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Guest Post: How the Paper Money Experiment Will End

Tyler Durden's picture


Submitted by Philipp Bagus via the Ludwig von Mises Institute blog,

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this scenario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government.

We are now in a situation that looks like a dead end for the paper money system. After the last cycle, governments have bailed out malinvestments in the private sector and boosted their public welfare spending. Deficits and debts skyrocketed. Central banks printed money to buy public debts (or accept them as collateral in loans to the banking system) in unprecedented amounts. Interest rates were cut close to zero. Deficits remain large. No substantial real growth is in sight. At the same time banking systems and other financial players sit on large piles of public debt. A public default would immediately trigger the bankruptcy of the banking sector. Raising interest rates to more realistic levels or selling the assets purchased by the central bank would put into jeopardy the solvency of the banking sector, highly indebted companies, and the government. It looks like even the slowing down of money printing (now called “QE tapering”) could trigger a bankruptcy spiral. A drastic reduction of government spending and deficits does not seem very likely either, given the incentives for politicians in democracies.

So will money printing be a constant with interest rates close to zero until people lose their confidence in the paper currencies? Can the paper money system be maintained or will we necessarily get a hyperinflation sooner or later?

There are at least seven possibilities:

1. Inflate. Governments and central banks can simply proceed on the path of inflation and print all the money necessary to bail out the banking system, governments, and other over-indebted agents. This will further increase moral hazard. This option ultimately leads into hyperinflation, thereby eradicating debts. Debtors profit, savers lose. The paper wealth that people have saved over their life time will not be able to assure such a high standard of living as envisioned.

2. Default on Entitlements. Governments can improve their financial positions by simply not fulfilling their promises. Governments may, for instance, drastically cut public pensions, social security and unemployment benefits to eliminate deficits and pay down accumulated debts. Many entitlements, that people have planned upon, will prove to be worthless.

3. Repudiate Debt. Governments can also default outright on their debts. This leads to losses for banks and insurance companies that have invested the savings of their clients in government bonds. The people see the value of their mutual funds, investment funds, and insurance plummet thereby revealing the already-occurred losses. The default of the government could lead to the collapse of the banking system. The bankruptcy spiral of overindebted agents would be an economic Armageddon. Therefore, politicians until now have done everything to prevent this option from happening.

4. Financial Repression. Another way to get out of the debt trap is financial repression. Financial repression is a way of channeling more funds to the government thereby facilitating public debt liquidation. Financial repression may consist of legislation making investment alternatives less attractive or more directly in regulation inducing investors to buy government bonds. Together with real growth and spending cuts, financial repression may work to actually reduce government debt loads.

5. Pay Off Debt. The problem of overindebtedness can also be solved through fiscal measures. The idea is to eliminate debts of governments and recapitalize banks through taxation. By reducing overindebtedness, the need for the central bank to keep interest low and to continue printing money is alleviated. The currency could be put on a sounder base again. To achieve this purpose, the government expropriates wealth on a massive scale to pay back government debts. The government simply increases existing tax rates or may employ one-time confiscatory expropriations of wealth. It uses these receipts to pay down its debts and recapitalize banks. Indeed the IMF has recently proposed a one-time 10-percent wealth tax in Europe in order to reduce the high levels of public debts. Large scale cuts in spending could also be employed to pay off debts. After WWII, the US managed to reduce its debt-to-GDP ratio from 130 percent in 1946 to 80 percent in 1952. However, it seems unlikely that such a debt reduction through spending cuts could work again. This time the US does not stand at the end of a successful war. Government spending was cut in half from $118 billion in 1945 to $58 billion in 1947, mostly through cuts in military spending. Similar spending cuts today do not seem likely without leading to massive political resistance and bankruptcies of overindebted agents depending on government spending.

6. Currency Reform. There is the option of a full-fledged currency reform including a (partial) default on government debt. This option is also very attractive if one wants to eliminate overindebtedness without engaging in a strong price inflation. It is like pressing the reset button and continuing with a paper money regime. Such a reform worked in Germany after the WWII (after the last war financial repression was not an option) when the old paper money, the Reichsmark, was substituted by a new paper money, the Deutsche Mark. In this case, savers who hold large amounts of the old currency are heavily expropriated, but debt loads for many people will decline.

7. Bail-in. There could be a bail-in amounting to a half-way currency reform. In a bail-in, such as occurred in Cyprus, bank creditors (savers) are converted into bank shareholders. Bank debts decrease and equity increases. The money supply is reduced. A bail-in recapitalizes the banking system, and eliminates bad debts at the same time. Equity may increase so much, that a partial default on government bonds would not threaten the stability of the banking system. Savers will suffer losses. For instance, people that invested in life insurances that in turn bought bank liabilities or government bonds will assume losses. As a result the overindebtedness of banks and governments is reduced.

Any of the seven options, or combinations of two or more options, may lie ahead. In any case they will reveal the losses incurred in and end the wealth illusion. Basically, taxpayers, savers, or currency users are exploited to reduce debts and put the currency on a more stable basis. A one-time wealth tax, a currency reform or a bail-in are not very popular policy options as they make losses brutally apparent at once. The first option of inflation is much more popular with governments as it hides the costs of the bail out of overindebted agents. However, there is the danger that the inflation at some point gets out of control. And the monopolist money producer does not want to spoil his privilege by a monetary meltdown. Before it gets to the point of a runaway inflation, governments will increasingly ponder the other options as these alternatives could enable a reset of the system.


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Fri, 01/24/2014 - 13:34 | 4363246 fonzannoon
fonzannoon's picture

It will end in digital money. 

Look at this mindfuck....

