The Fraud of Money as Debt

[MD] The provocative (and ill-informed) title of this article begs some annotation. At Money Delusions, it is obvious and provable to us that  not only is money debt, it always has been and it always will be. Money is a promise to complete a trade over time and space … and a promise is obviously a debt.

So let’s see what this moron Shorty Dawkins has to say on the subject.

When the Federal Reserve System was established in 1913, it transferred the power of the US Treasury vis-a-vis the creation of money, into the hands of the Federal Reserve. The Fed creates money out of thin air and loans it to the US Treasury in the form of interest bearing debt instruments. Thus, the money of the US is based on debt. With over $20 trillion in Federal debt, the interest paid on that debt in fiscal year 2018 is estimated to be $310 billion. That’s no small amount!

[MD] What was actually transferred was the propensity to counterfeit.  Neither the Treasury nor the Fed create money. Only traders create money. You can’t give a single example where money is created that a trader is not involved and did not initiate it … that is, unless it is created by counterfeiting. And regarding the interest paid: If the process is a “real” process, the interest paid is exactly equal to the defaults experienced. Why don’t we ever see these people quoting defaults experienced?

What if money were not created out of debt? Is that possible? Sure. If the powers of the Federal Reserve were taken back by the US Treasury, it would be possible to spend money into existence, rather than into existence as debt.

[MD] Can he say anything more stupid? “Spend money into existence?” And if not into debt, into “existence” as what? Kind of left something out didn’t you Shorty?

The Federal budget for 2018 is: Total expenditures‎: ‎$4.094 trillion. The total estimated revenue‎: ‎$3.654 trillion. This leaves a projected deficit‎ of ‎$440 billion. Since the deficit must, under the current Federal Reserve System, be borrowed from them, at interest. Thus the deficit grows and next year’s interest payment will increase.

[MD] If a “real” money process were in existence, the government creating this debt would only do it once … and then be excluded from the marketplace as a trader. Deadbeat traders are automatically excluded when their interest load (due to their propensity to default) comes to equal the trading promises they seek to have certified.

However, if the US Treasury were to create the money, it could simply spend it into existence to cover the deficit. No interest need be paid! As the previous debt interests of the Federal Reserve came due, they could be paid off by money created by the US Treasury in the same manner. Eventually, the entire debt could be paid off in this manner.

[MD] “No interest need be paid” is true only for responsible traders. Governments are not responsible traders. In fact they never deliver. They just roll over their trading promises … and that is default … and purposeful default is counterfeiting! I’ll bet Shorty has a perpetual motion machine he would like to show us as well.

Beware! This is not free money!

[MD] In a “real” money process, money is “always in free supply”. That’s not to say it is “free money”. Rather, it says money “never” restricts the trading intentions of responsible traders who create it. They “always” deliver on their promises.

It may sound like free money, but it isn’t. As more money is spent into creation, inflation takes its toll. The true definition of inflation is the increase of the money supply above the value of goods and services produced. When the money supply increases faster than the value of production, there is more money chasing fewer goods and prices rise, as the value of the money decreases. If too many dollars are created, the value of the dollar decreases. Under the Federal Reserve System the value of the dollar has decreased by 98%, meaning that something bought in 1913 for $1 would now cost $98, disregarding any increases in productivity of a particular product.

[MD] In a “real” money process, inflation takes no toll … it  is guaranteed to be perpetually zero. The true definition of inflation is the amount that supply of the money itself exceeds the demand for the money … and we know in a “real” money process, supply and demand for the money itself is perpetually in perfect balance.

The fraud of the Federal Reserve System is that it was sold as a means of preserving the value of the dollar and that it would prevent crashes in the economy. Both of these selling points have not proven accurate. There have been multiple crashes of the economy since the Fed was established, including the Great Depression.

Ideally, the US dollar should be backed by gold and silver, or some tangible item, but that discussion is for later. First things first. We must End the Fed.

[MD] Gold and silver and any other commodity cannot maintain perpetual perfect balance of supply and demand for themselves. So obviously they are useless as money. Thus, your later discussion can be suspended. You don’t know what your talking about Shorty … and that is easy to prove.

The Federal Reserve has never been good for the public. It has only been good for the big banks. They love it, because it makes them money. Who pays? We do. We are slaves to debt. Isn’t it time to eliminate the Fed and turn its powers over to the US Treasury, where it belongs?

[MD] Even the blind squirrel occasionally finds an acorn. Congratulations Shorty. Governments are created by the money changers … always have been, always will be … unless we can effect iterative secession and have it our way in our own space.

[MD] It brought some amusement. It was easy fodder for illustrating how stupid the gold bugs are.

Shorty Dawkins

I am a writer of novels, currently living in the woods of Montana. My 5 novels can be seen here: https://oathkeepers.org/my-5-books-shorty-dawkins/

[MD] Frightening. Hopefully that doesn’t lead to the natural conclusion that there are people reading your novels. Stupidity is already widespread enough don’t you think Shorty?

Can Central Banks Keep Control of Interest Rates?

MD: I haven’t posted for some time but this article was too pertinent, silly, and misguided to pass up (revealing total cluelessness … and/or corruption … of our current Medium of Exchange (MOE) process.) The article is from the great see-er of all things money oriented … the Wall Street Journal. This is the link to the article which is likely to go away in a short period of time.

Can Central Banks Keep Control of Interest Rates?

 

MD: As usual, the title itself exposes the total lack of understanding of what money is. As anyone knows who has been paying attention here, interest rates are “not” controlled by anyone or anything in a “proper” MOE process. INTEREST collections are perpetually and immediately made to meet DEFAULTs experienced … and if that is under anyone’s control, it is the trader defaulting.

Inflation-adjusted—or ‘real’—rates remain low, lending support to booming , prices for stocks, property and other assets. But some worry that could vanish sooner than markets realize

MD: Actually, what we’re seeing here is the banks farming operation in action. They’ve loaded up the wagon with energized traders’ expectations and resulting risk taking behavior, and they will soon pull the rug out from under them.

By Jon Sindreu
Dec. 26, 2017 7:47 a.m. ET

Investors are elated by a booming global economy and the promise of central banks to tighten monetary policy only gradually. But a question haunts them: Will interest rates develop a mind of their own?

MD: “Will interest rates develop a mind of their own?” Can a stupider question be posed? Interest “rates” are a function of two things. In the numerator, they are a function of continuously accumulated DEFAULT experience. In the denominator they are a function of what someone chooses that denominator to be.  In a “proper” MOE process, the denominator would be related to cumulative defaults for each money-creating class, according to their actuarial propensity to DEFAULT.

While central banks set short-term rates—the 1.5% rate that the Federal Reserve publishes on its website—economists disagree about how much control they have over long-term borrowing costs. These are gauged by government-bond yields, especially those with returns tied to inflation.

MD: These so-called short-term rates are arbitrarily set by our current system. In general, they are about what their target rate of INFLATION is. They target 2%, have historically delivered 4%, while the proper value of inflation is 0%.

Low inflation-indexed—or “real”—rates push money into risky assets, because investors get little extra purchasing power for holding safer securities. According to a new report by BlackRock Inc., the world’s biggest asset manager, subdued real rates have been 2017’s main driver of returns in global infrastructure debt and investment-grade corporate debt. They also boost gold and real estate, analysts say, which don’t pay coupons but don’t lose value when inflation rises.

MD: “Subdued real rates?” What more direct evidence could their be of the banks farming operation? Do these so-called “asset managers” just accept this? Or are they actually part of the farming operation themselves?  “Main driver of returns?” In a “proper” money process, supply/demand ratios for each product and service are the main … and only real … driver of returns. If the ratio is high, the return will be low and vice-versa. Money has nothing to do with it because its perpetual supply/demand ratio is 1.000.

Many markets could climb off record highs if real rates rise. But it is hard to forecast, said Kevin Gardiner, global investment strategist at Rothschild Wealth Management, because “nobody knows exactly what sets interest rates.”

MD: “Climb off?” … don’t they mean “fall off?”.  Interest rates in the current process only benefit the money changers. With their special privilege, a 1% increase in interest rates yields them a 10% increase in return. In a proper process with perpetual 0% inflation, their privilege becomes no privilege at all … ten times zero is zero (10x 0.0000 = 0.0000)

Real rates have often moved in lockstep with central-bank policy—but not always. In the 1970s, runaway inflation pushed real rates down even as the Fed and other central banks increased nominal rates.

MD: With a “proper” process, the only “policy” is that DEFAULTs are immediately met with INTEREST collections of equal amount. That policy never ever changes. A “proper” process cannot be farmed.

Yields on 10-year inflation-linked Treasurys are currently below 0.5%. Before the 2008 financial crisis, they hovered at around 2%. After the Fed unleashed unseen amounts of monetary stimulus, they hit a record-low of minus 0.87% in 2013. Many analysts and investors see it as a sign that policy makers have strong control over real rates.

MD: With a “proper” process there is no such thing as “monetary stimulus”. Money is in perpetual free supply. That supply is perpetually identical to demand for the money yielding perpetual zero inflation.

“We are overweight global indexed bonds,” said Paul Rayner, head of government bonds at Royal London Asset Management. “We’ve done a lot of analysis on this, and ultimately the biggest driver of government bond yields still remains central bank activity, even for [inflation-linked bonds].”

MD: With a proper MOE process, Rayner is out of work. There is no “lot of analysis” to be done. Their worshiped relation  ((1+”i”)^”n”) … they call it the time value of money … is neutered when “i” is perpetually zero.

With a “proper” MOE process, there are no “government bonds”. Governments are simply no different than any other trader. If they are responsible, they create money without any interest load. If they are deadbeats, they pay interest accordingly. And since governments “never” return the money they create (they just roll their trading promises over … which is default), the interest paid by them perpetually equals the money they wish to create. In other words, they “can’t” create money.

But classic economic theory says that central banks can only influence rates at first, as people ultimately see through their meddling. So unless officials set policy to reflect the economy’s long-term economic trends—which is how the Fed’s Janet Yellen and Mark Carney at the Bank of England have justified keeping rates low in recent years—inflation or deflation will follow.

MD: “Classic economic theory?” You mean “classic economic stupidity!” don’t you? People never see through banks meddling. It is the farming operation and it has worked as long as the governments they institute protect the operation. Again, this is an open realization that banks have an enormously profitable farming operation. A competing “proper” MOE process would make that farming operation experience perpetual crop failure and/or market opposition.

According to this view, rates are so low because people are saving a lot and these saved funds can be lent out and used to invest, a copious supply that pulls down the cost of borrowing.

MD: Stupid is as stupid does … or as stupid has been duped to think. In our current process there is the illusion that savings play a role. And the 10x leverage privilege retail banks enjoy is directly affected by that. But in the final analysis, it is the Rothschilds that control everything through their control of all but two central banks in the entire world … and of the Bank of International Settlements. They do whatever they please. With a competing process they would be out of business almost instantaneously, never to raise their ugly head and influence again … ever!

Some money managers and analysts now warn that the tide is about to shift, whether central banks keep policy easy or not. By looking at the share of the population aged between 35 and 64—when people save the most—research firm Gavekal predicts real rates will soon rise as people retire and spend their life savings, eroding gains in stock markets.

MD: Boy … this guy is deluded beyond repair I think. The Rothschilds are in total control. The theoretical mechanisms the writer thinks are at work have been propagandized into his head. Yes, a degree in economics is just buying self imposed propaganda. With a proper MOE process, there are no economics … just trading decisions made on a perfectly static level playing field … i.e. buying and selling and producing decisions.

It “could happen tomorrow or 10 years from now, but I’m not counting on the latter,” said Gavekal analyst Will Denyer.

J.P. Morgan Asset Management argues that aging is already starting to push rates higher, meaning that 10-year real yields will be 0.75 percentage point higher over the next 10 years.

Other investors have a different worry: They fear that yields will stay low even if central banks try to tighten policy because they are concerned a recession may be coming. This year, the Fed has nudged up rates three times and yields on long-term government bonds—both nominal and inflation-linked debt—have stayed unchanged or declined, echoing similar issues that then Fed Chairman Alan Greenspan had in 2005.

MD: Translation: “a recession may be coming” means “harvest time may be coming”. It’s pretty easy to see when it’s time to harvest. You look at how ripe the crop is … i.e. how thoroughly the traders have been sucked in. The farming analogy is near perfect.

Indeed, the yield curve—the yield gap between short and long-term Treasurys—is now at its flattest since 2007, and many investors underscore that, in the past, this has often preceded an economic slowdown in the U.S.

“Unless the evidence is very compelling that’s a false signal, I think the market’s going to be nervous,” said David Riley, head of credit strategy at BlueBay Asset Management, who is now investing more cautiously.

MD: Booga booga … buy gold advises the great see-er.

Still, investors may read too much into what yields say about the economy, said the Bank for International Settlements, a consortium of central banks. In new research looking at 18 countries since 1870, the BIS found no clear link between rates and factors like demographics and productivity—it is mostly central-bank policy that matters.

MD: “A consortium of central banks?”…  Rothschield’s holding company you mean?

Does this mean investors can rest easy because rates won’t creep up on them? Not so fast, said Claudio Borio, head of the monetary and economic department at the BIS, because officials may still raise them to contain market optimism. Central banks in Canada, Sweden, Norway and Thailand are thinking along these lines, analysts said.

MD: “Not so fast” says Rothschild’s weather man. We can do anything to the crop we choose to do … when we choose to do it.

If central banks control real rates, then it is inflation that has a life of its own—it isn’t just a reaction to officials deviating from economic trends—and it could explain why central bankers have failed to stoke it for years. So officials might as well raise rates to quash bubbles instead of “fine-tuning inflation so much,” Mr. Borio said.

MD: Anyone who has followed MoneyDelusions analysis of these ridiculous articles has to be holding their sides in pain from laughing too hard.

