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Guest Post: Why Our Currency Will Fail

Tyler Durden's picture




 

Submitted by ChrisMartenson.com

Why Our Currency Will Fail

The idea that the very same economic forces that are currently plaguing Greece, et al., are somehow not relevant to the United States' circumstances does not hold water.  As goes the rest of the world, so goes the US. 

When we back up far enough, it is clear that money and debt are there to reflect and be in service to the production of real things by real people, not the other way around. With too much debt relative to production, it is the debt that will suffer. The same is true of money. Neither are magical substances; they are merely markers for real things. When they get out of balance with reality, they lose value, and sometimes even their entire meaning.

This report lays out the case that the US is irretrievably down the rabbit hole of deficits and debt, and that, even if there were endless natural resources of increasing quality available at this point, servicing the debt loads and liabilities of the nation will require both austerity and a pretty serious fall in living standards for most people. 

Of course, the age of cheap oil is over. And as Jim Puplava says, the oil price is the new Fed funds rate, meaning that it is now the price of oil that sets the pace of economic movement, not interest rates established by the Fed.  

However, of all the challenges that catch my eye right now, the one most worrisome is the shredding of our national narrative to the point that it no longer makes any sense whatsoever. I'm a big believer that our actions are guided by the stories we tell ourselves. To progress as a society, having a grand vision that aligns and inspires is essential.

But when words emphasize one set of priorities and actions support another, any narrative falls apart. At a personal level, if someone touts their punctuality but chronically shows up hours late, the narrative that says "this person is reliable" begins to fall apart.

Likewise, if a company boasts about being green but its track record belies them as a major polluter, the "green" narrative fizzles.

And at the national level, if we say we are a nation of laws, but the Justice Department selectively prosecutes only the weak and relatively powerless while leaving the well-connected and moneyed entirely alone, then the narrative that says "we are a nation of blind justice and equal laws" falls apart.

I wish this was just some idle rumination, but I see more and more examples validating the importance of alignment of narrative and behavior. Because when there is a disconnect between words and actions, anxiety and fear take root.

Unfortunately, there is quite a lot to fear and be anxious about in the most recent State of the Union address and GOP response.

State of the Union

The recent State of the Union speech by Obama, and its Republican response, are both remarkable for what they say as well as what they don't say. The summary is this: The status quo will be preserved at all costs.

Here are a few examples of the sorts of disconnects between rhetoric and reality that are absolutely toxic to the morale of all who are paying the slightest bit of attention.

Obama

Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It's time to apply the same rules from top to bottom. No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.

We've all paid the price for lenders who sold mortgages to people who couldn't afford them, and buyers who knew they couldn't afford them. That's why we need smart regulations to prevent irresponsible behavior.

It's time to apply the same rules from top to bottom? Is Obama aware of what Erik Holder is up to over there in the Justice Department? The robo-signing scandal alone has thousands and thousands of open and shut cases of felony forgery that can and should be applied to as many individuals as were directly involved, from top to bottom in every organization that was engaged in the practice.

Here's the reality. Under Obama, criminal prosecution of financial fraud fell to multi-decade lows during what is and remains one of the most target-rich environments in living memory.

(Source)

Obama

And I will not go back to the days when Wall Street was allowed to play by its own set of rules.

So if you are a big bank or financial institution, you're no longer allowed to make risky bets with your customers' deposits. You're required to write out a "living will" that details exactly how you'll pay the bills if you fail -- because the rest of us are not bailing you out ever again.

Has Obama checked with the Federal Reserve to assure they are on board with the new 'no bail out' policy? Because last I checked, they were the ones mainly involved in bailing out the big banks and providing swap lines and free credit to anyone and everyone that needed help, US or foreign. 

To be fair, Obama can make no statement or claim about what the Federal Reserve can or can't or will or won't do. It is not under executive nor even legislative control. If, or I should say when, the Federal Reserve bails out the next bank or country or whomever, it's "the rest of us" who will be paying the bill -- in the form of eventual inflation. 

Obama

[W]orking with our military leaders, I've proposed a new defense strategy that ensures we maintain the finest military in the world, while saving nearly half a trillion dollars in our budget.

Let's review the proposals for military spending then. The language above is nearly impossible to decode. What is really being said is that proposed defense increases have been scaled back, and that this is what is being called savings.

In 2000, Defense spending was $312 billion dollars. In 2012, the proposed budget calls for $703 billion, a 125% increase in 12 years.  

What the plan he mentions really calls for is spending increases in 5 out of the next 6 years. The lone holdout is 2013, when the plan calls for cutting spending by a whopping $6 billion less than the amount already approved for 2012. 

Somehow that all translates into rhetoric that implies cuts of "nearly half a trillion dollars."

As Lily Tomlin used to say, "As cynical as I am, I find it hard to keep up."

GOP Response

“The routes back to an America of promise, and to a solvent America that can pay its bills and protect its vulnerable, start in the same place.  The only way up for those suffering tonight, and the only way out of the dead end of debt into which we have driven, is a private economy that begins to grow and create jobs, real jobs, at a much faster rate than today."

This platitude-laden set of ideas is blissfully blind to the role of energy in the story, the amount of debt in the system, and the fact that both parties have contributed equally over the years to the predicament at hand.

How exactly is it that the private economy is supposed to flourish here, with the Federal government borrowing more than a trillion dollars a year and oil at $100 per barrel? The simple truth is that the US government needs to begin borrowing at a rate lower than the previous year's economic growth. If GDP grows at 2%, then the total debt pile must not grow by anything more than 2%. That is the only way that the official debts can shrink relative to the economy. 

GOP Response

“We will advance our positive suggestions with confidence, because we know that Americans are still a people born to liberty. There is nothing wrong with the state of our Union that the American people, addressed as free-born, mature citizens, cannot set right."

Last I checked, the original vote tally in the Senate on the National Defense Authorization Act, which empowered the armed forces to engage in civilian law enforcement activities and selectively suspended the habeas corpus and due process rights (as guaranteed by the 5th and 6th amendments to the Constitution), passed by a voice vote of 93 to 7 in the Senate.

It's kind of hard to swallow the idea that the GOP stands with Americans as "a people born to liberty" when their members are in perfect lock-step with the Democrats, chipping away at the most basic and cherished freedoms. There's no difference between the parties when both seem intent on limiting individual freedom and increasing the power of the government to reach into and examine our daily lives. 

When Words Hurt

The above examples are not meant to pick on any one person or party or set of ideas, but to illuminate the profound gap that exists between what we are telling ourselves at the national level and the actions we are undertaking. 

Again, it is the gap between what we tell ourselves and what we do that creates a sense of unease, anxiety, and oftentimes fear. When we hear words "X" but see actions "Y" over and over again, it is hard not to come to the conclusion that the words are meaningless; empty rhetoric designed with polls and focus groups in mind, but little else. 

It is the blind obedience to the status quo that worries me the most, as it raises the likelihood that nothing of any substance will be done until forced by circumstances, at which point, like Greece, we will discover that the remaining menu of options ranges from bad to worse.

Left Unsaid - Our Missing Narrative

In neither Obama's address nor the GOP response do we hear anything about Peak Oil, a stock market that has gone nowhere in ten years, or the fact that with two wars winding down there ought to be massive savings from defense cuts that we can capture. There's lip service to the idea of using more natural gas to begin weaning us off our imported oil dependence, but no commensurate trillion-dollar program offered to rapidly build out the infrastructure necessary to utilize that gas in a meaningful way.

A more honest set of messages would note that mistakes were made, opportunities squandered, and priorities misplaced. It would note that the US is on an unsustainable course with respect to spending, debts, and liabilities. There would be an explicit admission that having your central bank print trillions in "thin air" money in order to enable runaway deficit spending is a dangerous and foolish thing to entertain.

Most obviously missing is a national narrative that is coherent and comports with the facts. Both parties basically imply that if we elect a few more of their type, do a little of this and then tweak a little of that, then we will get our nation back on track. 

There is no call to a shared sacrifice for something greater. There is nothing to rally around except a laundry list of disconnected programs; a little something for everyone. There is no overarching theme under which everything else can be hung, such as a space race, a civil rights movement, or a massive upgrading of our national infrastructure.

A good narrative is one that inspires people and is based in reality but also asks something larger of us that we can share in. What is our vision for this country? Where do we want to be in ten years? How about twenty?   How will we get there, and what will be required? What should we stop doing, what should we start doing, and what should we continue doing?

None of these things are on display, and all are badly needed if we are going to make the most of the next twenty years.

The Troubling Facts

Of all the facts that got skimmed over or avoided in the State of the Union extravaganza, the fiscal nightmare in DC was probably the most glaring. Yes, both parties have decided to talk about the deficit, but neither is giving the appropriate context. 

