too will be exchanged
back through the banks. The moneychangers around the world would have a
field day for a while.

-There are many groups out there that are holding onto cash money for
reasons that go in color from grey to black. You have the husband who
tries to hide money from his wife. You have a million small retailers
who skim cash every week to hide from the IRS. Illegal aliens in the US
all have cash money. There is a ton of gambling money. On the completely
illegal side we go from bad to worse. Drug dealers, drug cartels,
organized crime, bank robbers and all manner of burglars. Throw in the
pirates, gunrunners, crooked politicians and very bad boys that I put in
the Jihadists camp.

How much of the money outstanding is in these hands? More than we want
to believe. $300-500 billion would be my guess.

-You can’t deposit more than $10k into a bank and not have a “flag item”
requiring disclosure and identification. While some black money will
get back into the banking system the bulk of it will be stuck. This will
be a global phenomenon.

-If you had a million or so in hundred dollar bills that were going to
be toilet paper in a few months and the “teller window” was closed, what
would you do? Spend it as fast as you could. What might you buy?
Anything, including: Jewelry, uncut diamonds, gold and silver, big
boats, as many cars as you could find, houses, raw land, cases of wine,
art works. Anything that had a chance to hold value. Fur coats and
expensive clothes would be flying off the shelf. Restaurants would be
full and travel/leisure would explode.

-Red Money would have to be done with a wink and a nod. It would be
understood in advance that a consequence would be that Bergdorf Goodman,
Saks and Macy’s would quadrupled their cash sales overnight. That would
be the intended consequence. So long as the money was going into
consumption they would look the other way. But at the same time some
very big (and smart) eyes and ears would be looking at the money flow.
This would be a good way to flush some of those bad boys into the open.

-Counterfeit money would be burned.

-The Fed sends billions of new money out every day. This would be a
massive ramp up. If you believe in this concept it is no stretch to
assume that the contingency plans for how this would get done are
already in a book. It would be expensive. But the jolt to the economy
and the associated increase in tax receipts would offset it. How much
would we pay to get a “follow the money” lead to Bin Laden? How much
have we already spent?

-The most desperate characters would face the biggest risks of
disclosure. They might just let the money they are sitting on turn to
dust. That would not be a bad outcome either.

-This could backfire on the Fed. What would be the consequence of this
if we went into it assuming there was a trillion out there and after a
few months we find it is actually 2 or 3 trillion? A very big
credibility problem. Economists would have to burn the mid-night oil
trying to re-figure the connections between monetary grown and GDP. The
old ratios would be worthless. If the number were much bigger than we
are guessing at then it would be a big slap in the face of the
Keynesians. Money does not multiply as fast as we thought.

-On the flip side we could get an unanticipated result. Only $500b could
show up. The rest would be smoke and off the balance sheet. It would be
quickly replaced by the Fed. They would love that opportunity.

-I have seen several reports of big ticket missing cash in both Iraq and
Afghanistan. How much of this has not been reported? Who has this
money? What are they doing with it?

-If one wanted to give the global economy a ~$300 billion of “instant
demand stimulus” this would be on the list. It would be a micro burst of
activity that would support another (longer) inventory cycle. Yes, a
lot of this money would be re-channeled into useless things like a
packet of diamonds, a Corvette or a condo in Miami. But that is what we
have been doing for the past twenty years. This just picks up the pace a
few notches. There is next to no cost to this. We might just catch a
bad guy.

-For some this would destroy the dollar bill as a store of wealth and a
medium of exchange. Roubles, Yuan, Euro’s, Yen, Aussies, Loonies and
Kiwis would fill the void. That would not be a bad result either. Who
doesn’t want a weaker dollar?

 

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Wed, 07/21/2010 - 08:47 | 480582 chomper
chomper's picture

http://www.ft.com/cms/s/0/420b628c-940d-11df-83ad-00144feab49a,s01=1.html

July 20 2010 16:23

The company, which manuafactures and prints bank notes, said production at its main plant in Hampshire had failed to meet “certain quality specifications”

The company declined to provide details of what was wrong with the paper, but said that production and shipment had been suspended while it conducted an investigation into the circumstances surrounding the faults.