Still, Isabelle Mateos y Lago, global macro strategist at BlackRock Investment Institute, thinks investors don’t have to worry about this yet.

“The conversation is moving this way, but I don’t think central bankers have a fully articulated view,” she said.

MD: “Central banks don’t have a fully articulated view?” Dream on. They do control the weather of this farming operation you know. And they control the farmers ability to buy seed and tractors and land. But having dropped the obligatory number of names, the write concludes his nonsense for now.

Write to Jon Sindreu at jon.sindreu@wsj.com
Most Popular Videos

MD: Please do write Jon as he begs … and send him a link to this exposure of his Money Delusion.

Dollar Cost Averaging (Quora question)

“How can I evaluate returns from a dollar cost averaging (automatic investment) into a leveraged fund (e.g. SSO) over a longer term (10+yrs)?”

(Link to Quora question and answer)

Early in my career I wrote an application for “financial criminals” to move people away from “whole life” insurance to “term” insurance, and investing the premium saved by dollar-cost-averaging into their mutual fund. The “illustrations” I produced for them were dramatic. Basically, the “investment income” goes to you and the mutual fund managers and not to the insurance company.

Well, to do this, the “law” demanded lots of small print. But it also demanded I show the cash flows precisely as if they were done into the mutual fund historically. That meant going back the 30 years (the planning window) and saying “if the next 30 years are exactly the same, this is where you would be”.

But it was really pitching “if you’d done this 30 years ago with our mutual fund, this is where you’d be” … and it was dramatically better than what the whole life scenario delivered (unless you used a poorly performing mutual fund … or had zero inflation).

This was 30+ years ago. Back then you had “whole life” insurance salesmen … with a comfortable annual commission stream. It tipped their cart. These insurance salesmen now call themselves “financial analysts”. Follow the money.

None of this would work if we had a “proper” Medium of Exchange (MOE) process … that “guaranteed” zero inflation … all the time and everywhere. If we had that, you could put your surplus money under a rock and do better than either alternative.

Leveraging doesn’t work with zero inflation (i.e. (1+i)^n is always “1.000” for all “n” when “i” is perpetually zero). So don’t expect a “proper” MOE process to be adopted any time soon. It puts the money changers and the governments they institute out of business.

(see http://MoneyDelusions.com (http://MoneyDelusions.com))

Todd Marshall
Plantersville, TX

Are Cryptocurrencies Inflationary? Are they “real” money?

Are Cryptocurrencies Inflationary?

 MD: If you understand money, you know the proper process to enable it “guarantees” perpetual perfect supply/demand balance for the money itself. Thus, it is neither inflationary nor deflationary.

The Bitcoin process thinks (like the gold bugs think) that money needs to be rare to be viable. This is nonsense of course. But Bitcoin is enormously “deflationary” as a consequence of its process. Supply is severely limited and ultimately capped. Demand is exploding because of this (because it is deflationary) … not because Bitcoin is viable money.

Nobody in their right mind owning bitcoins would ever part with them (unless the inevitable collapse was in progress). That’s the nature of a “deflationary” asset. The only appeal to bitcoins is their anonymity. And thus it is illicit trade that is really finding bitcoin useful. Everyone else holding them is gambling … plain and simple.

I have never tried to really understand the underlying process of bitcoin mining. The reason for this is the process is bogus on its face. It has no way of matching supply and demand. If this is a characteristic of all cryptocurrencies (and block chain mechanisms) in general, then all are not viable. However, I see no reason a block chain concept cannot be devised that creates new transparent, unchangeable blocks at zero cost. Then the proper MOE process uses the block chain to deliver the necessary “transparency” attribute of a proper MOE process.

As always, I’ll now intersperse comments as appropriate to highlight these obvious principles and violations thereof.

by John Rubino

There’s a debate raging over what, exactly, bitcoin and the thousand or so other cryptocurrencies actually are. Some heavy-hitters are weighing in with strong, if not always coherent opinions:

MD: Oh really? What is being debated? That they are money?

Jamie Dimon calls bitcoin a ‘fraud’
JPMorgan Chase CEO Jamie Dimon did not mince words when asked about the popularity of virtual currency bitcoin.

Dimon said at an investment conference that the digital currency was a “fraud” and that his firm would fire anyone at the bank that traded it “in a second.” Dimon said he supported blockchain technology for tracking payments but that trading bitcoin itself was against the bank’s rules. He added that bitcoin was “stupid” and “far too dangerous.”

————————

Peter Schiff: Even at $4,000 bitcoin is still a bubble
One of the best-known among the bears, investor Peter Schiff, is now making his case in even stronger terms for why bitcoin has advanced ever farther into bubble territory.

MD: It went into bubble territory right out of the box.

Schiff, who predicted the 2008 mortgage crisis, famously referred to bitcoin as digital fool’s gold and compared the cryptocurrency to the infamous bubble in Beanie Babies.

Moreover, the recent run-up in bitcoin hasn’t softened Schiff’s view: If anything, it’s reinforced his sense of impending doom.

Schiff told CoinDesk:
“There’s certainly a lot of bullishness about bitcoin and cryptocurrency, and that’s the case with bubbles in general. The psychology of bubbles fuels it. You just become more convinced that it’s going to work. And the higher the price goes, the more convinced you become that you’re right. But it’s not going up because it’s going to work. It’s going up because of speculation.”

MD: The fact that it is going up is proof that it “does not work”. Real money never goes up or down. It stays constant over all time and space.

“What it comes down to is that bitcoin ain’t money.”

“Libertarian-minded crypto fans saw this was a way to liberate people from the government,” he said, concluding:

“I think it will have the opposite effect. People are going to lose money. This could really backfire, giving libertarian ideals a bad name by making fiat look good. The downside can be really spectacular.”

MD: Actually, a competitive proper MOE process would give people an alternative to the “improper” MOE process commanded by the money changers and the governments they institute. If instituted  properly  (i.e. guaranteeing zero inflation), and in multiplicative fashion (like credit cards) nobody would continue to use government money, It couldn’t compete. The government would be forced to demand use of government money (for more than just paying taxes) and that would tip their hand … i.e. that they are simply the money confiscation machine instituted by money changers. Right now that machine is confiscating 3/4ths of everything each of us makes.
————————

Hedge fund manager James Altucher: Cryptocurrencies Could Be Worth $200 Trillion One Day
I’m not exaggerating when I say cryptocurrencies are the biggest innovation since the internet. We’re on the ground floor of an enormous trend that’s going to change the world.

Cryptocurrencies are currencies with no government in the middle. No bank in the middle. No organizations in the middle keeping track of all your payments, or taking advantage of your spending so they can invade your privacy, and on and on.

Cryptocurrencies solve trillions of dollars’ worth of problems, which is why they will be worth trillions of dollars one day.

MD: He says about three things that are right and then caps it off by saying something that proves they solve no problems at all.

Consider the potential:

There is currently $200 trillion in cash, money and precious metals used as currencies in the world. Meanwhile, there’s only $200 billion in cryptocurrencies. Cryptocurrencies are eventually replacing traditional currencies.

MD: If he knew what he was talking about … i.e. what money really is … he would also say there are currently $200 trillion in-process trading promises (net of government counterfeiting that is demonstrably about 4%). But of course that isn’t true because government trading promises are always defaulted … i.e. counterfeiting right out of the box.

So that $200 billion will eventually rise to the level of currencies. And probably sooner than we can imagine.

MD: Admitting he is clueless about money. Supply and demand for real money rise and fall in lock step.

Ask yourself, why does the world need multiple currencies? There’s actually no real reason. The only reason we have a U.S. dollar and also a Canadian dollar is that in 1770 the people in Canada decided not to join the U.S. So an artificial border created two currencies. It’s all dictated by artificial borders.

MD: Actually, it’s because “none” of the world’s currencies are from a “proper” MOE process. If we had a proper MOE process that “guaranteed” zero inflation, then there would be no need for multiple currencies (exchange rates would be perpetually constant). However, there always should be multiple processes in operation … just like there should be multiple insurance companies in operation. They’re addressing an identical problem and are disciplined and driven to efficiency by transparency and competition.

In the past, an ounce of gold would be accepted almost anywhere in the world. In that sense, unbacked modern fiat currencies are a step backwards.

MD: As it is today. Gold becomes more acceptable in trade as the MOE process in place becomes more and more “improper” (i.e. tolerates more and more counterfeiting by governments and more and more tribute demands by the money changers. Gold is just a clumsy inefficient stand-in for real money.

But in cryptocurrency world, there are what I call “Use Borders.” Every currency is defined by its use. For instance, Ethereum is like Bitcoin but it makes “smart contracts” easier. Contract Law is a multi-trillion dollar industry so this has a huge use case. Filecoin makes storage easier. It’s a $100 billion industry. And on.

Studying the “use” cases, and the effectiveness of the coin to solve those use cases can help us make investment decisions confidently.

MD: KISS (Keep is Simple Stupid). Money is not about “use cases” … it is about trade over time and space. Block chains may be about use cases, but those cases are not cryptocurrency. They’re not currency at all. Who ever thought of a contract as being currency? Just trapped myself didn’t I … because in a proper MOE process, the money represents a contract … a promise by a trader to the whole trading community that he will deliver on a trade over time and space.

This is the great promise of cryptocurrencies and why they will change the world. It’s just getting started.

No normal non-expert should expect to make sense of the above. So let’s just assume that the cryptocurrency universe will continue to expand for a while and narrow the discussion down to a single question: Are cryptocurrencies inflationary? That is, will their spread lead to higher or lower prices for the average person, and greater or lesser financial instability for the markets, and what does this mean for today’s fiat currencies?

MD: That’s his judge of inflation? Higher (or lower prices)? Prices are just a crude measure of inflation. Inflation can’t be measured. But a proper process can guarantee it to be zero … and thus requires no measurement. No block chain process I have ever seen described attempts to maintain perfect balance between supply and demand for the money (i.e. trading promises) it represents.

MF: I suggest you continue to read this article if you find it interesting. If you do, I suggest you continue to annotate it in your mind knowing the principles of “real” money and how they apply. This article is making me tired.

One common opinion is that cryptocurrencies can’t be inflationary because their owners have to pay for them in fiat currencies. So one bitcoin bought means one dollar, yen, or euro sold, with the net effect on prices being zero.

This makes intuitive sense at first glance, but only holds for the moment of purchase. Consider what happened after someone in, say, 2014 exchanged dollars for bitcoins. The dollars held most of their value, which means the total amount of dollar purchasing power in the world remained constant. But those bitcoins went up by several thousand percent, dramatically increasing the purchasing power – and thus the potential inflationary impact – of the bitcoin complex.

A real world example is Julian Assange:

Julian Assange Says Wikileaks Has Made a 50,000% Return on Bitcoin. Here’s What That Means
Wikileaks has seen an amazing return on investments in bitcoin, founder Julian Assange says, and he is “thanking” the U.S. government for forcing the controversial organization to get into bitcoin in the first place.

In a Tweet on Saturday, Assange said the group’s investment in the cryptocurrency has seen a return greater than 50,000% since 2010. Wikileaks began investing in bitcoin back then because global payment processors like Visa, Mastercard, and Paypal were under pressure by the U.S. government to block the ability of the group to take payments.

In fact, Bitcoin has seen a more-than 9 million percent return over the dates Assange references. In certain periods in 2010, bitcoin was trading for mere pennies. According to coindesk.com, one unit of bitcoin is now worth a record high of roughly $5,700. Anyone buying bitcoin through much of 2011 and 2012, when one unit was sometimes trading below $1 and was often under $10, would indeed see a return on investment of more than 50,000%, assuming they never sold.

The difference between Wikileak’s purchasing power pre and post-bitcoin is immense. If Assange decides to spend his windfall on goods and services he’d have, at the margin, an inflationary impact on the stuff he buys.

So the answer to the question of cryptocurrencies’ impact on price levels depends on how their values change. If they rise after people buy them, then they’re inflationary. If they rise a lot, they’re potentially very inflationary.

In this sense, it might be helpful to view cryptocurrencies as assets like houses or stocks rather than as money. When they rise relative to fiat currencies they increase the purchasing power of their owners, generate a “wealth effect” in which owners feel richer and more comfortable with splurging, and in that way push up prices. Based on the following chart, a lot of early adopters are feeling a whole lot richer these days.

Which then leads to what might be the major cryptocurrency theme of the coming year: Why would governments allow such an inflationary supernova to explode right in front of them when they presumably have the power to stop it? Here’s one possible — and of course disturbing — answer:

Will cryptocurrencies trash cash? ‘Fedcoin’ could do it
Economist Ed Yardeni of Yardeni Research asks the obvious question: Why would central banks—which derive their power as the centralized gatekeepers of fiat currency creation, check clearing and payment processing—embrace a movement that’s primary motivation has been to usurp this power in a decentralized way?

Part of that, according to St. Louis Federal Reserve president James Bullard, is recognition that the technology has achieved critical mass. Thus, there’s a fear of being left behind as the very foundations of banking and monetary policy—intermediation, funds transfers, transactions—rapidly change, not unlike the way the creation of mortgage-backed securities and credit default swaps changed housing finance in the mid-2000s.

There’s another, more self-serving purpose: Central banks could use their own cryptos to put the squeeze on paper currency. Why? To facilitate the use of negative interest rate policy, which has been deployed in Europe and Japan in recent years in half-baked forms. Currently, in Switzerland, short-term interest rates are at -0.75%.

When another recession hits, especially if one comes soon, a dive to even deeper rates of negative interest would be hampered by the hoarding of cash since banks would charge for deposits (vs. absorbing the cost of negative rates themselves, as they’re doing now). This is known by the economics cognoscenti as the “zero lower bound” in that interest rates cannot go much below negative before the traditional functions of deposits, loans and fractional money creation break down. Mattress stuffing ensues en masse.

