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Guest Post: Dollar Backwardation

Tyler Durden's picture




 

Submitted and © by Keith Weiner of the New Austrian School of Economics

Dollar Backwardation

The current financial crisis, may progress to a phase where people demand and hoard dollar bills but take electronic deposit credits only at a discount which increases until electronic deposit credits are repudiated entirely.  The Federal Reserve would be powerless to solve the problem, because while they can create unlimited electronic deposit credits they can’t create unlimited paper dollar bills, “money you can fold” as Professor Antal Fekete calls it.  There would be a glut of electronic deposits, but a shortage of dollar bills.

Before the financial crisis metastasized in 2008, Fekete wrote a paper that I think is underappreciated and under-discussed.  “Can We Have Inflation and Deflation at the Same Time?” (http://www.safehaven.com/article/8507/can-we-have-inflation-and-deflatio...)  In his paper, he discussed the “tectonic rift” between paper Federal Reserve Notes (i.e. dollar bills) and electronic deposits.  By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds).  Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.

He discussed the inverted pyramid of John Exter.  Gold is the triangle at the bottom, and then above is silver, dollar bills, and then the various kinds of electronic deposits, stocks, real estate, etc.  In a crisis, people want to move from top to bottom of the pyramid, but of course there isn’t enough of the stuff at the bottom.

In a scenario in which desperate, panicky people are trying to cope with the enormity of a collapse that they don’t and can’t understand, I think this split between “physical” dollars and “electronic” dollars is very plausible. 

Just as there is nothing to be accomplished by selling an underlying security as it becomes worthless, only to buy a derivative of it, selling Treasury bonds and buying dollars is equally nonsensical.  The dollar is the Federal Reserve’s liability, backed by the Treasury bond as the asset.  If you believe the Treasury bond is worthless, then you ascribe no value to the dollar either.  This is why gold will go into permanent backwardation.  Holders of dollars will provide an unlimited bid for gold that will not be reciprocated by holders of gold.  The latter own the only safe asset, and the only monetary asset that is not ultimately backed by the Treasury bond or the dollar, and they will have no desire to give it up.

The concept of backwardation is simple.  It is when people accept a future promise to deliver only at a discount to physical stuff handed over right now.  This could be when there is a shortage, such as wheat before the harvest.  Or in the case of gold, backwardation signifies a collapse in trust.  But isn’t this the same phenomenon of a tectonic rift between paper dollars and electronic deposits?

In a certain sense, the “money you can fold” behaves like a physical commodity, a present good (I realize I am stretching the concept here more than a bit).  The electronic deposit credit is most definitely a future promise.  In my gold backwardation thesis, the action begins with the offer on the futures contract falling below the bid on spot gold.  The bid-ask spread on spot gold widens, as the offer is relentlessly advancing, pulling the bid behind it.  The bid-ask spread on the futures contract also widens, as the offer remains stubbornly high, but the bid withdraws and retreats as gold buyers don’t trust futures and buy physical gold instead.  Eventually, there are no more sellers of physical gold and that is that (except for the dollar-commodities-gold arbitrage, a backdoor way for dollar holders to get a little gold before the end of the game).

If this split occurs in the dollar, I think it will play out the same way.  At first, sellers of real goods may accept electronic credit money, but demand a higher price.  The spread on the electronic dollar widens, with the bid from real goods falling.  At the same time, virtually unlimited demand for the “real” paper you can fold causes the bid on the paper dollar to rise.

Who knows how long it could last?  People could go on accepting paper dollars out of long habit.  Obviously, this is an unstable situation that must necessarily collapse.  Unlike gold, the paper dollar has no value other than the broken promises that back it.

I dub this “dollar backwardation”.

 

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Wed, 05/23/2012 - 13:52 | 2455820 tawdzilla
tawdzilla's picture

oh well, at least Snooki still has 4.5 mil twitter followers

Wed, 05/23/2012 - 14:06 | 2455883 Silver Bug
Silver Bug's picture

The dollar is on the path of complete descrution. Hold tight your Gold and Silver.

 

http://silverliberationarmy.blogspot.ca/

Wed, 05/23/2012 - 14:13 | 2455909 He_Who Carried ...
He_Who Carried The Sun's picture

Why one would want to stuff the matress with greenbacks is beyond me.

Weimar? We won't have it and prayers of this sort won't help Gold either...

 

Wed, 05/23/2012 - 14:33 | 2455991 iDealMeat
iDealMeat's picture

Convert All your greenbacks into physical coins.. Sheep think its "worthless"..  and it makes your safe to heavy to carry..

 

 

Wed, 05/23/2012 - 14:33 | 2455997 fourchan
fourchan's picture

dollar retardation

Wed, 05/23/2012 - 14:48 | 2456063 in4mayshun
in4mayshun's picture

$100,000 dollar bills......BOOM! Problem solved

Wed, 05/23/2012 - 15:25 | 2456197 malikai
malikai's picture

Just think of the tax revenues. Everyone will be in the 1%.

Wed, 05/23/2012 - 15:33 | 2456235 caconhma
caconhma's picture

"Chinese Buyers Defaulting On Commodity Shipments As Prices Plunge"

May be this is exactly what Chinese are deliberately doing: driving commodity prices down! Here Chinese, American, and EU interests are in line.

However, based on the G8 statement about the US intention to release oil from strategic reserves, there is no free/spare oil to go around.

Consequently, this commodies created plunge will not be long living event.

One thing more. To make yuan a world reserve currency, Chinese will have to tie it to the gold. Nobody will allow Chinese to print uncontrollably their reserve currency yuan as the USA has done it with US$ for the last40 years.

Wed, 05/23/2012 - 20:15 | 2457147 UP Forester
UP Forester's picture

How Hyperinflation Occurs:

http://www.youtube.com/user/TruthNeverTold

Wed, 05/23/2012 - 16:42 | 2456533 Rynak
Rynak's picture

 

Weimar? We won't have it and prayers of this sort won't help Gold either...

You are correct about the weimar bit - we won't have it..... because in weimar, it was just one country's financial system breaking down. The looming risk instead if of a scale, that has no history, because it never happened before.

Wed, 05/23/2012 - 23:25 | 2457699 cynicalskeptic
cynicalskeptic's picture

Pray to God we DON'T have Weimar - or any other version of hyperinflation - but what IS the end game when debt is expanding exponentially and governemtns are creating trillions out of thin air?  Weimar looked pretty good for a while - was quite 'prosperous' because of all that newly created cash (even drew in foreign investors) right up until things went to hell.  

We've never had ALL major currencies in the world 'printing' more money at a rate that is beyond belief.....      In past situations like Weimar (Hungary, Yugoslavia, ZImbabwe and others) there was always a "Safe haven' (or safe havens) to flee to - other currencies you could put your money to preserve value.  When Yugoslavia went to hell the preferred haven was the Geeman mark - with ZImbabwe it was US dollars or South African Rands - or gold dust panned from rivers.  