Look at this "crusty veteran" Cashin try to equate a 10 bil taper from 85 bil in QE to 75 bil to Volker hiking rates to 14% in 1982 and "choking inflation to death" and  then he backed off because the Mexican Peso was in trouble.

Is that some shit or what?


Fri, 01/24/2014 - 13:39 | 4363272 nope-1004
nope-1004's picture

Personally, I'm hoping it ends in public hangings, as well.


There is no taper.  Only lies about it.  FED has been monetizing North of 100 Bil per month for years.  Add up all the back door shenanigans and you'll arrive at the same conclusion.



Fri, 01/24/2014 - 13:40 | 4363277 THECOMINGDEPRESSION

Thats why you have to pick up these free bitcoins while it lasts..I am up to FREE 1/2 a bitcoin a week, forever..or until the site dies..haven't used a dime..

Fri, 01/24/2014 - 13:52 | 4363315 Professorlocknload
Professorlocknload's picture

But, of course. Free money!?

Fri, 01/24/2014 - 13:59 | 4363350 AlaricBalth
AlaricBalth's picture

From a distance, this portrait looks alot like Bernanke hung amongst a wall papered with US currency.

Fri, 01/24/2014 - 14:28 | 4363485 max2205
max2205's picture

Sure...ain't never going to happen

Fri, 01/24/2014 - 14:51 | 4363596 SafelyGraze
SafelyGraze's picture

Old Financing:

borrow money. build a house. borrow money. add/improve on house. 

bank lists house on its assets. as house value increases, so does the bank asset. owner pays off mortgage and then dies.

Recent Financing:

borrow money. buy a house. house value declines. owner defaults. bank doesn't evict. bank continues to up-value the house. former owner is now a squatter.

Emerging Financing:

borrow money. build a house. internal walls is made with silver rods. each month, the owner sells a rod and uses the cash to pay the monthly mortgage. when the rods have all been liquidated, owner walks away.



Fri, 01/24/2014 - 15:25 | 4363743 Richard Chesler
Richard Chesler's picture

Paper Money Excrement.


My eyes playing tricks on me.

Fri, 01/24/2014 - 18:03 | 4364575 woerm
woerm's picture

Paper money doing what it always does chap n to the x

Had been wondering what the trigger would be looks like Chicom letting one of their 'investment' vehicles collapse will time in with Turkish delight and Vensuleian(?) socialism.


buckle up this may be a bumpy ride

Fri, 01/24/2014 - 13:53 | 4363319 new game
new game's picture

death march to monetary concentration camp of inflationary chokehold til last breath.

Fri, 01/24/2014 - 13:59 | 4363335 Manthong
Manthong's picture

OK, so Governor Walker has been in Wisconsin for like what.. 2 years or so?

I just heard from a noted talk show entertainer that the state is running an  f’n $ 1 Billion  SURPLUS  now and that he is pushing legislation that will rebate the surplus to property tax payers.

Stick THAT up your posteriors, you liberal MF’s (meant as a literal.. you all probably do your mothers and grannies).

Fri, 01/24/2014 - 14:07 | 4363400 SAT 800
SAT 800's picture

Walker for President ! Let's get the ball rolling!

Fri, 01/24/2014 - 14:12 | 4363416 Manthong
Manthong's picture

whoa.. now that's an idea.. 

Wisconsin's loss might be the country's gain.

Fri, 01/24/2014 - 14:22 | 4363458 NIHILIST CIPHER

I'm in if no skeletons in his closet. 

Fri, 01/24/2014 - 14:31 | 4363491 Manthong
Manthong's picture

..everybody has some bones somewhere..

there is no total purity or perfection..

as Daniel Hannen noted, man is fallen..

let's work with that.. except if you are a golf addict choom fool that is owned by GS. 


Fri, 01/24/2014 - 14:31 | 4363504 NoDebt
NoDebt's picture

My own towship went from a $200K per year DEFICIT to a $500K per year SURPLUS after throwing the bums off the board and severing ties with their cronies.  Put a nice group of conservatives in there, found out there was so much corruption we called the District Atty. on some of the old board members, and then set about fixing the problems.  It took ONE YEAR to realize the radical improvement in fiscal health and NOT ONE SINGLE SEVICE WAS CUT TO ACHIEVE THAT.

I could get behind Scott Walker a lot easier than I could be persuaded to feign excitement for the Fat Man.

Fri, 01/24/2014 - 14:53 | 4363603 Dick Buttkiss
Dick Buttkiss's picture

No real reformer can get elected President or not be assassinated if he/she were.

The Fed/MIC/NSA/CIA rule.

At least until Bitcoin and friends end-run them, stripping them of their power.

Fri, 01/24/2014 - 16:33 | 4364061 Talleyrand
Talleyrand's picture

Nobody for president, please....or governor or congress or any of that. Enough already!

When will people learn? Probably not in my (your) lifetime. Oh, well.

Fri, 01/24/2014 - 18:55 | 4364725 Dick Buttkiss
Dick Buttkiss's picture

"I believe we are headed now into a breakup of the nation into smaller units, but this time there will be no reconstituting the original USA as in 1865." — James Howard Kunstler,

Yes, we are, and I fully expect it to happen before the decade is out. States Rights is a resurgent phenomenon, after all (drug legalization, Obamacare nullification, etc.), and as the abysmal failure of our vaunted experiment in federative government sinks in, I believe the American people are going to experience the same sense of futility that their Soviet counterparts did, "We pretend to work, and they pretent to pay us" being their running joke. 

How long, then, before something like it — "We pretend to rule, and they pretend to let us"? — so infuses the public consciousness that the American people collectively Just Say No and walk away?

It's over, after all, and surely, at some level, we all know it.

Fri, 01/24/2014 - 14:11 | 4363414 brewing
brewing's picture

Nebraska looking to do the same.

