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Guest Post: What Happens When All The Money Vanishes Into Thin Air?

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Submitted by Charles Hugh Smith from Of Two Minds

What Happens When All the Money Vanishes Into Thin Air?

Issuing debt and printing money do not create wealth. All they can create is a temporary illusion of wealth.

I could have written "if all the money vanishes," but that would be misleading, for all unbacked money will most certainly vanish into thin air. The only question is when, not if. Frequent contributor Harun I. explains why:

Those who fail to understand that the Status Quo is impossible to maintain will be shocked when the disintegration is undeniable. But the whole thing was perverse to begin with. Words like capitalism and meritocracy are thrown around to make people feel good when, in reality, we have never owned anything, not even ourselves.

 

How can we own ourselves when the very thing we use for subsistence can be cheapened or reduced to nearly nothing, not by market forces, but by central banks acting at the behest of governments? When a person does not control his labor, what is he?

 

I have been studying the monetary history of the world for the past few weeks. I can tell you that the second oldest profession is currency debasement. Nothing is new.

 

Of course, this should be no surprise, everything is cyclical. Humankind is like the trader looking for the Holy Grail. There is no perfect monetary system, there is only better and worse. And this one ranks among the worst. 

 

I wait patiently for people to come to the understanding that the only way for everyone to get their money would be to destroy its value completely, meaning that a loaf of bread would be a million dollars. If a small fraction of what has to be printed to keep the system afloat has caused the price spikes in energy and everything else, imagine what happens as the disintegration picks up speed.

 

As the exponential debt curve moves closer to the pure vertical, the rate at which debts come due will approach infinity. Of course, while this is the ultimate mathematical outcome, the reality is that the system will collapse before this point is reached. But don't think governments will throw in the towel. If history holds true the rise of a totalitarian government is just over the horizon.

 

Then there are those who get it right and wrong in the same breath. John Mauldin, in a KWN interview, thanked Europe for keeping the heat off the US. Mr. Mauldin apparently does not understand that our monetary policies are transferring what we do not want to the rest of the world, at least for a time, but not much more.

 

How many more food items be made smaller and sold at the same price? In effect this is a slow starvation of those at the margin. The 46 million American souls on food stamps will soon find their food stamps to be worthless.

 

Those who assert that a credit system cannot go hyper-inflationary may not have thought through the exponential effects on the relationship of the debt and productivity curves within the context of all money is debt and the only way to create money is for debt to be created. Eventually the debt curve accelerates away from the productivity curve, then the productivity curve collapses all together. Sovereign debt crises caused by governments stepping in to keep the debt system going is the last stage. Then comes the debt/currency collapse.

 

Even if the Fed stopped printing money, I fail to see the difference between too much money that is worth nothing, and no money at all. It's not going to matter to a starving man that a loaf of bread is $1 million and he is a dollar short, or if it's $1 and he is a dollar short.

Thank you, Harun. Many observers have addressed the key concept here, which boils down to this: paper money is an abstract representation of the real world.

This can be explained by a simple example. If there is $100 in the money supply, and $100 of goods and services to trade, then $1 will be exchanged for $1 of goods and services. If the money supply suddenly increases by $100, then the value of the existing $100 declines by half, as the money supply is now $200 and the supply of goods and services remains unchanged. Thus it now takes $2 to buy what $1 once bought in goods and services.

Holders of the currency have had half the value of their currency (what we call purchasing power) stolen by the central bank that issued the additional $100 in money supply.

Here is the primary point: issuing debt and printing money do not create wealth. All they can create is a temporary illusion of wealth.

(This is drawn from Chapter One of Resistance, Revolution, Liberation: A Model for Positive Change; you can read Chapter One for free.)

Here is another example. Let's say that a small group is stranded on a desert island that supports a handful of coconut palms. Each palm produces a limited number of coconuts each season. To facilitate trade, the group issues a currency that represents one coconut. (Lacking a printing press, they have to laboriously carve out a pattern on a rock to imprint a difficult-to-counterfeit stamp on the currency.)

This system works well, as the currency issued matches the number of coconuts harvested annually (for simplicity's sake, let's say that's 100). 100 pieces of currency are issued to match the 100 coconuts that exist in the real world. The currency (let's call it the quatloo) is an abstract representation of the goods available, i.e. the coconuts.

But then a wise-guy (i.e. the "central banker" on the island) realizes that if he prints another 100 quatloos, he and his buddies can buy up all the coconuts and fish without having created any real goods in the real world: the abstraction is used to con people out of their real coconuts.

The residents quickly catch on, and the "price" of coconuts rises to 2 quatloos. The wise-guy is addicted to the scam, and so he prints 1,000 quatloos, and then issues quatloos in denominations of 1 million.

Soon enough, each coconut costs 1 million quatloos.

Creating debt and paper money does not create real goods and services or real wealth.

As Harun observed, we have been promised trillions of dollars that can supposedly be traded for trillions of dollars in real goods and services, and buyers of bonds have been promised trillions of dollars of the same artificial exchange of paper for real goods.

Just as on the desert island, the growth of actual goods in the real world lags the growth of money, i.e. abstract representations of real goods.

The U.S. Central State (Federal government) has borrowed and squandered $6 trillion over the past four years, and the actual production of goods and services has not risen at all when adjusted for inflation. The central bank (the Federal Reserve) has expanded its balance sheet by $2 trillion, and yet all the assets it have tried to force higher are actually lower when measured in real goods such as gold, oil, wheat, etc.

It's easy to expand the money supply and difficult to expand the actual production of real goods in the real world. Expanding the money supply and issuing debt that lacks collateral is just like printing quatloos on the desert island: you can print a million quatloos but that doesn't create a single additional coconut.

If you print enough quatloos, then people will no longer accept them in exchange for coconuts. You will actually need a real coconut to exchange for fish.

This is why Greek towns are reportedly reverting to barter, the exchange of real goods for other real goods. We can anticipate that silver and gold will soon enter the barter as means of exchange that can't be counterfeited or printed by wise-guys (central bankers).

We can also anticipate the issuance of letters of credit, a practice that stretches back to the trading fairs of Medieval Europe, as described by Fernand Braudel in his three-volume history of early capitalism, The Structures of Everyday Life (Volume 1), The Wheels of Commerce (Volume 2) and The Perspective of the World (Volume 3).

Since gold was in insufficient supply, letters of credit were issued and accepted on a basis of trust. At the end of the great fairs, the letters were exchanged and payment of balances due made in gold or silver. Thus 99 coconuts could be traded for 100 dried fish via letters of credit and the balance due in gold or silver was the value of 1 dried fish--a mere 1% of the total value of goods exchanged.

This is what happens when abstract representations, i.e. "money," vanish into thin air. Alternative systems of exchanging goods and services arise: actual goods are exchanged via barter, tangible concentrations of value that cannot be counterfeited such as gold and silver are used as a means of exchange, letters of credit or equivalent are traded and settled with tangible goods or gold/silver, and eventually, a means of exchange ("money") that is backed by tangible goods in the real world that can be trusted to actually represent the value being traded might enter the market.

That which is phantom will vanish into thin air, while the real goods and services remain to be traded in the real world.

 

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Tue, 04/24/2012 - 12:09 | 2370162 Pladizow
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Money: The Greatest Hoax on Earth - Merril Jenkins

From whence it came!