For FY 2012, the federal government is projected to run a $1.1 trillion deficit.   Let's compare that number to the projected revenues:

 (Source

The $1.1 trillion deficit is 42% of total revenues and 73% of all income taxes. That is, in order to spend what the US currently spends without going further into debt (i.e., to have no deficit), income taxes must immediately increase by 73%(!).

This is the sort of territory that, were the US any other country, would have already landed its debt markets -- and likely its currency, too -- in very hot water.

Historically, countries that have run deficits 40% greater than revenue for more than two years have experienced profound financial and political crises. The US is now in its fourth year of inhabiting this rare territory.

How can it keep doing this when every other country that has tried has gotten into trouble? Simple. The Federal Reserve has enabled such egregious deficit spending by buying up mind-boggling amounts of government debt. This has both kept rates low and created a lot of additional buying demand for Treasuries.

Exactly how much US debt is the Fed buying? Under Operation Twist, the Fed has bought anywhere from 51% to 91% of all gross issuance of bonds dated six years or longer in maturity. 

(Source

It is quite obvious that the Fed has been a major participant in the bond markets and a major reason why Treasurys are priced so high and offer so low a yield. 

It seems that it is well past time to speak directly to the enormous fiscal deficits in a credible way, not merely bemoaning them being too high. And we're also overdue for an adult national conversation that it's unwise and unsustainable for a country to lean on its central bank to print up the difference between receipts and outlays.

Oil and Recoveries

There is a clear relationship between high oil prices and recessions, confirming the idea that the price of oil has the same impact on the economy as higher interest rates (perhaps even more so nowadays). Both are a source of friction. With higher interest rates, less lending and less consuming happens. With a higher price of oil, more money gets spent on energy, much of it sent to foreign producers of oil, and thus less money is available for other consumption.

Both higher oil prices and higher interest rates cause people to think a bit more before pulling the trigger on either ordinary spending or a big capital project.

Note that all of the six prior recessions were preceded by a spike in oil prices. In the case of the double-dip 1980's twin recessions, oil remained elevated after the first recession was (allegedly) over. Don't be fooled by the logarithmic nature of the chart below -- note that the typical decline in oil prices between the recession-inducing peak (blue lines) and the recovery-enabling trough (green lines) was a substantial 30%-50%:

(Source

Also note in the most recent data that oil prices happen to be at roughly the same level that triggered the first recession in 2008 (the purple dotted line). 

If we needed one simple chart to help us understand why trillions of dollars of stimulus and handouts are not causing the economy to soar, this is the chart that explains the most. High oil prices and recessions are highly correlated, and it's not too much of a stretch to postulate that economic recoveries and high oil prices are inversely correlated.

Note also that the above chart is not inflation-adjusted. If it were, it would show that there have been exactly zero recoveries when oil prices are near or over $100 per barrel. 

For those counting on an economic recovery here to lift all boats and assist the bailout efforts, the burden of history is upon them to explain why this time we should ignore the price of oil. 

I say we cannot. Policy planners and citizens alike should be ready for disappointing market and economic activity in response to the usual bag of printing, borrowing and delaying tricks.

Dead Ahead: A Currency Crisis

The State of the Union speech and GOP response neither accurately portray the true fiscal condition of the US, nor present a compelling narrative that speaks either to the realities of today or a future we might like to head towards.

The US is simply on a fiscally ruinous path, and neither party seems up to the task of laying out the story in a way that is mature, clear, and direct. 

No recovery has ever been possible from oil prices this high, nor with debt levels this extreme, and it is quite improbable to think that both conditions could be overcome with anything less than a completely clear-eyed view of the true nature of the predicament faced.

Decades ago, Ludwig Von Mises captured everything discussed here elegantly:

There is no means of avoiding the final collapse of a boom brought about by credit expansion.

The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Our current dire fiscal condition, our leaders' dysfunctional unwillingness to address the flawed behavior that caused it, plus many other recent events both in the US and in Europe, point to the idea that a voluntary abandonment of further credit expansion is just not on the menu.

That leaves us with some final and total catastrophe of the involved currency system(s) as the inevitable outcome.

In Part II: Surviving a Currency Crisis, we explain what a currency is, what happens when a currency collapses, and, most importantly, how to position yourself prudently in advance.

At this point, time to prepare is your greatest asset. But as we can see from the precarious global economic situation described above, time is running out. Use what remains wisely.

Click here to access Part II of this report (free executive summary; enrollment required for full access)

 

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Wed, 02/08/2012 - 12:52 | 2138243 WALLST8MY8BALL
WALLST8MY8BALL's picture

Currency Collapse and Pepper Spray - Its what's for dinner!

Wed, 02/08/2012 - 12:58 | 2138274 ilion
ilion's picture

Failing currency is one step in the right direction.

Wed, 02/08/2012 - 13:02 | 2138292 kindape
kindape's picture

you're kidding right

do you know how many people will die within a week if our currency fails? And how many then die within a month as people don't go to work. imported components, medicines, etc dont show up.  You think this stuff all happens automatically?

Get your head out of the doom porn and be constructive/aware/real.

Wed, 02/08/2012 - 13:06 | 2138322 hedgeless_horseman
hedgeless_horseman's picture

 

 

...do you know how many people will die within a week if our currency fails?

Excellent fear mongering.  Are you a pro?

Wed, 02/08/2012 - 13:08 | 2138325 derrick773
derrick773's picture

Doomsday Preppers

Wed, 02/08/2012 - 13:19 | 2138355 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Can't eat dollars.

Wed, 02/08/2012 - 13:34 | 2138410 Ms. Erable
Ms. Erable's picture

Good for wiping, though.

Wed, 02/08/2012 - 13:53 | 2138481 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

save and or collect phone books, yellow pages=brown pages. :)

Wed, 02/08/2012 - 14:10 | 2138562 tired1
tired1's picture

Crap! What a wonderful idea!

Wed, 02/08/2012 - 14:24 | 2138623 economics1996
economics1996's picture

The best thing we can all do is learn about 100% fractional reserve banking with gold/silver as the base.  Remember that you people on this site will be the "experts" as to why there was a collapse to your friends and neighbors.  If you haven't read about banking you need to now.  Here are a couple of my favorite banking books.

http://www.amazon.com/History-Money-Banking-United-States/dp/0945466331/ref=sr_1_sc_1?ie=UTF8&qid=1328719446&sr=8-1-spell

Murray Rothbard

http://www.amazon.com/Money-Sound-Unsound-Joseph-Salerno/dp/1933550937/ref=sr_1_1?s=books&ie=UTF8&qid=1328719618&sr=1-1

Joseph Salerno

Wed, 02/08/2012 - 14:06 | 2138546 stirners_ghost
stirners_ghost's picture

...not to mention rapid exothermic oxidation

Wed, 02/08/2012 - 13:46 | 2138460 zerotohero
zerotohero's picture

Hellooo its DONAIRS - duh

Wed, 02/08/2012 - 13:54 | 2138489 Flakmeister
Flakmeister's picture

Maritimer, eh?

Wed, 02/08/2012 - 15:28 | 2138826 TeMpTeK
TeMpTeK's picture

How bout some Preppermint gum?

Wed, 02/08/2012 - 15:25 | 2138814 whoisjohngalt11
whoisjohngalt11's picture

Food goes then violence starts, how long does that take??

Wed, 02/08/2012 - 16:41 | 2139134 LowProfile
LowProfile's picture

As long as delivery isn't interrupted, for a long time.

If delivery is interrupted, about a week.

Wed, 02/08/2012 - 17:57 | 2139407 SilverDOG
SilverDOG's picture

Now that is being generous.

I'd give it 72hrs.

Only took 48hrs in the Tennessee Mts? a couple years back due to a snow storm.

Fightin' over food and fuel, and the currency was still afloat.

Wed, 02/08/2012 - 22:41 | 2140304 pods
pods's picture

Hell that happens in NC when snow is forecast.

pods

Wed, 02/08/2012 - 14:09 | 2138335 Ghordius
Ghordius's picture

he might have a point, though. some people get hurt or die when a currency fails (not that I believe in the catastrophic collapse of the USD, more a decline)

----

since I got 6reds vs. 1green up to now for the statement above I'll explain: the Treasury has (or appears to have, for the hard-core) some 10'000 tons of gold. Yes, the FRN might all try to come home at one point, but it's a card that let's me think of orderly decline instead of catastrophic fail.

Wed, 02/08/2012 - 13:30 | 2138396 kindape
kindape's picture

Pro? At what ? Towards what end?
just a doctor.

Wed, 02/08/2012 - 13:37 | 2138417 hedgeless_horseman
hedgeless_horseman's picture

 

 

...do you know how many people will die within a week if our currency fails?

My crystal ball is only a novelty item.  However, history is in the books.  How many people died within a week, Doc, each of the previous times the currency failed in America?