There is NO 'safe haven' large enough to accommodate a flight from the Euro or $US.   There aren't enough Swiss Francas, Norwegian Kronas, or Singapore Dollars to accommodate the demand for 'safety' that arises when people see their savings losing value and their banking system collapse.  

The US dollar looks good ONLY in comparison to the alternatives at the monment..... You're worried about Greece?   California has a far bigger GDP and is in far worse shape.   But what happens when the arabs won't take US dollars for oil - and China won't take any more IOU's from the US?   China is reaching the point where it no longer 'needs' the US as a market.  We gave them all our factories and let them create a working and middle class that can now afford to buy what they produce.  Chnina may have its Potemkin cities but they are likely to keep control of thing at home far longer than the US or Eurpoe when things go to hell.

And for those interested in history - One of the signs of hyperinflation taking off is NOT ENOUGH PAPER CURRENCY......... this has happened in EVERY example of hyperinflation.  Governments cannot  - literally - print money fast enough (even as they add more and more zeros to new notes).  The electronic systems shut down - unable to cope with the everchanging prices.  No sane company will let you use a credit card when you can buy something on credit and that 'thing' is worth far more than the money you owe by the time your billis due to be paid.  Nobody wants NY bank balance - letting money sit means you are watching it lose value.    The VELOCITY pf cash goes supersonic as it is spent as soon as it is received.  You get paid weekly , daily or even more often - go out and buy food, fuel ANYTHING you cann while yourmoney is still worth  something.  In Argentina you'd convert your paycheck into a refrigerator - or appliance - ANYTHING Of value - after buyting what food and fuel you could.   Cash is in demand but rising prices mean there's never enough of it.  Ironically, coins hold value better - and disappear form circulation as their metal value is SOMETHING - while 12 digit Zimdollars aren't even good for toilet paper.

ANd if you think the truly wealthy are going to stand by idly and watch THEIR savings go to zero, you're naive.  They will find whatever safe havens they can (if they already haven't done so) - and then buy up everything on the cheap when blood runs in the street.

Wed, 05/23/2012 - 21:02 | 2457270 Dr. Sandi
Dr. Sandi's picture

The point is that when this slow motion crash gets nasty squishy, the ATMs will be turned off. The banks will stop giving you cash for the digits showing a credit on your account.

Those with actual greenbacks will still be able to buy stuff when the little plastic cards stop making money flow from the wall.

If the liquidity dries up, your trip to the grocery will be pretty rough if you only have a debit card and friendly Mr. Kroger only wants dollar bills.

Those with thousands in the bank may be willing to write a check for hundreds or even dozens of greenbacks. They will be very lucky if anybody is willing to accept the risk and take the check though.

There's roughly $1.1 Trillion in Phoney Reserve Notes in circulation worldwide, nearly $1 trillion of it in $100 dollar bills according to the Feeble Reserve website. That's what we have to work with if the electronic money gets blown away for some reason. People who pretend to know this stuff say well over half of those greenbacks are actually living outside the U.S.

The problem is that we have over $6 Trillion in existence. So less than 1/5 of our "money" is FRNs. The rest is being held safely on title deeds and hard drives and other hard to spend abstractions.

When the fan blades start to seriously clog, the real fake money, in the form of $100 bills, will take on a new life. Particularly in the grey and black markets where DHS can't easily determine if you bought more than your government alloted share of gasoline, potatoes or hookers.

When the magic money from the wall machines start to choke, actual fake money in the form of dollar bills will become king.

Wed, 05/23/2012 - 14:12 | 2455910 Pladizow
Pladizow's picture

Perhaps this is another reason why Gov's push for cashless societies!

Wed, 05/23/2012 - 14:53 | 2456069 Beam Me Up Scotty
Beam Me Up Scotty's picture

And the gubbamint likes to stick its nose into everyones business too.  All you bureaucrats can get your pointy little noses out of everyones lives.  Between the smart phones and the credit cards, they can track everywhere you go on a daily basis.  Two words:

Fuck Off

Wed, 05/23/2012 - 16:00 | 2456358 Ahmeexnal
Ahmeexnal's picture

smartphones are for stupidpeople

Wed, 05/23/2012 - 17:10 | 2456619 Cupid Stunt
Cupid Stunt's picture

What`s a smartphone ?

Wed, 05/23/2012 - 17:26 | 2456646 akak
akak's picture

I've heard rumors that it is something that shallow, soulless, insecure, trend-sucking, conformist consumerist sheep fanatically carry with them every waking moment of the day as some kind of fetish in the desperate attempt to convince themselves that their pathetic, empty lives actually have meaning.

Wed, 05/23/2012 - 15:16 | 2456156 Kayman
Kayman's picture

"Perhaps this is another reason why Gov's push for cashless societies!"

This is the reason Government wants a "cashless" society.  It is a lot easier to skim taxes electronically.

To the articles main point.  Paper money has more puchasing power than electronic money.  I don't think it is necessary for me to provide transaction details.

"Hey Joe.  How much would ya charge me if I paid ya debit/credit instead of cash ?"

The parasites, including the government, are forcing a burgeoning underground economy.

I say let the fat, lazy fucks look after themselves. That includes you Bernanke.

Wed, 05/23/2012 - 16:02 | 2456372 Snidley Whipsnae
Snidley Whipsnae's picture

I believe doing biz in cash is great but the cops are stealing large sums at every opportunity... So, be damn careful how you transport cash for legit biz transactions...

Here is a recent example from Tenn... but I can site many examples from Florida and other areas where cash has been confiscated and most times not returned... The cops are the robbers! Stay clear of I 95 in Florida if you are carrying cash. When Vogel was sheriff of Volusia County he literally stole millions of dollars from travelers. Granted some were drug trafficers but many were legit citizens on business ventures.

http://rt.com/usa/news/cash-tennessee-reby-bates-935/

Wed, 05/23/2012 - 16:16 | 2456433 Debtman And Robbin
Debtman And Robbin's picture

Hmm...

Taxes? Inflation is a tax. They do not need to track your money when they can debase it's value on a permanent basis.

You seem to assume that governments need a society at all. How come everyone thinks that they will e.g. hyperinflate to keep the system alive, even if only for a lttle longer?

They could just starve a whole nation and completely sacrifice it if they think that it fullfilled its purpose in the great game.

E.g., how important is US for the world economy today? There are enough countries that could compensate for the real US contribution to world trade. The iShit is made in China anyway.

Wed, 05/23/2012 - 17:34 | 2456704 sullymandias
sullymandias's picture

Many Chinese restaurants in my area give 5% discount if you pay in cash.