Tue, 04/24/2012 - 12:17 | 2370226 Alea Iactaest
Alea Iactaest's picture

"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money"
-- Daniel Webster

Tue, 04/24/2012 - 12:22 | 2370251 Pladizow
Pladizow's picture

"Paper is poverty, it is the ghost of money and not money itself." - Thomas Jefferson

Tue, 04/24/2012 - 12:29 | 2370283 AlaricBalth
AlaricBalth's picture

Ask Jon Corzine about vanishing money. He seems to know quite a bit about the subject.

Tue, 04/24/2012 - 12:35 | 2370306 DoChenRollingBearing
DoChenRollingBearing's picture

How come he is not in jail yet?  How come we STILL do not know where the money is (JPM, maybe)?  He is still out there bundling for Obama.

"Justice" in America.  These kinds of crime are yet another example of why the decline of moral behavior is driving gold out of the USA (an example I put in a reply on another thread).

Tue, 04/24/2012 - 12:53 | 2370342 The Big Ching-aso
The Big Ching-aso's picture

 

 

When money vanishes into thick air that means my wife farted.

Tue, 04/24/2012 - 13:04 | 2370424 Bicycle Repairman
Bicycle Repairman's picture

The money won't actually disappear.  You'll still have paper in your hand and digits in your bank account.  Except for the government store, they won't buy anything.  And the shelves at the government store will be empty.

Tue, 04/24/2012 - 13:07 | 2370435 Badabing
Badabing's picture

Had Chinese food the other night. How I love that General Tso chicken or cat cant tell and don’t care it tastes good. What does bother me is how the fuck much soy sauce packs to use! One pack used to be enough BUT NO they had to put one third or so in a pack and I used too much and ruined my dinner.

WHAT GIVES THEM THE RIGHT TO INFLATE THE MONEY WE USE TO VALUE EVERYTHING!!!  

Tue, 04/24/2012 - 16:14 | 2371319 RafterManFMJ
RafterManFMJ's picture

What gives them the right? Dunno, maybe that dude in black body armor with those cool weapons? And you paid for all that tactical gear, and the armored car that brought him to your door. This is what the white folks call 'irony.'

Tue, 04/24/2012 - 16:59 | 2371509 defencev
defencev's picture

The author really proved over time that he understands nothing. In the world where supply exceeds demand creating money out of the thin air make sense. And Japan is a living proof of it. All these arguments about real and surreal would make sense for scarce products. And, indeed, we see that the price of oil is going up. But the price of flat screen TV's is going down because of obvious oversupply. The author is an idiot : pure and simple. Another his thesis that we need to patiently wait until paper money lose any value is equally idiotic: we can wait a very long time.

   People who want to do barter with Gold as exchange media should not wait. They should be able to do it right now. Yesterday, I made an argument in favor of abolishing capital gain taxes on Precious metals (without this measure Gold and Silver cannot be used as money in this country). In fact, the existence of such a tax contradicts US constitution which recognizes the rights of States to issue Gold and Silver money. I suggested that Ron Paul should ask GOP nominee to pledge the abolishing of this tax.

The reaction: I was ridiculed by local Marxists. The only thing Ron Paul can actually accomplish is to push the abolishion of this tax. Beyond that: yes, he implicitly can help reelect Obama if he runs as a third party candidate.

Tue, 04/24/2012 - 19:47 | 2371903 SHRAGS
SHRAGS's picture

.

The author really proved over time that he understands nothing. In the world where supply exceeds demand creating money out of the thin air make sense. And Japan is a living proof of it. All these arguments about real and surreal would make sense for scarce products. 

Things you need are in short supply, things you want aren't. You can't eat a flat screen TV. 

Tue, 04/24/2012 - 21:00 | 2371996 Real Money Wins
Real Money Wins's picture

The Money has already disappeared!!!!

 

It's just that they all refuse to admit it! Damn little ones and zeros are so hard to keep track of!

Tue, 04/24/2012 - 12:48 | 2370356 Ancona
Ancona's picture

Because he's too connected to get arrested.

Tue, 04/24/2012 - 13:18 | 2370482 AlaricBalth
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I think I got junked by Jon Corzine. What an honor!!!

Tue, 04/24/2012 - 14:21 | 2370736 Harbanger
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He was a Democrat helping poor people.  The MSM gives him a pass.

Tue, 04/24/2012 - 12:55 | 2370383 knightowl77
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Because he bundled more than $500,000.00 to the Obumster's campaign this year....

Tue, 04/24/2012 - 15:12 | 2371041 Darth..Putter
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When the appearance of a systems functioning is more important than the functioning of the system, is when the "jig is up".

Tue, 04/24/2012 - 15:28 | 2371108 mick_richfield
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the decline of moral behavior is driving gold out of the USA

That's backwards.  It is the lack of gold that is driving moral behavior out of America.

If the government can force us to accept fiat 'money' then they have become our rulers, and can dispense with any pretense of representation.

When silver was our money, they needed to get our agreement.  Now they don't.

 

Wed, 04/25/2012 - 01:23 | 2372482 StychoKiller
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"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence.  Destroyers seize gold and leave to its owners a counterfeit pile of paper.  This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it.  Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims.  Watch for the day when it bounces, marked, 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good.  Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral.  Do not expect them to produce, when production is punished and looting rewarded.  Do not ask, 'Who is destroying the world?  You are."

-- "Atlas Shrugged"

Tue, 04/24/2012 - 12:47 | 2370349 Benjamin Glutton
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But I still have checks!

 

Digital money coming to a planet near you.

Tue, 04/24/2012 - 13:55 | 2370622 francis_sawyer
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Debt money IS "thin air"... It just goes back to where it's created from (after some Zionist does some usury tricks with it)...

Tue, 04/24/2012 - 12:39 | 2370325 Muddy1
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"We can anticipate that silver and gold will soon enter the barter as means of exchange that can't be counterfeited or printed by wise-guys."

You are naive if you really think gold and silver can't be counterfitted.  The Chineese are doing a great job of it with old silver coins like the Morgan silver dollar.

Tue, 04/24/2012 - 13:16 | 2370472 donsluck
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As long as it's silver, who cares what it looks like?

Tue, 04/24/2012 - 14:08 | 2370680 disabledvet
disabledvet's picture

Haven't seen you in a while. "if only greed was too."

Tue, 04/24/2012 - 21:22 | 2372035 Buck Johnson
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It's already happening and soon it will be crazy.

Tue, 04/24/2012 - 12:06 | 2370163 SheepDog-One
SheepDog-One's picture

When the fake money vanishes, the banksters wont need to explain anything at all. Theyll have the most hated creature on the planet to point to and pin all the blame on, the dreaded white republican Romney who will be ushered in thru another fake rigged election to take the heat.

Tue, 04/24/2012 - 12:40 | 2370326 Harbanger
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“But don't think governments will throw in the towel. If history holds true the rise of a totalitarian government is just over the horizon.”

It’s been the plan all along. A debt induced crash to usher in a totalitarian government. The Bankers and Big Govt. Central planners win. Then again, (The best laid schemes of mice and men / Often go awry.)

Tue, 04/24/2012 - 12:48 | 2370354 SheepDog-One
SheepDog-One's picture

And the horizon is likely far nearer than most people think. Then the Banksters and Central Planners 'win'....as Trent Reznor says 'You can have it all, my empire of dirt'....yea whatever.

Tue, 04/24/2012 - 12:50 | 2370362 Alea Iactaest
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An' lea'e us nought but grief an' pain,
For promised joy.

 

Continuing the Robert Burns theme...

Tue, 04/24/2012 - 14:10 | 2370686 disabledvet
disabledvet's picture

It's not the banksters but the banks. I do agree "the people running them don't know how make money." that used to be an insult btw.

