What is an ‘improved currency’? – Quora

There is only one “currency” that can’t be improved upon. That is a currency that is the product of a “real money process”. Once this currency is instituted, no further improvement is possible. It begins with knowing what money is.

Attributes of this “perfect” currency, all the time and everywhere are:

• Free supply of money
• Perpetual zero INFLATION
• Zero INTEREST load on responsible traders
• Perpetual 1.0 exchange rate among currencies
• Zero time value of money

Why don’t we have this perfect money? Because bankers don’t allow it.

First, they claim 10x leverage over you and me. You “save” a dollar with them, they “loan” out ten dollars. Thus, if you make 4% on your money, they make 40% on your money. That’s a pretty big deal. To do this they put in a dollar of capital and get certified by the state (that they create). Their money doubles in just 2 years. Your money takes about 17 years to double. They call that “capitalism”. Neat, huh? Look mom, I’m a capitalist.

They arbitrarily collect tribute (they call it INTEREST). They allow the state (which they create) to counterfeit (states call it Roll Over) the money resulting in higher prices (they call it INFLATION). And they never report DEFAULTs. That’s like an insurance company arbitrarily setting PREMIUMS; never reporting CLAIMS.

Money is provably “an in-process promise to complete a trade over time and space.” It is always, and only, created by traders like you and me. For example, when we buy anything on “time payments”, we are creating money. And as we make those payments were are destroying money.

The proof is in examining trade. Trade happens in three steps: (1) Negotiation; (2) Promise to Deliver; (3) Delivery as promised.

In simple barter exchange, (2) and (3) happen simultaneously…on the spot. With money, (2) and (3) happen over time and space.

For example, we buy a car with 60 monthly payments. We create the $30,000 and give it to the seller…and he gives us the car. Then, each month we recover (earn) and destroy $500. After 60 months, we have recovered and destroyed the full $30,000. We have kept our promise.

But what if we fail to keep our promise? What if we miss a payment or two? This is where the “real money process” comes in. The process perpetually monitors everyone’s performance on money-creating-transactions like this. Missing a payment is known as a DEFAULT. You are now an “irresponsible trader”. That DEFAULT is immediately made up by an INTEREST collection of like amount. Who pays the INTEREST? Irresponsible traders (according to their propensity to default) do. If you make up the DEFAULT, you get the INTEREST back.

Immediately mitigating this DEFAULT guarantees perpetual perfect supply/demand balance of the money itself…i.e. zero INFLATION. Thus, there is no domino effect when you DEFAULT. There is just the automatic negative feedback mechanism of increased INTEREST load.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero.

You are familiar with all these terms. However, you have been taught to believe that INTEREST is the “time value of money”.

Bankers claim that when there is “too much money in circulation”, they can claim higher INTEREST “tribute” from you. And when there is too little, they can claim less. Looking at the relation you quickly see there is no justification for this whatever. This allows them to manipulate the money…they call it the “business cycle”. And they make no mention of DEFAULTs at all. That’s like reporting COVID “cases” and not mentioning COVID “deaths”…which of course government is doing right now!

You can see from the relation that the “time value of money” is perpetually zero. A dollar today is worth exactly the same as a dollar 10 years from now. It trades for the same stuff.

The so-called “sound money” people claim gold (or something rare) is the basis of sound money. Others claim proof of work (Bitcoin…proof of wasted electricity) is the basis of sound money. You are learning here how foolish they are.

Let’s consider the unit of money to be a HUL (Hour of Unskilled Labor)… not a Dollar or Mark or Yen or Euro…or any other arbitrary and meaningless unit. We choose this HUL unit because we are all implicitly aware of its value. It’s what we, as high school students, typically traded for money. It trades for a certain size hole in the ground…regardless of when a high school student digs it.

Contrast that with the dollar. In 1960 when I was in high school, a HUL was worth $1.50. Today it is worth about $15.00 (minimum wage). However, with a “proper money process” we don’t want this to ever change…a HUL is a HUL is a HUL…anytime and anywhere.