Fri, 01/24/2014 - 14:28 | 4363487 Joeman34
Joeman34's picture

Check out what Bruce Rauner is trying to do for IL:

Dare we say the tide is beginning to turn??

Fri, 01/24/2014 - 14:39 | 4363544 WillyGroper
WillyGroper's picture

That Kock bros. sellout?

You can be serious, You believe that?

Fri, 01/24/2014 - 17:44 | 4363892 Tall Tom
Tall Tom's picture

Government Unionized Workers took a large cut in benefits because of Scott Walker's actions.


It would help if the Federal Government Employees lost some of thier pension compensation and benefits also.


It is not a "cure all" but it is a good start.


You know that when Government was "shut down" the Government Employees were delighted to take an UNSCHEDULED PAID VACATION at Taxpayer Expense. That is why they want to Shut Government Down again.







Fri, 01/24/2014 - 13:56 | 4363338 fonestar
fonestar's picture

If eBay and Google. start accepting Bitcoin it will go to thousands of dollars per BTC this year.

Fri, 01/24/2014 - 14:05 | 4363383 maskone909
maskone909's picture

hope so.  gold silver and BTC is the way to go. 

Fri, 01/24/2014 - 14:10 | 4363404 SAT 800
SAT 800's picture

If pigs had wings they could fly.

Fri, 01/24/2014 - 14:13 | 4363417 fonestar
fonestar's picture

We are making history while the losers are being left behind.  Enjoy the SHTFantasy'ing fellas!

Fri, 01/24/2014 - 14:15 | 4363425 FeralSerf
FeralSerf's picture

Not necessarily. Ostriches have wings and they don't.

Fri, 01/24/2014 - 14:27 | 4363481 midtowng
midtowng's picture

I'm starting to think that people pushing Bitcoins are part of the pump-and-dump crowd.

Fri, 01/24/2014 - 14:38 | 4363536 fonestar
fonestar's picture

Bitcoin isn't some stock that can be pumped.  It's $780 today because it's the vastly superior product, not because anyone pumped it there.

Fri, 01/24/2014 - 14:00 | 4363363 rubiconsolutions
rubiconsolutions's picture

"Thats why you have to pick up these free bitcoins while it lasts"

Isn't that precisely what got this country into trouble? Thinking that you can get 'sumthin for 'nothin? Can't create wealth the old fashioned way? Just print it! Isn't that what you are saying? What a load of crap.

Fri, 01/24/2014 - 14:04 | 4363386 new game
new game's picture

thread jacker..

Fri, 01/24/2014 - 14:11 | 4363411 fonestar
fonestar's picture

Right, the pinnacle of mathematical, networking and cryptograpic genius is tantamount to "nothin" according to braindead morons on Zerohedge.  

Fri, 01/24/2014 - 14:35 | 4363520 jomama
jomama's picture

luckily for all us incredibly stupid idiots at ZH, we've got you around to set us straight!

glad to see you're so charitable so sit around here 'educating' us every chance you get to open your cum recepticle.

Fri, 01/24/2014 - 14:30 | 4363492 midtowng
midtowng's picture

If Bitcoin was such a great deal then why are you spamming for it? Shouldn't you be trying to keep it a secret while you accumulate Bitcoins?

Fri, 01/24/2014 - 14:41 | 4363552 fonestar
fonestar's picture

Personally, I'm not worried about it.  It seems 95% of people will not get Bitcoin no matter what.

Fri, 01/24/2014 - 16:24 | 4364006 Tall Tom
Tall Tom's picture

Without widespread acceptance the BTC is doomed to failure.


But in the chance that there is a greater acceptance of the Cryptocurrency...


How are you planning to account for the growing data size of the BLOCKCHAIN??? My Internet Downlink speed is not growing anywhere near as rapidly as the Blockchain size of BTC.


That means that if BTC progresses into wider acceptance then the TIME for transactions increase Exponentially as there are limits to download and upload speeds.


If you claim that there will be a Central Hub, Supernodes, that will store any portion of those transactions, then the Cryptocurrency is subject to control by another entity.


Anonymity will disappear.


The software architechture is flawed.


I am not the only one whom knows this...


Watch the video from


You cannot hide the truth, fonestar.


Fri, 01/24/2014 - 17:19 | 4364352 fonestar
fonestar's picture

That is totally false.  Bitcoin already has been elected by the technical elite as the currency and those are the only people who really matter on this planet.  Joe Six-Pack and Farmer Bob are superfluous and they can go fruck themselves.

Fri, 01/24/2014 - 17:37 | 4364452 Tall Tom
Tall Tom's picture

...the technical elite as the currency and those are the only people who really matter on this planet.


Well when you need your Toilet fixed I am certain that you will not be paying in Bitcon. What good is it if it is not a viable Curency? If I cannot trade it for what I want then it serves no purpose.


And if you are looking toward "Corporate Plumbers" and "Corporate Auto Mechanics" then you are really detached.


Enjoy your Corporatocracy. That is what you promote. That is fascist. You are part of the problem, fonestar.

Fri, 01/24/2014 - 14:32 | 4363513 fijisailor
fijisailor's picture

Incredible.  I just won .00000228 bitcoin.  I'm rich.  Try again in 1 hour.

Fri, 01/24/2014 - 15:59 | 4363893 Herd Redirectio...
Herd Redirection Committee's picture

OMG, thats almost 0.01 USD!  Actually its 1/10th of 0.01 USD, but hey...

Sat, 01/25/2014 - 07:01 | 4366155 Zelotai
Zelotai's picture

Why do you spread this shit?

Sat, 01/25/2014 - 07:05 | 4366164 Bearwagon
Bearwagon's picture

Maybe he simply does not know that the less you have to pay for something - the less is free.