Wed, 02/08/2012 - 13:42 | 2138442 Au Shucks
Au Shucks's picture

His proctology practice limits the amount of time he can spend learning history.  To him, it's all one dark, smelly hole.

Wed, 02/08/2012 - 13:55 | 2138492 kindape
kindape's picture

This is a no analog event. Population,degree of interconnectedness, dependence on trade for basic inputs and lack of local regional supply chains make it very different situation. ALL past currency failures ha much more decentralized means of production. You're right. I don't know. But know enough to junk that first poster rooting for currency collapse. Those liitle shiny pieces in his basement will do scant good if trade abruptly stops

Wed, 02/08/2012 - 14:10 | 2138561 clymer
clymer's picture

now you're assuming he's a gold bug? You are a pro

Wed, 02/08/2012 - 14:22 | 2138619 kindape
kindape's picture

Ok sorry.
But it is a common theme here...dollar collapse will increase the relative fitness of all those who own gold. My main point is that they are neglecting a likely huge drop in absolute fitness. And lest you jump to your own conclusions I think gold ultimately is going to soar and I own some. But gold will still only be a monetary marker for real capital and a sideshow to the larger social story

Wed, 02/08/2012 - 14:31 | 2138641 hedgeless_horseman
hedgeless_horseman's picture

 

 

So we should all just live with the cancer because the cure might kill some of us?  

Wed, 02/08/2012 - 15:03 | 2138750 Calmyourself
Calmyourself's picture

Really that is what he said HH?  I do not think so, I realize we (most) folks here believe this is coming and it will be bad either way but lets try to be a bit inclusive. Just a thought..

Wed, 02/08/2012 - 15:17 | 2138788 hedgeless_horseman
hedgeless_horseman's picture

 

 

Inclusive of people like the poster, ilion, he was responding to that would welcome a new monetary system as a step in the right direction?  Inclusive of posters that really understand the inflation tax?  Inclusive of people that stood up to Hank Paulson's threats of blood in the streets and voted against TARP?  Or a different kind of inclusive?

Wed, 02/08/2012 - 15:41 | 2138867 Calmyourself
Calmyourself's picture

Both, as they both mainly agree with us.  The collapse will be painful how painful none of us really know but I will take someone who has awaken from the lies, ponzinomic bullshit and perhaps overlook some aspects if we can share a foxhole and argue monetary poilcy and which rat we eat next..

Wed, 02/08/2012 - 15:22 | 2138805 HungrySeagull
HungrySeagull's picture

Some of us actually choose not to under go the poisoning and just get Hospice to manage the dying process.

Wed, 02/08/2012 - 15:47 | 2138885 hedgeless_horseman
hedgeless_horseman's picture

 

 

Some of us actually choose not to under go the poisoning austerity and just get Hospice cable television to manage the dying debt process.

I do agree with you on cancer, HS, although I would want to die at home.

Wed, 02/08/2012 - 16:38 | 2139120 HungrySeagull
HungrySeagull's picture

Same here, what good is thousands of dollars a week in a futile fight to buy a few more days or months? Some will do it anyway.

I know of one who did. It took 5 months for that person to die. It was not the original medical emergency that killed this person but bedsores. The kind that get infections into the blood and killed that way.

We actually cut the cable because we can no longer withstand the repeat of bullshit, lies and paradise being dispensed to the masses.

Wed, 02/08/2012 - 15:55 | 2138917 aerojet
aerojet's picture

Nobody ever explained what you're supposed to do with the gold.  Do you barter with it?  Do you convert it to some other currency on some long time horizon?  You don't want to sell it for dollars if dollars are worthless. 

I really think the prepper crowd is out of their minds.  They're people who don't have much going for them, they desire collapse because it fulfills some kind of leveling fantasy where they may achieve status simply for somehow being ready for something.  What they fail to understand is that they are flawed actors in the our current system for a reason and will end up being flawed actors in whatever future "apocalypse" scenario comes into being for the same reasons.  That is, unless, they are a totally violent badass Rambo, which they aren't, because totally badass Rambo types aren't preppers.  You see what I'm getting at here?  If you're marginal in today's system, you're still going to be marginal in tomorrow's unless you smarten up.  Gold isn't going to help you, either way--it may make you feel better, or allow you to avoid dealing with unpleasant personal characteristics, but it's not magically going to elevate you to warlord status sometime down the road.  Personally, I think gold is in the mother of all bubbles, just like oil and a real recovery will flatten it, no matter what inflation does to the dollar.

 

 

Wed, 02/08/2012 - 16:02 | 2138962 Sweet Chicken
Sweet Chicken's picture

Please humor me on how the hell physical gold can be in a "bubble"?! This is absurd in the extreme. You can't manipulate gold, you either have it or you don't!!!

Wed, 02/08/2012 - 16:04 | 2138975 trav7777
trav7777's picture

bingo.  The worst bugz around here want a total collapse of all paper, thinking they will be the only ones left with any wealth.

Wed, 02/08/2012 - 19:28 | 2139597 Green Leader
Green Leader's picture

To prevail what's coming up will take seeds, fertilizer, hand tools, LOTS of calcium carbonate and LOTS of physical strength & agroecological  farming skills. Goats, chickens, donkeys and other farm animals, too.

Thu, 02/09/2012 - 08:20 | 2141000 DanDaley
DanDaley's picture

You're right, but don't forget barbed wire, pepper spray, and lead. Lots of lead.

Wed, 02/08/2012 - 16:13 | 2139007 Calmyourself
Calmyourself's picture

Tough question, what to do with gold, hmm how about buy bread??

http://www.youtube.com/watch?feature=player_detailpage&v=7ubJp6rmUYM

Folks are alwys going to need something to transact business with and in a total collapse it will take time but the gold will bubble up..   Personally I am stocking curly lightbulbs for the mercury content, it is the new precious metal..

 

Wed, 02/08/2012 - 19:12 | 2139692 darkhorse222
darkhorse222's picture

hmmm.....so you walk into a store with your $500 gold coin, or worse, gold BAR worth thousands, to by a loaf of $10 bread-what storeowner would make change for that purchase???

Wed, 02/08/2012 - 19:32 | 2139747 Calmyourself
Calmyourself's picture

Well, all you've proved is that you did not watch the video. Watch the video. All your questions will be magically answered.  If it happens in f*&^%& Zimbabwe, it can happen here...

Wed, 02/08/2012 - 16:36 | 2139115 10mm
10mm's picture

Being capable of handling one's self without the help of some type of authority/agency to come to the rescue in a breakdown is not being unresonable.Or in general.depends on where one lives.

Wed, 02/08/2012 - 17:14 | 2139250 RockyRacoon
RockyRacoon's picture

Go ahead, aerojet, and maintain your faith in the fiat.   Are you old enough to remember silver coinage?  Well, if not, you'll be old enough to remember the nickel.

Canada changes alloys of $1, $2 coins in cost-savings move

Lighter multi-ply plated steel coins due to enter circulation soon

By Jeff Starck-Coin World Staff | Feb. 03, 2012 10:00 a.m.   

Canada’s $1 and $2 coins will soon sport technological upgrades to deter counterfeiting, and new compositions to save the Canadian government millions annually. Examples of current composition 2011 coins appear here.

Canada’s new lighter weight $1 and $2 coins are due to enter circulation in early 2012, after receiving final governmental approval before Christmas.

The notice of approval was published Jan. 4 in the Canada Gazette.

The new multi-ply plated steel coins will be similar in appearance and feel to the current versions.

Though largely driven by the potential to save millions annually, the changes are coming hand-in-hand with the development of new anti-counterfeiting technology by the RCM.

Planned anti-counterfeiting technology to make its debut on the coins includes the use of a lasermark maple leaf on the reverse of each $1 coin and two “virtual image” maple leafs “between two lines at the top of the coin and the words CANADA and 2 DOLLARS interspersed with two lasermark maple leaves each within a circle at the bottom of the coin.” In addition, edge lettering of CANADA and 2 DOLLARS, with a maple leaf flanking each side of CANADA, will be used on the $2 coin.

RCM Senior Manager of Communications Alex Reeves declined to answer questions about the timing of the coins’ release, the RCM’s cooperation with Canadian vending officials and how the new coins affect the RCM’s relationship with blank provider Jarden Zinc in Greeneville, Tenn., which expanded its facility in 2011 to service global plated coinage demand. The firm has produced blanks for Canada’s dollar coins since 2005 and will be retained as a secondary source of supply for the multi-ply plated dollar blanks.

The new technology will also allow the RCM to expand a metal harvesting program that it began in 2003, pulling millions of tons of older nickel-composition coins from circulation to be replaced with new, cheaper coins.