Tue, 04/24/2012 - 12:05 | 2370168 LFMayor
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what happens?  To quote an old Scorps tune:  The Riot of Our Time.

Tue, 04/24/2012 - 12:14 | 2370206 centerline
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Most at the margins don't have much to barter except lead.  And I wouldn't really call it bartering either.

Tue, 04/24/2012 - 12:45 | 2370339 mclant004
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Any ideas on other metals that will maintain wealth? copper? lead? hafnium? zinc? iridium?

i like to spread my bets!

Tue, 04/24/2012 - 13:38 | 2370552 mayhem_korner
mayhem_korner's picture

 

 

Try Pb in Cu casing.  Comes in lots of denominations - .22, .306, etc.

Tue, 04/24/2012 - 14:35 | 2370807 Jena
Jena's picture

Just do your best to not owe (or appear to owe) the IRS $50K or more.  There is an effort to pass a bill that would give the IRS the right to revoke an "American’s travel rights and even remove the right to own a firearm."   http://bit.ly/JDtyvh

Tue, 04/24/2012 - 12:06 | 2370175 AmCockerSpaniel
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It's much harder to tax a barter transaction than a cash one.

Tue, 04/24/2012 - 13:00 | 2370405 Vince Clortho
Vince Clortho's picture

yet they always seem to come up with a way.

Tue, 04/24/2012 - 12:06 | 2370177 Gene Parmesan
Gene Parmesan's picture

Aaaand... it's gone.

Tue, 04/24/2012 - 13:06 | 2370430 fuu
fuu's picture

http://www.youtube.com/watch?v=4TlPo0yCSa4

South Park vs Cafe Del Mar (Remix)

Tue, 04/24/2012 - 12:08 | 2370182 Christoph830
Christoph830's picture

FYI:  Whitney Tilson on Fast Money defending his NFLX stake right now...hilarious

Tue, 04/24/2012 - 12:14 | 2370205 walküre
walküre's picture

I bet he got ZNGA'd too!

Tue, 04/24/2012 - 12:42 | 2370331 mvsjcl
mvsjcl's picture

And about to get "Face"d.

Tue, 04/24/2012 - 12:09 | 2370184 insanelysane
insanelysane's picture

Should be basic reading in DC and in colleges, high schools, and middle schools.

Tue, 04/24/2012 - 12:12 | 2370189 SheepDog-One
SheepDog-One's picture

'When all the fake money vanishes' then everyone will see what it was all REALLY about, the central banksters own everything, doesnt matter the cash value, THEY. OWN. EVERYTHING.

After all, they know theres only about $300 million worth of actual LEGAL currency....thats right according to the Federal Reserve Act of 1913 the only LEGAL tender is 'United States Notes' not these fake 'Federal Reserve Notes' and there are only about $300 million worth of those around.

Its all a scam people, a huge illusion, bottom line.

Tue, 04/24/2012 - 12:38 | 2370320 blu
blu's picture

Possession is nine-tenths of the law. Meaning them as has, keeps. The bankers hold a lot of paper on real things but they'll have to raise a private army to enforce that claim once the money evaporates leaving just the goods behind.

I know, raising an army is easier when you have lots of money during a down economy. And, with things like the NDAA on the books they can probaby expect the US Army to turn out and take things for them on some terrorist pretext. But I'm not real worried about that, I think the US Army will be having a hard enough time defending the borders and be too busy to kick people out of foreclosed homes just so the banker class and take them back. Maybe expensive homes full of "terrorists" will get a visit from the local SWAT team, but they won't show up to seize my little shack.

Tue, 04/24/2012 - 12:47 | 2370350 walküre
walküre's picture

When your money is worthless, the mercenaries aren't working for you. How many guns are distributed among private citizens? There's your army and each and every so called "soldier" knows what is out there. Russian "soldiers" deflected in large numbers and sold their army's goods to the highest bidders.

Tue, 04/24/2012 - 12:47 | 2370351 centerline
centerline's picture

To think that getting what we have is the goal is definately not on target.  We can pushed around as needed at will.  The prize is resources.  Oil, gas, water, food, etc.  Armed forces would be used to keep rioting masses from getting too far out of hand.  The majority of the non-rioting public can be choked off to a large degree by supply chain controls.  Few are truly ready, able and in the place to really just ride the storm out.  

Tue, 04/24/2012 - 12:11 | 2370194 Shizzmoney
Shizzmoney's picture

I simply do not know where the money is, or why the accounts have not been reconciled to date. I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules. Moreover, there were an extraordinary number of transactions during MF Global’s last few days, and I do not know, for example, whether there were operational errors at MF Global or elsewhere, or whether banks and counterparties have held onto funds that should rightfully have been returned to MF Global.

- Jon Corzine

http://www.rollingstone.com/politics/blogs/taibblog/jon-corzine-is-the-original-george-zimmerman-20120424

 

Tue, 04/24/2012 - 12:32 | 2370292 SheepDog-One
SheepDog-One's picture

Right, why do they need to explain anything at all? Vast amounts of money vanish daily thru things like MF Global, or stock plunges, and they dont have to explain a damn thing and no one does anything about it anyway. They do whatever the fuck they feel like.

Tue, 04/24/2012 - 14:40 | 2370837 boogerbently
boogerbently's picture

Isn't that the "WHITE-COLLAR" CRIME WAY OF SAYING "The dog ate my homework"?

Tue, 04/24/2012 - 12:34 | 2370303 Gene Parmesan
Gene Parmesan's picture

You too can be above the law if you're politically connected enough. Have you considered acting as a campaign bundler for Obama?

Tue, 04/24/2012 - 12:15 | 2370196 mayhem_korner
mayhem_korner's picture

 

 

Standard of living cannot be maintained unless one's income (share of the money supply) rises at the same rate as the money supply.  Once one realises this is impossible, the strategy is very clear - convert every available note of fiat into something that can store value longer.

Tue, 04/24/2012 - 12:12 | 2370198 walküre
walküre's picture

I bought AAPL at $625. Thought it was a good deal. Can't remember where I read it.

Will it ever see $625 again?

LOL

AAPL grinding down is all you need to watch.

Tue, 04/24/2012 - 12:16 | 2370220 mayhem_korner
mayhem_korner's picture

 

 

It was a good deal.  Whether it was a good deal for you, well...

Tue, 04/24/2012 - 12:24 | 2370258 walküre
walküre's picture

I was kidding. Were you?

Tue, 04/24/2012 - 13:33 | 2370533 mayhem_korner
mayhem_korner's picture

 

 

Am I ever serious?

Tue, 04/24/2012 - 12:15 | 2370204 Diogenes
Diogenes's picture

Here is what happens. As long as they keep increasing the money supply people are happy. They feel "richer" because they have more money. Rising prices, inflation, the high cost of living - those are someone else's fault, foreigners or speculators or somebody.

When the inflation gets ridiculous, as when the unit of currency resembles a sub atomic particle and prices double overnight ( yesterday a cup of coffee cost $100,000 today it is $200,000), then it is time to reboot.

Recall all the old green dollars and replace them with new red dollars at $10,000,000 to $1. After a certain date all green dollars become worthless. That will show all those greedy speculators and black market racketeers! Because you will only be allowed to exchange a limited number of dollars and the bad guys will get stuck.

Then the whole game starts all over again.

This basic scenario has played out over and over again around the world. In some countries 2 or 3 times in a lifetime.

Tue, 04/24/2012 - 12:37 | 2370315 SheepDog-One
SheepDog-One's picture

People DONT have more money! Theyre broke, at best sitting on their #1 asset a home which is plunging in value. WHAT 'more money'?