Further, in 1964 a quarter contained 90% silver and traded for a gallon of gasoline. In 1965 a quarter contained 0% silver…and still traded for a gallon of gasoline. Obviously, the silver played no role in the trade. And today, you need 10 quarters to trade for a gallon of gasoline. No quarters traded today contain silver. The “sound money” people have hoarded all those. And the government loves it. All those quarters were retired…and they didn’t have to pump any gasoline in exchange. They do the same thing now with “collector” quarters (different stamping for each state). They’ve done it with stamp collecting. And they do it with the lottery…prey on the stupid.

Our HUL can only trade for the same size hole in the ground if we “guarantee” perpetual perfect balance of supply and demand for the HUL itself. And the process guarantees that.

Before you make your car-buying-promise, no money exists for that promise. After you deliver on your promise, no money exists for that promise. In the interim, the HUL you create goes into the mass of HULs we call the marketplace. It is the most common object of simple barter exchange. It enables us to make trades over time and space.

And obviously “all” those HULs represent a “promise to complete a trade over time and space”. And obviously “all” of them are created by traders like you and me.

MD: I was searching the web for an instance where money was associated with a “promise”. There weren’t many hits. I tried this one. It was a waste of time as you can see.

https://paradigmlife.net/blog/better-understand-premise-money/

How to Better Understand The Premise of Money
By: Paradigm Life
On: August 26, 2016
In: Blog
How to Better Understand The Premise of Money

Ever wondered if you could trade your dollar for its value in gold? The answer is maybe, but it won’t come from Fort Knox.

MD: Why won’t it come from Ft. Knox. Isn’t that where all our gold is?

Understanding the original premise behind the power of the almighty “dollar,” and its role in society can help you make better decisions about money.

The Premise of Money

From a historical perspective, money makes perfect sense. In the days of old, people would trade goods and services for other goods and services. However, they were constantly working around the inherent problem of production and demand. For example, if you had milk and I had bread, that was pretty-much all that was available for us to trade. And if I don’t want your milk, but need bread. . . our system breaks down. The concept of money has gotten humans past this problem.

MD: And there is another “more common” problem with trading over time and space. Let’s see if they have a clue about that.

Money was invented as a promise; a means of exchange representing value in goods and services.

MD: And what was the units of measure of that value?

The premise of money is that when I give someone a dollar, it’s a promise of “receipt” tied to something of value; something “better” than the paper it’s printed on.

MD: Not exactly. When you give someone a dollar, they accept it because it trades for a dollars worth of stuff. It’s not a promise. If you gave them a sea shell and it traded for dollars worth of stuff, they would accept that as an object in trade. At the time a dollar is accepted in simple barter exchange, the traders have no perception of it being a promise. However, it does come into existence with a trader making a promise and getting it certified. And it does go out of existence with that same trader delivering on his promise and returning the money.

Any kind of money should have definite characteristics—it’s portable, visible, and durable; it has shared value, and it is widely accepted. Now let’s talk about what our society has agreed on as the value behind the money—gold and silver, mostly gold.

MD: Here the nonsense begins. Gold and silver are just stuff. And in fact a dollar bill is just stuff. They may work to make trades but it’s only because of the universal acceptance. And it is the “real money process” that brings on that acceptance. And since gold and silver are so much less efficient than the dollar in preforming that duty, they are virtually never used.

For over 6,000 years we’ve agreed on gold to back up what we call money.

MD: Who’s “we” Ki mo-sabe? There was clearly no such agreement at the end of the 1800’s as silver gave gold a run for its money. It only failed because of a power play. If “real money” had existed at that time, neither gold or silver would have been in consideration at all.

When people invented money, using metal made sense because metal met all of the right characteristics—but why gold? The metal had to be somewhat rare so that not everyone is producing coins, but available enough so a reasonable number of coins can be created to allow commerce (http://www.investopedia.com/articles/investing/071114/why-gold-has-always-had-value.asp).

MD: I don’t think there’s any point in reading further. He doesn’t have a clue about how money is created and destroyed. He’s just another gold bug. But ours is not the reason why…

That trail leads to gold because of its unique color and resistance to tarnishing. Truthfully, gold’s greatest value is society’s sustained agreement that this is so. And though you’ll never be able to eat gold, it is the most likely bartering tool humans will use to recover from a zombie apocalypse.