Wed, 05/23/2012 - 22:03 | 2457471 WmMcK
WmMcK's picture

At Sym's, an educated consumer is our best customer. Cash and carry, if it doesn't in a certain time frame, it was marked down.

Wed, 05/23/2012 - 17:30 | 2456691 Overfed
Overfed's picture

Something to think about every time you see an ad on TV pimping the Visa card instead of cash. Also, if you have a problem with the rich getting richer, stop giving them your money!!!!

Wed, 05/23/2012 - 23:28 | 2457708 cynicalskeptic
cynicalskeptic's picture

Imagine waking up to find out that EVERYTHING you've saved, everything you earn, is now only spendable - and accessible - under new rules imposed by Big Brother......

Besides it's a lot easier to create cash electronically than print more banknotes with extra zeros.

Wed, 05/23/2012 - 14:56 | 2456077 Sizzurp
Sizzurp's picture

I have been fully onboard with the inflation argument, but I remain perplexed that we have not seen it runaway as of yet.  There can be no dubt that powerful deflationary forces are also at work.  Fekete, interestingly enough, has not been surprised by this, and has in fact predicted this scenario for several years.  He points the finger at rampant bond speculation, front running the fed by the big financial institutions which continually drive interest rates lower, as the main culprit in runaway delflation.  It's an interesting argument, and while I am not sure I fully understand everything this man says, I definetely take his words seriously as the thesis seems to fit the scenario we are seeing. Anyway, it's worth a read http://www.professorfekete.com/articles/AEFNoBusinessLikeBondBusinessStill.pdf

Wed, 05/23/2012 - 15:29 | 2456211 i_fly_me
Wed, 05/23/2012 - 14:12 | 2455911 DosZap
DosZap's picture

By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds).  Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.

 

SINCE WHEN has this Admin, done, been limited by ANYTHING??

They will do whatever they want, whenever they want.

Presses???......................hell we have Foreign gubs w/ USD presses.

Wed, 05/23/2012 - 14:28 | 2455972 LawsofPhysics
LawsofPhysics's picture

Since when has any administration since 1913 been limited?  - fixed.

Wake the fuck up already.

Wed, 05/23/2012 - 21:32 | 2457381 Vlad Tepid
Vlad Tepid's picture

Calvin Coolidge pretty much kept to himself...

Wed, 05/23/2012 - 14:37 | 2456013 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

"SINCE WHEN has this Admin, done, been limited by ANYTHING??"

 

Bingo.  That Ben will have to break the law to do all the printing required will be offered as the true measure of his heroism. 

 

Anyone could have worked within the rules.  Only a true leader can commit jailable felonies on a daily basis to save us all.

 

</sarc for the the kind of people who don't get MDB>

Wed, 05/23/2012 - 14:45 | 2456046 Bunga Bunga
Bunga Bunga's picture

By statute, Dollars could be redeemed for physical gold until they couldn't.

Wed, 05/23/2012 - 15:06 | 2456120 delacroix
delacroix's picture

north korea, and Iran, will print all the dollars we need.

Wed, 05/23/2012 - 23:34 | 2457722 cynicalskeptic
cynicalskeptic's picture

Actually the drug barons in South America have been doing a pretty good job too.....

Dirty secret - the US LOVES all the illegal business conducted worldwide in cash ($US) - so do the big banks who launder these funds.  Thise millions in drug dealers safes and held by mobsters all over the world are like interest free T-Bills - free loans to the US government.  You could end the drug business in a month by issuing new $US 100 bills - and invalidating the old ones  - requiring that ALL conversions of amounts greater than ...say $5000 - be 'explained' or refused.  There aren't enough 'strawmen' in the world to convert all the illegal business proceeds out there.....

Wed, 05/23/2012 - 14:18 | 2455927 Karl von Bahnhof
Karl von Bahnhof's picture

Isnt this billions?

Wed, 05/23/2012 - 15:11 | 2456135 Karl von Bahnhof
Karl von Bahnhof's picture

The cartoon dog?

Wed, 05/23/2012 - 13:54 | 2455826 Bay of Pigs
Bay of Pigs's picture

BINGO! We have a winner...

Wed, 05/23/2012 - 14:17 | 2455922 Stoploss
Stoploss's picture

Yeah, i'll buy that.  The cost of a debit card to the issuing banks in relation to the note itself is already on the radar i would think. Although i think this falls into the hoarding phase of fiat collapse. This is where the story of "cash in the matress" comes from.

If i had to choose, based on what the fed does, (electronic manipulation) as opossed to actual paper manipulation, (is the preferred method), since electronic transactions can be controlled centrally, also suggests paper backwardation could be a part of the grand plan.

Careful what you wish for.

Wed, 05/23/2012 - 14:31 | 2455983 Debtman And Robbin
Debtman And Robbin's picture

 

IMO Fekete is one of the most intelligent contributors on money theory on the internet.

But he says that there must be a distinction between physical and digital FRN due to the limited (mechanical) capacity of a printing press.

Keith Weiner also thinks that "this split between “physical” dollars and “electronic” dollars is very plausible".

I think this is complete bullshit. Haven't they seen Weimar Reichsmark bills with a face value in the millions and billions, even trillions?

You can even buy them on ebay.

Just add as many zeros as you like...

Limited printing capacity? Come on!

Wed, 05/23/2012 - 14:47 | 2456054 tarsubil
tarsubil's picture

You have a point but I'm not convinced either way. Perhaps adding zeros to dollar bills will be tough enough politically for there to be a delay. During the delay you'll see the physical note gain in value. Probably should stay on the cautious side and hold a small amount of cash along with gold and silver. Physical notes will bridge the gap if need be.

Wed, 05/23/2012 - 15:50 | 2456310 Debtman And Robbin
Debtman And Robbin's picture

I think I know what you mean. And I also see a delay. But the other way round. It's the commercial banks who are the main creators of digital currency for the slaves. And since they (at least for now) have minimum reserve requirements, I think the FED will always be able to front-run the banks with paper shit. 

I also do not think that there will be a difference between adding digital zeros or some micrograms of ink - at least from a political view. Even the dumbest sheeple should realize that the system is falling apart when suddenly they are all billionaires. 

I really do not understand why Fekete ignores the Weimar lessons. Especially since he is quite an expert on Heinrich Rittershausen, one of the greatest economists ever. 

Wed, 05/23/2012 - 18:39 | 2456903 UP Forester
UP Forester's picture

Hammer, meet nail.  This is the problem with the "big thinkers."  Everything is theory, until it meets reality.

Anybody go to your local coin shop and stack recently?  Best I can get is $35 on rounds, $28 face on pre-'64 halfs and under, $40 on dollars, and $37 on ASEs.

Spot price on anything is just a guesstimate, really a theory, where as reality is what you actually can get.

As far as I can tell, the whole system is in backwardation.