Tue, 04/24/2012 - 12:50 | 2370364 Diogenes
Diogenes's picture

If  paper dollars are money, and someone gives you more paper dollars you have more money.

The point is, the scam can continue forever unless the majority wises up and refuses to take the fake money. For this to happen the currency has to go to zero 3 times in one lifetime. As in Germany between 1914 and 1945.

In postwar Germany the government did not dare inflate the currency. The people had been burned too many times. They were wise to the scam.The result was a strong, stable Mark, the German "Economic Miracle" whereby they went from ground zero to being more prosperous than ever before in history in 10 years and went on to become the richest most powerful economy in Europe. By the 70s the Mark was far stronger than any other currency including the US dollar.

Tue, 04/24/2012 - 13:16 | 2370471 SheepDog-One
SheepDog-One's picture

Thats right, but no one knows how to do that. On each check you get, on the endorsement write 'redeemed in US Notes', that is the 'real money' not even gold, and also the IRS cant tax it, only income in FRN's.

Tue, 04/24/2012 - 13:21 | 2370492 cranky-old-geezer
cranky-old-geezer's picture

 

 

'redeemed in US Notes'

Bullshit.  US notes are no longer in circulation. 

Stop posting bullshit like this you moron.  Somebody tries this nonsense and they'll end up facing tax evasion charges.

Tue, 04/24/2012 - 13:30 | 2370520 francis_sawyer
francis_sawyer's picture

OK... I'm this far down into the thread & I guess I'll have to do it myself...

http://www.youtube.com/watch?v=i-j3xITvYQY

Don't give me that do-goody-good bullshit...

Tue, 04/24/2012 - 13:25 | 2370503 Badabing
Badabing's picture

Had a party the other night. My wife told me to go out and get more chips. All I had to do is break them into more pieces and volea

Tue, 04/24/2012 - 12:56 | 2370389 Diogenes
Diogenes's picture

I didn't say they ARE richer, I said they FEEL "richer".

Tue, 04/24/2012 - 13:17 | 2370478 SheepDog-One
SheepDog-One's picture

Hell if people are 'feeling richer' although theyre far poorer and paying record higher for gas and food, just because theyre told such by the media, then we're REALLY fucked!

Tue, 04/24/2012 - 13:50 | 2370601 Diogenes
Diogenes's picture

Exactly. That is the point. That is how the scam works.

 

 

Tue, 04/24/2012 - 14:44 | 2370870 SheepDog-One
SheepDog-One's picture

The scam of what....the pea and shell game except there is no pea, ever?  Well they can have fun with that I guess, doesnt really mean anything to me.

Tue, 04/24/2012 - 14:17 | 2370714 Da55id
Da55id's picture

from the article "If you print enough quatloos, then people will no longer accept them in exchange for coconuts. You will actually need a real coconut to exchange for fish.

This is why Greek towns are reportedly reverting to barter, the exchange of real goods for other real goods."

...

The real reason barter is arising in Greece is the LACK of Euros in private hands! This is not hyperinflation - those folks doing barter would Love to have some Euros I'd wager.

Wed, 04/25/2012 - 08:39 | 2372891 WmMcK
WmMcK's picture

Green for red? You mean FRN's for US Notes, that's dangerous talk.
I'm waiting for the blue money (SDR's).

Tue, 04/24/2012 - 12:16 | 2370218 tlnzz
tlnzz's picture

What happens?

The greatest Ponzi scheme on Earth comes crashing down.

Tue, 04/24/2012 - 12:16 | 2370219 Dorky
Dorky's picture

When there is no more money, everything becomes free. Duh!

Tue, 04/24/2012 - 12:18 | 2370232 mayhem_korner
mayhem_korner's picture

 

 

"Free" is the most dangerous price for allocating anything.

Tue, 04/24/2012 - 13:15 | 2370469 Amish Hacker
Amish Hacker's picture

"If you think health care is expensive now, just wait until it's free."

Tue, 04/24/2012 - 12:20 | 2370241 Paul Atreides
Paul Atreides's picture

"When a person does not control his labor, what is he?" <--- This is a key statement.

Tue, 04/24/2012 - 12:26 | 2370266 tarsubil
tarsubil's picture

Um... a super awesome free American citizen? No? Wait, what?! Are you with the trrists!?

Tue, 04/24/2012 - 14:31 | 2370782 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture

<chuckle> Funny!

Tue, 04/24/2012 - 15:03 | 2370991 ronin12
ronin12's picture

Begins with S, ends with E and rhymes with CAVE.

 

 

Tue, 04/24/2012 - 12:20 | 2370242 cranky-old-geezer
cranky-old-geezer's picture

 

 

"Vanish into thin air" really isn't correct.

It doesn't vanish.  It just becomes worthless.

The only thing vanishing is whatever wealth you have in dollars and dollar-based assets like bank accounts, bank CDs, money market accounts, insurance policies (they pay out in worthless dollars), annuities (they pay worthless dollars), and any kind of check, like social security check, and your payroll check of course.

Yes, you end up working for less and less as the dollar loses more and more value.  Your paycheck might be $5,000 but they won't buy much.  Eventually you end up working for nothing. 

No, you don't get a raise every time bankers print more dollars.  You don't get any of those newly printed dollars.

 

Tue, 04/24/2012 - 12:28 | 2370273 Pladizow
Pladizow's picture

No, the token remains and becomes worthless, but the value which is no more then a belief, vanishes!

Tue, 04/24/2012 - 12:33 | 2370298 SheepDog-One
SheepDog-One's picture

Something that never existed in the first place cant vanish.

Tue, 04/24/2012 - 12:36 | 2370314 Pladizow
Pladizow's picture

The belief of value exists and will vanish.

Tue, 04/24/2012 - 12:43 | 2370336 cranky-old-geezer
cranky-old-geezer's picture

 

 

Saying dollars never had value is nonsense.  They obviously have value if you can buy stuff with them.

But I agree, that value is mere belief.

But belief is all any monetary system has, even gold.  It's worth what people believe it's worth.

Tue, 04/24/2012 - 12:52 | 2370373 centerline
centerline's picture

It all boils down to the basics:  food, water, shelter, protection.  We can add on from there.  Energy per se - of one form or another.  Gold is just an token as well, for the most part.  And therefore relies on faith for it's real value outside of industrial use.

Tue, 04/24/2012 - 13:48 | 2370595 Thisson
Thisson's picture

Gold is more than a mere token.  It has intrinsic value as money.  That is gold's utility.  It intrinsically has all of the properties that make it excellent as money.

Tue, 04/24/2012 - 13:09 | 2370439 kridkrid
kridkrid's picture

Not trying to be overly picky, but it is more than "belief".  Debt money is "belief", but other forms of money have practical value.  Money that is "backed" by some fractional reserve of assets... that too is "belief"... but closer to real value.  But exchanging one asset for another (or an asset for anything really... a good, a service, a whim) that "money" isn't belief.  Any sort of barter that uses a PM as money moves beyond the "belief" category, IMO.

Tue, 04/24/2012 - 13:34 | 2370536 cranky-old-geezer
cranky-old-geezer's picture

 

 

There's no such thing as "debt money" you moron.   Fed prints dollars and buys treasuries.  The dollars aren't debt.  Treasuries are the debt.

Money that is "backed" by some fractional reserve of assets... that too is "belief"... but closer to real value.

More bullshit.  "Backing" is a myth.  A "gold-backed" currency is just as worthless as a totally fiat currency.

Redeemable is the only thing that counts.