Despite an initial $40 million cost to the vending industry for retrofitting equipment, the move will save a maximum estimated $16 million a year for the Canadian government, according to RCM documents filed as the RCM sought approval, for a present value of $107.5 million over 10 years.

That estimate of savings is based on a projected demand of 30 million coins of each denomination for each of the next 10 years, with some of the production needed to replace coins that are withdrawn from circulation and melted through the metal harvesting program. The RCM reported in the 2010 annual report that using a multi-ply plated steel blank for the $1 coins would save 30 cents per coin.

In the request for approval, the RCM sought and received an amendment to the Royal Canadian Mint Act, which governs the denomination, composition and other specifications of Canadian coins, in order to make the
changes.

Plated steel

The new coins will be struck from a multi-ply plated steel composition. The replacement composition was developed by the RCM in 1999 and has been in use for most Canadian coins since 2001.

Multi-ply plated steel coins are made from steel plated with multiple, alternating layers of copper and nickel.

The RCM said it has struck more than 6 billion 1-, 5-, 10-, 25- and 50-cent coins in multi-ply plated steel since 2000, saving the government approximately $250 million.

The $1 and $2 coins are the only two denominations of Canadian coinage that RCM officials have not converted to a multi-ply plated steel composition. However, in some instances, the RCM still issues coins of an old alloy if it has to meet circulation needs and cannot acquire sufficient plated steel blanks to meet demand.

Changing the alloy hedges against possible spikes in the price of raw material used to make coins, according to the document.

The dollar coin is currently composed of bronze-plated nickel or brass-plated nickel (both alloy variations exist). New dollar coins will have a steel core coated with multi-ply plated brass.

The current $2 coin has an aluminum-bronze center piece and nickel outer ring. For the new $2 coin, the center piece will be composed of aluminium-bronze coated with multi-ply plated brass; the outer ring will be steel plated with nickel.

The dollar coin will remain “yellow in color,” according to the RCM, and the shape will remain 11-sided.

The $2 coin will continue to have a yellow core and an outer ring that is white in color, but edge serrations will be thinner to allow for the application of edge lettering.

The dollar coin, which now weighs 7 grams, will weigh 6.27 grams after the switch, while the $2 coin, currently 7.3 grams in weight, will be reduced to 6.92 grams.

The diameters are not expected to change.

Counterfeiting safeguards

The RCM is using the introduction of new money-saving alloys as also an opportunity to bolster the $1 and $2 coins against the ever-growing threat of counterfeiting. The new security features are pre-emptive, and not a response to any specific counterfeiting threat, according to the regulatory filing.

“The new features present a major deterrent to forgers trying to duplicate them as it would require a significant capital investment along with strong technical knowledge to effectively operate the process,” according to the RCM.

The new lasermark, virtual images and edge lettering features will allow for a visual authentication of the new $1 and $2 coins, and the cost to produce such features would result in it being prohibitive for counterfeiters to duplicate, according to the RCM.

Vending industry

Another deterrent to counterfeiting will be the unique EMS, “electromagnetic signal,” of both coins. That change is not without cost to operators of coin acceptance machines.

The RCM acknowledges that introducing the new coins will require the vending industry to spend an estimated $40 million Canadian to recalibrate automated coin-acceptance equipment to read the new coins and still accept the old versions, but that “as part of the industry’s capital planning, such updates already occur on a somewhat regular basis.”

The cost estimate is based on $300 for recalibrating each older machine and $100 for each newer machine. Any new machines purchased after the new coins are introduced would already be equipped to accept the new coins.

The RCM has been working with vending industry representatives since 2009 to keep them aware of the changes. RCM efforts include presenting sample tokens to the Canadian Automated Merchandising Association’s members on multiple occasions, including sending out samples of the new coins in April 2011.

In addition to deterring counterfeiting, the unique EMS also enables equipment to sort the old coins from the new, allowing the RCM to expand its metal harvesting program, according to the RCM. Millions of pounds of older, nickel-based Canadian coins have been withdrawn from circulation in the Alloy Recovery Program, which began in 2003 and generates millions of baseline revenue for the Mint.

More than 1 billion dollar coins and more than 700 million $2 coins are in circulation, according to the RCM, offering a huge supply of metal to be melted.

The new coins will not pose a problem to those with limited or no vision, according to the documents.

The new $1 and $2 coins will be produced along with other circulation coins at the RCM’s Winnipeg Mint, and their lighter weight means savings in transportation costs.

 

http://www.coinworld.com/articles/canada-changes-alloys-of-1-2-coins-in-...

Thu, 02/09/2012 - 02:10 | 2140827 StychoKiller
StychoKiller's picture

There's a sound financial reason WHY counterfeiters do NOT counterfeit pennies (or any other coin these days!)

Wed, 02/08/2012 - 15:53 | 2138909 Iwanttoknow
Iwanttoknow's picture

Kindape,You are an insult to other physicians including myself.

Wed, 02/08/2012 - 16:47 | 2139020 kindape
kindape's picture

why exactly?

 

. What a bizarre hateful place this is...great seeds for cultural change...

Not.

Wed, 02/08/2012 - 17:05 | 2139223 CrockettAlmanac.com
CrockettAlmanac.com's picture

And there's nothing bizarre about a guy who hangs around a forum he claims to despise.

Not.

Thu, 02/09/2012 - 02:13 | 2140832 StychoKiller
StychoKiller's picture

Ever read the story of Joseph in the Bible?  He rose from Hebrew slave to trusted advisor to the Pharoah.  Look at HOW he did it.

Wed, 02/08/2012 - 13:55 | 2138494 Silver Dreamer
Silver Dreamer's picture

The Great Depression is a good example.  Compare the rates of people living in rural areas compared to urban ones then and now.  Then take in consideration the estimated millions of people who died back then either from exposure or starvation or disease related to them.  If we have a collapse today, things will be far worse too.  Look at all of the houses with no chimneys.  Look at all of the people who depend heavily on grocery stores compared to the past rural areas with local farm support.  A great culling is coming to America, and a collapse like the Great Depression is a best case scenario--with a far worse one more than likely.

Is that really fear mongering?  What do you think will happen to people when their money no longer buys anything?  What happens when the store shelves are empty?  Hell, idiots kill each other already over far lesser situations.  The reason people joke about a "Zombie Horde" is partly because that's exactly what urban mobs will act like when the SHTF.

Wed, 02/08/2012 - 14:28 | 2138631 economics1996
economics1996's picture

Back then the country was homogeneous, 90/10.  Today we are many different tribes.  When the fiat collapses you are looking at Yugoslavia times 10.

Wed, 02/08/2012 - 15:22 | 2138806 GeorgeHayduke
GeorgeHayduke's picture

Actually, rural areas have around 16% of the people on some kind of government food assistance program. I know it's more fun to get riled by the urban, non-white "Welfare Queen" stories perpetuated by Reich-wing radio mouthpieces, but the reality is, rural America is just as filled with poor, half-literate people on government assistance as most urban areas. They're just spread out more.

I'm going to go out on a limb and speculate that this 16% of the rural population doesn't have food, water, gold, guns and ammo stocked up, like all of the good rural ZHer's do. It's also ludicrous to assume those 16% of rural folks will suddenly become noble and productive dirt farmers during a societal collapse. So, I'm guessing that we could see all kinds of different problems in all different kinds of places.

Personally, I will be interested in watching if those more "liberal" communities that have adopted alternative energy initiatives, left open space in their city, tried to reduce car travel by building walkable neighborhood instead of sprawl and who will likely try to ride out any social collapse in a community-base manner will outperform and survive better than all of the Rambo's on their 5-acre ranchette standing 24-hour watch for people picking their green beans.

Perhaps we will see "zombie hordes" of rural and "suburban-rural" poor trying to raid those urban areas that know how to function as a community instead of as a corporate entity. Maybe, just maybe, carrying your preconceived assumptions and biases into a crappy situation is dangerous.

Wed, 02/08/2012 - 15:25 | 2138819 Silver Dreamer
Silver Dreamer's picture

Regardless of preconceived assumptions and biases, you would agree living in an urban area with the knowledge most people have on here would be insanely stupid, right?

Wed, 02/08/2012 - 16:04 | 2138931 economics1996
economics1996's picture

 

It depends on the demographics.  Hispanics commit about 3.8 times more crime (per capita) than whites do.  The average IQ of Hispanics is 93.  Blacks commit about 6.5 times more crime than whites do and have a average IQ of 85.

I am not trying to be racist but those are the numbers.  Get in geographic locations that avoid these groups.  Detroit?  Forget it, suicide.

Asians are the least violent group, but also very socially…communist orientated. 

If you are in a military situation the two groups that there is decades of history on, that will be almost 100% guaranteed traitors to your cause, are homosexuals and Yids.  Look at the US spies over the last 60 years if you do not believe me.  Not saying they are all that way but if you are in a survival situation why chance it?  Keep information on a need to know basis.