 

Fri, 07/09/2010 - 11:29 | 460550 MrSteve
MrSteve's picture

Don't cha remember how instantly the gasoline rationing coupons hit the street, back in the 1970s? They were preprinted and stored in tractor-trailers on Army bases around the country. When it was time for a "currency change" as rationing coupon, they just rolled the trailers up to the banks for distribution and WHOOP! there is was.

 

The idea of issuing new currency only makes sense with a revaluation, 10, 100, 1,000 to one. Pick a number. The B I S  stated there were some $1.4 quadrillion in listed and unlisted derivatives so if 100:1 is the number, a quadrillion is then 10 T and an ounce of gold is $12. If Ben says the gold ounce is worth $20, reinstating the $20 gold piece as worth $20 new dollars, it will seem just like old times, happy days are here again.  This will only impact financial accounting as gasoline will not stay at 3 cents per gallon. It'll go to a nickel in no time. As the Five Families have all long ago gone "legit", banks in the Bahamas and Bermuda, etc are all set to move Suezmax cargo loads of cash into whatever the new fiat is, no questions asked as a rite of professional courtesy. The cash underground does game theory  too.

Thu, 07/08/2010 - 19:14 | 459553 kingwallop
kingwallop's picture

Red Credit

Thu, 07/08/2010 - 06:36 | 457929 Grand Supercycle
Grand Supercycle's picture

 

Ok, i've decided i can't put it off any longer - here it is ...

Scary DOW monthly chart.

http://stockmarket618.wordpress.com

Thu, 07/08/2010 - 04:33 | 457909 Oh regional Indian
Oh regional Indian's picture

What a fascinating premise!

When you are the rule-maker you can also be the best rule bender.

Makes sense.

So, even if the people come up with good ideas, the fundemental equation as I see it is:

Masses+Masses of Ideas+distributed wealth Vs. Classes+focus+concentrated wealth+time

 

Not quite balanced, eh?

 

How then do you pull off a revolution?

 

ORI

http://aadivaahan.wordpress.com

 

 

Thu, 07/08/2010 - 02:53 | 457899 Milestones
Milestones's picture

Americanspirit:: Yes, I remember that well with the Army SCRIPT $$. Iwas on a 19 day leave, and after a few poker games in London and near Paris I won appx $500. That nite on my way back to Frankfort there was a script change and I made some great exchanges as I was returning to base a day early. Bought up old script 4 &5 to one then went on base and changed it out.

$1700 bought a new car then. My, my what an incredible toss of the cards. Totally forgot about that til your note.   Milestones

Wed, 07/07/2010 - 23:47 | 457827 tommus
tommus's picture

I always thought "red money" was a way to create a blocked currency so it could be selectively devalued...  i.e. American debt-slaves using red money inside US borders and favored players (and the rest of the world) using green money, at a 10:1 or 100:1 exchange rate... it's the best of both worlds for the FED, maintaining the dollars reserve status while confiscating the benefits of that from the American people.

And yeah, using the red money to "flush out" the terrorists, drug kingpins and money-launderers is a real hoot - they would put the CIA and the TBTF banks out of business overnight!

Wed, 07/07/2010 - 23:23 | 457802 trav7777
trav7777's picture

see, we here are able to reason like chess players.  We see an endgame and so there's no point in playing the extra 20 moves.  The world will play the 20 moves.

The currency collapse is in slow-motion, look; it's been going on for 40 years.  The Roman collapse took hundreds.

As far as Red Money bringing out bad guys...LOLZ

NAFTA already made money laundering a matter of legal international banking.  There are billions sitting on banks this side of the border for which there is no way to account for their presence.  NAFTA enables trucks to cross to Mexico laden with paper cash, deposit in a Mexican bank, take a laundering fee haircut, and then those deposits can be taken via cashier's check or wire either to a US bank or a US branch of the same bank.