MD: Because society says so? What makes gold “the most likely bartering tool”? Just because? Ever hear of the “specie wars” near the end of the 19th century in the USA? It’s this kind of clueless-ness that keeps the scam going.

Fiat Money

MD: And here is the slur we get from the gold bugs. It’s really going to get good now. Just to set the “real” stage: All money is a promise. All promises are fiat. Therefore, all money is fiat. Always has been, always will be.

In the past you went to a bank with your bag of gold and they offered paper currency to use as a value exchange (because gold is super heavy). With gold backing your dollar, you were free to trade that money for whatever was valuable to you.

MD: Looks like his past doesn’t go back far enough. These so-called “banks” he speaks of were just traders who claimed they would keep his gold safe. It was a protection racket. They built a vault…a really really strong one. They put the guys gold in it, gave him a receipt (a claim to get his gold back…kind of like the receipt to get your coat back at a fancy theater). Comes back with the receipt, gets his gold, and leaves (hoping a highwayman doesn’t see him do it). Or, he could trade the receipt to some other sucker, who could then use it to get gold out of the bank. It was later that these banking con-men realized that they could “loan out” somebody’s gold and make money doing it. People would come to their so-called bank for a “loan”. They would give them a piece of paper “backed by gold”. As long as everybody didn’t come back for gold at the same time, all was well in paradise. Then somebody invented the bank run. And we were off to the races.

Jump ahead to the time period between the Great Depression (1930s) and the 1970s. As government expanded its role in peoples’ lives, it needed to “create” its own resources . . . money. Enter the Federal Reserve and what is called fiat money. Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. It’s different than money backed by gold, because the value of fiat money is derived from the relationship between supply and demand rather than literal gold or the value of the material that the money is made of http://www.investopedia.com/terms/f/fiatmoney.asp) .

MD: Ah…the concept of “legal tender”. Again he doesn’t go back far enough. A guy named Robert Morris (we all called him Bob before he got rich), a really rich merchant in the 1700’s “America” started getting sideways with the British…who claimed to “own” America. So he got some PATRIOTs (PeopleAboutToRIOT) to dump some tea into the harbor. As things would, they escalated…and the battle was on. He got Tom Jefferson to write up a “Declaration of Independence”…and it was oh-so-beautiful. “When in the course of human events…”. The timing couldn’t have been better. The Brits had their hands full with the French…and the Indians. Morris again armed some PATRIOTs who lined up against Brits on a couple hills…and they beat that handful of Brits. There’s more to the story, but for the time being the Brits had bigger fish to fry… Suffice it to say this cost Morris a bunch of money and he wanted it back. So he created the Articles of Confederation and Perpetual Union. Earth to Bob. There is no such thing as a “perpetual union”. There’s always a “buy/sell” clause. Bob just never put that clause in. After 10 years and still not able to get his money back, Morris got Al Hamilton (and three of his buddies) to write the Federalist Papers. After about 4 months of this they got a bunch of guys to hole up in the Independence Hall (I guess doing it in Carpenter’s Hall was no longer prestigious enough) and in about 3 month’s of secrecy created the so-called Constitution of the United States. It was really about the same as the “Articles” but this time had teeth…it had the so-called “law” behind it. Bob’s agent Al was made “treasurer”; two years later Al created a bank; and the rest is history. Bob got his money back (only to lose it all later trying to buy Ohio…another story)

Essentially these well intended institutions are saying, “Here. . .here’s some ‘money’. . [wink wink],” when they are really just handing you a piece of paper (or number in an account). Needless to say, when you start to print extra currency, the system gets off balance. Adding even more complication, during the Great Depression people caught on and said, “Hey, I want my gold back!” Unfortunately, they all did this at the same time. When a bank experiences a run, it immediately goes bankrupt or insolvent.

MD: That’s that “run” I was telling you about. With a “real money process” there are no runs. Why? Because it’s out-and-out silly to have a “run on promises”.

Unless. . .they are rescued by a central bank or the U.S. Federal Reserve. These institutions swoop in and give people their well-meaning imaginary money as bail outs. “Don’t worry you’re protected by the Federal Deposit Insurance Corporation (FDIC).” This story is coming together now, isn’t it?