 

Wed, 02/08/2012 - 16:32 | 2139102 johnQpublic
johnQpublic's picture

with an attitude like that you must be irish

Wed, 02/08/2012 - 16:52 | 2139172 lunaticfringe
lunaticfringe's picture

That shit is funny..I am mostly ear..ish...

Wed, 02/08/2012 - 18:02 | 2139393 smiler03
smiler03's picture

@ silverdreamer

"Then take in consideration the estimated millions of people who died back then either from exposure or starvation or disease related to them."

I would be interested in a link confirming this. The best I can find is that the death rate hardly changed at all, the suicide rate went up but that's it.

edit: it's US figures I'd like to see a link for.


 

Wed, 02/08/2012 - 15:32 | 2138832 HungrySeagull
HungrySeagull's picture

There are a large population on some form of Government assistance. And it is a good thing for our Nation to show compassion to these people in thier age.

 

But the places they are "Issued" really dont provide for any real accumulation of wealth (Bank accounts severly limited) and resources (Things and assets to keep) are very slim as most are disallowed.

Guns? Forget it. Metals? HAH> With what? The credit card?

But I have never ever seen the scale to which the Nation has done under Obama with the SNAP and so forth. Truly a unseen horrorshow when one hands over cash between two other customers who must swipe a snap.

Wed, 02/08/2012 - 15:43 | 2138879 Calmyourself
Calmyourself's picture

It is about density George not if the city dwellers are more noble than take your pick..

Wed, 02/08/2012 - 16:06 | 2138990 trav7777
trav7777's picture

the rate at which blacks are on welfare is far higher than whites.  The percentage of all the welfare population is about 1/3 white 1/3 hispanic 1/3 black.

These are easily-found stats

Wed, 02/08/2012 - 16:15 | 2139031 Calmyourself
Calmyourself's picture

Tough to disagree with the facts.  The factors behind the dependance cycle are the true heart of that debate.

Wed, 02/08/2012 - 17:13 | 2139245 CrockettAlmanac.com
CrockettAlmanac.com's picture

Proponents of the safety net teach black people that they can't compete in the marketplace and that they must depend on the government for a leg up. The slave holding antebellum Democrats have evolved into the  modern political masters of black America.

Government is the problem.

Wed, 02/08/2012 - 19:35 | 2139752 Calmyourself
Calmyourself's picture

Yep, I hear you clucking big chicken..

Wed, 02/08/2012 - 15:57 | 2138929 aerojet
aerojet's picture

Did gold help any of those poor fuckers lengthen their wretched lives?  Looks to me like survival has a whole hell of a lot to do with random events that are completely out of our control, despite what we like to believe about that.  Born in the US vs. born in Somalia, just for a simple example.

Wed, 02/08/2012 - 14:13 | 2138565 Smiddywesson
Smiddywesson's picture

My crystal ball is only a novelty item.  However, history is in the books.  How many people died within a week, Doc, each of the previous times the currency failed in America?

The past does not necessarily compare to our society today. 

We no longer share a single culture.  Multiculturalism saw to that.

Racial, religous and ethnic tensions are high.

Every major city has a terrible gang problem.  Did that exist in the past?  Were there over 1 million in jail in the past?

There are millions living in very small geographic areas with the potential of mass riots.  Have we not remarked upon the militarization of the police?  How about the Northern Command, or putting the National Guard under the Joint Chiefs.

We are no longer an agricultural society.  Our food is made and processed hundreds of miles away.

We don't even get paid in cash.  Everything is digital and succeptible to disruption.  There's no more tellers to assist you with a problem.

Nobody has any appreciable amount of cash on hand.  It's all credit cards that may or may not work.

In the Great Depression, people knew the grocers personally.  My grandfather lost his store extending credit to his neighbors.  Today, the manager at Wallmart won't give you anything, even if he had the authority to do so.

Zero inventory and Just In Time delivery practices mean there will be nothing on the shelves in 3 days, just like with the Japanese earthquake.

When the currency collapses, who will show up for work when they know they are not going to be paid.  The manager at Wallmart doesn't own the company and can't give you a credible promise you will be paid. 

Historical models don't match exactly what happens when a global economy, one that spent the last 40 years squeezing all the robustness out of the machine in a search for the last drop of efficiency, goes belly up.  Maybe you should rethink your response to the good doctor's response, because he is more likely to be correct than you. 

The collapse of the USD will entail the collapse of virtually all fiat currencies .  It won't be millions that die, it will be tens of millions, hundreds of millions, maybe more, because the collapse brings about other interesting developments like global war.  This is a whole new territory we are discussing because fo the complexity of our society and its global scale.  The collapse of the Roman Empire is about the only other global financial collapse I can think of that is similar to the collapse or our efficient and very fragile modern global economy.

Wed, 02/08/2012 - 14:31 | 2138640 economics1996
economics1996's picture

That was a excellent explanation, impressive!

Wed, 02/08/2012 - 15:09 | 2138737 hedgeless_horseman
hedgeless_horseman's picture

 

 

Maybe you should rethink your response to the good doctor's response, because he is more likely to be correct than you.

More likely to be correct than me about what?  His prediction of a future outcome is more likely to be correct than my understanding of historical events?  Really?  Really? 

I have read your post, and agree that some of what you predict may indeed come to pass.  What you are saying, essentially, is this time will be different.  Fair enough.  We are all entitled to our opinions and predictions for the future. 

Now, back to the past.  So, would you have been persuaded by Hank Paulson's fear mongering and voted for TARP?

Wed, 02/08/2012 - 15:20 | 2138801 economics1996
economics1996's picture

Me?  No way.  The bail out was doomed to fail and most "Tea Party" people new it immediately.

Wed, 02/08/2012 - 15:41 | 2138825 hedgeless_horseman
hedgeless_horseman's picture

 

 

Oh yeah?  Well, Paulson's fear mongering was pretty much the equivalent of Smiddy's speech, above, that you found so impressive, plus some martial law thrown in for good effect.

Do not be fooled by bankers.   America's currency is not what is holding up our fragile civilization.  Farmers, ranchers, teachers, oil-field workers, miners, doctors, engineers, local law enforcement, and soldiers are the people that keep us going...not central bankers and not most of our current crop of so-called 'leaders' in DC.

Wed, 02/08/2012 - 16:02 | 2138960 economics1996
economics1996's picture

The problem is when money becomes worthless, USSR, Rome, empires crumble.  

Sometimes the negative affects are a decade later, Germany-1920s.

You grossly underestimate the impact this collapse will have on society, and the world.

Wed, 02/08/2012 - 16:16 | 2139028 hedgeless_horseman
hedgeless_horseman's picture

 

 

You grossly underestimate the impact this collapse will have on society, and the world.

I do?  Where do I do that?

The problem is when money becomes worthless, USSR, Rome, empires crumble.

Was, and is, that necessarily a bad thing?

On a long enough timeline
the survival rate for
everyone drops to zero.

 

 

Wed, 02/08/2012 - 17:16 | 2139257 CrockettAlmanac.com
CrockettAlmanac.com's picture

Studies of disinterred bodies show that those who lived immediately after the fall of Rome were larger and healthier than their imperial predecessors.

Wed, 02/08/2012 - 14:50 | 2138710 mr. mirbach
mr. mirbach's picture

The system would't allow me to give you a ^1.... so here is the written version : +1

Wed, 02/08/2012 - 15:18 | 2138797 Citxmech
Citxmech's picture

What he said.

+1

Wed, 02/08/2012 - 15:02 | 2138746 pods
pods's picture

Nice description Smiddy!

I would still chance that rather than have my progeny be crushed under the continuing weight of a bloated debt money system and the constant threat of state sponsored death, tyranny and the unspoken reality that we are all in fact slaves.

pods

 

Wed, 02/08/2012 - 15:07 | 2138766 Calmyourself
Calmyourself's picture

"Historical models don't match exactly what happens when a global economy, one that spent the last 40 years squeezing all the robustness out of the machine in a search for the last drop of efficiency, goes belly up."

Excellent way to put that vulnerability!  Insulate yourself from this system with skills, mindset and tribe even if it never happens you build systems that make life more enjoyable and survivable in case of minor disruptions or natural disasters.

Wed, 02/08/2012 - 15:21 | 2138803 RafterManFMJ
RafterManFMJ's picture

While your laundry list of potential problems is long and scary, I, for one, have faith in the ability of our government to provide timely and nutritious food deliveries, security and order, warm and dry shelter, and clothing that is both climate appropriate and stylish.

Your lack of faith is appalling.

Wed, 02/08/2012 - 15:24 | 2138811 HungrySeagull
HungrySeagull's picture

Those are called fallout shelters and being the free and brave People who are the government for the people, we must provide for ourselves.