But exchanging one asset for another (or an asset for anything really... a good, a service, a whim) that "money" isn't belief. 

Yes it is belief you dumbass. PMs are worth what people believe they're worth, just like any paper currency, no difference at all.

But PMs can't be printed on a printing press like paper currency can.  Bankers can't dilute the value of PMs like they can dollars.  That's why PM's are a superior store of value.  But it's all still belief.

 

 

Tue, 04/24/2012 - 13:57 | 2370633 kridkrid
kridkrid's picture

Awesome... I haven't been called a name here is quite some time.  I won't exchange it in kind, if you don't mind. Not that I'm always above name calling... but, I do it less frequently as I've matured.  Perhaps there is some sort of bell curve on this behavior? 

The fed doesn't need to "print" anything to buy treasuries.  The fed doesn't even need to buy treasuries itself, it can simply "loan" into existence the "money" via an electronic entry to the account of said buyer.  That buyer can then "purchase" said treasury in order to run the government.  

Again... I don't know if our differences are based on semantics, but virtually all money is loaned into existence... that loan has interest associated with it.  The "money" that needs to be created to cover the interest doesn't exist... so more "money" must be loaned into existence.  This is why fiat money and fractional reserve banking is destined to fail the moment it is introduced.  It is, quite literally insolvent from inception.  But it isn't until the cost of maintaining the debt begins to choke the productive economy that we really begin to feel the effect.  Along the way, the wealth effect provides us with a bit of an illusion.

But I think there is more we agree on than we disagree.  I agree, for example... that gold backed is ALMOST as worthless as fiat.  The value in gold backed... at least you have some recourse... as long as, as you say, it's redeemable.  This is, after all, what happened in the 70's.  The world called our bluff and demanded gold.  Our system was broke.  The dollar should have ended right there... but the world was duped into something different.  And we are getting ready to pay the price for the evil.

 

Yes it is belief you dumbass. PMs are worth what people believe they're worth, just like any paper currency, no difference at all.

Again... such name calling.  usually a sign that you're sunk.  Kind of silly position to take, suggesting that there is no difference between paper money and a precious metal.  The simple fact that there is utility to a PM makes the two vastly different.  Of course you know that.

Wed, 04/25/2012 - 02:04 | 2372509 cranky-old-geezer
cranky-old-geezer's picture

 

 

Again... I don't know if our differences are based on semantics, but virtually all money is loaned into existence...

No it's NOT loaned into existence you delusional idiot.  it's (a) created, then (b) loaned out. 

And it doesn't have to be loaned out.  In '08 Fed (a) created billions of dollars and (b) bought worthless securities from Wall Street banks with them.   See, no lending, just buying.

"a" and "b" occurring more or less at the same time, or "a" happening because of "b", doesn't make dollars debt.  The promise to repay is the debt.

And yes, with a few keystrokes Bernanke could create a billion dollars in someone's bank account, or 10 billion, 100 billion, whatever. 

But Fed isn't in the business of giving currency away.  Benny boy want's something in exchange for that (digital) currency he just created with a few keystrokes. 

And yes he'll gladly take worthless securities in exchange. He doesn't care, it didn't cost him anything to create that 100 billion in someone's bank account, plus he can put those worthless securities on his books and assign any value to them he chooses.  He could say they're worth 200 billion, 300 billion, whatever, it doesn't matter, nobody is gonna question it, at least nobody who can do anything about it.  Who's gonna charge Benny boy with accounting fraud?  Nobody.

The simple fact that there is utility to a PM makes the two vastly different. 

Utility to PMs?  When's the last time you went to the grocery store and paid for groceries with PMs? But you can pay for those groceries with dollars no problem.  So which has more "utility"?

The ONLY problem with dollars is Benny boy can print 'em on a freikin printing press, and yes, create 'em in someone's bank account with a few keystrokes, and when he does, all dollars in existence lose a little value ...and merchants raise prices a little to compensate.

He can't do that with PM's.  He can't debase PM's like he can dollars.

Actually this IS another problem with dollars.  Benny boy is printing (or digitally creating) so many of 'em, and they're losing value so fast now, the rest of the world might just decide to stop accepting them ...and yes that's exactly what's gonna happen, the dollar collapse I keep talking about won't happen in America, it'll happen outside America where Benny boy can't do a damn thing about it.

Why do I have to keep explaining basic monetary principles like this?  C'mon folks, this is ZeroHedge for christ's sake.  Don't bring your "debt money" bullshit here, take it (and your dumbass) back to FOFOA or whatever other bullshit site you came from.

Tue, 04/24/2012 - 14:39 | 2370830 valkyrie99
valkyrie99's picture

Gold coinage derives only part of its’ value from intrinsic means, ie its' value by weight.  However if you look at the monetary history, gold has derived more of its' value from governments stamping coinage at values much higher then gold by weight, restricting the ability for others to create coinage with military might when needed, monetizing the coinage by demanding payment using them for needed services and taxes, mandating merchants accept payments in gold coinage that otherwise weren't inclined to, religious rites declaring the overvalued coins money, restriction trade with civilizations that valued gold much lower to only be made by the states coining money, and ensuring only small amounts of stored gold is released to circulation to maintain scarcity so the value of gold didn’t decrease back to costs reflective of its’ costs to produce and its’ value based on its’ usefulness. Therefore, much of the value of gold is fiat, granted to it by historic government mandate and might, and maintained by large holders of gold that ensure supply remains limited. It’s just that the ability for the powerful to create the means of exchange, money, was many centuries before paper was invented (in the west at least).

 

Tue, 04/24/2012 - 14:47 | 2370886 kridkrid
kridkrid's picture

Yes... all well said.  Getting government out of money altogether would be the best thing... or at least ending the government’s ability to create a monopoly on money.  We should have lots of different forms of money competing for use and able to be exchanged for each other.  It wouldn't limit commerce, it would enhance it.  The destruction of one currency wouldn't take the whole system down with it. 

Tue, 04/24/2012 - 15:40 | 2371180 valkyrie99
valkyrie99's picture

Yes, I generally agree with you. In my research the most stable monetary system (aside from effects of particular goods due to weather affects and natural disasters temporarily causing deviation in price, ancient drawings and especially cuneiform indicate over 3000 years of stability) was mixed commodity monies – the only way governments (Egypt, Assyria, etc.) affected this method of exchange was publishing tables of exchange rates the state would accept (1 calf or 130 sacks of 130 grains of wheat might be accepted as payment for the same debt) that established a minimum that these predominant goods as well as their liquidity (one could be relatively sure that if they traded they uncommon good they had for a widely and government accepted cow, they would in turn be able to trade that cow for the less common good they ultimately desired so trade and store of value functions were achieved). In this time finance did offer deposit services (at a cost without lending deposits), check clearing functions where goods would be paid to a third party, and loans with interest were restricted only to organic goods that reproduced (first solution offered to the interest problem – if you loan cows society can pay back interest in calves, but if you loan silver with interest due, there is more principle + interest due from society then silver available to repay). I would see a modern version of this, many currencies backed by locally abundant natural resources as one of the best options available.  

 

The only part I’ll disagree with you on is that aside from the possibility of backroom deals to monetize debt, most government don’t have a monopoly or even ability to create money themselves, just to issue bonds – promises to pay that logically wouldn’t be necessary if the government was just creating money when it wanted to spend it. Currently the private and central banking system has the monopoly on money creation – a situation that is often called ‘government printing’, but I see as much worse, and is certainly so far showing signs of less longevity, then a government monopolizing money creation (say how ancient Rome declared it the right of sovereignty for it to monopolize the money supply or King Edwards’ tally sticks – not perfect, lasted relatively long but not forever - even the despotic empires had a better track record issuing the money supply then banks).   So although I do like the idea of competing currency, I don’t think banks should have the issuing power - when they do, the longevity of the currencies they offer is terrible, frequntly causing inflation and panics within a couple years - perhapse not distroying the entire system but redistributing resources from productive uses to destructive bubbles in the process - that did not seem to be part of the business cycle prior to fractional reserve banking.