The Fed is clearly thinking about it. In testimony to Congress last year, Fed chairman Janet Yellen admitted policymakers “expect to have less scope for interest-rate cuts than we have had historically,” adding she would not completely rule out the use of negative interest rates.

The BIS­—the central bank of central banks—in its latest quarterly review posited that a crypto backed by the Fed “has the potential to relieve the zero lower bound constraint on monetary policy.” Any distinction between regular dollars and this new “Fedcoin” could be removed by establishing a fixed one-to-one valuation. Any competition from the likes of bitcoin could be squashed by regulation; not unlike how the private ownership of gold was outlawed in the 1930s when it threatened the Fed’s ability to ease credit conditions.

At the risk of being repetitious, pretty much all of the above looks good for gold and great for silver.

Wikipedia: Nash – Ideal Money

 MD: It has been suggested that we at MD study Nash’s “ideal money” as an assignment (presumably to see it disproves our case) … by someone who won’t admit what we describe here is indisputable … or even give evidence they have even read the less than 500 words that present the principles of “real” money. As usual the assignment comes from those who resort to just handing out reading assignments … rather than reading our simple 500 words. This one is of particular interest because it claims “ideal money”. The “proper” MOE process described here at MD maintains the only “real” money imaginable … so it “has” to be as ideal as anything out there or proposed to be out there:
  • It is in perpetual free supply;
  • it maintains perpetual perfect supply demand balance of the money itself (zero inflation);
  • it imposes no restraint nor interest load on responsible traders;
  • it is fair in imposing interest loads on irresponsible traders commensurate with their propensity to default;
  • it maintains perpetual perfect transparency of the creation and destruction of the money process itself;
  • it requires no resources (reserves) at all;
  • the cost of its operation is negligable;
  • it is measured using an unvarying scale (the HUL);
  • there is not money to made in operating it (as there is in insurance … i.e. investment income)
  • and its behavior is totally objective and the results easily provable;
There is “nothing” more ideal … so this should be interesting. Nash looks like an egghead … I presume he will think like one too. Expect lots of footnotes.

Ideal money

From Wikipedia, the free encyclopedia

John Forbes Nash, Jr.

Ideal money is a theoretical notion promulgated by John Nash (Nobel Laureate in Economics), to stabilize international currencies. It is a solution to the Triffin dilemma which is generally about the conflict of economic interests between the short-term domestic and long-term international objectives when a currency used in a country is also a world reserve currency in the meantime.

MD: “To stabilize international currencies”? Tilt!!! Real money is an inherently and perfectly stable process. It has the automatic negative feedback mechanism of immediately mopping up defaults with interest collections of like amount. Now, with a statement like that first thing out of the chute, we here at MD know its silly to read further. But we’ve been given the assignment. We trudge on.

“Triffin dilemma”? Conflict of economic interests? A “proper” MOE process has no sensitivities to such things at all. There is no difference between short term and long term. The time value of money is provably 1.0000. When a proper MOE process exists anywhere, there is no such thing as a world reserve currency. “All” monies either come from a proper process or they are competed out of existence in an instant. Thus all moneys exchange at a constant rate … 1.000 if denominated in HULs (Hours of Unskilled Labor). And no “real” money requires “reserves” of any kind whatever!

Contents

Introduction

How does the idea of Ideal Money appear

“Money can be recognized as a technological development comparable to the wheel and of similar antiquity. Among the more recent developments in the technology that facilitates transfers of utility (in the sense of game theory) are systems like those of EZ Pass, by means of which vehicles traversing toll bridges or toll highways can pay their toll fees without stopping for the attention of human personnel manning the toll booths. In this lecture, I present remarks about the history of monetary systems and about issues of comparative quality or merit , along with a specific proposal about how a system or systems of ‘ideal money’might be established and employed.”[1]

MD: He describes a transfer system. The real money process is insensitive to the myriad of transfer systems employed in the money’s circulation. The process itself is only interested in its media’s creation and destruction and prevention of “all” leaks. He talks of a technological development. Exotic transfer systems are not it. There is nothing technical in addition and subtraction. That’s just simple accounting. I’m going to ignore all his noise about history. I’m just going to look for his solution to all the historical failings. We here at MD already know the best … and yet untried solution.

Main value standard of ideal money

Ideal money is working in the theory similar to the gold standard, but it is generally based on a Nonpolitical Value Standard. “A possible nonpolitical basis for a value standard that could be used for money would be a good industrial consumption price index(ICPI) statistic. This statistic could be calculated from the international price of commodities such as copper, silver, tungsten, and so forth that are used in industrial activities.”[1] John Nash said in his lecture.

MD: Tilt!!!   All money is a perception held by two traders at an instant in time. One has money. The other has an object they will trade for money. In the negotiation step (1) of a trade, they decide how much money is involved. In all our illustrations our money will be measured in units of HULs (Hours of Unskilled Labor). A HUL has traded for the same size hole in the ground for all time … and is expected to do so in all future time. There is no “standard” … .political or otherwise. If the trade is made using existing money, the trade is complete  for both traders. Promise to deliver (2) and Delivery (3) happen simultaneously on-the-spot. That trade is done. It has no impact on any other trade in the entire trading environment. It is just between those two traders. While the trade “uses” money, it doesn’t “create” money.

Money is “created” when one trader promises to do the trade over time and space. And we have all done that. We have bought a house, a car, a washing machine, or a steak dinner by creating money and then returning it a little bit at a time. Our trading promise is certified, the person with the house, the car, the washing machine, or the steak gets money (which we created on the spot). We then go about working to return that money and destroy it as we promised to do. If we are responsible traders (i.e. we don’t default), we pay no interest. If we have a propensity to default, we pay interest actuarially based on that weakness.

So Nash need not make this more complicated than it has to be. We can ignore references to anything “political” for example.

Why gold can not be an ideal money

MD: Not only can gold not be “ideal” money. It can’t be money at all. Anyone holding gold is doing just that … holding gold. They’re no more holding money than someone holding a ribeye steak.

The gold does not reach the standard of ideal money, despite its merits. The main problem is because the silver and gold do not have a constant value all the time.

MD: One gold star for Nash. Real money guarantees perpetual perfect balance between supply and demand for the money itself.

“To the undiscerning minds of the mass of men a pound sterling of gold, a silver five-franc piece, or a paper dollar, represents always a definite unit.

MD: So does a pound of ribeye steak. The pound is the unit … what it is a pound of can play no role at all. We choose the HUL as the best candidate for unit. It is related to time, which is unvarying, and what can be delivered in that time … which is relatively unvarying. Who knows how big a hole an ounce of gold traded for 100 years ago? Most don’t even know what it trades for today. But everyone can put a spade in their hand and in one hour make a hole that is one HUL in size. And they can know that their hole, for all intents and purposes, is the same size hole a HUL would have produced 100 or 5,000 years ago. We don’t need to search the Dead Sea Scrolls for proof.

It has not escaped attention, however, that a given amount of money buys much less at one time than another.”[2]

MD: May have to take back Nash’s gold star. A given amount of “real” money will always trade for the same size hole in the ground … always! It may trade for a different size car or different size ribeye steak or a different number of gold ounces … but that’s because of the supply/demand relation of those things themselves. The supply/demand for the money itself is perpetually perfect and plays no role whatever in the pricing.

in other words, people are used to measuring the value of goods by money, but due to some reasons the value of money itself changes, which causes the value of silver or gold changes. We can’t tell the constant value of the metal, and the fixed mind-sets can not easily be changed.

MD: What he says is only true of an “improper” MOE process like that run by the Fed and every other central bank which ever existed. if everyone does the same thing wrong, that is only one thing being done wrong. People thinking in HULs will never have this problem. Thinking in dollars, a HUL was $1.50 when I was one. It is about $8.00 for those who are HULs today. In both cases, it trades for the same size hole in the ground.

Related factors mentioned in Nash’s lecture

Welfare Economics

“A related topic is that of the considerations to be given by society and the national state to ‘social equity’ and the general ‘economic welfare’.

MD: But we at MD know that (welfare) has nothing whatever to do with money. So we should be able to skip this whole topic … but of course we can’t because we’ve been given this study assignment.

Here the key viewpoint is methodological, as we see it. How should society and the state authorities seek to improve economic welfare generally and what should be done at times of abnormal economic difficulties or ‘depression’?

MD: I don’t know and don’t care … as long as they don’t try to do it by manipulating the MOE process.

We can’t go into it all, but we feel that actions which are clearly understandable as designed for the purpose of achieving a ‘social welfare’ result are best.

MD: Best for whom? “real” money is not concerned. People can “use” it to do the things they feel are good. They can even “create” it to do so … as long as they also return and destroy as they promise to do. But they absolutely cannot “counterfeit” it to do the good things they want to do. That results in bad things for others … and a “proper” MOE process cares nothing about good or bad. It just cares about strict adherence to the process, thereby achieving the predicted and desired result … with zero outside meddling.

And in particular, programs of unemployment compensation seem to be comparatively well structured so that they can operate in proportion to the need.”[3]

MD: Unemployment compensation is no different than broken car compensation. If you can’t cover the risk through self insurance, you better be buying insurance. Regardless, that is no concern of a “proper” MOE process. Nash, this is oh so easy! Are you being paid to give these lectures?

Generally, the social welfare is what we always expect to be improved, and if there is really an ideal money, the whole economy would be influenced, including the social welfare.

MD: Why say the ideal money should do it? Why not say the ideal drug should do it. Or the ideal bullet should do it? “Social welfare” is not the business of money. Trading over time and space is the business of money.

Money, Utility, and Game Theory

MD: You gotta love it when they throw in game theory. Can string theory be far behind? How about global warming?

The concept of utility generally appears in the field of economics but it can be connected with the game theory in mathematics. In the game theory of economics, “utility” is a very important and essential factor. In the book (on game theory and economic behavior) written by the mathematician John von Neumann and the economist Oskar Morgenstern, a utility function is proved, which can be used to put the individual’s preference on the interval scale, and the utility is always preferred to be maximized. (More details can be found in Von Neumann–Morgenstern utility theorem.)

MD: And this is the exact same kind of nonsense Mises spends most of his really boring words on. When it comes to money, why traders make the trades they do is completely irrelevant. We see time and time again “buyers remorse”. It can happen in a day. Or it can happen over several years (e.g. in the case of a boat purchase … two days of glee, the day they buy it and the day they sell it … other than that, it’s just a hole in the water into which they throw money). That’s all irrelevant to the subject of money. But we have our assignment to study this nonsense!

In John Nash’s lecture about ideal money, he gave the opinion that we can through observing the changing relationship between the money and the utility transfer to see “how the ‘quality’ of a money standard can strongly affect the areas of the economy involving financing with longer-term credits.

MD: With a “proper” MOE process, quality is in the transparency and the efficacy of the process. The quality of the governor on a diesel engine is more complicated than that … its parts can break. The MOE process is either operating objectively as dictated … or it is not. Only in the former case does it have quality of any kind … and that quality is of the perfect kind.

And also, we can see that money itself is a sort of ‘utility’, using the word in another sense, comparable to supplies of water, electric energy or telecommunications.

MD: Absolute nonsense. It is never proper to think of money “supply”. A proper MOE process has media is perpetual free supply. There is always exactly as much there as is needed … no more … no less. Nash … no gold stars for you!

And then, if we think about it, money may become as comparable to the quality of some ‘public utility’like the supply of electric energy or of water.”[3] The game theory of economics is a good way to check whether the quality of a money is ideal or not.

MD: The way to check the quality of money is by observing its universal acceptance in use … and observing its trait (built in) of perpetual zero inflation of the money itself. The latter will enable and result in the former.

Keynesians

“The thinking of J. M. Keynes was actually multidimensional and consequently there are quite different varieties of persons at the present time who follow, in one way or another, some of the thinking of Keynes.

MD: “Multidimensional”? As in wishy washy? … yep … as in wishy washy.

A very famous saying of Keynes was ‘…in the long run we will all be dead…’”[3] Keynesian economics gives the opinion: in the short run, the change in economic output has a strongly relationship with the change in aggregate demand, the output is always affected by the demand.

MD: How about this from us here at MD: In the long run, inflation of real money will be zero; and in the short run inflation of real money will be zero. It’s more true than what Keynes said … some people die before the long run.

And look what they’re talking about: “aggregate demand”. Money doesn’t care about demand. It is in free supply. There is always in circulation the exact amount that is needed … or some trader is creating it as we speak.

If there is an ideal money which can be stable in a very long period, we do not really need to worry about lots of problems in the long run.

MD: Real money is perfectly stable … perpetually … as is a HUL and the size hole it trades for. It never worries about any problems … long run or short. It perpetually mitigates defaults experienced with interest collections of like amount and this is a stabilizing negative feedback loop.

Asymptotically ideal money

MD: OH PLEASE!!!!!

Main idea

Asymptotically ideal money is the currency close to but still not ideal money. In John Nash’s lecture, “Ideal Money and Asymptotically Ideal Money” focused on” the connection between fluctuation in inflation and exchange rates and the perceived long-term value of money”, he mentioned that: “‘Good money’ is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation.

MD: So money from a “proper” MOE process (i.e. real money) is “good money”. It (the process) guarantees it (the media) will hold its value in HULs over all time everywhere. It cannot be made to do otherwise without violating the process … at which point it is no longer “the process” … it is no longer “real” money.

The policy of inflation targeting, whereby central banks set monetary policy with the objective of stabilizing inflation at a particular rate, leads in the long run to what Nash called ‘asymptotically ideal money’ – currency that, while not achieving perfect stability, becomes more stable over time.”[4] That means if a currency has shown a trend to be more stable,it could become an asymptotically ideal money or even the ideal money in the future.