MD: In the beginning there was no such thing as a “central bank”. It wasn’t needed. There was no “Federal Reserve”. With a “real money process” there are no reserves. So you don’t need a federal one. And you didn’t need insurance either. If somebody “defaults”, it’s immediately mitigated by an “interest” collection of like amount…paid by an irresponsible trader creating money.

Because of this technique, our “money” has been off the gold standard since 1971, and every major international currency has followed suit. Now you have to ask yourself, “What is a dollar?” It used to represent a measurement of gold. Now it’s not really definable. As Nobel Prize-winning economist Milton Friedman puts it, “The pieces of green paper have value because everybody thinks they have value.” For now, society is stable in agreeing it has value, but it’s a rather tenuous place to be with consequences that may actually be worse than a zombie apocalypse.

MD: Another myth…going off the gold standard in 1971. The French could see the dollar wasn’t trading for as much gold as it did originally…like only for 1/2 as much. The USA owed the French some money. The USA tried to give them dollars, The French said, we’d rather have gold, thank you very much. And bingo, the jig was up.

What You Can Do

If learning the truth about how our gold standard has slipped away and its role in bailouts and banking makes you frustrated, you’re not alone. Anger and frustration are good motivators for action, but all-out protests are not what we’re proposing here at all. You can be so much more effective by applying your influence to educate yourself and others.

MD: Don’t choose stupid people to educate you. That’s worse than a waste of time.

Here’s what you can do:

The only way to ensure our financial system in the U.S. functions well is for all of us to understand not just the premise of money, but how the system has devolved over time.

MD: “Devolved”…good word. I think it means “got worse”. A “real money process” cannot devolve over time…or over space for that matter.

We want you shake up your paradigm and beliefs about money and to see money from a different perspective. Reinstating certainty into the financial make up of Americans is our goal. Let us show you how to apply lasting moral principles to your financial system. Take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!

MD: And the blind leading the blind takes another giant leap backwards.

https://www.azerbaycan24.com/en/amazon-squeezing-workers-amid-covid-19-crisis-is-unacceptable-french-finance-minister/?cf_chl_jschl_tk=87bc0cd9fbd6c3b2d9b38d1168015e34c8425d67-1584621871-0-AdgqRVnYRkygZ207fh9by5kTd_juzE3wnYY9cOwcqwx5eOeb44m-0EF_bPMVWVta9HbFWypcx1ziUQK_kUjcRe4bmxX3S5uK1mv-O2-HBnv_9nEiHDKVVbeOD95P0RD_HJrHu7cL2KtQwZukaqKsQGd3mLBhkdjUTBUWE_-cKDPZ6Eg7cjUnChIi68xjhKcMi5EXOLH2Yh5hNk1ln8QbBucB92UhXwIp4nyuG74wrGoXkYYS2EFjZ46E9APjXzOyDdCM4UEivaJRW3-VCf0fcYAHUqfxtEzdzBHnA-CHa6rDgCTcNYAp1zviT0OW9QUAUqS0Ew0ePqU69ZodhITlSI8X0x68TxvXk1LpcZ7WlleXYyufHd-GjZjrsLm6kTu_6HMnZj0oGsCuh9TkLx4MBA6S11938rTXg-0W1YHUisMrOeTY5ZJCDbYdJ3OmjuZdG9b7fLW7u0ti4kRygBvrHNE

MD: Here at Money Delusions we are constantly comforted with how a “proper money process” makes even enormous problems and issues almost go away. This is a good example.

With the Covid-19 crisis, we have the general class of problems that affects everyone simultaneously in a global fashion. If the solution is for everyone to shelter in place, well, that puts out of work everyone who can’t do their job remotely…they can no longer trade their value to others.

This article takes a case in point where the French government is dictating a solution (e.g. shelter in place). And Amazon is responding rationally. It’s really all about where the buck stops. Here are the steps: (1) Government dictates quarantine. (2) Amazon workers comply. (3) Amazon workers don’t get paid. (4) Government says “that’s unacceptable”.

First, it’s interesting that government acknowledges that some things are not acceptable. I, for one, find that government taking a full 3/4ths of what I earn is unacceptable. If I just declare it unacceptable (which it obviously is) nothing happens. But if I refuse to pay tax … well, the government pulls rank and forcefully takes my stuff.