 

Tue, 04/24/2012 - 16:43 | 2371427 kridkrid
kridkrid's picture

thanks for the thoughtful response.  There is a great book out there right now talking about the history of money and debt.... Debt, the first 5,000 years.  Worth checking out.  The author should be a regular guest here... not sure how I can help to make that happen.

Tue, 04/24/2012 - 14:33 | 2370791 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture

HA! sez YOU! I do it all the time!

Tue, 04/24/2012 - 12:21 | 2370249 KandiRaverHipster
KandiRaverHipster's picture

but it creates Series A through IPO investment in wothless software that lets you manipulate pictures and instantly share them without doing any work!

Tue, 04/24/2012 - 12:22 | 2370252 Jason T
Jason T's picture

i think larouche's triple curve is also a valid interpretation of what happens when you expand the financial aggregates and monetary aggregates and the physical economy breaks down.. you get a hyperinflationary blowout.

I'm watching productivity output per hour as I think that is what is indicate the real collapse.  

Tue, 04/24/2012 - 12:24 | 2370259 CEOoftheSOFA
CEOoftheSOFA's picture

As a kid, while playing Monopoly, we dished out double the amount of cash to each player at the start of the game.  The result was that everyone would buy as much property as possible at the "Controlled" price, and then flip them to other players for double the book value.  In the end, we all ended up with the same amount of properties.  You would think the adults would have figured this out by now. 

Tue, 04/24/2012 - 12:31 | 2370289 DoChenRollingBearing
DoChenRollingBearing's picture

What an interesting take!  + 1

Tinkering with the rules on Monopoly (and Risk) was always great entertainment when I was young.

Tue, 04/24/2012 - 13:42 | 2370575 Badabing
Badabing's picture

The new rules for monopoly is whoever plays the banker can change the rules on the fly!

Tue, 04/24/2012 - 14:36 | 2370811 Almost Solvent
Almost Solvent's picture

Monopoly will soon be banned because it teaches one to turn PAPER $ into PHYSICAL - land & hotels (& PMs, although not used in the game).

 

Tue, 04/24/2012 - 12:34 | 2370308 SheepDog-One
SheepDog-One's picture

Nah, greed erases all logic and common sense, the banksters know this.

Tue, 04/24/2012 - 13:14 | 2370460 kridkrid
kridkrid's picture

We also put money into "free parking"... started with $500 and we paid into free parking along the way (pay the bank $100 for X, Y or Z).  A couple of things this did... 1. increased the randomness of victory (hit free parking a couple of time early any the table tilted dramatically in your direction.  2. Sped up the game.  This is the important take away, IMO, as we circle the drain more quickly every day.

Tue, 04/24/2012 - 13:30 | 2370519 Silver Dreamer
Silver Dreamer's picture

Allow the banker to continually create more money, and then see who always wins.

Tue, 04/24/2012 - 12:25 | 2370263 Dr. Engali
Dr. Engali's picture

What happens when money vanishes into thin air? I don't know let's ask Corzine. Seriously though this sounds like the basis for Free gold in simpler terms than FOFOA describes it.

Tue, 04/24/2012 - 13:27 | 2370514 manhunter
manhunter's picture

No, he is advocating a gold standard, with gold as medium of exchange. Won't work, and definitely not freegold.

Tue, 04/24/2012 - 12:37 | 2370319 Ljoot
Ljoot's picture

Print money on rice paper. At least then we could eat it.

 

Tue, 04/24/2012 - 12:54 | 2370385 Alea Iactaest
Alea Iactaest's picture

Joss paper, a/k/a Spirit money

Tue, 04/24/2012 - 13:27 | 2370512 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Print money on rice paper. At least then we could eat it.

...or roll doobies with it.

 

Tue, 04/24/2012 - 12:39 | 2370324 greyghost
greyghost's picture

this writer kept referring to "debt" and money. am i missing something? talks alot about "money" but nothing on "debt"? who creates debt, how debt is created into "money". is how "debt" is created into "money".....that  being phoney "money" and not even hard money such as gold...silver...and yes even paper money? isn't a reader left with the ever popular notion that "money is bad"? when it is the creation of debt out of nothing, not even created with printed paper money you can hold, that is the true problem? earlier i had the poster stacker giving me grief over trying to solve the soc. sec. problem of lack of funds. i stated that the u.s. goverment needs to create the money to pay the soc. sec. payments direct into peoples checking accounts. how is that more or less hyper-inflation when done this way. right this very day...at this hour...my goverment is borrowing...damn there is that DEBT word again...to pay people now...by borrowing? how is that not twice as inflationary as the goverment creating the "money" only once? these payments by goverment for soc.sec. will be spent right into the economy to maintain or create more jobs......AT NO COST TO THE TAXPAYER. oh i know here come the knuckle heads.....you can't do that shit [with no solution from them] because...because....because.....really because why? remember, we have gone 4/5 years with up to 23 trillion dollars given to the bankers in one form of another and yet the system is still broke!!!!! how bankrupt is soc. sec.? 23 trillion worth????????? i just sayin

Tue, 04/24/2012 - 12:51 | 2370371 cranky-old-geezer
cranky-old-geezer's picture

 

 

Money is not debt.  US dollars are not debt. Euros are not debt.  No currency is debt.

Want proof?  Simple.   In '08 the Fed printed lots of dollars and bought (worthless) secruities from Wall Street banks with them.   See, no debt.

Granted, most dollars are printed these days to buy US government Treasury bonds.  But the dollars aren't debt.  Treasury bonds are the debt.

Tue, 04/24/2012 - 14:33 | 2370781 BigJim
BigJim's picture

Sorry, no, the vast majority of our money is debt: it's been created, out of thin air, by commercial banks when making 'loans'. But they're not loans, per se, because the banks are not lending out existing money; they're actually creating the money and then lending it out. 

When the loan is repaid, the 'money' vanishes. It ceases to exist, though in aggregate all this credit has puffed up the price of things bought with it... houses, for example. But when money velocity slows, and more and more of the debt has been paid off, the money supply shrinks, exacerbating the problem. 

If all debt was paid off, our money supply would vanish. Another way to look at this: we are paying rent on our currency. 

The reason QE is used to buy debt is that when that debt is repaid, in theory, the money can be written off by the central bank to shrink the money supply back to where it was.

Tue, 04/24/2012 - 12:42 | 2370330 walküre
walküre's picture

When money vanishes into thin air, nobody can pay their bills / debt with said money.

At that moment, everything you possess on your property whether it is fully paid for or not is automatically yours to keep.

Whoever sold you the item on credit may try and establish a title to the property but technically they will neither have the legal framework nor the muscle to enforce it.

When money vanishes into thin air, the money changers will be out of jobs unless they go back to trading goats for rocks.

Tue, 04/24/2012 - 13:12 | 2370452 stopthejunk1
stopthejunk1's picture

I think you're dreaming.  The people that own everything will absolutely still own it when the currency is devalued.  And if you don't have a job and can't pay your bills with the new money, your house will absolutely be repossessed, and you will be on the street, just like 1933.

That is, unless there is revolution and the banks are killed once and for all.  But don't hold your breath.