Fri, 01/24/2014 - 13:58 | 4363339 Landotfree
Landotfree's picture

Public hangings will do nothing to stop anything.   Billions of unfunded walking liabilities will have to be liquidated.  The use of credit as money has been going on for 1000s of years.... why?  Because humans want something for nothing including the majority of the 7 Billion on this floating rock.   

"same conclusion"

Whether or not the Fed does this or that will not eliminated the same conclusion.   Attaching interest to your medium of exchange will eventually get you to unable to grow at an exponential growth, collapse and then liquidation of the unfunded walking liabilities.

Sounds like you are into the Hilter way of liquidation of the walking unfunded liabilities.  Quick.  The world hired Hilter to do within a decade what it would have taken 40-60 years without him.   



Fri, 01/24/2014 - 14:07 | 4363392 Duke of Earl
Duke of Earl's picture

"Public hangings will do nothing to stop anything. "


You never know unless you try.

Fri, 01/24/2014 - 14:17 | 4363433 Landotfree
Landotfree's picture

I wonder who the unlucky SOB is... I mean there is  7 billion to choose from.   Popcorn ready.

Fri, 01/24/2014 - 14:31 | 4363494 midtowng
midtowng's picture

Public hangings are the ONLY thing that ever stopped corruption.

Fri, 01/24/2014 - 15:40 | 4363782 Landotfree
Landotfree's picture

That does not address the issue.... 

The system is collapse due to Math i.e. humans believing they can supply and demand exponential growth.  So, King George hangs X amount of people then I guess there is no corruption, good luck with all that.


Good luck in your hangings... unless of course you are the one they come for.   :)


Fri, 01/24/2014 - 17:02 | 4364220 Duke of Earl
Duke of Earl's picture

This is an oversimplification.  Human beings do not believe that at all.  I highly doubt if government officials do despite what they say, note the massive amounts of commodity purchases going on by the wealthy.  The governments have painted their way into a corner and the only way out is through collapse.  The goal is to kick the can to the next guy in line.

Nobody is going to get elected by saying they can cause more pain now to avoid potential pain in the future.  People get into power by telling everyone that they can take money away from others and give it (through services or directly) to whomever they happen to be speaking to at the moment.

If you can devise a way to stop the current economic death spiral without violence as a result, I'd love to hear it.

Sat, 01/25/2014 - 09:43 | 4366354 Escrava Isaura
Escrava Isaura's picture

Landotfree, awesome reasoning against  ~some~ brainwashed idiots at Zero Hedge [unfortunately].

Fri, 01/24/2014 - 14:10 | 4363403 ebworthen
ebworthen's picture

Those efficient Germans.

Fri, 01/24/2014 - 14:15 | 4363419 Landotfree
Landotfree's picture

"The Architect - Denial is the most predictable of all human responses. But, rest assured, this will be the sixth time we have destroyed it, and we have become exceedingly efficient at it." - The Matrix Reloaded


Now there exists even more efficient ways of liquidation i.e. nuclear fusion.  Either way the result of use of the equation will produce the same conclusion.

Fri, 01/24/2014 - 14:25 | 4363466 dick cheneys ghost
dick cheneys ghost's picture

how much time do we have??

Fri, 01/24/2014 - 15:37 | 4363790 Landotfree
Landotfree's picture

Chart expnential growth.... the norm is 60-80 years and the chart goes damn near straight up depending on a few factors.  

Even with the Fed, Japan and China doing everything they can, the system is dangerously close to not expanding.... the war against the equation is never won... it always wins... just like Truth.

Fri, 01/24/2014 - 16:34 | 4364070 Tall Tom
Tall Tom's picture

There is not that much time left at all.

Most will be unaware of what hit them.

It will be quick.

Maybe it is better to leave them asleep and unaware.

Fri, 01/24/2014 - 14:56 | 4363625 jaxville
jaxville's picture

  The use of credit as money has been going on for a long time. The difference now is that those creating credit based money have nothing to offer in exchange for the credit they have created. In the past those who created trade-able credits did so to facilitate a sale of a real good which lent backing to the notes they created. Credit based money (which is not mentioned by the author) is the greatest fraud ever foisted upon this planet. Public hanging of all those involved in fractional reserve banking would send a message to all humanity that would ring loud for a millenium. The financial sector is one big parasite sucking the lifeblood out of humanity. A useless lot that no one needs except corrupt gov'ts. I am sure we can find room on the gallows for those who swore to serve society but chose themselves instead.

  There can be no real change without such drastic action. I am very optimistic that people will take appropriate action as our banks (and the gov'ts they own) continue to act with such hubris.

Fri, 01/24/2014 - 16:58 | 4364207 Tall Tom
Tall Tom's picture

Credit based money (which is not mentioned by the author) is the greatest fraud ever foisted upon this planet. Public hanging of all those involved in fractional reserve banking would send a message to all humanity that would ring loud for a millenium.


Have you ever used a Credit Card? Have you ever financed a car? Have you ever purchased a Mortgage on a Home?


Take a good look in the mirror as you were directly involved in the Fraud, regardless of whether or not you paid off your debt.


Look at yourself in the Mirror. Enjoy your Hanging.   


To calculate the drop necessary to break your neck you take 1000 and divide that by your weight. That is the Drop required to deliver the 1000 foot pounds to your neck.. Slow Strangulation is rather painful. You want your neck broken.


3/4 Inch Three Strand Manila Hemp is a Good Rope to use. Boil it and then Strech the Rope for a day by suspending it with 1000 lbs of stones in a bag at the Noose End.  That ensures that all of the Force is deliverered to the neck at the end of the drop and none of the energy will be wasted through stretching the rope. If done properly there will be little to no recoil at the end of the drop on Hanging Day.