In the case of government, they seem to think it is acceptable to demand workers be paid for doing nothing when doing nothing is dictated by the government. If the government feels that way, the government should be doing the paying. But in reality, no-body should be doing the paying.

In a free market of traders, traders deliver value and are compensated. Failing to deliver value results in no compensation. It’s just that simple. A calamity like Covid-19 is not the only thing that can tip over trader’s apple carts. There may be severe storms. There may be destruction of their work place. There may be a death or illness in the family. All such things are really the trader’s responsibility…not the responsibility of their trading partners nor of governments (to whom they trade their freedom for safety).

So what does all this have to do with Money Delusions?

Remember, money is “always and only created by traders like you and me”. It is “never created by banks nor the governments they institute”. So if the citizens are going to give government this power they must expect to suffer the consequences.

This represents a perfectly good reason for a trader to make a trading promise spanning time and space … i.e. to create money. The trader knows his trading is going to be inhibited for maybe up to 1/4 or 1/2 a year. He hasn’t planned for this. Once it has happened, he studies the situation and sees this is likely to happen in about 7-1/2 year intervals. So he immediately creates money to carry him over this 1/2 year of making no trades with the promise that he will return and destroy that money over a 7 year period (e.g. 84 monthly payments). That gives him a good cushion.

In this way, all traders take their own responsibility for the problem and initiate a solution. Over that period the trader can adjust his prices or work more hours to make up for this unintended idle time.

As we read this article I think we’ll find that the government claims the responsibility is Amazon’s … not the government’s and not the traders.

Amazon squeezing workers amid Covid-19 crisis is ‘unacceptable’ – French finance minister

© REUTERS/Mourad Guichard

French Finance Minister Bruno Le Maire said Amazon’s refusal to pay wages of staff who walk out over coronavirus fears is “unacceptable” as the country is considering nationalization of bigger companies at risk.

MD: So it is evident, it is the trader who is refusing to work. Thus, it is the trader who must suffer the consequences.

“These pressures are unacceptable, we’ll let Amazon know,” Le Maire said after several hundred workers protested the company’s policy on Wednesday. The e-commerce giant refused to pay workers who walked out or stayed at home in self-isolation over coronavirus fears.

Le Maire said Thursday that he would soon present a variety of plans to President Emmanuel Macron to assist the country’s biggest companies, such as BNP Paribas, Renault, Air France KLM, through the coronavirus crisis, some of which might include nationalization.

MD: Nationalization? The government just takes one trader’s business to satisfy another trader’s grievance? That’s what you get when you trade liberty for protection!

“We have several options on the table for all of the major industrial companies which could face major threats on the market, it could be us raising our stake in their capital… or it could be nationalizations,” Le Maire said.

MD: And where does the government get its “stake”? By stealing from traders. Government shouldn’t be able to do this. With a “real money process” it wouldn’t be able to do this. Governments never deliver on their promises. They just roll them over and that is default. A real money process would ostracize them.

MD: At Money Delusions we quite frequently come across one of these beauties we just can’t pass up. The only way to deal with this kind of nonsense is to annotate it in place.

Bill Bonner’s Diary
“Free” Money Destroys the U.S. Financial System
By Bill Bonner
August 29, 2019 Print

MD: He begins with the obligatory flowery writing which is not relevant to the subject.

POITOU, FRANCE – Today, we are packing up, closing the shutters, putting away the lawn chairs and the croquet set.

Everything needs to be stored away; otherwise, rain, wind, and sun will do their damage. The wood cracks; the metal rusts; the curtains fade…

…It is nature’s way. And no matter what we do, nothing resists time.
Dirty War

In preparation for our departure, yesterday we got on our bicycles and rode around the countryside, saying goodbye to old friends.

Our first stop was a visit with a retired colonel, a man who had spent his life in the military – including engagements in the war in Algeria and peacekeeping operations in the Congo.

He is 80 years old and had cancer a couple of years ago; we didn’t expect to find him still alive. But he seems to be recovering and was cheerful and chatty.