No one else is going to do it.

Thu, 02/09/2012 - 02:22 | 2140842 StychoKiller
StychoKiller's picture

The aftermath of Katrina proves your point...

Wed, 02/08/2012 - 15:26 | 2138820 pods
pods's picture

Ahhh, the thoughts of that remind me of johngaltfla and his missive about the end of the machine.

Great stuff.

Wed, 02/08/2012 - 23:13 | 2140410 Jena
Jena's picture

Rafter, did you see any footage of Hurricane Katrina?  There was little "timely and nutritious food deliveries, security and order, warm and dry shelter, and clothing that is both climate appropriate and stylish."  But maybe you were being facetious and I just missed it in my appalling lack of faith.

Wed, 02/08/2012 - 16:08 | 2138999 tired1
tired1's picture

Perhaps the DCians can build a wall around the beltway to protect themselves. I know that there are Israeli firms that can assist in design and construction.

Wed, 02/08/2012 - 17:19 | 2139266 imbrbing
imbrbing's picture

You my good sir have hit the nail on the head. There will of course be those of us who would lose the store to hand out food, but

then there are those who are going to come kill you for it first. Not like a 30's depresion scenerio at all. If anyone has ever read

"one second after", paints a good picture of collapse, albeit and electrical one there from an EMP, none the less, a collapse. It wil leave you

(if you have any heart) scared, I dont care how tough any of us think we are, we would ALL be toast, whether left to survive the aftermath

or not, just plain toast.

Wed, 02/08/2012 - 14:13 | 2138577 silverserfer
silverserfer's picture

my dreams of being a part time interprative dancer wil die if our currency colapeses.

Wed, 02/08/2012 - 15:55 | 2138899 Silenus
Silenus's picture

You'll have all the more time for interpretive dance!

Maybe you can do a dance about the financial system collapsing. It'll require a lot of whirling and dizziness.

Act I: Circling the Drain

Act: II: Into the Sewer

Wed, 02/08/2012 - 15:23 | 2138807 whoisjohngalt11
whoisjohngalt11's picture

i have never heard a figure of more than three days food on shelves at 
Wally World 

Wed, 02/08/2012 - 15:25 | 2138817 HungrySeagull
HungrySeagull's picture

15,000 people want a onion will see maybe one or two pallets in wallyworld right now. 12,000 will not have that Onion today.

 

Now if they grew onions in the garden to eat, then walmart wont be needed yah?

 

I cut grass in the part where we grew onions and have the tears to prove it.

Wed, 02/08/2012 - 17:20 | 2139270 CrockettAlmanac.com
CrockettAlmanac.com's picture

You're a very kind man indeed to weep for those lost onions. I'm getting all choked up. May I borrow your hanky?

Wed, 02/08/2012 - 16:06 | 2138989 Stax Edwards
Stax Edwards's picture

Apparantly we have devolved to the point where we are willing to engage in hand to hand combat to secure waffle irons and use pepper spray on competing towel buyers, all in the name of saving a dollar or two.  Keep this in mind when you contemplate what might happen if the fiat ever goes tits up. You had better be armed and prepared, JIC.

That being said I don't think we will see a tits up event unless a Black Swan of great magnitude occurs.  Either some adults will come to the fore and offer to work together to fix what is broken or we will just continue to circle the drain in a long painful decline.  The long painful decline being the first choice of the majority of our elected officials at the present time as they fight over partisan nonsense while we suffer. But be sure, if a bill trampling our rights comes to the floor, bi-partisanship is the order of the day.  Sad state of affairs, truly sad.  

We are in desperate need of a new breed of politicians, a return to real statesmen.  IMO These are most likely going to be folks who don't want to be involved in politics, but are willing to fight for what is right to put us back on better footing.

Wed, 02/08/2012 - 16:11 | 2139008 trav7777
trav7777's picture

how about the Air Jordan riots last year?  Oh, didn't hear about them?

Demographics, people...

Wed, 02/08/2012 - 22:34 | 2140284 Davalicious
Davalicious's picture

>...do you know how many people will die within a week if our currency fails?

Perhaps not as quickly as a week. But within six months you will see wide spread starvation. Many poor countries are net importers of food e.g. Bangladesh. They have large populations with corrupt governments (or they would already be feeding themselves). It takes time to set up barter arrangement with other countries, to be able to import food in exchange for other exports. Poor countries will not be quick off the mark. More wealthy countries will have enough to worry about.

Expect depopulation from these over populated nations. Rather like a bloated public sector, a bloated population is painful to slim down.

Wed, 02/08/2012 - 13:22 | 2138367 kridkrid
kridkrid's picture

What does it mean to be "constructive"?  I happen to agree with Chris when he calls our situation a predicament, not a problem.  A problem implies that there is a solution, but there is not.  Our monetary system, defined by virtually all money being loaned into existence with interest attached, requires debt to grow perpetually.  Why?  New debt must be created in order to roll existing debt and interest.  At some point, the cost associated with maintaining debt overwhelms the productive economy. 

X <---- you are here.  We are here.  Peak oil simply creates the perfect storm.  Even if you choose not to accept the predicament of our global economy being built on cheap energy that isn't an infinite resource, debt alone in enough. 

Wishing for or against the failure of our currency doesn't change that fact that it will fail... it's only a matter of timing and what comes next. 

Wed, 02/08/2012 - 13:45 | 2138448 Oracle of Kypseli
Oracle of Kypseli's picture

Yes! And the erlier you take the bitter pill the lesser the destruction.

Wed, 02/08/2012 - 17:15 | 2139244 slewie the pi-rat
slewie the pi-rat's picture

according to my calculation, here...

uhnnnmm...

with negative interest rates, we can be back to sound money in...about...

...100 years, BiCheZ!!! 

...no fuking dQQm from slewie today! 

Wed, 02/08/2012 - 13:27 | 2138386 surf0766
surf0766's picture

Call us when the culling starts.

Wed, 02/08/2012 - 13:36 | 2138419 battle axe
battle axe's picture

Planet of the Apes, go long Ape Costumes, you might survive....

Wed, 02/08/2012 - 14:19 | 2138607 Smiddywesson
Smiddywesson's picture

or maybe, Omega Man?

Wed, 02/08/2012 - 17:22 | 2139280 CrockettAlmanac.com
CrockettAlmanac.com's picture

In any case, get your Heston face on.

Wed, 02/08/2012 - 18:12 | 2139461 MagicHandPuppet
MagicHandPuppet's picture

I'm leaning towards the black capes and funny white face paint.

Wed, 02/08/2012 - 13:39 | 2138434 Au Shucks
Au Shucks's picture

You demonstrate many things with your post, but an understanding of history and free markets are not among them.

Wed, 02/08/2012 - 14:30 | 2138639 Smiddywesson
Smiddywesson's picture

History is a tricksy little bugger.  The comparison to the Great Depression is relevant in some ways, but the underlying problem today is different.  The US was a creditor nation then.  The problem today, unlike the Great Depression, is we are going bankrupt.

It wasn't WWII that ended the Great Depression, and it sure as shit wasn't spending our way out of the Depression with government money.  We crawled out of the Depression by devaluing our dollar, stealing from the future by switching to a fiat currency system, staying out of WWII for as long as possible to sell other countries stuff, surviving the war with our industries intact while everybody else had to purchase stuff from us to rebuild, and forcing favorable international trade agreements down the throats of our weaker trading partners, to include the US dollar as a reserve currency.

Make no mistake, this is not the Great Depression, it's much worse, and it's on a global scale.  The USA is broke, there is no baby boomer generation coming to our rescue, and we don't wield the influence to force a world with better manufacturing bases than ours to our will.   

Wed, 02/08/2012 - 15:50 | 2138887 Silver Dreamer
Silver Dreamer's picture

What is coming will make the past Great Depression look like child's play.  That's just my opinion, and I could be wrong.  I owe it to my children to be prepared for the worst however.

Wed, 02/08/2012 - 17:29 | 2139311 aerojet
aerojet's picture

Who did the Boomers rescue last time? 

Wed, 02/08/2012 - 14:29 | 2138638 roccman
roccman's picture

You have not read "Overshoot" by Willian Catton - have you?

 

a "dieoff" (read KillOff) is ordained - whether the US dollar fails OR NOT is of no import.

 

 

Wed, 02/08/2012 - 14:44 | 2138690 Smiddywesson
Smiddywesson's picture

Yes, we are not primates, we are lemmings.  We live lives as individuals completely apart from our lives as part of the society, the crowd, the hive.  When the inevitable time comes to follow the other lemmings, our minds create a believeable self justification for doing so, such as when men go to war for the romance of it, honor, duty, or for justice, or their rights, when in fact we just go to war because it is our nature as lemmings to jump.