The British Noose is the most efficient. Do not use that Noose seen in all of the Cowboy Western Movies which the Americans use. Make sure that the eye of the noose is underneath your Right Chin with the massive part which forms that eye is against your Adam's Apple. This ensures Death by not only severing the Spinal Cord inside of the dislocated Neck Vertabrae but has the affect of crushing the Esophagus.


Of course if the drop is too much then decapitation is the result. That is just too messy to clean up.


Enjoy your hanging.

Fri, 01/24/2014 - 13:57 | 4363347 Mad Mohel
Mad Mohel's picture

Exactly, if I was smashing you in the face with a bag of assholes, would you really care how many assholes the bag contained? 

Fri, 01/24/2014 - 13:42 | 4363289 Skin666
Skin666's picture

Yes Fonz.


Bitcoin is going mainstream with users, but more importantly merchants. Expecting this to accelerate this year.


Electronic gold and silver and whatever other commodity will then be in direct competition with crypto currencies.


This is the dawn of a new Age...

Fri, 01/24/2014 - 13:51 | 4363314 Occident Mortal
Occident Mortal's picture

"This is the dawn of a new Age..."

Yeah, this time it's different.

Fri, 01/24/2014 - 13:55 | 4363328 fonestar
fonestar's picture

There's never been decentralized, P2P currencies before.... so yes this is very different.

Fri, 01/24/2014 - 13:59 | 4363357 Ignatius
Ignatius's picture

Jeez, man, aren't you missing a Star Trek convention somewhere?

Give it a rest or open The Church of the High Holy Tech Solutions.  Something.

We need a break.

Fri, 01/24/2014 - 14:19 | 4363441 Imminent Crucible
Imminent Crucible's picture

fonestar: "There's never been decentralized, P2P currencies before"

Apparently he's never heard of bank notes. Private commercial banks have issued their own scrip for centuries, which circulated as currencies everywhere from the U.S. to Europe and back in Han Dynasty China.  Most of them plunged in value as the issuing bank's credit circled the bowl.

I'm sure this time will be different.  Did you not notice that Bernanke was careful to say that BTC was beyond the Fed's control? That's called baiting the trap.  They would love to see you pile all your personal wealth into a vaporous cyber currency block chain, where they can steal it faster than you can say "dropoutJeep".

Fri, 01/24/2014 - 14:25 | 4363469 fonestar
fonestar's picture

Comparing 19th century private bank notes to Bitcoin is almost as dumb as Wired Magazine's article about Civil War era stamp laws killing Bitcoin.

Fri, 01/24/2014 - 14:47 | 4363581 RafterManFMJ
RafterManFMJ's picture

If you cannot trust something you cannot see that is supposedly stored on the rock safe internets, then what can you trust?

I'm going to buy 3 rolls of BitCoins as soon as OblamoCare pays for my lobotomy.

Fri, 01/24/2014 - 14:52 | 4363601 fonestar
fonestar's picture

Why do I need to see or hold something to trust it?  Most of the things I trust I cannot see.

Sat, 01/25/2014 - 11:54 | 4366555 Imminent Crucible
Imminent Crucible's picture

"Why do I need to see or hold something to trust it?"

Spoken with the childlike uncritical faith of a Jim-Jones cultist.  How about all the people who owned stocks with or through MF Global?  When Corzine blew it up, they were left with nothing.  You know why?  Because they didn't have the paper stock certificates; all their shares are belong to the Deposit Trust Clearing Corporation.  If they'd taken delivery of the certificates, they wouldn't have lost all that sleep.  Instead, they trusted crooks they'd never met with assets they'd never seen.

In Corzine we trust. In Obama we trust. In Bernanke we trust.  In some Japanese programmer whose real name we don't know, WE TRUST.

All that faith buys you a ticket to a hard lesson.  But don't get me wrong: It's your right to sink every penny you've got into a currency that can disappear at night while you're asleep, or be declared illegal, or lose half its value in a day, or be confiscated by General Clapper.  It's your money.

Fri, 01/24/2014 - 14:28 | 4363482 fonestar
fonestar's picture

Give it a rest or open The Church of the High Holy Tech Solutions.


I'll tell you when fonestar gives it a rest.  When the Bitcoiners and devotees of Satoshi Nakamoto achieve TBA (Total Bitcoin Adoption).

Fri, 01/24/2014 - 15:09 | 4363675 Johnny Cocknballs
Johnny Cocknballs's picture

I just want to know why you think the US government is going to let Bitcoin compete with the dollar...???  I'm not being snide or glib... inquiring minds....

Fri, 01/24/2014 - 14:34 | 4363516 SAT 800
SAT 800's picture

missing his medications, at the very least.

Fri, 01/24/2014 - 14:51 | 4363592 fonestar
fonestar's picture

Robospamming DXM

Fri, 01/24/2014 - 14:02 | 4363371 i_call_you_my_base
i_call_you_my_base's picture

Until I can charge clients and pay employees in bitcoin (ie get paid), I don't care about it. I don't see the point until that time. If you can't get paid in bitcoin, you are speculating in the exchange rate.

Fri, 01/24/2014 - 14:07 | 4363399 LawsofPhysics
LawsofPhysics's picture

Correct, the only value is in the ability to make discrete transactions.  the problem being that this applies to all the same bad actors (the TBTF banks) as well.  They still have plenty of firepower to manipulate that exchange rate however they like.

Fri, 01/24/2014 - 14:32 | 4363503 fonestar
fonestar's picture

Until I can charge clients and pay employees in bitcoin (ie get paid), I don't care about it. I don't see the point until that time. If you can't get paid in bitcoin, you are speculating in the exchange rate.


Buy now, buy at $10,000 or buy in at $100,000 BTC.  Your choice.