“The Algerian conflict was a dirty war. We could have won the war militarily. But it was ruining the integrity of the army, turning it into a ruthless and unruly police force. I asked myself if I should resign. But I stuck with it and did the best I could. I don’t regret it.”
Broken Man

After a cold beer and warm conversation, we got back on our bikes and pedaled along the country road.

The next stop was to see a friend who used to work on our farm until he retired about 10 years ago.

He is in remarkably robust shape. At 79, he works in his garden every day and chops his own firewood.

But his oldest son was killed in a car crash last year – the second of his three children to die. Since then, he has seemed a bit like a broken man.

“How are you, Francois?” we asked.

“Okay,” was the answer from his mouth.

But his eyes told a different tale. He suffered.

After a few minutes and a glass of cold, freshly squeezed apple juice, we mounted up again.

A few miles farther on was the house of another retired couple.

Both are in their late ’70s. The woman is small, lively, energetic, and as friendly as ever. But her husband has multiple sclerosis. He no longer leaves the house, except to go to the hospital.

Still, his mind is alert, and he is keenly interested in China.

We took him a book from our library that we knew we would never read. It was written long ago in Chinese and now translated into French.

“In Chinese, there is no clear separation between writing and the ideas it conveys,” he explained. “Both should be true, beautiful, and timeless. To the eye… and to the mind.”

“Uh… yes,” we replied.
Rare Truth

MD: Ok, hopefully we’re now going to get into our subject matter … money. Look for clues that he knows what money is. We don’t expect to find them… but it’s always fun to look for them in these pontifications.

But our beat is money. And in today’s money world, truth is rare; beauty can be found only in irony and mockery.

Yesterday, for example, the president of the USA came out with this:

Our Federal Reserve cannot “mentally” keep up with the competition – other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money – ZERO INTEREST PLUS! No Clue Fed!

MD: So the president is clueless about money too. What’s new.

The president is disturbed because the Fed is not debasing the U.S. money supply fast enough.

“Everybody else is doing it,” he seems to say. “Why aren’t we?”

Of course, “we” are. Our Fed is lending out fake money to member banks at a rate that is about even with consumer price inflation.

MD: Change the word “lending fake” to “counterfeiting” and you have the proper description of what is going on

This “free” money does to the U.S. financial system about what a hurricane does to a South Florida swimming pool; it becomes a greasy swamp with an alligator in it.

MD: In a “real money” process, we know that money is in perpetual free supply. Traders like you and I can create it any time we want to … and we want to when we can see clear to a trading promise spanning time and space. There is no “financial system”. There is only a purely objective process.

But our guess is that other Leaders were not “giddy” about the storm, but puzzled. Why would investors take shelter in a 10-year Italian bond at less than a 1% yield?
Raving Mad

MD: Notice the focus on so-called “investors”. In a real money process, everything is focused on traders like you and me. It’s about trading. It’s not about gaming the process for yield. And no “shelter” is needed. A real money process “guarantees” perpetual perfect balance between supply and demand for money itself … thus perpetual zero inflation and zero time value of money. The time span is not relevant.

There is the smart money. And there is the dumb money. But this money must be stark, raving mad.

MD: In a “real money process” money has no intellect. Money is a promise made by a trader. And a real money process does not allow a broken promise by one trader to affect other “responsible” traders. Defaults are immediately mitigated by interest collections of like amount. These collections are paid by irresponsible traders according to their propensity to default (i.e. risk).

Italy’s economy has been in a slump for more than 10 years. Its native-born population is expected to be cut in half by the end of the century. It owes more than 130% of its GDP.

MD: The “it” referred to here is the government. And the amount it “owes” is simply the amount it has counterfeited. It never had any intention of keeping its promises. No government does.

And its government bumbles from one unstable coalition to another… barely able to govern at all.

MD: That’s the modus operandi of all governments. It’s like the Harlem Globetrotters and the Washington Generals. They pretend to be in a basketball competition … but they work for the same guy.

You’d have to be nuts to lend money to Italy…

…unless you thought the fix was in.