Wed, 05/23/2012 - 21:45 | 2457422 tarsubil
tarsubil's picture

Hmmm, if you'll excuse me, I've got a meeting with an escort for a couple hours.

Thu, 05/24/2012 - 00:55 | 2457469 New World Chaos
New World Chaos's picture

A 1,000,000:1 paper/electronic disconnect happened in Zimbabwe, but electrons could be converted to paper at a lesser ratio in exchange for kickbacks to certain corrupt bankers.  This is the kind of thing that Americans will never understand until after it has hit them.  Idiots at the LA Times actually ran an article called "Zimbabwe economy threatened by lack of suitable currency paper" or something to that effect- too lazy to google it. 

There is also a similar thing going on in the occult economy which is run by the high-ranking Illuminati.  There are trillions, even quadrillions in secret accounts with the central banks but good luck turning it into little-people electrons, let alone paper.  Think about what happened to those who held the "monster boxes" of bonds.  Basically, there is an even bigger invisible ponzi lurking beneath the the publicly visible ponzi.  They try to keep them separate.

Agree that there will be a brief window when cash is king in America.  It will have to be after the bank holiday is declared but before there are extra zeros, price controls, and empty shelves.  Last chance to stock up cheap.  How long before Americans figure out what has happened?  I want to say two days but the sheeple are exceptionally stupid.  Give them two weeks, maybe two months tops.  Nice trades can come from the disconnect but I refuse to hold cash beyond two weeks' expenses. 

Nickels, bitchez!  Coins historically don't get revalued and a nickel already contains metal worth more than its face value.  Protection against inflation and deflation.

Thu, 05/24/2012 - 05:35 | 2458188 andrewp111
andrewp111's picture

Nickels. So you are going to take delivery of a dump truck load of nickels and store 30 tons worth in your basement. And when you go to spend those nickels in any significant amount, you will have to pay huge counting costs. Even most parking meters won't take nickels anymore, now that rates have gone up to $3/hr.

Thu, 05/24/2012 - 20:03 | 2460612 New World Chaos
New World Chaos's picture

You don't need 30 tons worth.  Just enough to make the main silver time-safe unmovable and get by until people figure out that junk silver is the new currency.

Wed, 05/23/2012 - 15:27 | 2456206 ffart
ffart's picture

Limited ability? Doesn't really sound like much of an engineering challenge to me. Just add more 0's to the bank notes and print them one sided on newspaper. Weimar style. Still, I'm hoping it's at least a few years before people realize there's absolutely no innate value in FRNs paper or otherwise and commence dumping them en masse.

Wed, 05/23/2012 - 15:57 | 2456344 Debtman And Robbin
Debtman And Robbin's picture

That's what I meant. Just print more zeros on the paper. 

But Fekete's argument is that you can not print tons of paper bills 24/7.

WTF!?! As if they would stick to today's face values for all times... Add some zeros and a 100 FRN bill will not even be worth pocket change.

Wed, 05/23/2012 - 13:54 | 2455827 dark pools of soros
dark pools of soros's picture

Aren't Zynga Zuckerbucks better anyway? 

Wed, 05/23/2012 - 14:10 | 2455896 Pladizow
Pladizow's picture

ZUCK THAT!

Wed, 05/23/2012 - 14:19 | 2455929 THX 1178
THX 1178's picture

Zuck that Zhit.

Wed, 05/23/2012 - 14:36 | 2456011 Cupid Stunt
Cupid Stunt's picture

Zuck that Zhit Zorgan Ztanley

Wed, 05/23/2012 - 13:54 | 2455829 Trimmed Hedge
Trimmed Hedge's picture

FB is in the green, too!

BUY BUY BUY!!!

Wed, 05/23/2012 - 14:22 | 2455937 Whoa Dammit
Whoa Dammit's picture

NASDAQ FB Highs/Lows for today have somthing that looks wrong. The high is shown as 42 which is not shown on the intraday chart. Fat finger or head fake? Here's a screen shot: EDIT-Deleted the screen shot as it didn't show up as charts.


Wed, 05/23/2012 - 14:57 | 2456080 Beam Me Up Scotty
Beam Me Up Scotty's picture

Good.  Keep it propped up until there are options available.  I want to buy some long dated out of the money puts.

Wed, 05/23/2012 - 13:55 | 2455834 OpenEyes
OpenEyes's picture

!zehctib noitadrawkcab rallod

Wed, 05/23/2012 - 13:58 | 2455847 LULZBank
LULZBank's picture

Its dollar, not bollar btw... :)

Wed, 05/23/2012 - 15:56 | 2456337 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

What a silly bunt!

Wed, 05/23/2012 - 14:12 | 2455904 Canadian Dirtlump
Canadian Dirtlump's picture

I initially thought I was being verbally berated in polish.

 

But then I just nodded and slid open my office drawer containing 10 gleaming 2012 maples.

Wed, 05/23/2012 - 14:39 | 2456017 akak
akak's picture

 

I initially thought I was being verbally berated in polish.

Psia krew!  Ziebie czech kaczka kopnila, dupajasz!

Wed, 05/23/2012 - 15:07 | 2456124 Karl von Bahnhof
Karl von Bahnhof's picture

Good! But mixed...

Wed, 05/23/2012 - 18:19 | 2456848 Canadian Dirtlump
Canadian Dirtlump's picture

I'll take that under advisement with someone other than my mom thanks..

 

 

 

Wed, 05/23/2012 - 17:41 | 2456735 SilverRhino
SilverRhino's picture

!zehctib revlis ... taht kcuf

Wed, 05/23/2012 - 13:56 | 2455836 suckerfishzilla
suckerfishzilla's picture

Keeping some money under a mattress isn't so crazy after all.

Wed, 05/23/2012 - 14:22 | 2455921 tocointhephrase
tocointhephrase's picture

Good luck when it goes hyper, that hard earned paper will buy a teenth of what it did, but hey be my guest ;)

Wed, 05/23/2012 - 14:24 | 2455960 crawldaddy
crawldaddy's picture

no you wont. If the economy does fall so far as to silver/gold/barter,  There will be no restaurants, there will be no stores, only black markets.  LIsten if fiat goes hyper our ENTIRE society grinds to a halt, nothing gets trucked or moved, most stores have 3 days worth of inventory.

If the shit goes bad, there are no winners.

Wed, 05/23/2012 - 14:29 | 2455975 LawsofPhysics
LawsofPhysics's picture

Correct, then beans, bullets, and like minded innovative neighbors is all that matters.

Wed, 05/23/2012 - 14:57 | 2456079 WillyGroper
Wed, 05/23/2012 - 14:45 | 2456044 GFKjunior
GFKjunior's picture

We can only wish all that happens.