And it's all perfectly legal.  This is what is so laughable about the Patriot Act and all of this $10000 and $2000 transaction shit.  The BIG illegal activity is taking place every day totalling up over time to hundreds of billions in parked, laundered deposits.  The Gov already created the means by which if the terrrists were so inclined, they could move large amounts of money AT WILL.

Meanwhile, coin shops are having to take IDs for >2k purchases, what a fucking JOKE.  Green money would be turned into Red Money via mexican banks; it already has been.

Wed, 07/07/2010 - 21:29 | 457678 Mercury
Mercury's picture

3 thoughts:

-This would be a great, velocity-of-money power move. There have to be some relevant case histories here. Pre-Euro how many times have various European countries replaced an existing paper/coinage with a new one - if for no other reason than to trump counterfeiters? Quite a bit I think.  The reasons were different but when the cash Euro was finally established it must have flushed out a lot of technically illegal and/or ill-gotten cash - thirteen currencies worth at once no less.  Again, any good studies on this?

-If we haven't got our financial/fiscal/government house in order first this move will just be a short lived adrenaline rush.  No sense using the heart-start paddles on the patient if he's covered in napalm and on fire too.

-No.  The real power move here is that the government just eliminates or severely restricts the use of all cash period. Forever.  Everyone gets a debit card tied to their SS# and you get paid electronically, pay all bills electronically and buy all things in stores with the plastic.  All kinds of illegal activity would come to a standstill overnight: drugs, bribes, prostitution, black market, gambling, counterfeiting and any tax evasion of any kind over a penny - anything that relies on a transaction with no audit trail.  You could still hustle in PM and barter but it probably wouldn't be like it was before when the greenback was king. The downside of course is that the government would have it's microscope so far up your ass you won't be able to buy a fucking Fresca without it showing up on 17 different reports.  In other words, how could Obama not love this idea?

Wed, 07/07/2010 - 21:42 | 457706 Snidley Whipsnae
Snidley Whipsnae's picture

How would the banks that are buying the politicians pay for them? With a credit card that leaves a paper trail? So much for that theory...

Wed, 07/07/2010 - 22:17 | 457740 Mercury
Mercury's picture

Let's see...company jet time, getting a job for junior, anything involving sex, products/services at the bank's disposal, a bump to the front of the line on that country club waiting list, the keys to the place in Aspen, an Ivy League acceptance letter...hell any functioning set of dentures and a sloppy kiss might be enough for Barney Frank.

Wed, 07/07/2010 - 20:55 | 457647 DoctoRx
DoctoRx's picture

Bruce- what do you have against Miami condos?

Having lived in Westchester, Manhattan and Miami, I'll take Miami.

Wed, 07/07/2010 - 22:45 | 457767 Bruce Krasting
Bruce Krasting's picture

Love Florida, Love Miami. Would Miami like to see 3000 high end condos sold in three months?

Wed, 07/07/2010 - 20:43 | 457629 Bagbalm
Bagbalm's picture

An interesting fact: In WWII the US was concerned Hawaii might be lost and the cash on the islands used against US interests so they printed special bank notes that could be refused elsewhere if they were captured and presented elsewhere.

Wed, 07/07/2010 - 20:15 | 457585 Bear
Bear's picture

It seems that everyone here misses the whole point why this would never happen:

The FED knows to the dollar how much money has been printed and how much money has been returned. You know they keep track of this and don't need to 'estimate'. Unfortunately for us (and US) is that there is probably 3 Trillion out there, so they definitely will never, never want a physical inventory to be taken.

Wed, 07/07/2010 - 19:44 | 457549 blindman
blindman's picture
Sovereign Debt: The Death of Nations vs. the Wealth of Nations July 7th, 2010 by Damon Vrabel

The gap between the truth vs. the lies that pass for truth in the media has never been so wide.  But living a lie is very destructive, so it’s important to cross this gap.  Today I want to clear up one of the most important lies reinforced by the media–the idea that we have sovereign countries.