Society just had a very long run, but forestalling our nature too long has just made the cliff higher and our time is now out to submit to what we are and jump.

Wed, 02/08/2012 - 17:23 | 2139285 CrockettAlmanac.com
CrockettAlmanac.com's picture

I am not an animal. I am a human being.

Wed, 02/08/2012 - 21:37 | 2140146 Marty Rothbard
Marty Rothbard's picture

If you are a human, you are both a human and an animal.  Being part of the animal kingdom, is not anything to be ashamed of.  The fact is, if you were to learn about the mechanisms, with which they perform their life functions, and I do mean mechanisms, you would realize what a miracle ever single cell, of every single organism is.  As an engineer I am in constant awe of the organisms, that most people take for granted.  There is nothing qualitative that seperates humans from the rest of the animals, the only differences are quantitative.   The soul?  If such a thing exists, I have no doubt my dog posesses one.  If you posit a soul, but cannot prove it's existance, how can you know nonhuman organisms lack one?

Wed, 02/08/2012 - 15:02 | 2138747 ilion
ilion's picture

@kindape do you know how many people will die within a week if our currency fails? And how many then die within a month as people don't go to work. imported components, medicines, etc dont show up.  You think this stuff all happens automatically?

Are you for real?

This is not the currency that we have in the US, this is a policy tool to manipulate the world and the American people, to push them into slavery, rip them off from their savings. It was a currency, when we had the gold standard, it was a strong currency. Got it?

Wed, 02/08/2012 - 15:08 | 2138767 HungrySeagull
HungrySeagull's picture

It would be far better to eat what God meant us to eat rather than take in foods that require medicines to process properly.

 

Wed, 02/08/2012 - 17:30 | 2139317 aerojet
aerojet's picture

That kind of thinking is why the dark ages were so fucking dark.

Wed, 02/08/2012 - 16:02 | 2138957 Vendetta
Vendetta's picture

have you ever thought that that is what they are planning on?

Wed, 02/08/2012 - 18:08 | 2139451 Marty Rothbard
Marty Rothbard's picture

   That's absurd!  Don't you know the government will protect us.  They have promised to.  Why do you think we are paying all these taxes, and giving up our liberties?   So that we will be safe, of course.   You must be one of those gold standard loving extremists!  I bet you voted for that nutcase, loser Ron Paul.

   In actuallity, the terrible conditions after a currency collapse, in an complex, technologically dependent economy, will put most of those dependent on government for jobs, or handouts, out of their misery.  It would be entertaining to see the expression on their faces, when they finally realize that they are on their own.  It will be like the Superdome in New Orleans, after the flooding, except help eventually came there.  When the collapse affects the whole country, there will be no help.  There will doubtless be lots of rioting, and looting of Walmarts, but the grocery shelves will already  be empty, and HD TVs don't fry up well.  Hopefully, by the time they think to leave the cities, there won't be any gasoline left, and they certainly won't consider walking more than a few blocks.  Those who are left will be resistant to being managed by government, and may recover the liberties won by the founders.

   You may consider me heartless, but if that were true, I would not be warning anyone who will listen, and supporting Ron Paul.  I suffer the curse of Cassandra, yet I have never affronted the gods.

   I just hope some starving attorneys, or other government officials come by my farm begging for help.  Now that's entertainment.  Maybe they could clean out my septic tank for me.  Digging ditches would be too good for them, and they have lots of experience distributing loads of crap.  Maybe if they do a good job, I'll let them stay around after I feed them.  I can see it now, a government employee reeducation camp.  Nope, wouldn't work.  You could never get enough work out of them to make it economical.

Wed, 02/08/2012 - 13:03 | 2138301 trav7777
trav7777's picture

slack oil capacity sets the rate of economic activity.

Obama is an unmitigated liar.  I marvel that anyone believes him.  They must be so high on hopium as to be akin to a dog.

Wed, 02/08/2012 - 13:06 | 2138321 Ghordius
Ghordius's picture

"There's lip service to the idea of using more natural gas to begin weaning us off our imported oil dependence, but no commensurate trillion-dollar program offered to rapidly build out the infrastructure necessary to utilize that gas in a meaningful way."

whoha! big spender, eh? - anyway, I was expecting long ago that the US heavy trucks would convert to nat-gas and I'm flabbergasted that this has not happened (yet)

trav7777, below I've put four posts about something that bothers me regarding your comments. My point is that it's the personal car use that is going to have some trouble in the future, not the whole rest, including the restocking of supermarkets and agriculture. I'd like you to comment on this. thx

Wed, 02/08/2012 - 13:21 | 2138363 Flakmeister
Flakmeister's picture

Pop Quiz:

1) Does the USA import or export NG on a net basis?

2) Current daily US NG production corresponds to how many bbls of oil on a BTU basis?

3) If there is a 100 year supply of NG (at current consumption rates), how long will is last if you increase usage at 3% annual rate? 5%?

Now back to our regular programming...

Wed, 02/08/2012 - 13:33 | 2138407 kridkrid
kridkrid's picture

Question #3 is a killer question, never discussed.  By the way, I responded to your post about Carter yesterday... and I agree with you.  Did you see my reply?  The Carter assassination plot is an interesting (albeit, relatively unknown) piece of American history. 

Wed, 02/08/2012 - 13:37 | 2138424 Flakmeister
Flakmeister's picture

Yes... I saw your reply... I thought we were at the point of quibbling and in basic agreement....Was not aware of the ass. plot so I can't comment.  A phenomena similar to the embryonic fascist coup against FDR....  

I also got sidetracked by a AGW debate...this guy was better than most, but he still ended up running away with his tail between his legs...

Wed, 02/08/2012 - 14:22 | 2138617 kridkrid
kridkrid's picture

Yeah... we were in agreement it would seem.  I just love the story of the Carter plot.  I mean what are the chances that two conspirators are named Raymond Lee Havey and Osvaldo Espinoza Ortiz?  fascinating.  And yeah... the coup on FDR... and of course they tried to contract Smedly Butler who I love to quote:

I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.[13]

Wed, 02/08/2012 - 13:37 | 2138425 Ghordius
Ghordius's picture

even with fracking? I'm not debating 3), there is a physical limit to growth everywhere, but there is a difference between a in-ten-years-problem and a in-fifty-years-problem. Nixon created in 1971 a problem that was not his nation's problem for forty years, for example...

Wed, 02/08/2012 - 14:05 | 2138462 Flakmeister
Flakmeister's picture

Yes... even with with fracking...

As for 3) if you replace current oil consumption with NG your rate of usage will increase ceteris paribus

If you are really interested in NG, I strongly recommend the following article that came out today by Art Berman

http://www.theoildrum.com/node/8914

Pay close attention to required replacement flow rates given observed frack'ed Hz well declines  and the capital deficit for the drillers....

Personally... I am slowly snarfing conventional NG assets while they are cheap...

Recommend DCA into HGT.... for the more aggressive long dated NG futures e.g. June '15....

--------

Edit:  Also re: 3), one expects that peak production is reached once 1/2 of the resource is utilized....so when might you expect NG production to peak given a 3% growth rate?? 5%??  NG production is growing currently at a 3.4% rate....

Wed, 02/08/2012 - 13:47 | 2138463 trav7777
trav7777's picture

compare gas supply curves to BTU-for-BTU oil usage and you will see that this isn't a 50-year problem.

It's inevitably NOW.  Nevermind the buildout to have NG infrastructure for a motor fuel.

Wed, 02/08/2012 - 16:04 | 2138921 cranky-old-geezer
cranky-old-geezer's picture

 

 

I'm not aware of a practical way NG can be used in diesel engines.  There's no practical way to inject a gaseous fuel at TDC like liquid diesel fuel is injected.

Converting a diesel engine to NG is an expensive process, essentially turning it into a conventional gasoline engine, i.e. different pistons to lower compression ratio, adding spark plugs and ignition system, adding throttle body or port injection system.

One company doing such conversions charges $8,000 - $12,000 for the engine conversion plus cost of NG tank installation and related changes to the vehicle.

LNG has 58% of the thermal energy (BTU) of diesel fuel per gallon.  A diesel engine converted to NG would have 1/2 the power, even turbocharged.  This is unacceptable in most heavy truck applications.

So yes, building a NG motor fuel infrastructure wouldn't solve the problem in commercial trucking nor any other diesel-dominant transportation like railroad and ships.

Wed, 02/08/2012 - 17:35 | 2139344 aerojet
aerojet's picture

Yeah, but the nice thing is that it creates more jobs--more (smaller) trucks have to be built and more drivers have to be around to drive less cargo on shorter trips.  It's win-win!

Wed, 02/08/2012 - 20:38 | 2139955 Quick
Quick's picture

A barrel of oil yields so much gas, diesel, kerosene, etc etc.