Wed, 05/23/2012 - 13:57 | 2455842 ATG
ATG's picture

Brilliant illustration of Gresham's Law for fiat, but there's no substitute for Constitutional Legal Tender Silver sound money:

http://richcash8tradeblog.blogspot.com/

Wed, 05/23/2012 - 13:58 | 2455848 Azannoth
Azannoth's picture

I don't know what to think of this post? April 1st Déjà-vu?

Wed, 05/23/2012 - 14:11 | 2455900 Karl von Bahnhof
Karl von Bahnhof's picture

Cash is cash or...? Im puzzled

"Visa is for life TM"

Wed, 05/23/2012 - 14:46 | 2456039 Doña K
Doña K's picture

Perhaps the hidden agenda is that once this notion goes viral, enormus amounts of cash wil be withdrawn and the banks will loose leverage. Al you need is a start and then the sweater unravels in minutes.

Best strategy: Physical gold & siver, 3-6 months living expenses in cash in two safes (one easy to find the other much harder) and the rest electronic in various banks.

If you don't have such cash, store food. 50lb bag of rice less than $18 at Sams Costco etc.

Wed, 05/23/2012 - 14:00 | 2455849 Joe The Plumber
Joe The Plumber's picture

The discounting of electronic deposits is already ocurring. It is unbelievable the cash deals i can get from small businesses and individuals

A big toyota odyssey van windshield replaced for 140 bucks total including labor?

Huge discounts for cash on all sorts pf pre owned stuff sometimes even on new like that windshield

It is fukin unbelievable the cash discounts you can get

Wed, 05/23/2012 - 14:09 | 2455875 BobPaulson
BobPaulson's picture

Don't attribute to backwardation what is actually tax evasion.

This is like the USSR in the 80s. When the only market is the black market, the goverment can only generate "revenue" by printing it.

I've seen guys in dark alleyways trade in traveller's cheques that were as old and worn as FRNs that went the the washer just to have a hard currency that wasn't government made.

Wed, 05/23/2012 - 14:19 | 2455924 Joe The Plumber
Joe The Plumber's picture

If the discount is greater than the dude's marginal tax rate then tax evasipn is not the only consideration

That would be the way to measure the phenomena

Wed, 05/23/2012 - 14:33 | 2455992 TonyCoitus
TonyCoitus's picture

Bingo!  Folks love to get paid cash bithez!

Wed, 05/23/2012 - 13:59 | 2455851 Rathmullan
Rathmullan's picture

I forget what time the afternoon U.S. equity decoupling begins? Is it when the aperitifs are served in Brussels or after the creme brulee? Oh, never mind I see that it has already begun with the market significantly off of morning lows.

Wed, 05/23/2012 - 13:59 | 2455852 Born-Again Bankster
Born-Again Bankster's picture

Stop making so much sense and using such big words...I'm trying to watch an infomercial for the lap band. 

Wed, 05/23/2012 - 14:00 | 2455858 willien1derland
willien1derland's picture

 By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds). Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.

1.) Ummm, have you seen the Fed's Balance Sheet Lately...Treasury Bonds they got!

2.) Printing Capacity can be expanded - Obama will lunge at the camera screaming Do you think Romney's Bain could create jobs priniting cash?! No, I didn't think so damn it!

Despite the idea if it came down to printing FEDNOTES - they would do it - and Obama would get the credit for creating jobs...

 

Wed, 05/23/2012 - 14:02 | 2455870 Joe The Plumber
Joe The Plumber's picture

A cash economy is the working man's way of protesting and going Galt

Wed, 05/23/2012 - 14:44 | 2456040 narnia
narnia's picture

Margin calls & bank runs are in our future.  This analysis does not include the deflationary effect of this tsunami of credit explosion.

There will be a small window from the start of the bank holiday to the "major announcement" where FRNs & coin will be king.  It's not that they'll be a spread per se, there just won't be access to electronic $.

When commerce ceases & the blackouts start, a good portion of the population will be celebrating what they will get next, which will pre-empt any backwardation.

 

Wed, 05/23/2012 - 14:31 | 2455980 jimmyjames
jimmyjames's picture

1.) Ummm, have you seen the Fed's Balance Sheet Lately...Treasury Bonds they got!

***************

They have swapped their UST's-for a balance sheet of toxic junk ie: FNM-FM-in fact all GSE's-Toggle bonds--PIIGS bonds etc.

Wed, 05/23/2012 - 14:02 | 2455864 Darth..Putter
Darth..Putter's picture

The only thing that makes a currency valid is the trust that value can be gotten from it after accepting it.  A pyramid can be overlaid on the inverted one showing the trust factors of each level.

Thu, 05/24/2012 - 05:30 | 2458185 andrewp111
andrewp111's picture

Not exactly. Currency has value if you must have it to pay your taxes.  The fact that you must pay the IRS to stay out of prison, or pay the county to keep your house  means you must have US dollars.  The Sovereign is the source and sink for money, and it is the taxing power that gives any currency its real value.

Wed, 05/23/2012 - 14:02 | 2455865 Waterfallsparkles
Waterfallsparkles's picture

I agree I have been taking paper dollars out of the bank.  I still worry about a Bank holiday where you could not have access to your funds.  And heck with .05% return what am I losing.  Nothing.

If America did have a Bank run I also believe that there are not enough actual Dollars printed or in circulation for everyone to be able to get their Money.

Best to plan ahead.

Wed, 05/23/2012 - 14:26 | 2455948 tekhneek
tekhneek's picture

Yeah. Base money is like 10% of Revolving Credit (or maybe even less now)

1 in 10 people will get their money, the other 9 suckers will get Zuckerbucks.

If you have significant money in a bank (e.g., more than just your bills) then I strongly suggest a plan to wind down that "position" in the bank and go to something less... counteryparty risk(ish) like maybe... gold and silver?

Just don't lose it all in a boating accident like I did. Shit's heavy in the water.

EDIT: Monetary base is about 2,638 (billions of dollars) http://research.stlouisfed.org/fred2/series/BASE?cid=124

And M2's at about 9,869 http://research.stlouisfed.org/fred2/series/M2?cid=29

Can someone correct me, I thought M0 was base money (currency in circulation) and M1 was base money + deposits.

If that's the case then M1 is 2,217 http://research.stlouisfed.org/fred2/series/M1?cid=25

I think I had a bit too much whiskey last night.

Wed, 05/23/2012 - 15:30 | 2456221 jimmyjames
jimmyjames's picture

and M1 was base money + deposits.

*********

It is-but deposits are bogus because of Sweeps and a deposit in savings (including the Sweeps in checking) become credit transactions and not "money"

When a depositor leaves his money with a bank-they are agreeing to a lease to lend their money out for a risk rate-that deposit can be leveraged and loaned out 10 or so times-

The checking depositor does not agree to loan their money out and expects it back on demand-but because of Sweeps-it becomes a Credit transaction as well--

Like you said above-it's not there-

Wed, 05/23/2012 - 14:03 | 2455873 Pancho Villa
Pancho Villa's picture

Euro backwardation could very well happen in Greece if the banks run out of cash. There would be a premium on physical euros because everyone would be hoarding them in expectation of their euro bank deposits changing overnight into drachma deposits.

