Are You Prepared For The End Of Fake Money?

Authored by EconomicPrism's MN Gordon, annotated by Acting-Man's Pater Tenebrarum,

What Is Money?

Today we begin with a fundamental question: What is money?  This, no doubt, is an important question.  And we ask it with clear intent and purpose.  Namely, we want to better understand how it’s possible for America to rack up such a massive trade deficit with China.

China-US imports and exports of goods. It has to be stressed that the most often cited figure is the trade deficit in goods, which is the “scariest” figure. The US surplus in services with China has grown rapidly in recent years. It was $33 billion in 2015, doubling from $16.5 billion just four years earlier. By 2017 it had grown to $38.5 billion. The idea that a trade deficit is somehow “bad” is highly dubious. “Countries” do not trade with each other anyway – individuals and companies do, and they obviously do so because they deem it advantageous for both sides. Moreover, these aggregate statistics obscure more than they reveal. The global supply chain is extremely complex – a single $3 t-shirt “Made in China” will contribute to the incomes of people in some 15 to 20 countries before a consumer in the US plucks it off a shelf at Wal-Mart. If we were to talk incessantly about the US capital account surplus – which offsets the trade deficit – would anyone complain? [PT]

America’s trade deficit with China, in 2017 alone, was $375 billion.  That’s a gap of over $31 billion a month – or $1 billion a day.  We believe having a better grasp on what money is will bring clarity to the nasty trade deficit that’s motivating today’s burgeoning trade war.

With respect to our initial inquiry we turn to Victorian economist William Stanley Jevons for edification.  In his 1875 work, Money and the Mechanism of Exchange, Jevons stated that money has four functions.  It’s a medium of exchange, a common measure of value, a standard of value, and a store of value.

Many deficiencies with today’s renditions of money, including the dollar, appear when applying these functions to the present system of floating exchange rates.  With the exception of functioning as a medium of exchange, the dollar, like all of today’s debt based fiat currencies, comes up short in its function as a common measure of value, a standard of value, and a store of value.

Hence, today’s money is not real money.  Rather, it’s fake money.  What’s more, this fake money has ridiculous implications on how people earn, save, invest, and pay their way in the world we live in.  Practically all aspects of everything have been disfigured by it.

An image of the “disfiguring” – US broad money supply TMS-2 since 1986. In early 2008 it stood at USD 5.3 trillion – a decade later it has grown by more than 150%. Think about this for a moment: just the additional amount of money created in the US economy in the past decade was  1.5 times greater than the amount of money created in all of US history before 2008. It is impossible for the effects of this to be “neutral” in any shape or form. [PT]

Follow the Fake Money

The failings of today’s fake money generally stem from the unsatisfactory reality that it is birthed from debt.  Money is borrowed into existence seemingly without limits.

On top of that, floating exchange rates, where the relationships between currencies are ever changing, and money is continually eroded by monetary inflation, make it wanting as a common measure of value, a standard of value, and a store of value.

Take the dollar, for instance.  Over the last 100-years, it has lost over 95-percent of its value.  Yet, even with this poor performance, the dollar has one of the better track records going.  In fact, many currencies that were around just a short century ago have vanished from the face of the earth.  They have been debased to their actual value – that of fire kindling or toilet paper.

One of the more glaring results of the insanity of central economic planning. Not surprisingly, real economic growth has never again reached its pre-Fed heights and has in fact declined decade after decade in the post WW2 era. This money system is poisonous – it has transformed the State into a giant Leviathan and enriched its cronies, while robbing everybody else – and it is perpetually teetering on the edge of a catastrophic final reckoning. [PT]

So how’s it possible for America’s trade deficit with China to be so gargantuan?  By following the fake money, some semblance of an answer comes into focus. The U.S.Treasury borrows money into existence via budget deficits.

Similarly, commercial banks borrow money into existence via fractional reserve banking. The Federal Reserve encourages the over issuance of credit by artificially suppressing interest rates for extended time periods – often a decade or more.

This continuous flood of credit – the flip-side of debt – finds its way into stocks, real estate, and foreign made imported goods.  Some of it even finds its way into the absurdity of 75-inch flat screen televisions.

Surplus trading partners, like China, then recycle the dollars back into U.S. Treasuries, thus, perpetuating greater debt creation – and an ever expanding trade deficit.

The trade deficit, you see, is a function of fake money and expansive fiscal and monetary policy.  Without fake money, the trade deficit never could have blown out to today’s extreme imbalance.  Unfortunately, the economy is so dependent upon ever expanding debt that all it takes is a minor pause – like in 2008 – and the whole edifice is at risk of crashing down.

So where does this all lead?

Total US credit market debt: the debt-laden US economy cannot even withstand the tiniest pullback in credit growth without suffering a systemic crisis. [PT]

Are You Prepared for the End of Fake Money?