MD: A “proper” MOE process is subject to no such manipulation. Thus it can only produce “ideal” results. But the results are only ideal for the traders. They are far from ideal for the money changers or the governments they institute for their protection and force in applying their scam. And they are not ideal results for those in the business of finance. Their cherished and worshiped expression (1+i)^n from which they claim the time value of money … well, it always produces 1.000 … i.e. “real” money has zero time value. So those in the scam of finance need to find other work.

Euro

Currencies may become (asymptotically) ideal money

Euro

John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability.

MD: We here at MD wished they talked to us when they created the Euro. We could have told them exactly how to do it to make it perfect “real” money (for traders that is). But the Euro was created by money changers to gain control over lots of countries at the same time. It is an open scam … and BREXIT is saying, we’re out … we want to run our own scam. Note, the Euro scam, like our own Constitution scam has no buy/sell agreement.

It is the currency used by the Institutions of the European Union and is the official currency of the eurozone which consists of 18 of the 28 member states of the European Union. In general, Euro has a macroeconomic stability, people in Europe owning large amounts of euros are “served by high stability and low inflation.” Moreover, in March 2014, Euro was commented as “an island of stability” by the head of the European Central Bank.[5]

MD: Every one of those individual entities in the European Union could have instituted their own “proper” MOE process. Ideally, they all would have adopted the HUL as the logical choice for unit of measure. If they had done that, all their money would be freely exchanged with a constant exchange rate … that being 1.000. Had they done that, there would have been no reason to “unionize”. And there wouldn’t be a European Central Bank; or 18 central banks; or 28 central banks. there would be “no central banks”. Just certified certifiers with transparent operations employing a “proper” MOE process. What’s not to love about the simple and the obvious?

References

 

 

External links

GoldMoney.com: Gold – Crossing the Rubicon

Gold – crossing the Rubicon

Gold is challenging the $1300 level for the third time this year. If it breaks upwards out of this consolidation phase convincingly, it could be an important event, signalling a dollar that will continue to weaken.

MD: Look at how silly this reads if you know what real money from a “proper” MOE process is. Referring to “real” money that sentence would read something like:

The HUL (Hour of Unskilled Labor and the unit of “all” real money) still trades for the same size hole in the ground that it did last month … and last year … and last century … and for all time.

The factors driving the dollar lower are several and disparate. The US economy is sluggish relative to the rest of the world, the rise of Asia from which America is excluded is unstoppable, geopolitics are shifting away from US global dominance, and the end is in sight for monopolistic payment for oil in US dollars.

MD: With a proper MOE process, the money cannot be driven higher or lower or anyplace else. It has nothing to do with the economy. If the traders don’t see clear to delivering on their trading promises over time and space, their money creation goes down. Otherwise, it stays the same or goes up. Either way, as far as real money is concerned, the economy is a non-issue. Real money is in perpetual free supply and is always where it needs to be when it needs to be there to immediately serve the demands of any state of the economy … i.e. what traders want to promise to do over time and space. There is “no” monetary policy,  geopolitics, state dominance, commodity influence or anything else to cause it to deviate from its appointed task … that task being to keep track on all certified in-process trading promises spanning time and space.

These subjects have been covered in some detail in my recent articles, which will be referred to for further clarification where appropriate. This article summarises these trends, and explains why the consequence appear certain to drive gold, priced in dollars, much higher.

MD: And he knows his writing is non-sense … because I have annotated it for him numerous times in this very way.


The importance of gold and reasons for its suppression

The post-war Bretton Woods Agreement confirmed the US dollar to be fixed to gold at $35 per ounce. All other national currencies were linked to gold through the dollar at the central bank level. Ordinary civilians, businesses and commercial banks were not permitted to exchange their currencies for gold through central banks, so this was simply a high-level arrangement designed to maintain control of gold priced in dollars.

MD: Gold attempted to become money by edict as described here. You can’t make something money by edict and expect it to work. It is just a stand-in for real money. Look how silly this is. The gold was what gave everyone confidence in the money … even when they were explicitly told they couldn’t exchange their money for gold … the very basis for that confidence. Who’s going to believe nonsense like that?

A few years after Bretton Woods, in 1949 and when the newly-fledged IMF began to collate statistics on national gold reserves, the US Treasury was recorded owning 21,828.25 tonnes of gold, 74.5% of all central bank reserves, and 43.6% of estimated above-ground gold stocks. However, over the years the proportions changed, and by 1960, US gold reserves had declined to 15,821.9 tonnes, 47% of central bank reserves, and 24.9% of above ground stocks.

MD: With real money, none of the nonsense in the above paragraph is ever called for. There are “no reserves”. Nobody cares where the money is. Traders making new promises spanning time and space create it in the amounts and at the place they need it … they get their promises certified … and then go about delivering on them. That means doing something to reacquire money in circulation and return it … upon which it is immediately destroyed. They don’t have to go hat in hand to someone who has “proof of work in hand” before they can make their promise.

Clearly, American control of gold had weakened considerably in the two decades following Bretton Woods. This weakening continued until the failure of the London gold pool, the arrangement dating from 1961 whereby the major American and European central banks collaborated to defend the $35 peg.

MD: Again notice. With “real” money from a “proper” MOE process, you don’t have this nonsense. You have a peg … a real one … one that never changes over time and is used as the obvious unit of measure … you have the HUL … the Hour of Unskilled Labor.

It has traded for the same size hole in the ground over all time … and we have all been one at sometime in our lives (usually in high school summer jobs). we never lose a reference to its “real” value. That is made possible and maintained through its perpetual “guarantee” of zero inflation.

That guaranteed behavior is implicit in the process and real under direct observation … it is the nature of every trade … i.e. perfect perpetual balance between the supply and demand for the money itself.

Gold has never gotten close to delivering that sub-minimal attribute of real money. In fact, it claims to be money via the opposite path … that it is “rare”.

The Americans had abused the gold discipline by financing foreign ventures, notably the Korean and Vietnam wars, not out of taxation, but by printing dollars for export, and it began to put pressure on the dollar. The London gold pool effectively spread the cost of maintaining the dollar peg among the Europeans. Unsurprisingly, France withdrew from the gold pool in June 1967, and the pool collapsed. By the end of that year, the US Treasury was down to 10,721.6 tonnes, 30% of total central bank gold reserves, and 15% of above-ground stocks.

MD: “Abused the gold discipline”. Now that is rich!!! And remember, the co-option of trader’s invention of money by the money changers now has “all” taxation going to paying tribute (interest) to those money changers. Governments are sustained totally by counterfeiting. It’s not “Americans” who abused the money … it’s the governments … which are demonstrably everything that is “non-American” in values and behavior.

And again notice, all the machinations he describes are of no interest to a “proper” MOE process at all … not at all!

Inevitably the decline continued, and by the time of the Nixon shock (August 1971 – the abandonment of the gold exchange commitment) it was clear the US Government had lost control of the market. She had only 9,069.7 tonnes left, representing 28.3% of central bank gold, and 11.9% of above ground stocks. Monetary policy switched from the fixed parity arrangements centred on gold through the medium of the dollar, to a propaganda effort aimed at removing gold from the monetary system altogether, replacing it with an unbacked dollar as the international reserve standard.

MD: “The Nixon Shock”. The French called them on their obvious bluff and lie. You don’t have money by edict. The most efficient and fair process allowed to be instituted will always prevail … and there can be any number of instances of it. Their operation is totally transparent. There is no concept of the “backing” of the money. The fact that “all” defaults are immediately recovered by interest collections of like amount is what guarantees perpetual zero inflation of the money … it’s what gives the money its integrity. There is no “standard” … international or otherwise (other than the obvious use of the HUL as an unvarying unit of measure). There are no “reserves” … international or otherwise.

The result was the purchasing power of the dollar and the other major currencies measured in gold has all but collapsed, as shown in the chart below.

MD: Duh … the only right value for inflation is zero. Real money from a “proper” MOE process guarantees it perpetually.

Currencies priced in gold

Between 1969 and today, the dollar’s purchasing power relative to gold declined by 97.3% (the blue line). By banning gold from having any monetary role, the US removed price stability from the dollar.

MD: Ramping up of government counterfeiting (and then lying about the obvious inflation that results) is what removes value from the dollar. Instability comes from the fits and starts of their counterfeiting. If they did it predictably, we would still have the 4% leak … but we could compensate for it with regular 4% price and wage increases. But with “real” money, none of those degrees of freedom even exist. It’s a much kinder and gentler environment for traders (like you and me).

More recently, since the great financial crisis the quantity of fiat money in the global currency system has expanded dramatically relative to the long-term average growth rate of money and bank credit. This is illustrated in our second chart, which records the growth in the total amount of fiat dollars in the US banking system.

MD: Note the presentation of the “fiat” qualifier for money. Knowing what “real” money is … i.e. a promise … you know that it is fiat. But they say it as a slur. Their alternative, gold, is obviously deflationary and strangles trade … but it’s not fiat. It’s not money at all. It represents a trade completed. How stupid they are!

Fiat money quantitiy

MD: Draw that curve for “real” money and it’s a perfectly straight horizontal line … a HUL is always a HUL and always trades for the same size hole in the ground. This is the pot calling the kettle black.

The fiat money quantity is the sum of true money supply and commercial bank reserves held at the central bank (the Fed). It is the measure of all deposits, including those of the commercial banks. Monetary inflation has expanded dramatically since the great financial crisis, illustrated by its acceleration above the long-term trend. The consequences for the dollar’s purchasing power in time will be to accelerate the dollar’s decline even more.

MD: The money quantity is the sum of “all in-process trades”. And it is always exactly what it needs to be. Supply of real money is perpetually in balance with demand for real money. What could be simpler. What could be more appropriate? That’s what it is right now in spite of the improper MOE process the Fed runs. Government counterfeiting is also a trading promise … which is DOA (Default on Arrival … they never deliver … they just roll their trading promises over). That would be ok if it was met by equal interest collections. But it is not. Those interest collections (taxes) go straight to the money changers. Thus, “all” governments are sustained by inflation. So are all finance practitioners.  With “real” money, Their cherished (1+i)^n formula (the time value of money) runs a constant 1.000 perpetually. They have no reason to exist.

The monetary expansion of the dollar has been echoed in the other major currencies, with negative consequences for global price inflation in the coming years. Meanwhile, gold’s inflation, at roughly 3,200 tonnes annually, is about 1.9% of above-ground stocks. The different rates of increase between above-ground gold stocks and the fiat money quantities of unbacked state-issued currencies is what ultimately drives the price of gold measured in those unbacked currencies. It is easy to see why a higher gold price, reaffirming gold’s role as sound money at a time of excessive fiat currency inflation, is viewed by the major monetary authorities as a potential threat to their currencies’ credibility.

MD: Notice they say “price” inflation. “Prices” have to do with the supply and demand of the object in question. Inflation has to do with supply/demand of the money itself … witch is properly and perpetually zero. They just don’t get it! And look at all this effort to keep track of gold … and calling it backing. Remember, there’s just one ounce per person on Earth (and I have well over my fair share). That’s just $2,000 per person. It’s lost in the noise of trading and saving levels. That’s the “backing” they’re in love with. You can’t make this stuff up!

There can be little doubt that without the propaganda war against gold led by the US monetary authorities, without the expansion of unbacked paper gold constituting artificial gold supply in the futures and forwards markets, and without the secret interventions of the US’s Exchange Stabilisation Fund, the gold price would be considerably higher, expressed in dollars.i

MD: With a “proper” MOE process competing with what we have now … and with “would-be-stand-ins” like gold, this article couldn’t exist. Gold would be priced in HULs and that would only change with the supply and demand for gold … the supply and demand for HULs being in guaranteed perpetual perfect balance. Thus the HULs required to buy gold would be related to miners, electronics manufacturers, dentists, and jewelers. GoldMoney.com would be out of business. So, who do you think needs to keep driving the propaganda? Follow the “fake” money. Imagine “real” money.

However, gold remains centre-stage as a global hedge against the decline in purchasing power of fiat currencies. Besides rescuing the financial system from collapse nine years ago, the expansion of bank credit is inherently cyclical.ii The credit-cycle for China’s yuan appears to be moving into a new expansionary phase, reflected in a rising trend for nominal GDP. This will be put into context later in this article, but it is noticeable that on the back of China’s GDP growth, Japan, the EU and the UK are also enjoying export-led revivals.

MD: Actually, my six months of canned food and my free and clear land and improvements are a far better hedge than gold. Look at the Weimar debacle. Gold played no role at all. They did a reset. Everyone got screwed to various degrees. And they started over. It took about 3 years to ramp up and explode … it was reset in about 6 months and started all over again. But look at all the hand waving … “… new expansionary phase …”

The US does not share these benefits, partly because China and Russia, the founders of the Shanghai Cooperation Organisation (SCO), are deliberately freezing America and her money out, and partly because of America’s own tendency towards trade isolationism.iii It is therefore less certain that America is close to moving from the recovery stage of the dollar’s credit cycle into expansion. In the absence of other factors, the difference in interest rate outlooks this implies should be reflected in a declining dollar exchange rate against the other major currencies, a trend that has been under way since last January.

MD: A proper MOE process cannot be frozen out by anybody or anything. It is as good as a money process can be. Competitors can only copy it. They can only compete through greater and greater efficiency and fairness. There is no such thing as an “interest rate”, let alone an “interest rate outlook”.

Despite the massive expansion of fiat money over the last nine years, it is possible for governments to stabilise the future purchasing power for their currencies. It will require their fiat currencies to be tied convincingly to the characteristics of gold. It depends on the government concerned accepting that gold is superior money to its own currency, owning sufficient physical gold reserves to convince the markets, and the gold price being at a level where the arrangement sticks. There is no doubt that China, Russia, as well as the other SCO member states and their populations regard gold as a superior money to fiat currencies, partly because their fiat currencies do not have well-established records of objective exchange value.