Wed, 05/23/2012 - 14:05 | 2455880 Boxed Merlot
Boxed Merlot's picture

Thank goodness treasury bills are physical.  The muppet version however, savings bonds, have gone electronic.

Does the US pay China's ~2 billion a month interest in physical, electronic or land?

Thu, 05/24/2012 - 05:25 | 2458181 andrewp111
andrewp111's picture

T-bills haven't been physical in decades. Ever hear of Treasury Direct? It is now the only way to own T-bills, notes, and savings bonds.

Wed, 05/23/2012 - 14:06 | 2455886 RationalPrepper
RationalPrepper's picture

Assuming this prediction plays out, one would want to hold a substantial amounto of physical cash in addition to physical metals, while eliminating all exposure to any other assets.

Any pontifications on an appropriate amount/ratio?  How much cash to hold is probably best denoted in months of expenses vs. a %, since incomes will vary so widely. So how much cash to hold?  Six months of living expenses?  A full year?  The rest in bullion?

Admittedly, the major problem with this is who in the h#%@ knows what current dollar value will equate to 6 months of living expenses when TSHTF...

Wed, 05/23/2012 - 14:15 | 2455918 youngman
youngman's picture

Just don´t tell your kids, your family,, your friends,,,,, and have a little brass and lead as cover...

Wed, 05/23/2012 - 14:22 | 2455947 Joe The Plumber
Joe The Plumber's picture

Dont tell anyone. Then you have a heart attack and die. Then some geek in the future with a metal detector gets rich

Wed, 05/23/2012 - 14:37 | 2455998 tekhneek
tekhneek's picture

Good luck getting a good ratio.

Let me put it this way -- have significantly more exposure to metals and cash than digital deposits. Cash will be very valuable in a deflationary spiral (which we're headed for) until parity's reached at some level w/ gold. Whether it's dow 1,000 gold $1,000/ounce or not doesn't make a difference.

Deposits can also be worthless if they shut the power off, I know that's a side note, but it's fucking true.

EDIT: I'd go with 80/20 as a good starting place and adjust as time progresses. Just don't be surprised if commodities get slammed the remainder of this year. They'll probably bounce on QE but there will still be a sell-off and deflation will resume at some point. I wouldn't even be against 50/50 (flat) right now as deflation looks like it's headed this way and we're going for lower commodity prices across the board.

I'd also recommend a substantial position in silver. Gold's for your wealth. Silver's for exchange/money medium at markets. Go to a local farmers market and ask the farmer if he'll accept a 1 oz silver eagle for $30 of veggies and I betcha he'll say yes.

Premiums, bitchez.

Wed, 05/23/2012 - 15:55 | 2456332 silverserfer
silverserfer's picture

Dont go spend your OZ's for just $30. Wait untill the bad money is out of the system before you spend the real stuff. If the farmer accepts cash give them cash and save your shiney till it buys you the entire farm. 

Wed, 05/23/2012 - 16:14 | 2456420 tekhneek
tekhneek's picture

That's the plan.

I was just pointing out that even now the real stuff trades at a premium to the paper.

Wed, 05/23/2012 - 21:53 | 2457443 WmMcK
WmMcK's picture

I'm currently getting $12-15 of produce for each Liberty bell (90% half) and the (paper) spot price does not seem to matter much. Great way to make friends.

Wed, 05/23/2012 - 18:47 | 2456932 boooyaaaah
boooyaaaah's picture

Oh, I get it

I go to an Indian run Gas station in NJ

Raceway

And they charge 3.75 $/gal witha dredit card

And 3.65 $/gal for CASH

 

 

 

Wed, 05/23/2012 - 14:07 | 2455889 NERVEAGENTVX
NERVEAGENTVX's picture

Here comes the post-European close HFT market ramp. Wouldn't be surprised if the major indexes close green today.

Wed, 05/23/2012 - 14:07 | 2455890 Rathmullan
Rathmullan's picture

Problem is though, the government can render the whorded currency obsolete with a few key strokes and force repatriation into the new "legitimate" currency.

Wed, 05/23/2012 - 14:17 | 2455923 NotApplicable
NotApplicable's picture

Otherwise known as "The Law of Rule."

Wed, 05/23/2012 - 17:37 | 2456719 FeralSerf
FeralSerf's picture

And then force everyone to prove how they got it and that taxes were paid on it.  This can be difficult when one is guilty until proven innocent -- that's the IRS rule -- and The Man has the confiscated the cash and the bank is foreclosing on your home.

Wed, 05/23/2012 - 14:08 | 2455893 Centurion9.41
Centurion9.41's picture

Dollar Backwardation <- Triangle = truth; when it's really bad, value must = can carry & protect. All else is BS

Wed, 05/23/2012 - 14:10 | 2455897 scatterbrains
scatterbrains's picture

12 handle on MS bitchezz!

Wed, 05/23/2012 - 14:12 | 2455913 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Well said!  Ben cannot throw electronic digits out of a helicopter, I don't think?

Tuco

Wed, 05/23/2012 - 14:21 | 2455942 Almost Solvent
Almost Solvent's picture

SNAP cards and Imaxipads could be chucked overboard swiftly to the rioting masses

Wed, 05/23/2012 - 14:57 | 2456081 Doña K
Doña K's picture

They can repeat what Paulson did with Pelosi. Give tax refunds of 2k per dependent to all taxpayers. 

Wed, 05/23/2012 - 17:40 | 2456730 Overfed
Overfed's picture

I would happily take that $2K and go buy some silver!

Wed, 05/23/2012 - 14:28 | 2455969 tekhneek
tekhneek's picture

$3 off their 2008 lows.

Wow.

Fuck Morgan Stanley.

Wed, 05/23/2012 - 15:05 | 2456113 WillyGroper
WillyGroper's picture

Sideways with a rusty post hole auger!

Wed, 05/23/2012 - 14:19 | 2455930 Nothing To See Here
Nothing To See Here's picture

"they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis"

That's bullocks. They can always print 100 000 000 000 trillion bills like in Zimbabwe.

Wed, 05/23/2012 - 14:53 | 2456073 Bagbalm
Bagbalm's picture

They can commandeer the newspaper presses.

Wed, 05/23/2012 - 15:06 | 2456116 WillyGroper
WillyGroper's picture

That's already been taken care of.

Wed, 05/23/2012 - 14:20 | 2455936 midgetrannyporn
midgetrannyporn's picture

Hookers and blow prefer cash.