MD: In this context, “lend” assumes new money is not being created. Rather, the control of existing money is being handed over to another party (the government) for some consideration (yield). So what does he mean here by “unless the fix is in”? He’s saying you don’t loan to a “deadbeat counterfeiter” unless the fix is in. I don’t know about you, but I only loan to a deadbeat counterfeiter when forced to … taxed… and I have zero expectation that the loan will be repaid…ever.

That is, buying Italian bonds – or German bonds, or French bonds… or USA bonds, for that matter – makes sense only if you are front-running central banks, counting on them to do something even nuttier than you did, buying your overpriced bonds at even higher prices.

MD: A good example is financial manipulators buying Venezuelan debt for pennies on the dollar. The holders had little expectation of being repaid. But the purchasers knew they could get the USA government to institute “regime change”. After that, the new regime would “make good” on the bonds. They do this by instituting a new money… i.e. they clean the slate.

Which is what Mr. Trump wants the Fed to do – rig up the credit market even more than it is now.

The Fed should print up more fake money, he believes, and lend it to his government at even cheaper interest rates. The idea is to get the economy running hot in time for the 2020 election.
Free Money

MD: With a “real money process” governments are just traders like you and me. But we know from experience that they never deliver on their trading promises. Then their defaults equal their money creation…and interest collections against them equal these defaults. They can no longer create money. They are thrown out of the game. A real money process cares nothing about “the economy”.

Our guess is that this huge bubble in debt marks a major change in world economic power.

MD: A bubble happens when the preponderance of traders make promises they can’t keep. This happens often in a manipulated money process. After a period of “tight” money, the money changers move to an “easy” money policy. Traders, having been strangled for some period, can now breathe…and they begin trading over time and space … creating money. Then the manipulators tighten the money again (they call the loans and refuse to “grant” new loans). Trades that were sound become unsound … and trades that were depending on those trades become unsound … and on and on. One failed trade cascades into a string of failed trades. A real money process doesn’t exhibit this behavior. If a trader defaults, it doesn’t affect other existing trades. It just serves as an automatic negative feedback … imposing slightly larger interest loads on new irresponsible traders. Responsible traders have zero interest loads because they don’t default.

Americans forsook their gods – honest money, smallish government, balanced budgets.

MD: When did Americans every have honest money, small government, and balanced budgets? The whole idea of forming the USA union was to repay guys like Robert Morris.

Now, those gods forsake them.

Fake money has destroyed real capital, created chaos in the markets, caused trillions in malinvestment, slowed down growth, and resulted in appalling inequality.

MD: Remember, “fake money” is “counterfeit money”. A real money process tolerates no counterfeiting at all.

It has also corrupted the government; the feds use it to avoid making hard – but necessary – decisions.

Fake money finances their fake wars… rewards lobbyists, campaign donors, crony contractors… and has added more than $10 trillion in additional debt in the last 10 years.

And with so much cheap credit available, not a single candidate even suggests balancing the budget or curtailing wasteful spending.

Why make tough choices when you get free money?
The Fix Is In

Germany is actually “getting paid” to borrow, Mr. Trump reminds us.

But people only get free money when the fix is in. And the fix won’t stay fixed forever.

Today’s rigged-up bond bubble will be no exception.

When will it pop? How?

We would love to meet the person who knows the answers to those questions.

MD: Read a history book. It has “rhymed” in this regard innumerable times in innumerable places. It is the money changers principal tactic.

In the meantime, we wait… we watch… and we try to connect the dots. And we wonder: What really matters?

Our final stop yesterday was at the modest house of a woman whose husband had recently died after a long, losing battle with Alzheimer’s disease.

We sat with her for a few minutes and reminisced. We discussed the weather, the small tomatoes in her garden, and what was going on at the local church. But she had her husband on her mind.

“The last words he said were five years ago,” she explained, tears in her eyes. “He said ‘I love you.’”

Regards,
signature

Bill

MD: Beautiful writing Bill … but you’re clueless about money.

*** MD: This article is from ZeroHedge.com. There they are clueless about money, but continue to pontificate with articles like this.

At MoneyDelusions (MoneyDelusions.com/wp) we know that gold is not money … and easily prove it. Lets see how they get around our proof.