Readers frequently write us to point out the dollar’s unique role as the world’s reserve currency.  They highlight the need for massive quantities of dollars to provide a medium of exchange for global trade.  Readers are also quick to bring up something called Triffin’s dilemma and reproach us for not mentioning it.

According to an insight elaborated by Belgian-American economist Robert Triffin some 50 years ago, the U.S., as bearer of the world reserve currency, must supply the world with an abundance of dollar reserves.  But, as a consequence, the U.S. must run a trade deficit.

Specifically, by having the world reserve currency, the U.S. must import more than it exports.  It must spend more than it earns.  In other words, it must eventually go broke.  Hence, the dilemma. Is Triffin’s dilemma a fact?  We don’t know.  But perhaps the mere mention of it inflates our IQ.

Robert Triffin, the man who put the US into the dilemma prison. Nobody asked him to do that, but he went and did it anyway. These days he’s dead and the US is still in his prison. [PT]

What we do know is that readers who write to admonish our failure to mention Triffin’s dilemma are also swift to use the term ‘exorbitant privilege’ to describe the unique advantage the U.S. has as issuer of the world reserve currency.  They even supply lengthy and convoluted arguments pleading their case.

As far as we can follow, this exorbitant privilege affords the U.S. the unique opportunity to create money from nothing and trade it to foreign countries in exchange for real stuff.  Somehow, according to this theory, the trade deficit can expand without limits forever and ever – and without consequence.

This all sounds great – like having cake and then eating it too.  Nonetheless, we remain unconvinced.  There’s an itch of suspicion we can’t quite satisfy.  Something tells us that fake money yields fake theories that attempt to offer some sort of academic justification for an economic cancer.

We could always make a few colorful pictures and charts of the dilemma prison. With equations to boot!  [PT]

Moreover, we believe the jury’s still out on the eternal pre-eminence of the dollar. Fake money requires an inordinate amount of misplaced confidence to perpetuate its charade.  But confidence in the dollar, like Hollywood star power, can quickly fall out of favor.

Be it a trade war, a currency war, a fighting war, or the mass realization that the Federal Reserve’s painted itself into a corner and has lost their ability to combat an episode of extreme inflation or deflation of its making – confidence in today’s fake money will wane.  It’s already happening.

Real money, the money of last resort, and the type of money that fulfills the four functions of money identified by Jevons, is physical gold.  Readers, whether they believe it or not, would be remiss not to hoard a little gold – or silver – bullion as we journey from summer into fall.

Get you bar before it flies away. [PT]

There’s doom and gloom out there, just yonder the horizon.  The time to prepare for the end of fake money is now.

Comments

Free This Sat, 07/21/2018 - 12:11 Permalink

The shit storm approaches, slowly, then all at once devours everyone, no one shall escape!

Go back through my posts and find the posts that have the links to lifesaving knowledge - I do not want to be accused of spamming the board again.

I cannot stress the importance of KNOWLEDGE - it outweighs temporary preps every time!

It could be civil unrest, economic collapse or world war - or all three at once! THiNK Critically my friends, time is short!

Form a group of loyal and trusted family and friends, there ain't no "i" in team!

Beware of Secret Societies - that is the true deep state!

Sic Semper Tyrannis

Stuck on Zero Cryptopithicus Homme Sat, 07/21/2018 - 13:56 Permalink

The Author states: "Surplus trading partners, like China, then recycle the dollars back into U.S. Treasuries, thus, perpetuating greater debt creation – and an ever expanding trade deficit."

BS Our surplus trading partners have not been aggregate buyers of treasuries for quite some time. They are all buying up US land, factories, agriculture, real estate, and our politicians.

In reply to by Cryptopithicus Homme

Dabooda Cryptopithicus Homme Sat, 07/21/2018 - 14:20 Permalink

The absolute worst thing about fiat money is that GOVERNMENT spends it into existence.  If you consider that government is the deadly enemy of human liberty, produces nothing of value, and transfers wealth from the peaceful and productive part of the economy to the coercive  and counter-productive segments, then the ability to conjure money out of thin air (never mind the deliberately confusing shell game played between the Treasury and the Federal Reserve) is the most powerful of economic weapons -- and it is entirely in the hands of The Enemy.  How smart is it to organize a country's economy by handing unlimited spending ability to the most murderous, tyrannical and corrupt gang of power-junkies extant?

In reply to by Cryptopithicus Homme

chubbar Free This Sat, 07/21/2018 - 12:20 Permalink

Of course this was all going to end badly. Outsourcing our manufacturing base via NAFTA/CAFTA, et al., probably hastened the arrival of the collapse or at least aggravated the trade deficit. I guess some could argue that making China accumulate vast sums of US debt helped keep the dollar the reserve currency, I certainly don't know the answer to that.