MD: Right. You’re counterfeiting hand over fist and inflating the money … and you’re going to harness that by “convincingly tying your counterfeiting to characteristics of gold”. Amazing! And “owning sufficient physical gold reserves”? Like more than your 1oz fair share? What’s with these idiots!

In the US, Japan, the UK and through much of Europe, the populations have experienced a longer, generally more stable objective exchange value for their currencies. Under pressure from their governments to use only state-issued currency, they have lost the habit of regarding gold as money. The monetary authorities of these countries, with a few exceptions, also do not regard gold as having any monetary role at all, beyond paying lip-service to a vague concept it has value as an asset which is no one else’s liability.

MD: Lost the “habit” of “regarding gold as money”. I don’t know about you but I have never regarded gold as money. It hasn’t been money in my 70+ year lifetime … anywhere. Nor in my father’s 80+ year lifetime. And I saw it proved not to be money (in concept) when in 1964. Then I traded a quarter … with 90% silver … for a gallon of gasoline. And then the next year in 1965 when they made quarters with 0% silver … I did the same thing … one 0% silver quarter traded for a gallon of gasoline. Now come on! What does that tell you about the role that precious metals obviously plays in the eyes of traders like you and me? Zero … right? Right! With a “proper” MOE process, there are no “monetary authorities” … in this country or anywhere else … ever.

Therefore, understanding the role of gold and the protection it can offer fiat currencies is split into two geographic camps: the governments of Asia which are actively accumulating, or would like to accumulate additional reserves of monetary gold, and the governments of North America and Western Europe which see the gold price as irrelevant from the monetary point of view.

MD: I understand the nature and role of “real” money. I understand it is created and destroyed only by traders. I understand that gold plays no role whatever. How about “you” get some understanding of the obvious!


Gold reserves and gold secrets

We shall now briefly comment on the positions of the main monetary authorities on the global gold stage, their current gold policies, and how they are likely to change. These are the US, China, and the member nations of the SCO.

MD: Tips his hand right away. With a “proper” MOE process, there are “no” monetary authorities … on the global gold stage or anywhere else. There are no “policies”. There is just the process that all trading promises creating real money are certified and transparent; that deliveries on those promises are perpetually and openly monitored; that defaults are detected and mitigated by interest collections of like amount … transparently; and that no money exists before a trading promise is certified, nor after the trading promise is delivered and the money destroyed, for any trading promise … period!

United States

The US monetary authorities were behind the push to remove gold from the monetary system, when they terminated the Bretton Woods Agreement in 1971. They are somewhat schizophrenic on the issue, the US Treasury claiming it still owns 8,133 tonnes of gold, reflected in the Fed’s balance sheet at the last official price of $42.22 per ounce. Interestingly, when the previous Fed Chairman, Ben Bernanke, was questioned on the subject by Senator Ron Paul in 2011, it was clear he did not regard it as money, only a legacy asset. If this is true, the Fed should substitute the reference to gold in its balance sheet with an unsecured loan to the US Treasury, which if Ben Bernanke is right, has a greater monetary credential than gold. It would also end the embarrassing calls to audit the Fed.

MD: Knowing they have taken the wrong fork in the road, we’ll now just scan forward to see if they ever bring themselves back. Don’t hold your breath. If we see a glaring misconception … in the midst of this total misconception, I’ll call it to your attention.

The resistance to leaving go of gold rather proves that gold is still money. However, the monetary policies of the Fed since the great financial crisis are predicated in the belief that gold is not money. This dichotomy is also shared with the Bank of England, the Bank of Japan, and the European Central Bank.

They all say that the world has moved on from the days when gold was part of the monetary system, so they are ill-prepared to discard the Keynesian beliefs upon which their current monetary policy is based. Their advanced, welfare-state economies are simply too far down the road of the state theory of money to turn back. However, this exposes their currencies, and particularly the US dollar as the world’s reserve currency, to a substantial loss of purchasing power as the rapid monetary expansion of the last nine years works its way through to consumer prices. The election of President Trump promising to make America great again is turning out to be a failure. The removal only last week of Steve Bannon, his chief strategist, clears the way for the pre-Trump establishment to reassert itself. Gone is Bannon’s talk of a financial war against China and Russia, and doubtless, with a trio of the Generals Kelly, Mattis and McMaster now in control of the White House, it will be back to military options.

General Kelly, who was appointed to bring some order into the White House is doing this by removing dissenters from the mainstream. This was why Bannon had to go, and why President Trump himself will have to knuckle under and become as anodyne as President Obama. The mainstream is back and little has changed.

MD: Bannon had to be let go because Kelly knows gold is money? Wow!

Meanwhile, the US economy muddles along without clear signs of improving consumer demand. It seems increased trade tariffs against China remain on the agenda, in which case they will amount to a self-harming tax on American consumers. Furthermore, global economic growth and progress is being driven primarily by China, from which America is excluded. And as the interest rate differentials start to widen between a stagnating US economy and an expanding Asia that also benefits Japan, the EU and the UK, the dollar is likely to weaken considerably in the foreign exchanges, as well as in terms of the commodities a dollar will buy.

MD: Remember … tariffs are just a way for the governments instituted by the money changers to deliver tribute to those money changers. They steal it directly from the traders.

Some forecasters believe that the US economy is stalling and deflation beckons. This is a mistake. The conditions replicate an inflationary outlook, whereby prices start rising at an accelerating rate, driven by a falling purchasing power for the dollar. The dollar is likely to lose more purchasing power through the effects of the last nine years’ monetary expansion working through to consumer prices. Additionally, foreign nations and commodity suppliers doing business in Asia are likely to be sellers of dollars for other currencies as the world moves towards an Asia-centric global economy. For deflation to take hold, there must be a shortage of dollars, not the substantial excesses in existence today.

China

In partnership with Russia, China is ringmaster for all Asia. The Chinese economy is run with a beneficial mercantilist approach. The primary political objective is to plan an economic future for the benefit of its people. Instead of democratic responsibility, the leadership commands the economy strategically in the universal interest of its citizens, crushing all individual dissent.

MD: How is Chinese money created? Same bogus way the Fed does it, right? Through government counterfeiting, right? Institute a competitive “proper” MOE process and you put the Chinese manipulators on the ropes too … immediately

The Chinese state, having embraced important concepts of free markets, operates rather like the East India Company of old. Through a series of five-year plans, hundreds of millions of workers are being moved from less productive employment, redirected and retrained to more productive, higher technology and service occupations. The whole economy is in a planned transition. Low-skill jobs are being mechanised. Already, China is expanding into the rest of Asia, promising to move whole communities and countries out of relative poverty. The trans-shipment of goods across the Eurasian continent is expanding rapidly. The Chinese have also taken economic control over much of sub-Saharan Africa to secure the natural resources for the Grand Plan.iv

Most of this expansion is financed through bank credit, issued through the large state-owned banks. Unlike economic policy in the West’s welfare states, which is aimed at preserving legacy businesses, the positive redeployment of capital resources limits the build-up of malinvestments in China. Furthermore, the expansion of nominal GDP, which is the direct consequence of the expansion of bank credit, is accompanied by genuine economic progress, which is decreasingly the case in the West.v

MD: Financed through “bank credit”? That’s an open myth. Banks have no credit to give. They’re just the score keepers for the money changers. They are their retailers. Just store fronts. They are empty suits.

Consequently, China’s credit bubble is arguably less dangerous than those in the US, EU, UK, and even in Japan. However, credit bubble there is, and it is part of a global credit cycle that afflicts all fiat currencies. Undoubtedly, the Chinese authorities are aware of this danger, evidenced by their repeated actions to contain credit-fuelled speculation before it gets out of hand. [Crypto-currency enthusiasts, beware!]vi

So far, China has pursued a policy of managing the yuan’s exchange rate against the US dollar, and consequently records $3.08tr in foreign reserves, the vast bulk of it in dollars. At some point, China will need to abandon foreign exchange support of the dollar, because the dollar’s purchasing power measured in commodities is likely to continue its decline. This policy is making the raw materials China needs more expensive priced in yuan.

It is therefore becoming more sensible for China to dispose of her dollars and encourage the yuan to rise against it on the foreign exchanges. Admittedly, this will damage the profits of exporters to dollar-denominated markets, but should have the beneficial effect of redirecting capital and labour resources from these legacy businesses towards the new activities favoured by the five-year plan. Now that the process of refocusing the economy from manufacturing and exporting cheap goods towards a technology and service driven economy is well underway, China must be getting closer to ditching the dollar as the yuan’s reference currency. It is near the time for China to stop supporting the one currency she wants to do away with.

MD: With a “proper” MOE process, “all real” money, regardless of who certifies it exchanges at a constant rate with all other “real” money. And if they all adopt the HUL as the obvious unit of measure, that exchange rate between all moneys is 1.000. Supply and demand for goods themselves is what determines their price … everywhere … all the time. You change nothing by exchanging 1 dollar for 1 yuan for 1 HUL and back to one dollar.

All the indications from China’s gold policy are that the end-plan is to tie the yuan to gold. In 1983, China introduced regulations appointing the Peoples Bank with the role of acquiring gold on behalf of the state. Analysis of contemporary prices, Western central bank sales and leasing into a prolonged bear market, shows China could accumulate significant quantities of gold bullion. In the 1980s, China had capital inflows she wished to neutralise, followed by the trade surpluses that began to accumulate in the 1990s. Adding to her programme of acquisition of gold from abroad, China beefed up her gold mining capacity and her gold refining state monopoly. Today, she is the largest mine producer by far, and takes in gold doré from other countries to refine and keep.

MD: Tie the yuan to gold. That 1oz per person? Going to strap them down with that are you?

By 2002, she had accumulated enough bullion by then permit her own citizens to buy gold, and even advertised on television and other media to encourage them to do so. Deliveries into private ownership through the Shanghai Gold Exchange (controlled by the Peoples Bank) has totalled over 15,000 tonnes after 2002, though some of that will have been recycled as scrap. I have speculated that by 2002, the Chinese state could easily have accumulated over 20,000 tonnes before the Shanghai Gold Exchange was established, rather than the paltry figure of 1,843 tonnes in declared reserves today. Whatever the true figure, the Peoples Bank has purposefully been acquiring gold for thirty-four years, and by 2002 had built a strong and satisfactory position, clearing the way over the last fifteen years for her people to do the same.vii

MD: Permitted them to buy gold. Did any buy more than their 1oz share? That means some others couldn’t buy their 1oz share, right? Stupid is as stupid thinks.

China now has an iron grip on the physical gold market. The launch of the Hong Kong owned LME’s new gold contract is the latest move, building on China’s policy of using the Hong Kong and London connection for the development of her interests in international capital markets. The contract has been a success from day one. While the American banks push the price round on the Comex futures market, the real control over the market is now in Chinese hands.

MD: “Iron grip on gold market”. Well, dentists and jewelers and electronics manufactures … you know where you need to go to acquire your feed stock. And you traders creating money to effect trades over time and space … fear not … you’re not affected in the least. Just institute your “proper” MOE process and let those idiots do as they please … as long as they leave you alone.

China and her citizens are still accumulating gold. Basically, gold that goes into China does not come out. This contrasts with the US and the EU, where people are strongly discouraged from regarding gold as money or a store of value. For geopolitical purposes, it matters not who is right, but who has the power to be right. By ending the yuan’s exchange relationship with the dollar and transferring it to gold, global monetary hegemony would be transferred from America to China and her sphere of influence in one big step.

The Shanghai Cooperation Organisation

The SCO is driven by China in partnership with Russia. As well as a population of 3.3bn, it is the principal trade partner of Japan, the Koreas, and all the South-east Asian nations, adding a further 830 million people into the SCO’s sphere of influence. Dependents on the SCO for their exports of raw materials takes in nearly all sub-Saharan Africa, adding another billion. Europe, Australia and New Zealand are also drawn into the SCO’s circle of trade influence, a further 700 million. That totals over 5.8bn, leaving nations with a population total of about a billion either neutral or siding with America. Yet, it is the US dollar that settles the bulk of world trade.

There are strong indications that gold will be part of the settlement medium for the SCO’s future trade. Not only is China driving the SCO in partnership with Russia, which appears to be gold-friendly as well, but central bank demand for physical gold has mostly been from SCO member states and affiliates.

MD: Again … ground your thinking as you read all this nonsense. There is only 1oz per person on Earth … and everyone reading this has more than their 1oz fair share.

India, which lacks enough gold at the state level to support her membership, is using increasingly desperate measures to acquire gold from her own citizens. India’s economic renaissance, since the socialist Ghandi dynasty was ousted, has been on the back of Keynesian policies, so there is likely to be a strong intellectual resistance to gold in the monetary elite. Furthermore, senior appointees to the Reserve Bank have traditionally been on the advice of the Bank of England, which is anti-gold, and at the same time conscious that Indian gold demand on top of that of China is undermining control over the London bullion market. India’s gold policy as a member of the SCO is somewhat confused,

MD: “Membership” in what? The community of idiots? As Groucho Marks once said, “I wouldn’t be a member of any club that would have me as a member.”

The imbalances between gold ownership of the various SCO member states rule out a new super-currency, so it is likely to be the yuan that is predominantly used for Eurasian trade settlement, with other members pursuing a currency board approach for their own currencies.

MD: With a “proper” MOE process (i.e. real money) there are no imbalances … anywhere … any time. They really tip their hand when they make these idiotic statements.