No doubt most of you have heard of the sovereign debt crisis that so many countries are facing.  We hear endless economists, reporters, and billionaire hedge fund raiders talk about it.  But the phrase they use is fictitious.  It is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London.  Sovereign debt is an impossibility.  It cannot exist.

It seems ridiculous to point this out, but sovereign debt implies sovereignty.  Right?  Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions?  How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs?  Why would they be subjugated to the whims of auctions and traders?

A true sovereign is in debt to nobody and is not traded in the public markets.  For example, how would George Soros attack, say, the British royal family?  It’s not possible.  They are sovereign.  Their stock isn’t traded on the NYSE.  He can’t orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets.  But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.

The fact is that most countries are not sovereign (the few that are are being attacked by CIA/MI6/Mossad or the military).  Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending.  Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based, floating currencies on countries.  So let’s start being honest and stop describing their debt instruments as sovereign.

We long ago lost the free market envisioned by Adam Smith in the “Wealth of Nations.”  Such a world would require sovereign currencies, i.e. currencies that are well-regulated rather than floating, and an asset rather than an interest-bearing debt.  Only then could there be a “wealth of nations.”  But now we have nothing but the “debt of nations.”  The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.

So thanks to debt-based, free-floating currencies, the “wealth of nations” transitioned to the “debt of nations” which is now transitioning to the “death of nations.”  The new world economic order with one currency, one banking system, one government, and one integrated corporate empire is on the horizon.  Perhaps that’s a good thing, but if it were, why would the establishment concoct oxymorons like “sovereign debt” instead of telling the truth?  That’s my only goal here–I think people can be trusted with the truth.  Lies harm not only the population hearing them, but also the powerful people telling them.

Those powers have the best salesmen in the world, so why don’t they just sell the population on the truth?  Apparently they don’t think you’d like it.  Well now you have it.  And it’s coming unless countries follow Iceland’s lead and recover their sovereignty.  The choice is ours.

csper.wordpress.com

Wed, 07/07/2010 - 19:28 | 457521 Operafaust
Operafaust's picture

This is the monetary equivalent to speculating how many angels can dance on the head of a pin.

Wed, 07/07/2010 - 19:12 | 457490 EconomicDisconnect
EconomicDisconnect's picture

Along the same lines I had wrote a while back:

"Interesting Currency Fact
Earlier this week I was paging through the marked pages of a book I read a while back titled "Gold: The once and future money" by Nathan Lewis. Now this is not going to be a gold post, I got tons of comments over at Seeking Alpha for the blurb I posted last night.

I had marked this section for further thought:

A staff member of the IMF estimated that as little as 10-15% of all the US Currency held outside of banks is used inside the United States. The rest is being used outside the country--by foreign central banks, in dollarized countries, by travelers, smugglers, drug cartels, tax evaders, and foreign commercial banks--as the international currency of the world. Roughly two thirds of all the dollars in the world are in the form of $100 bills, a denomination almost never seen in the United States.

I would wonder just how much money is out there but there is just no way to know. And I do not mean just the smugglers, well, the drug sort anyway not the government types!"

 

http://economicdisconnect.blogspot.com/2010/06/if-at-first-you-dont-succeed-try-try.html

Wed, 07/07/2010 - 21:33 | 457689 Snidley Whipsnae
Snidley Whipsnae's picture

" $100 bills, a denomination almost never seen in the United States."

I beg to differ with this comment. I see $100 bills every day.

Wed, 07/07/2010 - 18:38 | 457445 ratava
ratava's picture

and how does this stop the derivatives circlejerk?

Wed, 07/07/2010 - 18:20 | 457412 Gordon_Gekko
Gordon_Gekko's picture

Considering the implications, I actually want the Fed to do it. It will be a well deserved suicide mission.

Wed, 07/07/2010 - 17:39 | 457342 doomandbloom
doomandbloom's picture

what if all other countries followed suit and changed their currency? 

what if they all decided to have one single currency...:-)

Wed, 07/07/2010 - 18:30 | 457428 ratava
ratava's picture

it is difficult to do that without unifying the fiscal/monetary/supervisory infrastructure. look at Euro.