Wed, 05/23/2012 - 14:20 | 2455939 tempo
tempo's picture

OWS is set up by elites to bring street violence to USA/EU which will scare the masses into giving Govt more power and control over economy and our personal freedoms. Few rich, powerful, media types want to solve the issues only incite fear.

Wed, 05/23/2012 - 15:58 | 2456349 Bullionaire
Bullionaire's picture

"OWS is set up by elites to bring street violence to USA/EU"

OWS has been hijacked by elites to bring street violence to USA/EU 

 

Fixed.


Wed, 05/23/2012 - 14:23 | 2455941 Kreditanstalt
Kreditanstalt's picture

Oh, PLEASE...!

Why the hell does that FB and AAPL crap rise every time my precious metals stocks do so?

Disconnect, you diots...!

Oh!  OTOH, S&P -1.16%, NASDAQ - 1.34%!  Great stuff.

Wed, 05/23/2012 - 14:22 | 2455950 YHC-FTSE
YHC-FTSE's picture

A bit convoluted, but the gist of the article is sound I guess. It forgets to mention that 97%+ of all money in existence known as the USD exists only as bits and bytes on machines, not physically as folding or clinking currency, and essentially there is no difference between those who control the physical printing presses and those who control the access to change the values of those bits and bytes on machines. It's all worthless fiat "backed" by the phantom promise to be productive in the distant future by those not even born to redeem the debts of the present generation. 

Does it really matter that we'll soon see idiots hoarding paper currency? Ask the Weimar Germans or the Zimbabweans whether that worked out for them. With Lagarde, and most of the cunts in the G8 planning to print more money to "Foster growth" (aka the Japan principle), ad naseum for the foreseeable future, holding paper currency is the same as hoping to pay for your food with leaves. 

Wed, 05/23/2012 - 14:28 | 2455970 Joe The Plumber
Joe The Plumber's picture

Keep a thousand bucks in nickels around

People arent gonna want to give you much for a worn mercury dime because of money illusion. A roll of nickels might be a better value but only for the sessile

Wed, 05/23/2012 - 21:46 | 2457431 WmMcK
WmMcK's picture

Doing both, and many more.

Wed, 05/23/2012 - 14:25 | 2455963 haskelslocal
haskelslocal's picture

Who the fuck is John Exter and why the fuck do I care?

Placing Gem Stones at the top and Gold at the bottom.... Dork. It's a scale of liquidity and Gold certainly is not, unless it is, and if it is, so are diamonds.

Wed, 05/23/2012 - 14:36 | 2456009 balz
balz's picture

You can't melt or divide easily gem stones. You can't easily identify them as well. Please.

Wed, 05/23/2012 - 15:33 | 2456233 haskelslocal
haskelslocal's picture

So you can devide gold and maybe verify it. Then what. Sadly you blank on the concept of currency, trade, desire, confidence. Even your little gold theories derive from the same. It is only a rock afterall. So unless you're going to build yourself a gold house, comfort it with gold and eat it as well, good luck. To seriously think some type of armagedon wouldn't find many other alternative forms of currency in modern times is lunicy.

 

Wed, 05/23/2012 - 16:02 | 2456370 Bullionaire
Bullionaire's picture

Wow - you're a gigantic dumbass.

 

Wed, 05/23/2012 - 14:32 | 2455986 Joe The Plumber
Joe The Plumber's picture

Backwardation of gold or silver is free money if you own a cme gold contract isnt it?

You are basically receiving interest for loaning out your metal. The opposite of contango

Wed, 05/23/2012 - 22:24 | 2457532 New World Chaos
New World Chaos's picture

Free money for them, when they "vaporize" your metal.

Wed, 05/23/2012 - 14:33 | 2455995 Madcow
Madcow's picture

Hyper-Deflation

 

Wed, 05/23/2012 - 14:35 | 2456001 JLee2027
JLee2027's picture

Oh yes electronic money is intrinsically evil because it can be CONTROLLED by outside events. One cascade default and trillions could vanish.  Or the Government can use electronic money to limit what you receive. One example is the interception of funds headed your way. Right now electronic deposits exist in such huge amounts that turned into cash would cause virtually instant hyperinflation. This cannot be good. Trust no bank. Trust no Government.  Hoard cash.

Wed, 05/23/2012 - 14:35 | 2456004 junkyardjack
junkyardjack's picture

The quickest way to double your money is to fold it in half and put it back in your pocket

Wed, 05/23/2012 - 14:35 | 2456005 MrBoompi
MrBoompi's picture

Electronic deposit credits?  You mean they finally invented money that is worth less than the paper its printed on?

 

 

Wed, 05/23/2012 - 14:37 | 2456012 Temporalist
Temporalist's picture

I suppose the easiest solution would be to print $500, $1000, $5000 and $10,000 dollar bills first. 

 

Speaking of bills whatever happened to the "new" $100 frn?  That was supposed to be released Feb `11.  Printing errors takes over a year to fix?  It's probably nothing...

Wed, 05/23/2012 - 17:46 | 2456747 FeralSerf
FeralSerf's picture

It's much easier for the goobermint to keep the Ben Franklins and force everyone into plastic money.   Control over the sheep is more absolute as well.

As soon as those Ben Franklins will only buy a gallon of gas, what will we use to get out of town?  If legal tender laws are enforced more vigorously and barter with silver coins made illegal, -- your neighborhood Arco station will do what they tell them -- plastic will be the main item of currency left.  There will always be the few percent that get around it -- that's why they have cops and jails.

Wed, 05/23/2012 - 21:43 | 2457416 WmMcK
WmMcK's picture

Now you're talking. I'm planning my return.

Wed, 05/23/2012 - 14:39 | 2456018 SILVERGEDDON
SILVERGEDDON's picture

All I know, is once you are out of the green light territory, the odds of getting T- boned at the intersection of Investment St and Fiat Currency Avenue go up exponentially.

Food, clean drinking water, firewood, ammo, booze, are at the top of my investment portfolio. Prices on any of those items goes no where but up. And, I use all of those items anyway, so waste not, want not.

Next, is silver and gold as a guarantee of value versus paper investment bullshit that crashes at the drop of the stock market hat. Except, I keep doing the Tippercanoe when I transport my metals across the lake to get home. That means all my metals investments are liquid assets, bitchez.

Banks and fiat ? Joke material. The FDIC has less than 3 percent of the money required to back stop their pathetic account insurance program. And, if your last name isn't Inc., Ltd., or Co., you are not gonna get any coverage for your mom and pop savings account that is generating you less than a fractional percentage point of return from the institution that is playing Las Vegas betting with your money at 30 times assets.

Wake up, get real, or you are toast, America, and the rest of the world this time as well.