Fri, 01/24/2014 - 14:52 | 4363594 RafterManFMJ
RafterManFMJ's picture

HURRY YOU MUST ACT NOW!! Now or you'll miss this opportunity FOREVER!! YOU MUST GIVE UP YOUR MONEY NOW! Before it's to late!!!

You get a variant of the above most confidence games...

Fri, 01/24/2014 - 16:03 | 4363906 Herd Redirectio...
Herd Redirection Committee's picture

BTC went from $300 to $800 in about what, 5 days?  And since it has done nothing, except lose money for most who bought after that, 800->1100-> 800->900->800, etc.

And all the commercial mining set ups come online when?  In like 30 days?

Sat, 01/25/2014 - 06:06 | 4366088 limit_less
limit_less's picture

Rafter - " YOU MUST GIVE UP YOUR MONEY NOW! Before it's to late!!!" 

This is genius, Im not sure even i could resist getting into bitcoins if the price goes parabolic.

Fri, 01/24/2014 - 14:05 | 4363377 LawsofPhysics
LawsofPhysics's picture

"so yes this is very different." - not really, so long as the usual suspect can participate in the P2P currency market.  Now, should we elimiate these fraudulent actors ability to do so, then you might have something.  For now, the P2P currencies will only hasten the demise as they are conveinient mechanisms for moving wealth or buying things descretely.  Until the bad actors are put to death, nothing has changed.  P2P currencies won't change that, I'll descretely move my funds to physical assets (where I know they are safe) and use the P2P network to discretely purchase things I don't want the NSA to be aware of.

Fri, 01/24/2014 - 14:13 | 4363422 SAT 800
SAT 800's picture

Left hand threaded wing nut. Severe Delusional neurosis.

Fri, 01/24/2014 - 15:57 | 4363883 HungryPorkChop
HungryPorkChop's picture

Bitcoin, yeah, right?!  Bitcon has got some very powerful force pulling the strings behind the curtains and anyone that can't see this needs to put down the Bitcoin Kool-Aid.  When has any country or govt said it's o.k. to use a competing currency within its borders?  The answer is NEVER, NEVER and ABSOLUTELY NEVER.  Heck, they've invaded countries for less than this yet Bitcon somehow magically gets around all of these prevailing forces.  Not to mention the non-ending positive press from the media.  Am I the only one that believes this is more than incredibly odd?  Then consider that some magical force has pumped up the Bitcoin price like a race horse. 

Fri, 01/24/2014 - 16:05 | 4363919 Herd Redirectio...
Herd Redirection Committee's picture

If you ever look at the bids here you will see there are usually 2 large buy orders keeping a floor under the price...

Fri, 01/24/2014 - 13:54 | 4363323 JLee2027
JLee2027's picture

Digital money is intrinsically evil. It is the reason the current system has survived this long, decades longer than it should have. When everything crashes back to Earth, the only thing people will trust won't be stored in 1's and 0's. It will be in their jingling pockets.

Fri, 01/24/2014 - 13:59 | 4363352 fonzannoon
fonzannoon's picture

By the time this thing crashes the populace will be so dumbed down they will trust whatever Jon Stewart tells them to trust.

Fri, 01/24/2014 - 14:06 | 4363393 i_call_you_my_base
i_call_you_my_base's picture

Of all state propagandists you pick John Stewart? Interesting.

Fri, 01/24/2014 - 14:13 | 4363418 fonzannoon
fonzannoon's picture

by a landslide

Fri, 01/24/2014 - 14:21 | 4363452 Imminent Crucible
Imminent Crucible's picture

His brother left the NYSE, so it's all OK now.  You can trust him.

Fri, 01/24/2014 - 14:36 | 4363526 SAT 800
SAT 800's picture

Who's John Stewart? No, I really don't know. that's the point; why do you know? Why do you expose yourself to the organs of state propaganda?

Fri, 01/24/2014 - 17:08 | 4364255 Tall Tom
Tall Tom's picture

Know your enemy.


If you do not know the enemy then you know not what to fight or how to fight.


His name is JON...without the 'h'.

Fri, 01/24/2014 - 14:17 | 4363435 Chief KnocAHoma
Chief KnocAHoma's picture

No... it will end in blood, and lots of it.

Fri, 01/24/2014 - 15:08 | 4363670 Drifter
Drifter's picture

Maybe from foreign nukes, not from any fantasy "American revolution".

The blood will by yours, not theirs.

Fri, 01/24/2014 - 14:26 | 4363471 midtowng
midtowng's picture

Most of the solutions listed above are either being tried out now, or are being experimented with.

Sat, 01/25/2014 - 06:10 | 4366092 limit_less
limit_less's picture

Bagus, the author of this piece did an excellent video on the Euro crisis. How the Euro came to be, how it got f******

Fri, 01/24/2014 - 13:36 | 4363264 brewing
brewing's picture

tick, tick, tick, tick...

Fri, 01/24/2014 - 14:06 | 4363391 Sudden Debt
Sudden Debt's picture

okay... I'll play along...


Fri, 01/24/2014 - 14:38 | 4363534 SAT 800
SAT 800's picture

"Euro". Euro, who? yourowe everybody.

Fri, 01/24/2014 - 13:37 | 4363265 Ignatius
Ignatius's picture

Exponential debt spells the end.

Cancel the fucking debts (which cancels the savings of the oligarchic fucks who own 90% of it).

Fri, 01/24/2014 - 16:06 | 4363931 Herd Redirectio...
Herd Redirection Committee's picture

No, no, lets instead do a reverse Robin Hood, 10% wealth tax (for poor people only), to pay off sovereign debts...