Wed, 07/07/2010 - 23:01 | 457784 maddy10
maddy10's picture

Exactly , look at Euro

they knew Greece had problems since 2008-9 but didn't come out until the time came

Now Euro is going up coz Trichet finally gave up and metamorphosed into Europe's Ben and started monetising everything

European banks are allowed to get new money for all the useless things as collateral- best form of recycling, reserved only for big banks

They know there are problems in USD but let's party until the day comes

Long live big banks- Lets make Trichet the man of this yearand give him a trillion Nobel prizes!

 

Wed, 07/07/2010 - 17:09 | 457293 blindman
blindman's picture

"But at the same time some very big (and smart) eyes and ears would be looking at the money flow. This would be a good way to flush some of those bad boys into the open."

.

 hillarious, ...

Wed, 07/07/2010 - 16:51 | 457264 Scisco
Scisco's picture

I would like to direct your attention to http://globaleconomicanalysis.blogspot.com/2010/07/wells-fargo-wachovia-...

Any hope of getting mob and/or drug money has a snowball's chance in hell. Especally with TBTF, banks will not walk away from that profit when the downside is a slap on the wrist. All they need to do is whine how legal action will bankrupt them and poof, their problems go away.

Wed, 07/07/2010 - 16:48 | 457255 playitcool
playitcool's picture

I think investing in a good laser jet printer (and scanner) would be a great idea during a currency exchange/collapse.

Wed, 07/07/2010 - 18:40 | 457451 SPONGE
SPONGE's picture

gold, silver would almost instantly be realized as currency and sought out by the masses (and red dye).

Wed, 07/07/2010 - 17:52 | 457359 New_Meat
New_Meat's picture

Bob Kraft will be happy to sell you the paper, he's taking a bath at Patriot Place, but will never turn down a good deal.

- Ned

Wed, 07/07/2010 - 16:59 | 457235 DaddyWarbucks
DaddyWarbucks's picture

On the completely illegal side we go from bad to worse. Drug dealers, drug cartels, organized crime, banks and all manner of burglars.

 

I made a small correction for you Bruce. I couldn't help but think Wachovia, Bof A, et al. If laundering a million in cash is hard imagine 384 billion dollars in cash. Even criminals need bankers these days.

I don't have an economics PhD but with several years of running profitable businesses under my belt I'll take a swing at this. Forgive me if you are being humorous and I am too obtuse( where is Andy D. these days anyway) to sense it but in general this measure telegraphs desperation and it does so in a way that everyone gets to see every time they open their purse or wallet. The crooks at the top know they need a certain amount of public confidence in the economy and the currency.

The message that this would send is that the government is no longer allowing anyone to store and protect their wealth from the government itself. Most of us here know this already but if everyone was reminded of this every time we bought or sold something the public mood might quickly become quite foul. I think the full consequences of this are larger than any of us can imagine.

 

Wed, 07/07/2010 - 16:40 | 457226 anony
anony's picture

Presuming congress would have something to say about this as well as the supremes, and most likely whoever is temporarily in residence on Pennsylvania Avenue, and most ominously, Lord Blankfein and his henchpersons, the likelihood of this EVER happening is 180 degrees opposite of ZH's motto.

Wed, 07/07/2010 - 16:36 | 457216 americanspirit
americanspirit's picture

When I was an Army kid in Japan and Europe after WWII Americans used occupation script, not US dollars, to buy things on base at the PX, Commissary etc. A lot of script also wound up in the hands of Japanese, Germans, and Italians townspeople in various ways. Every so often, totally unannounced in advance, we would all be told that we had 24 hours to turn in all our old script for new script - after the 24 hours the old script was worthless. I can't tell you how much I made exchanging script for my friends families in town - all very illegal, and my Dad would have been court-martialed if I had been caught, but that never happened. The funniest part of the story is that after the 24 hours had passed, for a week or so afterwards, you would see wads of old script blowing around on the streets where it had been tossed. Totally worthless. So this basic idea has been around for a long, long time.