We are all going to find out what these fuckers have planned pretty soon. Either way, I'm not guessing it'll be a smooth transition.

In reply to by Free This

el buitre chubbar Sat, 07/21/2018 - 13:45 Permalink

The real question regarding Triffin's Dilemma is whether the planet needs a world reserve currency?  I would answer this in the most erudite manner - fuck no!  The Cabal eased the USA into this dilemma in same manner that Don Giovanni eased his dick into a 16 year old virgin - in stages.  But the last two stages are as follows:  set the USA up in Bretton Woods as the reserve currency but make it dependent that any country that had a trade surplus with the USA could demand the difference in gold at $35 per troy ounce once a year.  Then the second stage was the slamming shut of the gold window by Nixon and Kissinger 27 years later after de Gaulle called the USA bluff and Nixon and his handlers threw over the poker table .  With Kissinger's plan to establish the petrodollar in 1973, the stage was set for the USA to export elegant paper debt documents in exchange for huge imports of real stuff.  This went on fairly smoothly until the last decade though the world leaders with three functioning synapses knew that their countries was being screwed without mercy.  Prior to that time, the USA had the soft power of Hollywood, the power of SWIFT and the inertia of the global banking system, the John Perkin's CIA/IMF/BIS economic hitmen, and finally the nuclear and military option.  China and Russia have called the USA's bluff on all these pillars of dollar hegemony with the exposure of Hollywood being a satanist propaganda bed, CIPS, enormous, clandestine gold stockpiles, understanding how the economic hitmen work and countering them to some degree, Syria, and the Russians leapfrogging ahead in military technology thereby pulling a first strike success off the table.  The death of the dollar as a reserve currency can be measured in months now.

And contrary to the author's opinion, the Fed and its handlers up through the BIS and onward to cabals without names or faces, has not put itself in a corner.  They knew what they were doing, and as Q Anus would put it, it was part of the plan.  They realized as did PNAC, the Mossad/Neocon mouthpiece of the 9/11 false flag, that the global financial system needed a "new Pearl Harbor."  And they intended to direct the ensuing planet wide misery to construct their NWO Hunger Games society.  Will they succeed?  Stay tuned.

In reply to by chubbar

Free This el buitre Sat, 07/21/2018 - 13:59 Permalink

While I did not like it, Nixon did close the gold window! And the petro-dollar came about via Nixon too, to fund the Vietnam War. We used to have a straight up system of finance and governance, but it has been bastardized, I want to see it restored.

I cannot argue against what you have written, sadly. I hate what we have become, truly. I think Trump is a start to turn that around, time will tell.

I believe a shit storm is coming, not just in the USA, but for the world.

In reply to by el buitre

opport.knocks Free This Sat, 07/21/2018 - 14:39 Permalink

"turn that around" or "sink it like the Titanic" - that is Trump's (or the Fed's) dilemna. 

There will be a new world currency within a decade. Sorry, it will not be gold backed. The current global debt Ponzi is unsustainable.  America will default, since y'all will never work had enough to repay the FRN debts and a multi-generational inbred sense of entitlement will prevent you from acknowledging that you owe anyone anything. 

Just pray that the bankers figure out how to make the transition seamlessly and don't start another world war to cover their tracks.

In reply to by Free This

HoPewGassed Sat, 07/21/2018 - 12:14 Permalink

The pervasive surveillance state will prevent you from spending your PMs or cryptos. 
Maybe we could get away with bartering whiskey, ammo, seeds, ...

DingleBarryObummer Sat, 07/21/2018 - 12:21 Permalink

This continuous flood of credit – the flip-side of debt – finds its way into stocks, real estate, and foreign made imported goods.  Some of it even finds its way into the absurdity of 75-inch flat screen televisions.

Or $500 dollar crappy old NES nintendo games on ebay that no one really gives a fart about, except for a cheap/fleeting/shallow nostalgia thrill.  Not the Onion

DingleBarryObummer Petey4Prez Sat, 07/21/2018 - 12:33 Permalink

I didn't write this, it was a random youtube comment I saved, but I though it was worded beautifully.

What do you think those pieces of paper and coins represent Captain? What is their value? Would you agree that those numbers on their "money" are meant to represent the value of a person's substance? Numerated portions of a person's expended or stored energy. And if they can increase or decrease the value of their "money" they can determine the value of a person's life energy. That they can lower the value of life to the point where a person expends all their energy just to survive to the next paycheck.?
 

In reply to by Petey4Prez

icedoc DingleBarryObummer Sat, 07/21/2018 - 15:35 Permalink

Fast forward to today where many, like an addict, gladly exchange their life's energy for a few baubles or moments of unsatisfying, temporary pleasure. And then go out the next week and do it again.