Control over the oil market

The most significant post-war financial agreement achieved by America was with Saudi Arabia, whereby the Saudis agreed to only accept dollars in payment for oil in return for American protection. The agreement was adopted by all OPEC members, in return for the ability to fix oil prices as they pleased. This put the American banks firmly in control of the expansion of global credit, as well as the recycling of the currency surpluses arising from sales of oil to oil consuming nations, particularly benefiting the friends of America. That one decision, negotiated by Nixon and Kissinger, set up the dollar as the world’s reserve and trade currency after the end of the Bretton Woods agreement, and remains so to this day.

MD: A proper MOE process employs no agreement. It is just a transparent process traders (like you and me) use to effect our trades over time and space. If we don’t want to use it we don’t have to. The agreement is implicit in our use and the perpetual transparent view of its operation.

Today, Saudi Arabia is no longer the stable theocracy it was, and at current oil prices is running into financial difficulties. It plans to sell a five per cent stake in the national oil monopoly, Aramco, to raise $200bn to plug the gap in state finances. It can only do this by way of a public listing and offering if it can verify its stated oil reserves, which may prove difficult. If one was to guess an outcome for this dilemma, it would be that Saudi’s largest customer, China, could come to the rescue. And it would be expected that China would gain some influence over the disposition of Saudi’s oil sales.

MD: A proper MOE process (i.e. real money) cares nothing about religion … or superstitions of any kind.

It would be a typical Chinese strategy, repeating in the case of energy what China has already achieved in gaining control over the global economy. Other than America, whose consumption exceeds its supply by a significant margin, Russia is the largest global supplier (just), followed by Saudi Arabia. Between them they account for 22.4% of global supply. Other Asian suppliers in the SCO or allied to it gives a further 12%, making 34.4%. Coordinating these supplies gives China and her partners more production leverage on the global oil market than Saudi Arabia had in the 1970s.

MD: You do what I do when my consumption overwhelms my ability to supply? I increase supply or reduce consumption. Governments should try that.

Already, China is showing a preference to settling trade and energy deals in yuan, but to take this much further, it will need to offer gold convertibility to compete with the dollar. This appears to be being pursued in two steps, the first being oil suppliers given the opportunity to sell their oil for yuan, and to sell their yuan on the Shanghai futures exchange for gold, before the second step, a formal yuan convertibility, is eventually offered.

The yuan-gold contract already exists, the oil-yuan contract will shortly be introduced. The Shanghai International Energy Exchange is currently training potential users and carrying out systems tests prior to launch later this year. Obviously, these futures contracts in gold and oil may need to be initially supported by the state banks to enable them to build liquidity. But importantly, it will allow Iran, Russia and other Asian producers to avoid Western banking sanctions by selling oil for gold.viii

MD: With “real” money, the contract creating the money is strictly binding to the trader creating the money. He has what he traded for and his trading partner has the money he created … which he puts into circulation as he acquires things he needs. If the money creating trader defaults, those are mitigated immediately by interest collections … usually from other unreliable traders according to “their” propensity to default. Responsible traders “never” have an interest load.


Geopolitics could set the timing

MD: A proper MOE process cares nothing about politics … geo or otherwise. It, by its very nature, is immune to political intervention.

The course of economic and monetary events in Asia was predetermined by the Chinese some time ago. We saw evidence of this in the UK, when China decided its international financial markets would be operated between Hong Kong and London, cutting out New York entirely and the dollar as much as possible. The Hong Kong Exchange bought the London Metal Exchange in 2012, and a year later London’s role was cemented when the then Chancellor of the Exchequer, George Osborne, visited China. This was followed by Britain becoming the first developed nation to join the Chinese-led Asia Infrastructure Investment Bank, much to the annoyance of the US.

The Obama administration had no effective response to China’s strategy, and continued to attack China’s partner, Russia, through proxy wars in Ukraine and Syria. The bid to take control of resource-rich Afghanistan failed. The election of President Trump brought with it uncertainly in US foreign policy, prompting a visit by President Xi to President Trump last April. There was no doubt that Xi decided he needed to assess Trump personally. He is likely to have come away with the view that Trump was unpredictable, and so it has proved.

MD: Well, if we had a “Money Delusions Exposure” administration we would have a response to China’s strategy. We would institute a proper MOE process. Their strategy would then have to be doing the same as we did. If they don’t they’re not competitive. They wilt on the vine.

We can only guess as to whether Xi’s visit has caused the Chinese to accelerate their planned move away from the dollar to their ultimate trade settlement and monetary plans. The threat of an American invasion of North Korea will be watched closely by Beijing in this context. The prospect of American troops on the Chinese border only 500 miles from Beijing will be prevented at all costs, so retaliation by an attack on the dollar would be the most effective response.

The removal of Steve Bannon last week and the control of the White House passing to three generals are important developments. In his last interview while still officially appointed, Bannon correctly analysed the geopolitics between China and the US. His analysis was very much on the lines presented in this article. However, his assessment was that the US needed to fight a trade and financial war against China, and forget anything military. In his words, “unless someone solves the part of the equation that shows me that 10 million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you are talking about, there’s no military solution here, they got us.”ix

Bannon’s mistake is to assume America still wields its traditional financial power, when it is clear to informed outsiders that this is no longer true. However, the generals now in charge of the White House are more likely to stoke up proxy wars, either because that is where their skills lie, or more cynically perhaps they are influenced by the arms manufacturers who are looking for defence contracts. They have taken no time in ratcheting up the American presence in Afghanistan and clearly have a desire to gain influence in Pakistan, both of which are on China’s eastern flank, where she is building commercial and infrastructural ties.

MD: It is still the case. As long as they can make the objects they use for force, they can prevail. Oh … also, they have to keep their subjects stupid enough to want to carry those objects of force to their targets … return from the mission is not of import. Those directing the force never lower themselves to actually delivering that force personally.

So, geopolitics are back on familiar ground. Trump is now neutralised and will increasingly look like a cowed Obama. Perhaps more troops will be sent to Syria. Perhaps more advisors will be sent to Ukraine. Perhaps more missiles will be installed in Poland, or the Baltic states. North Korea will rumble on, in a stalemate protected by its nuclear weapons. But increasingly, China’s interests are now served by taking the next step to disentangling herself from the dollar, and that will mean selling down her dollar reserves to stockpile the copper and the other industrial materials she needs. It will also mean lending dollars to trade counterparties, such as Saudi Arabia, to be repaid in yuan.


Conclusion

MD: How do you conclude something that is proven to be absolute nonsense in its opening paragraph? It should have concluded right there.

China and Russia’s geopolitical strategy has been evolving long enough for observers to understand it and the implications for the West. We can assume the strategic thinkers and intelligence agencies of all the major players have a reasonable grasp of the implications, including America, which is determined not to lose in this Great Game. That was the point behind Steve Bannon’s candid interview with Politico.

Bannon was deluded about the extent of America’s economic and financial power. He is now out. We are back to geopolitics being decided by the military. Meanwhile, China’s interests have almost certainly moved firmly towards dumping the dollar. This can only be done successfully by linking the yuan to the characteristics of physical gold, the market which China has effectively cornered.

If gold crosses the $1300 Rubicon, it may be taken as an early sign that China’s long-term plan of monetising her gold is progressing towards the next stage. The oil-for-yuan futures contract is due to be launched very shortly, allowing countries like Iran to buy gold freely, paid for by oil sales.

MD: If gold crosses the $1,300 Rubicon, it’s still a ways below the Rubicon I acquired more than my fair share at. I acquired it when I was still drinking the gold-bugs coolade. I thought the train was leaving the station. Hopefully when we get back to my Rubicon, there will still be idiots out there to take it off my hands. If a “proper” MOE process gets instituted, I am toast.

Alternatively, if China defers securing the yuan to gold, the dollar still looks like weakening against other currencies, reflecting a US economy isolated from the positive Asian story. The pace of the rise in the gold price might be slower, but the direction seems equally certain.

Eventually, gold will need to rise to a level where the Chinese are prepared to set a conversion rate. Expect China to use its control over physical gold markets to achieve it at a time of its own choosing. Leaving the $1300 price behind could well be the start of the move towards this objective.

MD: Eventually, traders (like you and me) will take the bull by the horns and institute a “proper” MOE process. And they won’t let the money changers and governments instituted by them get anywhere near that process. And then we’ll all live happily ever after … unless we’re money changers, government workers, government suppliers, government contractors, or otherwise dependent on the government. There is absolutely nothing preventing us from doing it … that is other than “us” ourselves. Unfortunately, with 3/4ths of the fruits of our labor going to governments and those dependent on them, we’ll probably just have to wait for the collapse … iterative secession … and then institute a proper MOE process in our own space. Them them go pound sand.


MD: Ah … footnotes. As George W. Bush noted (one of his near non-existent wise observations), I have just read a “scholarly article”.

i The Exchange Stabilisation Fund was created under the Gold Reserve Act 1934 as a fund within the US Treasury. Its specific purpose is to manage the gold price. Congress has no right to any information concerning the Fund’s activities, so they remain a closely guarded secret out of the public eye.

ii For a description of the credit cycle and the current state of play see: https://www.goldmoney.com/research/goldmoney-insights/follow-the-money

iii The SCO now includes China, Russia, India, Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Among other future members are Turkey, Iran and Afghanistan. The estimated population of this economic unit when all future members have joined is 3.3bn, nearly half the world’s population.

iv More background on China’s grand plan is available here: https://www.goldmoney.com/research/goldmoney-insights/time-for-a-new-gold-standard-for-asia

v It is crucial to understand the difference between GDP and genuine economic progress. It is a common misconception in Western financial markets that China’s credit bubble is more dangerous than those in Western welfare states. All credit bubbles are dangerous, more so if they do not finance economic progress.

vi The commodity rehypothecation scandal in 2014, the stock market collapse in 2015, and commodity speculation last year are examples of bubbles popped by state intervention.

vii For the background to my assessment of gold bullion owned by the Chinese government, see: https://www.goldmoney.com/research/goldmoney-insights/china-s-gold-strategy

viii At current rates of Iran’s oil exports to China and at current gold prices their annual value is approximately 300 tonnes of gold.

ixSee http://www.politico.com/story/2017/08/17/steve-bannon-interview-american-prospect-241729

 


The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information purposes only and does not constitute either Goldmoney or the author(s) providing you with legal, financial, tax, investment, or accounting advice. You should not act or rely on any information contained in the article without first seeking independent professional advice. Care has been taken to ensure that the information in the article is reliable; however, Goldmoney does not represent that it is accurate, complete, up-to-date and/or to be taken as an indication of future results and it should not be relied upon as such. Goldmoney will not be held responsible for any claim, loss, damage, or inconvenience caused as a result of any information or opinion contained in this article and any action taken as a result of the opinions and information contained in this article is at your own risk.

 

What To Read Next

 

USD
  • USD
  • CAD
  • GBP
  • EUR
  • CHF
  • JPY
  • AUD
  • HKD
  • NZD
Metal
24hr
Sell
Buy
auGold
+0.02%
$41.30
$41.53
agSilver
+0.35%
$0.55
$0.55
ptPlatinum
-0.19%
$31.32
$31.51
pdPalladium
-0.61%
$29.79
$30.00

Get the latest Goldmoney Research before everyone else, direct to your inbox

Latest Insights

Gold – crossing the Rubicon

August 24, 2017 Alasdair Macleod

The fiscal benefits of free trade

August 17, 2017 Alasdair Macleod

Cryptocurrency – its status as money

August 10, 2017 Alasdair Macleod
Market Updates

Market Report: Pausing under the highs

August 25, 2017 Alasdair Macleod

Weekly DOE Oil Charts – August 18, 2017

August 23, 2017 Stefan Wieler

Get Started with Goldmoney

Cafe Hayek: Degrees of Explanation

Quotation of the Day…

by Don Boudreaux on August 25, 2017

in Curious Task, Economics, Hayek, Scientism, Seen and Unseen

Degrees of Explanation

… is from page 201 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, it’s from Hayek’s deep 1995 article “Degrees of Explanation,” which first appeared in the British Journal for the Philosophy of Science:

In ordinary usage we are inclined to admit as predictions only statements which narrow down the admitted phenomena fairly closely, and to draw a distinction between ‘positive’ predictions such as “the moon will be full at 5h 22′ 16″ tomorrow”, and merely negative predictions such as “the moon will not be full tomorrow.”  But this is no more than a distinction of degree.  Any statement about what we will find or not find within a stated temporal and spatial interval is a prediction and may be exceedingly useful: the information that I will find no water on a certain journey may indeed be more important than most positive statements about what I will find.  Even statements which specify no single specific property of what we will find but which merely tell us disjunctively that we will find either x or y or z must be admitted as predictions, and may be important predictions.  A statement which excludes only one of all conceivable events from the range of those which may occur is no less a prediction and as such may prove false [and, because it can be proven false, is ‘scientific’].

MD: Ok. We have a pretty straight forward assertion of the obvious. But we don’t know anything yet about what this assertion is supporting. Let’s see if that comes out in DBx treatment. Hint: No it doesn’t

DBx: I have always found “Degrees of Explanation” to be Hayek’s most challenging article, yet one that repays close study handsomely.  No summary statement by me can do this article justice, but it’s one of Hayek’s attempts to explain (!) why the method of the social sciences must differ from the method of the physical sciences (especially from physics) and why social scientists must be more modest in their claims about what they can explain or predict.

MD: The first thing that should be ruled out is that “social” can ever be “science”. We see empirical evidence that it cannot be science on a daily … hourly basis.

Applying the insight in the passage above to economics, we rediscover the most important practical role for the economist – namely, to warn the general public that much of what they suppose government action can achieve is, in fact, not achievable (or, at least, not achievable at the zero, low, or finely targeted costs that the general public supposes).

MD: Wait? The role of the economist is to “warn”? This leaves me wondering what we have to warn us of the nonsense that economists bring to the table? How can you trust a collection of people to warn you about anything, when down to last member of that collection, there is disagreement … major major disagreement? There is no science. There is not even a trace of a scientific method. There is just incestuous circular references in footnotes.