You can the percentages to a degree at a cost. But you cant take a barrel of oil and say - This barrel will be all gas or all diesel.

switching to nat gas will just make gasoline cheaper.

It's not a problem with an easy answer.

Thu, 02/09/2012 - 16:20 | 2143330 Flakmeister
Flakmeister's picture

Switching to NG will make NG more expensive....

Playing the energy arbitrage game works for a while....

Wed, 02/08/2012 - 14:55 | 2138728 mr. mirbach
mr. mirbach's picture

Time to go long on draft animals. Horses are ok,  oxen are stupid, donleys are stubborn.

Wed, 02/08/2012 - 15:51 | 2138900 Calmyourself
Calmyourself's picture

I prefer bankers i  na barbwire harness ten or twelve ought to pull a single disc..  They eat frn's so should be easy to keep..

Wed, 02/08/2012 - 21:19 | 2140093 Ms. Erable
Ms. Erable's picture

Seriously, have you ever seen a banker do an honest day's work? Their best utilities are as lamppost ornaments or compost.

Thu, 02/09/2012 - 16:06 | 2143260 snakeboat
snakeboat's picture

The lowly bicycle is the most efficient transport ever invented.  One can go 100 miles on a chipotle burrito and enjoy the trip to boot.  I predict bikes will become an increasingly important of our lives in the next few decades.

We may have to become adept at dodging all of the horse-pies in the road, however...

Wed, 02/08/2012 - 13:21 | 2138361 pods
pods's picture

I tend to agree, but do not view it happily.  Just is what it is.  I would rather our debt-money fail and we have a chance at rebuilding our nation out from under the shadow of banks and exponential expansion.

It is going to suck, but it is both needed an inevitable.

pods

Wed, 02/08/2012 - 13:29 | 2138394 Ghordius
Ghordius's picture

well, historically the debt part is less painful than the living-within-your-means

I say historically because as far as my studies go every time there was a hegemon on this world, he usually defaulted (there are many ways for this) several times. Ask the Dutch how many times they bailed out their dear ruler Philip II of Spain or bankrolled his armadas, just for example.

Wed, 02/08/2012 - 13:34 | 2138416 pods
pods's picture

But if everyone lived withing their means, the system would not function.

The living within your means only comes about when the FED reduces debt supply (hikes rates) so that the banks can then take possession of the real property through foreclosure.

It is a simple process.  Usually it goes up and down with what people have called the "business cycle."

I prefer to call it "Shearing the Sheep."

Too much leverage for too long results in a complete system collapse.

See mid 2013 for the US.

pods

Wed, 02/08/2012 - 13:51 | 2138476 Ghordius
Ghordius's picture

though in a bank-collapse, the US gov could become the owner of half the real estate of the US. In theory, it could then rent it out and with the rent income get the "house in order"...

I pointed several times in ZH to the fact that over 60% of the Germans live (quite happily - for Germans) in rent.

too much unicorn-milk in my coffee? ;-)

Wed, 02/08/2012 - 15:05 | 2138585 pods
pods's picture

Well there is a school of thought that thinks that the US corporate government has already pledged the property it owns, ie citizens and their property as collateral for the private FED to lend them money, way back in 1933.

So who owns the property is already in dispute.  

But I do not see how the government would be able to take possession of the property, unless the prior is in fact true.

My rough guess would be that the FED would take possession in order to continue to issue credit, as the treasury has no $$.  

Remember, the FED is NOT the government.

pods

(edit, it ain't me junking you)

Wed, 02/08/2012 - 15:38 | 2138852 MachoMan
MachoMan's picture

It's already purchased a shit ton of mortgages of deadbeat homeowners...  if it doesn't put them back on the issuing banks and make them eat the losses, you might see .gov being the owner of a shit ton of inventory...  and it will then rent out this inventory under the presumption it was a market maker that would kill prices if it dumped all the houses on the market at the same time...  probably trickling it out at a pre-determined rate.

And...  if .gov owes the FED...  not too difficult to connect the dots...

The FED already pulled liquidity to get us kicked off into this mess in 08...  I'd be weary of another liquidity pull.

Wed, 02/08/2012 - 17:04 | 2139219 pods
pods's picture

I can see how the FED would profit from this.  Not the .gov.  

There is the issue of the treasury, which is flat broke and borrows 42c out of every dollar it spends, steps in to guarantee a GSE (private for profit company), which in the prospectus of MBS that it issued says NO .gov guarantee, and how they can extract taxes out of the same people who are on the hook for the mortgage so they can pay back the FED who increased purchasing treasuries to allow the treasury to do this in the first place.

The whole things gets almost too icky to think about.  Then toss in the FED, which does whatever it wants, including pulling liquidity just prior to GD1 to gain more power and the picture is they have us by the balls.

I, as an individual do like the money printing from the view that it has given us a couple of years to prepare for the collapse at least.

Using the Greek model, when austerity comes ashore here it is NOT going to be pretty.

pods

Wed, 02/08/2012 - 17:37 | 2139350 aerojet
aerojet's picture

That is correct because debt is money, or is it money is debt?  Either way, without the debt, you can't create what the government needs to expand itself.

Wed, 02/08/2012 - 22:52 | 2140340 pods
pods's picture

More than the government, the economy cannot expand itself in a contracting debt situation.  Hence why the government replaced private borrowing in 2008 to keep the total debt moving upwards.  If it rolls over far enough, a waterfall collapse ensues.

pods

Wed, 02/08/2012 - 14:41 | 2138682 Chief KnocAHoma
Chief KnocAHoma's picture

Anyone holding any paper is about to get slaughtered!

Buy tangibles: http://garereport.blogspot.com/

Wed, 02/08/2012 - 17:37 | 2139353 aerojet
aerojet's picture

What credibility does that site have, exactly?

Wed, 02/08/2012 - 14:15 | 2138477 sitenine
sitenine's picture

What's with this 'pay to read part II' bullshit?

I just don't see the logic of paying in currency to find out why currency is worthless...

Wed, 02/08/2012 - 17:33 | 2139329 CrockettAlmanac.com
CrockettAlmanac.com's picture

Paying in worthless currency means you'll be getting it for free.

Wed, 02/08/2012 - 13:56 | 2138500 MassDecep
MassDecep's picture

Back to reality ZH'ers. They will prop up the system as long as profitable for them; and basically, you will serve the state. (not I)This is reality. The experiment failed. Look at history; we were the only real "free" society. We did not listen to the founders, and we were fooled into banking systems that they advised against. Ya gotta admit, the money/power hungry scum, are pretty crafty. (See NDAA). Man has a way of screwing things up through the lust of power and greed, and this is the reality today. My personal opinions are Biblical and cause controversy, but I am at peace...Brother. Whatever happens, not a problem for me.

Wed, 02/08/2012 - 17:35 | 2139343 CrockettAlmanac.com
CrockettAlmanac.com's picture

The problematic emotion is envy rather than greed. Greed spurs one on to greater productivity. Envy refuses to be productive and looks for advancement through redistribution (theft).

Wed, 02/08/2012 - 18:00 | 2139419 aerojet
aerojet's picture

I was with you right up to the biblical part.  I fail to see how the Bible has anything to do with present day circumstances other than to call out that human nature never really changes.  I think that part of the problem right along has been all you believers--what a fucking cop out!  You're at peace, so why the fuck lift a finger to do anything about it, right?  You're all the same--luddites!

Wed, 02/08/2012 - 14:52 | 2138720 disabledvet
disabledvet's picture

Let's keep it simple: if the Bank of North Dakota (which is State owned) decides to start issuing currency backed by shale oil reserves you will see the global ponzi start breaking down immediately

Wed, 02/08/2012 - 22:53 | 2140346 pods
pods's picture

Up until al CIA duh is found to be hiding there.  

pods

Wed, 02/08/2012 - 15:47 | 2138889 Red Raspberry
Red Raspberry's picture

All cooked up with microwave crwod control

Wed, 02/08/2012 - 19:17 | 2139711 Archon7
Archon7's picture

If anyone told me four years ago we'd even be talking about the possibility of a currency collapse, I would have said it's crazy talk.  Today, I think other scenarios are more probable than a currency collapse (e.g. massive inflation), but a currency collapse is still a "significant non-zero probability".  If it happens, it would be unrelated to cyclical factors, but triggered by structural and systemic failures, such as a global loss of confidence in the USD, which itself would probably be triggered by a systemic structural failure of the US economy.  The evidence supporting this scenario is that structurally, the USA simply can no longer pay its bills without printing gobs of money - economically, at this late stage in their sick "game" there are no solutions that don't involve printing money.  The question is whether they choose a solution that prints sh!tloads of money, or prints a lot of money, in other words, a choice between bad and worse.

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