They never exercise their gray cells to discover what is really valuable, and therefore they become an easy mark for the greedy system. At any time they can choose to step off the runaway train.

In reply to by DingleBarryObummer

Balance-Sheet Sat, 07/21/2018 - 12:32 Permalink

Forget about ancient academic economists and their vibrant imaginations. The World has moved through a number of phases in the past 100 years or so and Balance-Sheet will assist YOU!

The USA financed W. Europe 1914-1945 to defeat the German Menace though this completely bankrupted Britain and France and destroyed their empires.

Then with the industrialized world outside the US in ruins the US refloated (bailed-out) the world through Bretton Woods, financed the Marshal Plan, and financed a win in the Cold War.

Along the way the Global Economy had grown so large the Gold backing of the USD had to be dropped so it was under Nixon.

Later the USA financed the recovery of China from the EVILS of Maoism - poverty, tyranny, and mass murder.

Now in the 21st Century (already 18% complete) the Global Economy is SO large the USA (<5% global population) can no longer accept the exports from giant rich economies like the EU and China to the tune of 1-2T USD per year.

Other CBs just change their mix of assets and increase THEIR risk management problems.

Forget about Robert Triffin as we produce more lying economists every year and it is the same with Keynes- he died in 1946 and his important work referred to the period 1920-1933, really, in Europe between WW1 and WW2 about 85 years ago.

San Pedro Sat, 07/21/2018 - 12:33 Permalink

Valuations and "scale of economy" are worth pondering. Somebody making aprox.$20 dollars an hour working 40 hours a week in "non-coastal states" can afford to buy a home. Somebody living "in coastal states" making $50 dollars an hour can hardly find a place to rent.  I was driving around in a "non coastal state"  a few weeks ago and I saw a mudslide of "HELP WANTED" signs all over the place. Most of the jobs were paying up to $25 dollars an hour. 

shovelhead San Pedro Sat, 07/21/2018 - 13:11 Permalink

 In a lot of those places you can still maintain the old historic 2.5 annual earnings per house price ratio as long as you're not looking for a palace.  Out here in Flyoverville, we don't do boom bust RE. Young couples can still get married and buy, and use that slight appreciation to move up as their incomes increase. My niece has a nice house with acreage so they built a big storage garage with an apt. over it and rent it to her BIL who just got married. Pretty sweet apt. with a deck porch that overlooks the pond.

Just like the good old days.

In reply to by San Pedro

ThankUGartman Sat, 07/21/2018 - 12:38 Permalink

Money is only worth what you can buy with. Crypto currencies you can’t even wipe your ass with when they’re worthless.  Bitcoin split ratio was 91:1 for a reason. Think about how slow litepay and lightning network are at getting implemented. No one wants Cryptos except for trying to get rich quick. Another scam on the goy. Biggest transfer of wealth from poor to rich ever. Don’t get caught holding the bag to zero Imo a new coin will be introduced in 2021. 

Balance-Sheet Sat, 07/21/2018 - 12:40 Permalink

The USD (legal tender) is a digital exchange token that gradually falls in value if you insist on keeping it on your thumb drive. Please spend it quickly on some sort of consumption. Buy real investments including metal coins, houses, farms, equities, etc. but the USD is designed to gradually evaporate to block hoarding and to promote greater equality over a generation or two. You didn't have any money in 1913 and won't have any in 2113 either so if it goes from 100 to 003 over a century is of no consequence to you.

Dead indefinitely, kind of alive for 73 years, dead again indefinitely- focus on the middle here.

khnum Sat, 07/21/2018 - 12:44 Permalink

From the anti corruption society website about the 1933 Emergency banking act,'All Sovereign American Citizens residing within the Republic of States were expatriated from their Sovereign American status without their knowledge or consent and their labour,souls,children,property,sweat equity,and credit became the financial collateral for the public debt which had then been converted into a public trust.'

When the plug is pulled your nation is in for one hell of a civics lesson.

icedoc khnum Sat, 07/21/2018 - 15:42 Permalink

The reason that happened is we devolved our mindset from the pioneer mentality that expanded and built this country, into the dependent mentality of today. Even if they knew about the expatriation, they would have given consent, because in effect, that's what happened with FDR and his mandate confirmed by reelection 3 times. People were glad to exchange freedom for bondage to the state, and mostly still are glad.

In reply to by khnum

Consuelo Sat, 07/21/2018 - 12:45 Permalink

A large percentage of the working-age population has never known a Savings & Production-based economy.   Look at the graphs - every last one of them.   They all point to the same time frame - late 70's-early 80's as the point of no return - the terminal rise of easy credit and debt-based economics.   No one alive under the age of 85 has a clear perspective on what a real economic wash-out entails.   And that is when we had a gold standard backstopping our currency...    This is the kick-in-the-teeth when already on one's knees, that our current society at large is wholly unprepared for.