 

Tue, 04/24/2012 - 14:21 | 2370732 walküre
walküre's picture

This time IS different.

This time their funny money is worthless no matter how they slice or dice it. Their funny money is neither buying them protection nor is it buying them legal enforcement.

The people that own everything have converted to gold or are in the process of doing so. That is their exit strategy, their only way to survive what is coming. The people that own everything now won't care about the loans they made with funny money as they know their lives are more important than trying to establish ownership and collect on those funny money loans.

It's all bogus anyway and they know it BEST.

Tue, 04/24/2012 - 12:46 | 2370343 zonetraders
zonetraders's picture

Bond market fading equities rally. Big move down coming?

http://capital3x.com/think-tank/ranges-and-ranges/

Tue, 04/24/2012 - 13:30 | 2370526 TheFourthStooge-ing
Tue, 04/24/2012 - 12:47 | 2370344 Snakeeyes
Snakeeyes's picture

We become North Korea! Here are some photos of our future with our Statist leader, no capitalism and staggerging debt.

http://confoundedinterest.wordpress.com/2012/04/24/social-security-to-dr...

But at least no one (other than the leaders) are fat. Hard to get fat when you are starving.

Tue, 04/24/2012 - 13:59 | 2370642 Harbanger
Harbanger's picture

Our "poor" fat people need Michelle to make healthy food choices.

Tue, 04/24/2012 - 12:47 | 2370348 Jack Sheet
Jack Sheet's picture

Nice piece. The ideas have also been discussed at length over at FOFOA's blog (heavy reading at times but insightful).

http://fofoa.blogspot.de/2012/03/sushi-island-savers-saga-part-2.html

His best piece is the one arguing how hyperinflation with paper money will occur even in a fully electronic currency system. Believe it - or not.

http://fofoa.blogspot.de/2011/04/big-gap-in-understanding-weakens.html

Tue, 04/24/2012 - 13:31 | 2370353 akak
akak's picture

.

Let's say that a small group is stranded on a desert island that supports a handful of coconut palms. Each palm produces a limited number of coconuts each season. To facilitate trade, the group issues a currency that represents one coconut.

Would that be a Chinese citizenism running dog blobbing-up self-denialistic algebraic coconut?

 

If so, I have the perfect portrait for this new currency:  An Anonymous Chinese Dishwasher

Tue, 04/24/2012 - 13:41 | 2370572 TheFourthStooge-ing
TheFourthStooge-ing's picture

Based on the article, Chinese citizenism fractional reserve algebraic coconuttery appears to be running rampant on desert islands.

As a major fiat coconutation processing plants in China, from the beginning to put the operating profit too absurd.

The fractional coconuttery reservationism uproar obscures the attention of people more serious underlying Chinese citizenism crisis two decades despite all spoiled countries attempt to delay the inevitable results of it perish fate.

Gravity make falling finally in sand broke out of these evil consequences.

But the Chinese citizenism madness out the transfer of assets in addition to the corrupt officials.

 

Tue, 04/24/2012 - 14:43 | 2370843 akak
akak's picture

Based on the article, Chinese citizenism fractional reserve algebraic coconuttery appears to be running rampant on desert islands.

////////////////////////////////////////////////////////////////////

Coincidence making is not happening in the here, as desert islands overrun by algebraic coconutopoly not in the form of original deserts being were, thatsuch state now the resulting from infestations by blobbing-up Chinese citizenism citizens disciples of the it, who available roadsides not they having, are doing the nightsoil depositing hither and yon in everywhere, for the turning into deserts the islands now see the Chinese self-satisfied expressions of destruction.

Tue, 04/24/2012 - 12:48 | 2370358 fuzed
fuzed's picture

oh lordy another 'prophet of doom'  

Tue, 04/24/2012 - 12:48 | 2370359 beachdude
beachdude's picture

Prophets of Doom - Dr. Nathan Hagens

http://www.youtube.com/watch?v=37FGyLxahAE&feature=youtube_gdata_player

A History channel documentary from last year, Hagans portion.

Tue, 04/24/2012 - 12:57 | 2370372 jimmyjames
jimmyjames's picture

Those who assert that a credit system cannot go hyper-inflationary may not have thought through the exponential effects on the relationship of the debt and productivity curves within the context of all money is debt and the only way to create money is for debt to be created. Eventually the debt curve accelerates away from the productivity curve, then the productivity curve collapses all together

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

The credit supply can certainly go hyper-inflationary and i believe it did-

The currency supply is a bit harder because no central bank/government has the means to counter competitiveness-short of the slim chances of a currency peg working-

Devaluation in sync-every country wants a weak currency and so they will compete in printing/devaluing currency until a major pukes and then watch the rush to gold-

Not by J6P but rather central bankers-

 

Tue, 04/24/2012 - 13:18 | 2370481 manhunter
manhunter's picture

That isn't how HI happens; all money is not equal. Credit money is destroyed and replaced by the government with base money. It's always a base money hyperinflation. Physical cash with lots of 0s.

Tue, 04/24/2012 - 13:35 | 2370541 jimmyjames
jimmyjames's picture

That isn't how HI happens; all money is not equal. Credit money is destroyed and replaced by the government with base money. It's always a base money hyperinflation. Physical cash with lots of 0s.

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

Are you seeing lots of zeros added to the paper currency?

http://research.stlouisfed.org/fred2/series/TCMDO

http://research.stlouisfed.org/fred2/series/BASE

How pray tell is credit money being "replaced" by base money?

 

Tue, 04/24/2012 - 13:37 | 2370551 manhunter
manhunter's picture

Excess reserves held at the fed are base money. You aren't seeing 0s on bills because we aren't in HI, yet.

Tue, 04/24/2012 - 13:53 | 2370617 jimmyjames
jimmyjames's picture

Excess reserves held at the fed are base money. You aren't seeing 0s on bills because we aren't in HI, yet.

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

Excess reserves are being held by commercial banks-you are not following the money loop to its end-

Base is what's been printed--Fed reserves have "mostly" been given to banks-

http://research.stlouisfed.org/fred2/series/EXCRESNS

Banks are not distributing/lending out those reserves--they are hoarding them-obvious by velocity-none or very little of those reserves are making it into M1-

http://research.stlouisfed.org/fred2/series/MULT

Tue, 04/24/2012 - 14:00 | 2370645 manhunter
manhunter's picture

Yes, the base is parked by commercial banks at the Fed for now. It will move, just wait. Then you will see HI.

Tue, 04/24/2012 - 14:12 | 2370695 jimmyjames
jimmyjames's picture

Yes, the base is parked by commercial banks at the Fed for now. It will move, just wait. Then you will see HI.

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

If banks start lending it out and the Fed/Government keeps supplying it--you would be correct-

What would make the greedy bankers lend out this cash when they can't collect on what they have already lent out?

i think that is what Bernanke is trying to achieve-but pushing on a string doesn't seem to be working-

Banks wont lend to poor credit risks and good credit risks don't want to borrow-

 

Tue, 04/24/2012 - 13:49 | 2370550 akak
akak's picture

.

It's always a base money hyperinflation.

Actually, that is not true.

While neither were hyperinflations to the extreme degree of Weimar Germany or Zimbabwe, both the Mexican peso collapse of the 1990s and the Argentinian currency crisis of 2001-2002 saw their respective currencies undergo severe (50-75%) intial devaluations before any significant additions to the supply of physical currency were made, at least in the beginning phases of each currency collapse.