The economist is much like someone who follows a quack doctor around to warn the quack-doctor’s gullible audiences that none of the quack’s miracle cures will work and that many, or even most, of them will actually result in greater illness and injury.

MD: Actually, it’s more about “my quack doctor is better than your quack doctor.” I have yet to engage a single economist who knows what money is. And when presented with the obvious definition and proof, they will not embrace the obvious fact. If they were scientists, they would accept and support the obvious. Or they would easily prove the fallacy. They do neither. They are all going in different directions and cannot agree on anything.

The quack, of course, denies the ‘negativity’ while his gullible audiences, eager to believe in miracle cures, discount the economist as an unimaginative or mercenary naysayer.  And the real world, being far more complex than either the quack or his audiences realize, easily find reasons to reject the economist’s counsel.

MD: Gullible … yeh …. like gold-is-money, even though there is only 1oz per person on Earth and miners are willing to create new ounces for about $2,000 …. and to be money, that $2,000 per person on Earth has to be used for “all” in-process trading promises … plus all savings (i.e. trading processes that will be in process for an indeterminate period of time). And knowing an average person making just $50,000 /year (3/4ths of which is taken from them by governments without their ever seeing it)  … they will go through that $2,000 in less than a month … and never have it again. It will forever after, be held by the money changers to restrict trade over time and space … and it will always be in the wrong place at the wrong time.

And when these people (a faction of so called economists) are confronted with the obvious proof that gold has never been money, that it is just a hopeless, inefficient, expensive, insufficiently supplied clumsy stand-in for real money (real money which they use the slur “fiat” to dispel), they resort to religion: gold has been money for 5,000 years.

You gotta love them. They all live in very nice houses and drive very nice cars. Quack quack quack.

Corey Petty: A Look at the Status.im ICO Token Distribution

A Look at the Status.im ICO Token Distribution

NOTE UP FRONT: I express my opinions here (at least at the end of the article). If you don’t like them and don’t have evidence to support your dislike, then go kick rocks.

MD: I definitely have evidence … and proof, so I don’t expect to be kicking rocks (or pounding sand). But I predict I’ll ultimately end up doing just that. Cognitive dissonance is the strongest force I’ve seen in human nature. It has sustained all religions and enabled new ones.

ICO (Initial Coin Offering) is a not problem when you have a “proper” MOE process. Only traders create money. They do it by making a  trading promise spanning time and space and get it certified by the process.

It initially is just a record entry with the “score keeper” doing the certification. It usually quickly gets converted to a record entry in some other trader’s ledger or as currency or coin. In the case of the latter two, there are two instances of each: (1) physical media in circulation; (2) physical media in storage.

In both cases they ideally have HULs (Hours of Unskilled Labor) as their units of measure. These are universally known to never change trading value over time and space … you always get the same size hole in the ground when you trade one HUL for a hole in the ground.

In case (1) the HULs (money) serve in small simple barter exchange transactions … like buying a candy bar. In case (2) they are totally valueless … as long as they don’t enter circulation. They can be destroyed with no impact on trade what-so-ever. That is not true of those in case (1).

In any case, for this trading promise, no money exists before the promise, nor after final delivery (or mitigation of default by interest collection of like amount). And all money is just such a promise. From this emanates the guarantee of perpetual zero inflation. Start with 0; end with zero; 0 minus 0 is zero.

Things are moving forward quite rapidly in this space; I simply don’t have time to look at all the ICOs (ya know, full time job, podcast, wife, and stuff), but this one struck me as different while also being wildly anticipated.

MD: Multiple “proper” MOE processes can co-exist simultaneously and compete. The only front they can compete on is efficiency (and thus lowest cost and interest to traders using them in money creation).

This article digs into the Status platform ICO model, how it differentiated itself from other models, and what the results were. If you aren’t sure what they do, go read about em here.

MD: I see a case where the brilliant mind has complicated a non-problem.

You might want to start by reading their recap of the ICO. Ya know, cause they wrote it.

MD: I’ll defer on that for now.

Quick Obligatory Methodology Section:

This was all done using Project Jupyter notebooks and the Pandas package. The transactions were retrieved using my Python bindings to the Etherscan.io API (tagging Matthew Tan). The methodology is very similar to my previous articles mentioned earlier, and the Jupyter notebooks of all of it can be found in a new Github repo.

MD: I ignored Python from the first time I saw it. You can’t use “white space” as a programming element. It’s a fundamental concept … one that if ignored will come back to bite you over and over and over again. And I have some experience. I created GLEE (see WithGLEE.com).

In particular, I retrieved all transactions from the SNT Crowdsale contract address from Etherscan.io, and parsed out the ones that had an error or had a value of 0 ETH, for both external and internal transactions. The values refunded by the internal transactions are removed from the corresponding external amounts when grouped together. This is my dataset. All conclusions and numbers are derived from that. I don’t do an errored transaction analysis on this one, one may come afterwards if no one else does it, but people like CodeTract have been doing an excellent job of this for other ICOs. Go check out their stuff.

MD: See how complicated things can become when you’re totally confused about the problem to begin with? Think concepts! What are the concepts? KISS!!!

I’m happy to see that others are doing analysis of this space, so we can see more of the trends developing.

Status.im ICO Summary:

The Status platform prides itself on really caring about their community, the Ethereum community, and learning from previous ICO models.

MD: A “proper” MOE process cares nothing about the “community”. It has the requirement that “all” traders and “all their money creating promises” and “all their deliveries on those promises” and “all their defaults and immediate mitigating interest collections of like amount” are “always” totally transparent to everyone in any community … whether they create the exchange media or just use it in trade or are just watching. Noting is secret at the money creation or the money destruction stage of a “proper” MOE process. All “use” of the money is perfectly confidential.

By learning from previous ICO models, I mean attempting to widely distribute your token to those who are interested in its utility in the midst of a fever-pitched, FOMO induced, and irrationally exuberated (made that one up!) investor community ready to flip your ICO for profit.

MD: Contrast this nonsense with a widely recognized “proper” MOE process concept. To help, consider a Mutual Casualty Insurance Company. It is owned by the members (the users … the traders). CLAIMs perpetually equal PREMIUMS. Any money made on investment income in the meantime goes to reduction of premiums and application to costs of operation. A “proper” MOE process is only contrasted by having no investment income … there is nothing to invest. Thus, costs have to be recovered by interest collections.

But just like a Mutual Casualty Insurance Company, there can be any number of them … competing against each other. For all intents and purposes, in the risk community, they are all the same. They differ in efficiency (lower premiums, better claims service).

Proper MOE processes have a notable difference here. The exchange rates between them are perpetually 1.000. There is free exchange between them. There is no such thing as exchange of one insurance policy for another … except in the case of re-insurance which is an internal, not external, practice.

What was their plan? Two-fold:

MD: I’m not going to comment further on this concept. It is a non-issue. With a “proper” MOE process, it never comes up. I’ll scan ahead to see if there is anything else I take issue with. It’s silly for me to nit pick details when the whole process is bogus and misguided in the first place.

  1. They created a pool of “Genesis Tokens” (SGT) to give to early contributors that clearly showed they wanted to help the platform grow, which were given out at the discretion of the core devs. This token pool corresponded to a maximum of 10% of the total token supply. After the contribution period, SGT could be converted to the ICO token (SNT) so early contributors could “get in” on the ICO token for being a contributor early. Basically, early disbursement of tokens that map to a given percentage of the total.
  2. As for the crazy investors, they implemented a soft-cap, and subsequent “Dynamic Ceilings.” What is that? Well, you should read it from the people who implemented it here like a smart person, and then frown at my shitty explanation here. My explanation of Dynamic Ceilings, just imagine that as time went on, large investments only got a portion of their investment accepted, and the rest was refunded. This was an attempt to increase the time window for smaller investors, and slowly make it more difficult for large investments to get in. The effect of this was for every transaction that got an amount kicked back, there is one regular tx and two internal txs, for example ( numbers are for illustration ):
1.) User attempts to send 100 ETH
2.) Over time, smart contract says "screw you big investor, give the little guys a chance!"
   a.) Smart contract accepts 20 ETH
   b.) Smart contract refunds 80 ETH
3.) User gets 20 ETH worth of SNT and 80 ETH refund
** Note that percentages changed as time went on.

Here are the stats I pulled from various sources, as well as my personal analysis of the transactions themselves.

  • Start Block: 3,903,900
  • End Block: 3,908,029
  • Investment Time Period: 4,129 blocks or ~17.20 hrs
  • Initial ETH Ceiling: 12M CHF (Franks, yo!)
  • Total SNT Supply: 6,804,870,174.88
  • Total ETH Contributed: 299,343.15177772392

So this one got a bit hairy when summing up investor amounts from the smart contracts. You’ll notice (you probably didn’t notice) that I’m off by ~559 ETH from the reported numbers by the smart contracts themselves. This is because of the dynamic ceilings they employed.

So my analysis got a few of these transactions mixed up when combining external and internal transactions, which make my numbers slightly off, sue me (don’t). This annoys the shit out of me, but I don’t have the time to fix what went wrong. The trends will be the same, which is the main point of this article.

Total Supply Distribution:

Below is the Status graphic from the previously linked Contribution article for your convenience.

Note that the Status Genesis Allocation is “up to 10%.” Well, they didn’t actually give all of their allocation out, so the real numbers are as follows:

Status Genesis Token Holders:  6.92894026 %
Public Contribution:          44.07105974 %
Status Core Dev:              20 %
Reserved for Future:          29 %

Public Contributor Investment Distribution:

The remainder of this article is discussing that ~44% piece, specifically on how much of the total supply these investors control, and their distribution. In other words, we’d like to see how well the ICO did in “spreading their seed,” if you will. Were they premature like the majority of highly popular ICOs, or did they pace themselves well despite the crazy excitement?

MD: This is not an issue with a “proper” MOE process. There are no investors. There is no control. There is just federation of the process (like franchising of a restaurant when the franchisor … think PayPal without a linkage to banks … dictates operations and standards and otherwise has no interest).

With a “proper” MOE process, “all” franchisees must exhibit perfect transparency and thus exhibit perpetual perfect balance between the supply and demand for the money they certify. This means real time monitoring for defaults with immediate mitigation by interest collections of like amount.

Each unique address was summed up, giving its total contribution, and then placed into an “investor bin” that corresponds to how big of an investor they are. These bins are broken up by orders of magnitude of ETH, i.e.:

Investment (ETH):         Bin:
-----------------------------------
0 - 1                     0
1 - 10                    1
10 - 100                  2
100 - 1,000               3
1,000 - 10,000            4
10,000 - 100,000          5

Important Note: These value percentages are relative to the TOTAL SNT SUPPLY, which shows what type of investor has what control over the entire Status platform. Also, it should be noted that these numbers are only good for showing the distribution at the moment the ICO ended. More on this later. Here is the table of investors:

MD: I really can’t believe this much work has gone into a concept that is so easily dispelled as total nonsense. No wonder the cognitive dissonance is so strong.

and the plot:

  • click the pic to blow it up
  • click the link below to bring up an interactive version
Interactive Link: https://plot.ly/~CoreyPetty/195/percentage-vs-investor-group/

We can see from the numbers that smaller amount investors have significantly more control of the token supply than previous ICOs that I’ve analyzed. This is a significant pullback from the trend of very few people controlling the vast majority of tokens, albeit the trend still exists.

It should also be noted that this does not take into account the extra ~7% of token holders that are early contributors to the platform.

Response Edit, thank you Nick Johnson and David Henderson:

A few responses reminded me to point out that a unique address is not indicative of an individual, and such assumptions should not be made. I have discussed this in my TokenCard article, and did not include such a discussion. I guess it is prudent to say something.

MD: This does imply an issue that a “proper” MOE process has. At the money creation point, no trader is anonymous, no trader has more than one identity, no two traders have the same identity, and all traders are individuals … partnerships, corporations and governments need not apply. Common AAA principles (Authentication, Authorization, and Accounting) are strictly adhered to throughout.

Due to the way the ICO was structured, the savvy investor was incentivized to break up his desired large contribution amount into many smaller addresses, and spamming them into the ICO to try and see what sticks. If enough of this happens, then you basically sybil (not quite sybil, but you get it) the ICO into a DoS situation, which is what we saw. I don’t have enough data to say how much of the network congestion was due to this, maybe someone else will do a sweet analysis of that.

MD: With a “proper” MOE process there are no investors … savvy or otherwise. And there are no incentives. It’s all about trade and traders (like you and me). Further, there is no “time value of money”. Inflation is guaranteed to be zero. Thus, the cherished factor (1+i)^n is 1.000 for all “n” (“i” being always zero). Gamers in finance will need to find other work

There are some indicators that this was not the entire case, which you can read about in my response to Nick Johnson below, if you’re interested. There is another simple plot in there, for the people who just want eye candy.

Ultra Massive Exoneration Time! (a.k.a. opinions section)

People are hating on Status for various reasons, which are mainly driven from garbage understanding of how the Ethereum network works, and misplacing blame.

MD: You’re going to get that when you have a totally bogus concept with brains and no experience at the helm. KISS is unknown to them.

It was clear the fervor was there. They were aware of it, and managed to raise a bunch money while still allowing “the little guys” en masse. You can’t really argue with that… look at the distribution.

MD: Ponzi had no trouble getting takers either. Heck, his scheme was doubling their money in two to three months. And none took their money out. They couldn’t afford to. It was destined to double again in two to three months.

This is a good time for me to introduce the definition of a capitalist and the proof:

Definition: A Capitalist is two years and an elite privilege.