Wed, 07/07/2010 - 16:30 | 457185 ZackAttack
ZackAttack's picture

I always thought it would have been a really cheap way to recapitalize the banks in the first place if they'd just done away with paper money and coinage altogether and said 'All transactions from x day forward have to take place electronically and will require a bank or brokerage account.'

It would've been more money than the TARP and, as far as I can tell, wouldn't have cost a damn thing. Now that TARP has turned into a political slush fund, it's all going to get pissed away anyway.

My understanding was that the bulk of paper money was held by drug gangs. Seems appropriate to recapitalize the banks that way. It would make entire classes of crime more difficult and eliminate others. The people who have direct deposit and use cards (debit, credit, etc) for nearly everything now wouldn't give two shits.

Yeah, it's illegal and probably unconstitutional, but it was also the cheapest and most elegant solution to the problem at hand. I don't understand why it wasn't at least considered. If they wanted to get around any constitutional issues, well, the banks could've been urged to decree it in unison so that it came completely from the private sector.

Wed, 07/07/2010 - 16:17 | 457143 ThroxxOfVron
ThroxxOfVron's picture

Come on, Bruce!

You know that the TBTF Banks are laudering astronomical amounts of Dollars for the Drug Cartels and Foreign Dictators and Ponzi Artists.

 

This would do absolutely nothing that cannot be done Right Now to find the 'Bad Guys' and take the Profits from Their Criminal Enterprises from Them.

On the other hand; this would be an excellent way of fucking up Price Discovery and adding further Distortions to the Markets by confusing Producers and throwing Demand Signals into chaos; -thus making prudent choices in the use of Capital impossible.

This could only be desired by Criminals or Tyrants.

 

It is ONLY a great Idea if .GOV Inc™, the FED Cartel, Politically connected Inside Players Who would be in on the Scheme, and the Corporations are running flat out of other more viable ideas for screwing Everybody Who isn't part of the Oligarchy.

Nice TINFOIL, and might even be a contingency if TPTB are looking for a new angle from which to take a shit on the rest of Us; but, -I had come to expect better of You.

 

 

 

 

Wed, 07/07/2010 - 15:57 | 457071 thisandthat
thisandthat's picture

Isn't it here, already?

http://www.newmoney.gov/

Wed, 07/07/2010 - 15:51 | 457057 greyghost
greyghost's picture

just flush the fed at the same time......... "UNITED STATES NOTES"

Wed, 07/07/2010 - 15:50 | 457055 Pladizow
Pladizow's picture

Gold money loves Red money!

Wed, 07/07/2010 - 15:47 | 457050 Stun Gun
Stun Gun's picture

So, after everybody quickly converts their mattress cash into tangible assets, driving a short term pop in prices, what happens to those assets after the conversion is done?

 Many people will see a continued decline in equivalent value. It won’t fuel consumer spending for anything but a short period, then prices will drop even lower than they were as no one else is left to buy and the recent purchasers are fretting over the deteriorating value of their new assets and are no longer in a festive, buying mood.

It won’t end well so you might want to carry some of this around to keep those cranky types who got cornered in that paper money fiasco from ripping your throat out in the latte line at Star Bucks.

Wed, 07/07/2010 - 17:13 | 457301 Dr. No
Dr. No's picture

Exactly, which would then need to be followed by "Blue", "yellow", etc to keep driving the binge.  This is why I proposed disappearing ink above.  The money will just decay and that whay they dont have to keep picking new colors, since they may run out of color options and have to use green again someday (money will be like bell bottoms).  Its all a stupid idea anyway, I cant beleive I posted as many times as I have on this subject.

Wed, 07/07/2010 - 21:48 | 457715 VK
VK's picture

Hang on! You're on to something, changing colors, devaluing currency, pulling forward demand. The key idea here is to constantly decay the currency by issuing new currency to stimulate false economic activity in an ever increasing ponzi spiral to pull demand forward as otherwise all asset prices would fall. By jove! You've invented the Federal Reserve and fractional reserve banking, 96% loss of value in paper baby and the ponzi is going strong :)

Wed, 07/07/2010 - 15:43 | 457043 chistletoe
chistletoe's picture

I bought a pepsi yesterday with two dollar bills

and one of the two quarters I got back had red fingernail polish on it.