Wed, 05/23/2012 - 14:41 | 2456020 spooz
spooz's picture

Ridiculous fearmongering. Why would electronic payments be discounted? You think the fed's printing presses couldn't keep up with some fictional demand for paper? Fiat is fiat, paper or electronic.

You have not only stetched the concept, you've blown it to smithereens.

Here is a fun little piece on fiat:

http://www.nakedcapitalism.com/2012/05/j-d-alt-playing-monopolis-monopoly-an-inquiry-into-why-we-are-making-ourselves-so-miserable.html

 

Wed, 05/23/2012 - 14:50 | 2456066 SILVERGEDDON
SILVERGEDDON's picture

Yeah, fearmongering. Gold was $35.00 an ounce when I was a kid, and silver was worth up to a buck on the coin it was minted in. Those items have maintained value, while the paper dollar has burned away to ashes based solely on inflation.

So, WTF is a dollar gonna be worth in 5, 10, 20, 40 years from now ? Even if there is no default no credit event crashing and burning peoples faith in the fiat, inflation will continue to rob the saved dollar of it's purchasing power.

Paper dollar bought 4 gallons of gas when I was a kid. Paper dollar buys less than a quart of gas today. Silver dollar bought 4 gallons of gas when I was a kid - silver dollar buys 7 gallons of gas today.

Go suck on some more spooge, Spooz, because skill at doing so may be the only investment you make that keeps your sorry ass alive.

Rest of you, make like a fucking Boy Scout - Be Prepared. No harm, no foul

if nothing happens, and security if something goes sideways over the next couple of decades.

History's track record to date is real good for providing the unexpected for folks to deal with.

Choose wisely.

Wed, 05/23/2012 - 17:54 | 2456772 FeralSerf
FeralSerf's picture

The President can, if he decides that using silver as money is a "terrorist" act, put anyone away indefinitely for using that silver dollar as money.   This was a nasty rabbit hole that opened up with the Patriot Act and the NDAA.

There are people in prison that paid employees with silver coins.  TPTB do not look kindly on this practice.

Thu, 05/24/2012 - 00:57 | 2457888 sherryw
sherryw's picture

When my greatgrandmother died in1959 my grandmother found a great stack of gold sovereigns that great grandma had squirelled away over the decades of frugality. Grandma went mad getting all those soveriegns made into necklaces and bracelets for all the granddaughters. My mother, though not not very bright, knew instinctively that greatgrandma had stored value and passed it on. So what has my mother done? Why, she has a huge stash of gold coloured two dollar coins in a big copper box. She was slightly embarrassed when I told her she should go and spend them all because they'll be worth much less even next year. She doesn't get it. She thinks when she's dead there'll be a treasure trove of value. Sad.

Wed, 05/23/2012 - 16:20 | 2456453 RationalPrepper
RationalPrepper's picture

While the odds of this happening may be small, I don't think it's ridiculous fear-mongering.  It is human psychology, is it not?  Would you rather have somebody pay you for a good/service by handing you a couple $20 dollar bills, or tell you that they've put a check in the mail or set up an account with your name on it that you're free to withdraw from?  Times are relatively stable, and I'd still prefer the cash-in-hand.  While not a perfect analogy, I think it's good enough to illustrate the author's point.  If/when things delever, electronic cash, which is essentially credit (even if they're not), may become much less palatable. 

Regardless, ample physical cash on hand is still a good idea.  Hope for the best and plan for the worst - It costs you nothing.

Wed, 05/23/2012 - 16:02 | 2456371 ParkAveFlasher
ParkAveFlasher's picture

Any point that you physuically enter gold, is epic.

Wed, 05/23/2012 - 14:44 | 2456042 I am on to you
I am on to you's picture

To me it looks like what i want mostly,OSMOSE REVERSE,then you all have the metal.

When you all go dry,i sell you clean ,crystal clear water,cant drink Gold or pressed Carbon!

Who ever invented this word:Free money?Zuckerstein or Ienberg?Is it relativ or just sensetiv.

Defractations,money i give up.They realy are the stuff dreams  not is made of,only nightmares!

Wed, 05/23/2012 - 14:55 | 2456062 bbq on whitehou...
bbq on whitehouse lawn's picture

It would be location based market; in my opinion. Humans are critters of habit, there is also the "legal tender" thing to consider. If you have US debt then you will need US dollars. Electronic or paper dollars will be what you ask for.

The rest will be market based and markets for people tend to be local.

  Then there is the business of dollar controls screening that goes on the banker side of the equation. It took me a month to move 20k into cash.

I have no idea what it would be like to move larger accounts into paper/cash but im sure it would not be any easier or quicker.

Just a year ago this would have been a non-issue, now its getting more and more difficult. Casher checks are now no longer as good as cash. For an example.

Cash in hand would seem to have value as trust in the credit side of the market shrink.

Its will come down to location. What kind of economy do you have and what type of currency and in what form do they want it.

Major cities may want more electronic credits then paper credits, while in the country it may be the opposite.

Welcome to the age of barter.

Wed, 05/23/2012 - 14:59 | 2456091 Sutton
Sutton's picture

In the end the solution will be to give everyone a million dollars to do what they please,after discharging all existing debts.  Some will hoard ,some will invest, and most and some will blow it.  An explosion of monetary velocity.  Then we get Ceasar.

Wed, 05/23/2012 - 15:01 | 2456101 slewie the pi-rat
slewie the pi-rat's picture

theNuttyProfessorTM's 2008 work was enjoyed by yers trooly muchly

i advise PM coinage and FRN's, myself, BiCheZ!

why?  less "debate" about "worthlessness v moneyness" of debt-money and more liquidity IF YOU NEED TO BUY anything and there is nothing but confused shitheads, seemingly everywhere

value, like beauty is in the "eye of the beholder" which is what slewienomics is really about, ultimately

ashes to ashes, faust to faust?

Wed, 05/23/2012 - 15:13 | 2456147 fuu
fuu's picture

If at faust you don't succeed...

Wed, 05/23/2012 - 15:07 | 2456123 Shigure
Shigure's picture

Hey, "cigarettes" isn't on the list, a last ditch currency if ever there was one

Wed, 05/23/2012 - 15:11 | 2456136 HAhyperion
HAhyperion's picture

Not sure I follow as electronic or paper it is all fiat and all can be changed at any time: new law, new denominations, etc. 

And gold or silver, it is fiat as well: it only has value in so much as collectively people say it has value.  

I would imagine if one was going to stockpile it would be food stuffs, water, gasoline, etc that actually have intrinsic value ie a worth, a purpose.  

Wed, 05/23/2012 - 18:38 | 2456840 DonutBoy
DonutBoy's picture

No - a fiat currency is a currency that has value by decree, that's the definition.

This statement is wrong:

"And gold or silver, it is fiat as well: it only has value in so much as collectively people say it has value."

Collectively people saying it has value is the market, not a decree.

 

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