I agree that it may very well be unlikely or even impossible to have Weimar-style hyperinflation (the kind with all the extra zeros) without massive physical currency printing, but is it really going to matter to the average investor or saver if his paper-denominated wealth is devalued by ONLY 85 or 90%, vs. 99.999%?

 

PS:  I believe that the 2001-2002 Argentinian currency crisis represents the best analogue to what is going to happen to the US dollar, and the USA, sometime within the next several years: a 75-80% loss of value within a relatively short timeframe of several weeks to several months, coinciding with severe capital controls, bank "holidays" and banking restrictions, food shortages and riots, and a dramatic breakdown (but not complete collapse) in public order, civility and infrastructure,

Tue, 04/24/2012 - 12:58 | 2370401 Everybodys All ...
Everybodys All American's picture

Vegtable gardens, pay off any loans, and get a job that pays. Use your money to becomes self sustaining.

If you think this all ends well you are alone.

Tue, 04/24/2012 - 13:07 | 2370419 stopthejunk1
stopthejunk1's picture

"If history holds true the rise of a totalitarian government is just over the horizon."

We ALREADY HAVE a totalitarian government.  Too many observers have missed the fact that in the U.S., totalitarianism is even more perfected than it was under Hitler or Stalin.  To wit, many people are completely unaware of it or even buy into it, calling it "patriotism" or "capitalism" or "social justice" or whatever other bumper sticker cause they "feel" strongly about.

Even our "free speech" and the availability of the Internet make little difference, because the U.S. dictators have learned to control opinion in much subtler ways than crass censorship.  Our rulers are far more sophisticated than you can possibly imagine. 

And the crash serves their purposes.  Don't hope for a minute that somehow the destruction of the currency is a "reset button."  Not at all.  It will only help them solidify their power and perfect their dictatorship, because scared, hungry people will sell their last ounce of liberty for a loaf of bread.  Stalin famously illustrated this by pulling all the feathers out of a live chicken at a dinner party.  The chicken then nestled between his legs for warmth and ate out of his hand. 

We are fat, lazy, complacent, and doomed.  We won't have freedom because we don't want it badly enough.  George Carlin said correctly that our owners don't give a shit about us, and in order for anything to change, a lot of people are going to have to fucking die in the streets.   But first, we are going to have to sink into utter depravity.  We're not there yet.

 

Tue, 04/24/2012 - 13:28 | 2370516 AnAnonymous
AnAnonymous's picture

US citizenism aims for a total society.

Tue, 04/24/2012 - 13:52 | 2370603 akak
akak's picture

Chinese Citizenism citizens' sphincters aim for the side of the road.

Tue, 04/24/2012 - 14:04 | 2370667 TheFourthStooge-ing
TheFourthStooge-ing's picture

ROR!

 

Tue, 04/24/2012 - 14:04 | 2370662 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

US citizenism aims for a total society.

Chinese citizenism aims for the roadside (that is, when they actually make an effort to aim).

 

Tue, 04/24/2012 - 14:46 | 2370882 WTFx10
WTFx10's picture

STFU

Tue, 04/24/2012 - 13:36 | 2370549 the grateful un...
the grateful unemployed's picture

to respond to your naked chicken story, people are facing the difficulty that arises from a loss of central authority. you're a naked chicken with no where to go. the rich already understand this, they refuse to pay taxes, preferring instead to have private security, private education, (their own private communities, islands, etc) and to live microeconomically, off the grid (while extracting wealth macoeconomically from the global system, or seignory, the small price added to cost of using money)

the problem is not totalitarianism, its what happens when you call the police and no one comes (there's never a cop around when you need one). the point is they're leaving us to our devices, they don't need us any longer. automation is removing the need for labor, which is already in oversupply. what's their motivation? profit margins are near zero, wall mart, amazon, fed chiefs throwing money down to the masses. what's the point in being rich and powerful?

all the resouces of the world have been plundered, including human labor. maybe we can mine asteroids? (only the nuevo rich could think of something like that). basically nobody (including POTUS) cares what you do, or what happens to you. you're a naked chicken. the POTUS can make you buy health insurance (so you can act like you're rich, but you see through that) or the POTUS can tell you do whatever you want, i've got mine. those are the two messages you can chew on, but it's your world.

when filmmaker Milos Forman saw his native Czech republic leave the Soviet Union, he wrote a letter to the people. it was titled "Do you want to live in a Zoo, or a Jungle.." great piece, but we all face the same problems now. the Zookeeper has checked out.

Tue, 04/24/2012 - 14:50 | 2370901 Almost Solvent
Almost Solvent's picture

I have thought along these lines for some time now, today's "automation" and "technology" would allow the uber-wealthy and such to simply withdraw behind their private walls and islands.

There is no need these days to try to subjugate mass numbers of people to toil for your benefit.

Rather, let the ferel animals fend for themselves. Why bother with big brother when it's easier and faster to withdraw into walled communities and islands.

Wed, 04/25/2012 - 08:24 | 2372858 WmMcK
WmMcK's picture

+1 for getting Stalin and Carlin in the same post.

Tue, 04/24/2012 - 13:15 | 2370468 manhunter
manhunter's picture

Using gold as medium of exchange always fails; try using fiat as medium of exchange and gold as store of value. That solves triffin's dilemma quite nicely. Where have I heard of that? Oh yeah, freegold. Coming soon.

Tue, 04/24/2012 - 13:17 | 2370475 Jack Sheet
Jack Sheet's picture

correct !

Tue, 04/24/2012 - 14:54 | 2370931 jimmyjames
jimmyjames's picture

Using gold as medium of exchange always fails;

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

Using gold as a medium of exchange-always has failed-but gold and the gold standard itself never failed-gold works better than anything for a medium of exchange-but only when the laws protecting it as such (the constitution) are upheld-

Tue, 04/24/2012 - 15:03 | 2370990 css1971
css1971's picture

Read Silvio Gesell.

 

Tue, 04/24/2012 - 13:26 | 2370508 gookempucky
gookempucky's picture

I wait patiently for people to come to the understanding that the only way for everyone to get their money would be to destroy its value completely.

"Money is value" has been programed into the people for many decades when actually a lot of folks miss the whole point--- your TIME has been stolen--money is just the vehicle from which you can enjoy your personal TIME.

You can print all the paper money you want but you cant print TIME

Tue, 04/24/2012 - 13:40 | 2370566 mantrid
mantrid's picture

Since gold was in insufficient supply, letters of credit were issued and accepted on a basis of trust

 

what da ya say? like erm... paper money?

 

there's no such thing as "insufficient supply" of money. just relax regulations and let the prices drop.

Tue, 04/24/2012 - 14:04 | 2370661 jimmyjames
jimmyjames's picture

there's no such thing as "insufficient supply" of money. just relax regulations and let the prices drop.

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

Correct--any supply of goods and services-if allowed-will adjust to whatever the supply of money is-providing the money supply remains more or less constant-

Tue, 04/24/2012 - 20:05 | 2371926 zerozulu
zerozulu's picture

Some where in the middle of an ocean, there was an island. One person spent a month and converted a rock in to a 3 feet sphere. Making that sphere is perfect one month labor and cannot be made in less than that.

Another person cut trees in the jungle and spend one month on this and convert that wood in to a dozen chairs. Now both, the round stone sphere and dozen chairs take same amount of time to make and can be exchanged. That round sphere become one unit of currency that every one knows cannot be counterfeit. So you must work one month to produce some thing of value to exchange with that round stone unit of currency. This is a solid base of monetary system. But our banker simply shuffle paper at the table and make millions in no time. And the people who work hard for one month get nothing in return.

This is unfair and cannot be sustained.

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