I was wondering if this was an omen from God to short the market.

But now, I understand ...

 

thanks again, zh

Wed, 07/07/2010 - 17:32 | 457328 Diogenes
Diogenes's picture

I've seen red painted quarters too. The best explanation I heard was from an apartment superintendent. The owner of the building gives him red quarters to use in the laundromat. When the owner empties the cash box he gives him back his quarters. Free laundry is one of the fringe benefits of being the super.

Wed, 07/07/2010 - 21:23 | 457679 Snidley Whipsnae
Snidley Whipsnae's picture

Many bars do the same thing with coins for Juke boxes, pool tables, etc.

Red painted quarters have been around forever.

Wed, 07/07/2010 - 15:41 | 457038 Gwynplaine (not verified)
Gwynplaine's picture

The main drawback to this plan is that unintended inflation would clear the physical markets of hard goods - anything portable.  At this point, it would generate too much fear and panic in one short impulse.   The way to introduce new money would be with a long persuasion campaign.  "It's really for your benefit, etc...".   This would require quite a lead time, so they should get started now.

For those of us who keep aware, there should be plenty of time not to get caught with worthless paper. It's like with the forced annuitization of IRAs and 401(k)s - just a watch at this point, not a warning.

Wed, 07/07/2010 - 15:31 | 457021 Problem Is
Problem Is's picture

DB Cooper Would Be Pissed...
Humping in backpacks of cash... For the rest of us:

"Anything, including: Jewelry, uncut diamonds, gold and silver, big boats, as many cars as you could find, houses, raw land, cases of wine, art..."

"Bergdorf Goodman, Saks and Macy’s would quadrupled their cash sales overnight."

It means the VAT tax would be put in place before Red Money...

Wed, 07/07/2010 - 15:42 | 457040 Bruce Krasting
Bruce Krasting's picture

There you go P. Another compelling argument. How can they ignore "it"?

Wed, 07/07/2010 - 23:04 | 457786 Problem Is
Problem Is's picture

The things "Fat Larry" Summers can think up in the oval office over a huge plate of cookies...

I liked your post... good thought experiment.

Wed, 07/07/2010 - 15:23 | 457011 the grateful un...
the grateful unemployed's picture

Red Money is just another version of some anecotal discussions which go on at the Fed. Bob Prechter mentions it in his book, the Fed has discussed means of stimulating the economy, by replacing bills in circulation with identical bills, except they would have time date strips. If the money doesn't circulate within a set amount of time, the money is devalued. 

If you were sitting on cash, you would have to recycle it every so often. The IRS and the DEA would be overwhelmed by the volume of a complete exchange out. And at first mention of the plan the price of gold would go through the roof. End game if they are looking for someway to restore confidence in fiat currency, this isn't it. 

Wed, 07/07/2010 - 15:14 | 457000 RockyRacoon
RockyRacoon's picture
Rubles: Now You See Them, Now You Don't

On January 22, 1991, Mikhail Gorbachev, the president of the Soviet Union, decreed that all existing 50- and 100-ruble banknotes were no longer legal tender and that they could be exchanged for new notes for three days only and only in small quantities. This had the effect of instantly deleting large portions of the savings and accumulated capital of private citizens. He followed up this genius move on January 26, by ordering that the police had the authority to search any place of business and to demand the records of any business at any time. The union's economic problems accelerated into a death spiral. Gorbachev resigned on December 25, and on the next day the Supreme Soviet dissolved itself and the Union of Soviet Socialist Republics.

http://mises.org/daily/4536

Wed, 07/07/2010 - 15:09 | 456996 DoChenRollingBearing
DoChenRollingBearing's picture

Great story Bruce.

Anyone have any sourcing on this Red Money theory?

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