Proof: Give a person a privilege of starting a bank with $1M. They can then create 10x that in money which they lend to traders at a 4% spread. That gives them 40% per year return. It doubles their money in less than two years. They take back their $1M and let the other $1M which they made ride forever after (or for their remaining 28 year career). 30 years later they can cash out at $24,000M … and for 28 of those years they had no skin in the game at all!

What’s not to love about capitalism … if you have the privilege!

You’re not going to have capitalism (or its alter-ego, communism) if you institute a “proper” MOE process.

So I believe that Status took steps in the right direction of both allowing smaller investors to contribute to an ICO, as well as being sure of putting tokens directly into the people that contributed early. This allowed people who actually helped build the system also take advantage of the ICO craze that is clearly going on. Full disclosure, I received SGT tokens for early contributions, which made me personally not inclined to participate in the ICO. I would predict that other SGT holders also felt this way, thus removing our would be transactions into the clusterfuck that was the contribution period.

MD: More full disclosure required. What did you give for those SGT tokens? Here again, you have issues that only exist because you’re working with a bogus concept!

The Dynamics Ceiling approach worked to keep a constant supply of incoming transactions of lower value over a longer period of time. The network congestion that people blame Status for is not their fault, unless you can blame them for building something MANY people wanted to contribute to.

MD: I’m an atheist but “OH MY GOD!!!” “Dynamics Ceiling? KISS!!!!

I talk at length about these network congestion issues raised from the ICO craze with MyEtherWallet’s Taylor one of my recent podcasts, take a listen:

Just as a side calculation:

MD: Why in the world would anyone listen if they know what a “proper” MOE process is … let alone if one was in actual operation? Would you listen?

Of all the transactions that tried to participate, the smart contract refunded 111,161 attempts for a total of 347,154 ETH.Status refunded back more ETH than they raised.

 

I’m not sure you can call that “greedy.”

MD: A “proper” MOE process only has one opportunity for greed by the franchisee (and none by the trader … and there are no investors). He can load interest collections with exorbitant costs. But then he wouldn’t be competitive with the other franchisees. No one would come to his store. With a “proper” MOE process, “all” traders enjoy zero inflation … and responsible traders (those who never default) have zero interest load … unless they go to a greedy franchisee … which of course they never would. You have to be smart to be responsible.


Holla at ya Boi!

I do this because I’m curious, and feel this type of information is lacking. We need to keep an eye on “where the money comes from” as we build this community out.

MD: You “need to come to your senses”. Grasp the concepts of a “proper” MOE process and it should be impossible for you to give this nonsense another thought … period.

As always, come listen to The Bitcoin Podcast and BlockChannel to hear me talk to people in the space about what they’re doing. Our slacks (TBP and BlockChannel) are always welcome to the community as well. I’m always present in them to talk.

MD: You think they would tolerate having their Money Delusion shattered? People this sharp are masters at their own cognitive dissonance. Look how many really smart religious leaders there are. Follow the money in all cases.

If you don’t like slack, hit me up on twitter at @corpetty or email me at petty.btc@gmail.com

Throw me some duckets of you like what I’m doing, and have some to spare. The donations definitely help me stay motivated to do these:

MD: Duckets? Amazing. English has abandoned me in one short lifetime!

Cafe Hayek: the “art of association”

Quotation of the Day…

by Don Boudreaux on August 24, 2017

in Civil Society, Complexity & Emergence, Myths and Fallacies

… is from page 353 of my GMU Econ colleague Chris Coyne’s excellent 2011 paper “Constitutions and crisis” (typo corrected):

The notion of the “art of association” can be traced back to Tocqueville, who noted America’s robust civil society that consists of an array of social associations and networks.  These associations and networks were not the result of government design or legislation, but instead evolved through the ingenuity of self-reliant citizens acting entrepreneurially.

MD: Yeh … like they didn’t have taverns before then? Sheeeesssssh.

 Associations stand between the government and the market.  They allow people to come together and solve common problems without relying on government.  In doing so, they serve as a check on government power because private individuals do not become overly reliant on government to solve the problems they face.  The emergence of a robust civil society is only possible when people’s right to free association is established and protected.  Where this right exists, people can invest in establishing social associations and networks, which can potentially play a crucial role in the wake of crises.

MD: Put more simply, if the solution to any issues is found to be government, well, you’re still looking for a solution.

DBx: Society is not government.  And while reasonable people can and do disagree over the degree to which government is necessary to a thriving society, indisputably false is the notion that society is created by government and is sustained only by the detailed directions – or, more accurately, detailed diktats – of government.

MD: Government is instituted by money changers. Society is just the fodder … the feedstock … the slaves … the putty in the hands of the money changers and government is what they institute to discipline that fodder. Religion is another form of that discipline.

Unfortunately, the creationist-engineering mindset is dominant in the general public and even more so in the ranks of social scientists.

MD: “Social scientist”:  The ultimate oxymoron.

Even among economists, who are the least likely of all social scientists to fall for the social-creationist myth, the social-creationist myth seems to me to be gaining ground.

MD: Since fully 96% of the worlds population is religious, it’s ridiculous to suppose economists only exist among the remaining 4%.

Were it not so laden with danger, it would be amusing to witness the typical professor who so often, with one breath, sneers at those who deny that the orderly complexity of the natural world is the result of unplanned evolution, and, with the next breath, cheers those who deny that the orderly complexity of the social world is the result of unplanned evolution.

MD: Delusion, oxymoron, myths, religion, self deception … you name it … human beings are the epitome of it all.

Deviant Investor: What Could Upset Markets?

What Could Upset Markets?

Guest Post from Clint Siegner, Money Metals Exchange

Investors have been well-trained in complacency. They have spent the past few years watching markets shrug off momentous geopolitical events – each more quickly than the last. Brexit’s impact faded within days. Trump’s election faded within hours.

MD: Notice how this is focused on “markets?” It’s never focused on traders (like you and me) … it’s focused on the gamblers and the gamers. Geopolitical events have almost no impact on real traders (those actually promising things and delivering). They just impact the highly leveraged gamers … who call themselves capitalists.

Stocks traded at all-time highs this summer and volatility made all-time lows. That is the set-up as we head into the fall…

MD: Stocks are about large collectives. If we had a proper MOE process we would still have stocks. A trader like you and me cannot make a promise to create an automobile company and create money to deliver on that promise. However, as all these companies start very small, a proper MOE process does allow the seed to be planted and grow. The gaming of our corrupt (so-called capitalist) system makes it difficult for small companies to compete with corporations.

Almost nobody seems nervous. In this age of central planning and highly artificial markets, it is hard to tell when this period of strange market serenity will end. But vigilant investors should have a few ideas. The next few months are going to challenge the status quo.

MD: The central planning and artificial markets are enabled by our “improper” MOE process. They are enabled by the nonsense they call capitalism. Capitalism is easily defined as “two years with a large dose of elite privilege”.

President Trump Is Under Siege

MD: And should be. He is just one of “them.” He has still not mentioned WTC7. But he is not being called on it. He is “not” under siege in reality.

It has been clear from the beginning of his term that President Donald Trump has very few supporters in Washington DC.

MD: Nonsense. This is all provably theater … like the Harlem Globe Trotters and the Washington Generals.

Democrats and progressives naturally oppose him. Deep staters have been working hard to undermine the administration. And you don’t need enemies when you have “friends” like John McCain, Mitch McConnell and Paul Ryan in the Republican led Congress.

MD: But one thing you can say about all the combatants you enumerate: NONE have mentioned WTC7.

Turmoil in Trump’s administration escalated last week. The president disbanded two separate business councils following the defection of high profile CEOs who disagreed with Trump’s response to events in Charlottesville, Virginia.

MD: And look at Erdogen in Turkey. This kind of turmoil enables these actors to reinvent themselves on a whole different stage. It’s all false flags. Israel is the master of this deception.

On Friday, Americans learned Steve Bannon, Trump’s Chief Strategist, was kicked out of the White House. That will cost Trump some support from his core constituency, who favored Bannon.

MD: As 15,000 newly minted morons (i.e. those disgusted with what they think are Trump’s opponents) show up to support him in Arizona. It’s “all” theater!

The president is already taking flack from supporters such as Ann Coulter. Bannon’s ouster leaves the President with an inner circle which is completely dominated by Wall Street insiders (with a history of supporting Democrats – such as Gary Cohn, Steve Mnuchin, and Dina Powell) and Pentagon brass.

MD: And Ann Coulter is a religious nutcase … who is occasionally right about things. I will guarantee you … she doesn’t know what money is.

Should a good portion of Trump’s voters stop backing the president, he’ll be in real trouble. And markets will start pricing that in.

MD: Oh really? He’s in there for four years. He can do enormous damage to us and benefit them  (i.e. rearrange things for the occupiers of our country). Look at George W. Bush. A third grader would have made a better top administrator … and he got two terms. What’s surprising is his dad only got one term. They really don’t like the disruption caused when they change their current “Meadowlark Lemon”.

Conflict with North Korea Possible, Even Likely

MD: Right. If that’s what they choose. They got it in Afghanistan, and poppies were their only interest there. If they can take out Qaddafi and Hussein (who they put in), they can take out Kim.

North Korean dictator Kim Jong-un ramped up the rhetoric again late last week in response to planned military drills conducted by South Korea and the U.S. Should the North Koreans test fire another missile, the U.S. may well respond with force.

MD: What’s theater without a crescendo occasionally? You have to create the emotion to hold the audience.

The generals advising the President appear to be succeeding in the effort to persuade him to get more aggressive. Steve Bannon’s departure signals that Trump has heard enough counsel for a less interventionist foreign policy.

The former Chief Strategist was one of few voices for restraint in the White House.

Bannon’s views with regards to North Korea in particular seem to be part of what put him at odds with the president. In an interview with the American Prospect, released just days before his ouster, Bannon said;

“There’s no military solution here; they got us. Until somebody solves the part of the equation that shows me that 10 million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about.”

MD: Bannon may not have been on the full inside track yet. We will find that “Kim” is one of “them” too … or can be taken out with ease.

In recent days, fears over a confrontation with North Korea have seeped into the markets. If actual warfare breaks out, investors can expect a much bigger reaction.

MD: There has not been a single war in my lifetime that was a “real” fight among people. They were all just theater with “them” moving “us” (the pawns … the cannon fodder) about the board. In the end, it was “them”, not “us” who won the spoils … regardless of the side you’re looking at. And we’ve been at war with someone my entire 70+ year life … and actually all the way back to Knox who got his standing army within six months of the formation of this ridiculous union.

Republican Leaders Angle for Debt Ceiling Increase

MD: Governments (all of them) are sustained totally by counterfeiting. They make trading promises … and then roll them over when they don’t deliver. That’s default. Not mitigated immediately by interest collections, that’s counterfeiting … that results in inflation.

The money changers collect tribute on that debt (which is just money created by a deadbeat trader … not loans from money changers) … and all that tribute (they call it interest) comes from taxes. They have to keep track of the counterfeiting number so they can tell us what our tribute needs to be. Otherwise, if you’re just counterfeiting, why keep track of how much counterfeiting you’ve done?

The Republican leadership in Washington DC wants to increase the borrowing limit, quietly and without fanfare. However, they may not be able to betray rank and file Republican voters and get away with it this time.

MD: Dreamer. They always get their minimum wage increases. They always get their debt ceiling increases. They always get their wars. They even always get their government shutdowns rolled back and no government worker loses anything … ever … unless they blow the whistle … then they lose everything.

Conservatives in Congress look ready to revolt, leaving leadership in the awkward position of having to seek compromise with Democrats.

MD: Oh please. Someone introduce this moron to Abe Saperstein!

The problem is that Democrats are looking for any chance to thwart Trump and Republicans.

It’s unlikely we’ll see a fight over the debt ceiling which is big enough, and protracted enough, to have significant implications for markets. Past battles over the debt ceiling have been for show. In the end, Congress has never missed an opportunity to hike the borrowing limit – big government Republicans and big government Democrats always find common ground.

MD: The fact that they can just continually increase the debt ceiling is proof, that tactic (which somehow got by “them”) has been neutered. Iterative secession. This thing is broken beyond repair.

However, the polarization in Washington DC is unprecedented. It might even lead to a genuine stalemate this time around.

MD: “Unprecedented” is a grossly overused word. When it comes to Washington DC nothing is unprecedented. Over the nearly 300 years time they’ve been fleecing us, they have tried everything … several times over.

Wildcard: Russia Hacking Story May Implode on Democrats & Fake News Media

 

Democratic leadership and their friends in media bet the farm on convincing Americans that Trump colluded with Vladamir Putin to subvert last Fall’s presidential election. They have been telling the world that Putin stole damaging, confidential party emails and coordinated with the Trump campaign to release them at the most opportune time – just before the people voted in November.

MD: The theme continues. Does Siegner really believe there are different forces competing here. I’ll cease comments on this fake competition for the rest of the article. Siegner is clueless about the tactic it seems.

Wikileaks founder Julian Assange says he can demonstrate unequivocally that the Russians are not the source of the leaked information. Last week, Republican Congressman Dana Rohrabacher met with Assange to discuss the matter and agreed to share the details with President Trump.

Investors should get ready for some significant developments to be announced soon.

MD: They’re already ready … those really inside elites  anyway Remember, they’re driving this bus. They’re chomping at the bit for the windfall they are about to create.

It will be bad news for the Democrat Party and its legacy media allies if their Russia narrative falls apart. Particularly if it turns out whistle blowers from inside the Democratic National Committee were the source of the embarrassing leaks. Party leaders do not want Americans to turn their focus to scandals such as the DNC’s effort to undermine Bernie Sanders or CNN feeding debate questions to Hillary Clinton.

If, as some on the right have speculated, the murder of Seth Rich is related to the leaks it could turn the political left upside down. That would shake Wall Street as well as Washington DC.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.