Fri, 01/24/2014 - 13:37 | 4363268 Seasmoke
Seasmoke's picture

It always Comes back to Gold. 

Fri, 01/24/2014 - 13:49 | 4363308 DaveyJones
DaveyJones's picture

but they usually take out one letter in the word to get you to do other things

Fri, 01/24/2014 - 13:55 | 4363327 new game
new game's picture

or just plain ol outlaw ownership, or at least try...

Fri, 01/24/2014 - 17:13 | 4364314 Tall Tom
Tall Tom's picture

They are trying to outlaw ownership and Inheritance. That is the goal.  That is what the ACA is actually about. If you get subsidized by Medicaid then the Government takes your assets to satisfy the "Medicaid" Bill which you rang up.

Fri, 01/24/2014 - 14:12 | 4363415 centerline
centerline's picture

It always comes back to food and water.  Violence typically a component of the journey.

Fri, 01/24/2014 - 14:19 | 4363442 SAT 800
SAT 800's picture

Silver. Govt.s and Big Banks are too interested in Gold; why buy yourself problems? Silver will appreciate more also; and they will ignore it cause the whole market is so tiny.

Fri, 01/24/2014 - 15:07 | 4363671 tvdog
tvdog's picture

Hasn't happened so far. The small size of the silver market only means that one bank (JPM) can control the price rather than requiring the coordinated activities of several.

Fri, 01/24/2014 - 13:38 | 4363273 Bearwagon
Bearwagon's picture

It will end in a great war.

Fri, 01/24/2014 - 13:59 | 4363362 Fish Gone Bad
Fish Gone Bad's picture

It will end with a great deal of finger pointing and crying.

Fri, 01/24/2014 - 13:39 | 4363278 LawsofPhysics
LawsofPhysics's picture

"recapitalize banks through taxation" - So bail these fuckers out again?  I don't think so motherfucker.

Let them die, perhaps someday, someone will step forward to provide a real banking alternative.

There haven't been "banks" on the planet for quite some time.

Fri, 01/24/2014 - 13:45 | 4363295 El Vaquero
El Vaquero's picture

I'm not really sure what real banking is though.  IMO, fractional reserve banking will inevitably give way to bankers having excessive influence and power, and it also encourages us to consume future resources in the present. 

Fri, 01/24/2014 - 13:45 | 4363296 NoDebt
NoDebt's picture

Next person to say the word "tax" gets a 2x4 to the back of the head.

Fri, 01/24/2014 - 13:55 | 4363334 El Vaquero
El Vaquero's picture

Even when said in the context of "Property taxes are unethical?"

Fri, 01/24/2014 - 13:55 | 4363337 new game
new game's picture

or a 2 x 2 wrapped with barbed wire up their ars...

Fri, 01/24/2014 - 13:58 | 4363356 El Vaquero
El Vaquero's picture

Tsk tsk, there are several in DC who might enjoy that. 

Fri, 01/24/2014 - 14:03 | 4363379 new game
new game's picture

the visual reminds me of the last deer i gutted. removing the ars hole is a bitch.

reeming good time. hey its still warm, hmmm...

Fri, 01/24/2014 - 14:27 | 4363483 El Vaquero
El Vaquero's picture

Open up the abdominal cavity, split the pelvis, cut the asshole out and send it back home to DC. 

Fri, 01/24/2014 - 16:41 | 4364106 Calmyourself
Calmyourself's picture

Bingo split them first get your fingers around it

Fri, 01/24/2014 - 14:20 | 4363449 Chief KnocAHoma
Chief KnocAHoma's picture

Tax tax tax

Don't get wrong, I'm as conservative as anyone you've ever met, but if the system needs to be recapitalized go get it from the fuckers who stole it... not hard working guys like me.

Fri, 01/24/2014 - 13:54 | 4363331 kchrisc
kchrisc's picture

""recapitalize banks through taxation"

I say, sure! But one problem, who's going to sew the heads of these motherfuckers back on?!

Fri, 01/24/2014 - 14:03 | 4363381 yogibear
yogibear's picture

DC will bail out the criminals again. Socialize losses and privatize profits. 

More wealth stealing. Until banksters are tried by the masses.

Fri, 01/24/2014 - 13:41 | 4363285 Dan The Man
Dan The Man's picture

Print like crazy while you're thinking about how to save your ass

Fri, 01/24/2014 - 13:51 | 4363317 DaveyJones
DaveyJones's picture

and in the meantime, at least it will have toilet paper

Fri, 01/24/2014 - 13:41 | 4363288 kchrisc
kchrisc's picture

It's not an "experiment" it is theft and we already know from history how it ends.

Sort of like me starting my neighbors house on fire and calling it an "experiment" to see what would happen.

Fri, 01/24/2014 - 14:24 | 4363460 SAT 800
SAT 800's picture

Exactly. Theft. Ongoing theft; been going on for a long time now; it's accelerating.

Fri, 01/24/2014 - 13:43 | 4363292 DaveyJones
DaveyJones's picture

"how the paper experiment will end"

I got in all down on paper

Fri, 01/24/2014 - 13:44 | 4363294 Spungo
Spungo's picture

Instigate war between China and Japan. You don't need to pay that money back if the bond holders are dead.

Fri, 01/24/2014 - 14:25 | 4363462 SAT 800
SAT 800's picture

Hey, that's not a bad idea.

Fri, 01/24/2014 - 14:55 | 4363617 RafterManFMJ
RafterManFMJ's picture

And you could sell both sides billions in weapons!!

Say, I wonder if Someone Else has ever done that?

Fri, 01/24/2014 - 13:46 | 4363298 NIHILIST CIPHER

We have another 20 years of currency...will it be paper? Look for the polymer plastic model.......Uk to start use of polymer notes in 2016. Twenty countries already use them. Crypto-currencies , who knows.

Fri, 01/24/2014 - 22:02 | 4363299 JuliaS
JuliaS's picture

I remember reading the Weimar chronicles, how the government was paying salaries of unionized workers with printed cash and even paying those who refused to work in foreign countries under WW1 reparation agreement. Almost all of the Germany's printing houses were running full time printing bank notes in the early 20's. Then in July 1922 the money printers themselves went on strike and that was one of the things for the currency shock - for a moment the Deutschmarks couldn't keep up with their own rate of inflation and that's when it all ended.

Fri, 01/24/2014 - 13:47 | 4363302 CheapBastard
CheapBastard's picture

"If you want to keep your paper experiment, you cannot keep your paper experiment."

Fri, 01/24/2014 - 13:49 | 4363306 I woke up
I woke up's picture

I think #4 Financial Repression will be next, mandate that 401k's have to purchase X amount of US treasuries because it's the patriotic thing to do.

Fri, 01/24/2014 - 13:58 | 4363354 new game
new game's picture

bingo, you are vested mutha fuka...

Fri, 01/24/2014 - 14:20 | 4363451 andrewp111
andrewp111's picture

QE and ZIRP already constitute financial repression. They are not of sufficient magnitude to do the job, since the debts are too large.

Fri, 01/24/2014 - 14:26 | 4363477 SAT 800
SAT 800's picture

Agreed. Owners of 401K's, and especially IRA's in money market funds are in great danger. Governments always steal everything that they can get their hands on, on the way down.

Fri, 01/24/2014 - 17:30 | 4364417 bilejones
bilejones's picture

There's a plan for that.

"Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration."


To be rolled out, like the Patriot Act,  when the appropriate level of fear has been reached.

Fri, 01/24/2014 - 17:30 | 4364426 bilejones
bilejones's picture

There's a plan for that.

"Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration."


To be rolled out, like the Patriot Act,  when the appropriate level of fear has been reached.


Because: "
The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”"

Fri, 01/24/2014 - 13:50 | 4363307 I woke up
I woke up's picture


Fri, 01/24/2014 - 13:52 | 4363318 shutdown
shutdown's picture

Looks like a dead end? Now there's a Five Star understatement!

Fri, 01/24/2014 - 13:54 | 4363324 Stuck on Zero
Stuck on Zero's picture

The Author forgets alternative #8. This is the route taken by many smaller countries.

#8 Beg for handouts from your rich neighbor under the threat of going unstable.


Fri, 01/24/2014 - 14:01 | 4363368 new game
new game's picture

9) take back the country by force and institute sound money.

Fri, 01/24/2014 - 14:30 | 4363493 SAT 800
SAT 800's picture

the only force that's significant in the modern world, (post WW11), is air force. without air superiority taking anything back by force is out of the question. When the Russians achieved air superiority on the eastern front, the Wehrmacht folded like a cheap toy.

Fri, 01/24/2014 - 14:30 | 4363496 SAT 800
SAT 800's picture

A military coup is possible; a civilian insurrection is impossible.

Fri, 01/24/2014 - 17:27 | 4364400 Tall Tom
Tall Tom's picture

The Afghanis did not have a superior Air Force (ANY AIR FORCE) to that of the Soviet Union. They won that war.

The North Vietnamese did not have a superior Air Force to that of the United States. They won that war.

The Iraqi Insurgents did not have a superior Air Force (ANY AIR FORCE) to that of the United States. We left Iraq in a mess and they expelled us. They won that war.

The Afghanis are currently engaged with the United States without any Air Force. They seem to be prevailing after 11 Years of conflict.


Superior Air Forces do not ensure victory. Post World war II History is replete of examples where this is not the case. There are many exceptions to the rule. Generally in asymetrical conflicts an Air Force is not necessary to achieve the goals.

Fri, 01/24/2014 - 14:34 | 4363518 Billy Sol Estes
Billy Sol Estes's picture

#10) Government kills its own citizens.

Fri, 01/24/2014 - 13:54 | 4363325 RaceToTheBottom
RaceToTheBottom's picture

Soon Groves Law will not be able to keep up with Greenspam/Bernanke/Yellen

Fri, 01/24/2014 - 13:56 | 4363330 The.Harmless.Who
The.Harmless.Who's picture


Banks eh?  

(from wiki) ....

The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths


Hmm, from Italy, during the Renaissance period... That rings a bell with a play that involved a "banker". 


Fast forward, check out today's FED bankers:

1. The previous head,

2. The out-going head,

3. The incoming head,

4. and her vice head.... 


What's really changed? 


Fri, 01/24/2014 - 14:30 | 4363499 detached.amusement
detached.amusement's picture

reminds me of something else that had 4 heads...


Fri, 01/24/2014 - 13:56 | 4363336 lasvegaspersona
lasvegaspersona's picture

or...a new system will emerge which allows governments to continue with their fiat...only this time a relationship to gold.

Currencies that hold gold on their balance sheet, MARKED TO MARKET, as the euro does, will think twice before unrestrained printing. If they take that course they will see the POG rise in their currency and its value will rapidly fall. As Rueff observed, our current system evolved from the gold exchange standard, one of "astonishment and scandal". Corrections will be made as these fiats, as they currenctly exist, are unstable. It does not have to be so. Freegold...see fofoa.

Fri, 01/24/2014 - 14:15 | 4363430 withglee
withglee's picture

The only constraint you can have by relating to gold, is to in-fact offer to exchange gold for the "fiat". Right now there's 1oz of gold per person on earth. It costs a little less than 1oz of gold in resources to create a new ounce. Thus, an ounce is worth less than $2,000. Each person would then be limited to $2,000 dollars in savings and debt. Does that work for you?

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