A couple of months ago, CNBC’s Josh Brown made a blog post saying that “Permabears are Ridiculous People”. Here’s my answer.
Why Gold Is Money: A Periodic Perspective
Profile picture for user Tyler Durden
by Tyler Durden
Fri, 07/05/2019 – 22:25
Authord by Nicholas LePan via Visual Capitalist,

The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money is an artifact of the past. In an era filled with cashless transactions and hundreds of cryptocurrencies, this statement seems truer today than in Keynes’ time.

*** MD: Agreed.

However, gold also possesses elemental properties that has made it an ideal metal for money throughout history.

*** MD: Disagree. It has never been money and never will be money. However, it may be a better money substitute than, say, cement blocks.

Sanat Kumar, a chemical engineer from Columbia University, broke down the periodic table to show why gold has been used as a monetary metal for thousands of years.

The Periodic Table

The periodic table organizes 118 elements in rows by increasing atomic number (periods) and columns (groups) with similar electron configurations.

Just as in today’s animation, let’s apply the process of elimination to the periodic table to see why gold is money:

*** MD: Note, he begins with the premise that money can be stuff (wrong). He then goes through the periodic table to see what the best stuff is for money. With an errant premise, you’re going to come to an errant conclusion. Watch him do it.

Gases and Liquids
Noble gases (such as argon and helium), as well as elements such as hydrogen, nitrogen, oxygen, fluorine and chlorine are gaseous at room temperature and standard pressure. Meanwhile, mercury and bromine are liquids. As a form of money, these are implausible and impractical.

*** MD: So he takes his false premise and hones it down to solids. What if he said music can be found in the periodic table … and the job is to select the best music. See how ridiculous things get when you start with a ridiculous premise?

Lanthanides and Actinides
Next, lanthanides and actinides are both generally elements that can decay and become radioactive. If you were to carry these around in your pocket they could irradiate or poison you.

Alkali and Alkaline-Earth Metals
Alkali and alkaline earth metals are located on the left-hand side of the periodic table, and are highly reactive at standard pressure and room temperature. Some can even burst into flames.

Transition, Post Transition Metals, and Metalloids
There are about 30 elements that are solid, nonflammable, and nontoxic. For an element to be used as money it needs to be rare, but not too rare. Nickel and copper, for example, are found throughout the Earth’s crust in relative abundance.

MD: Ok, here’s another false premise. “Money needs to be rare”. Nonsense. There must perpetually be an equality between the amount of money needed and the amount of money available. No “stuff” will ever meet this requirement. Money logically should be in “free” supply. Something rare will never be in free supply. And we can prove empiracly that he is wrong. In 1963 I was able to trade a silver USA quarter for a gallon of gasoline. In 1964 I was able to trade a composite USA quarter for a gallon of gasoline. Today, I can trade a USA quarter for 1/10th gallon of gas … whether it has silver in it or not. Logical conclusion? The silver (i.e. intrinsic value of the token) has absolutely nothing to do with the trade. Why the factor of 10 difference in trading power of the token? As we know here at MD, it’s because of counterfeiting (i.e. default not mitigated by interest collections of like amount) … predominantly by governments.

Super Rare and Synthetic Elements
Osmium only exists in the Earth’s crust from meteorites. Meanwhile, synthetic elements such as rutherfordium and nihonium must be created in a laboratory.

Once the above elements are eliminated, there are only five precious metals left: platinum, palladium, rhodium, silver and gold. People have used silver as money, but it tarnishes over time. Rhodium and palladium are more recent discoveries, with limited historical uses.

*** MD: They had the specie wars towards the end of the 19th century in the USA. Why? Because, though both gold and silver meet the ridiculous “rare” requirement, the people who had the gold pulled rank on the people who had the silver. They prevailed lawfully (i.e. in an un-principled fashion). Laws only dilute principles as is vividly illustrated in this example.

Platinum and gold are the remaining elements. Platinum’s extremely high melting point would require a furnace of the Gods to melt back in ancient times, making it impractical. This leaves us with gold. It melts at a lower temperature and is malleable, making it easy to work with.
*** MD: Ah … so his wisdom is divine. How interesting!
Gold as Money

Gold does not dissipate into the atmosphere, it does not burst into flames, and it does not poison or irradiate the holder. It is rare enough to make it difficult to overproduce and malleable to mint into coins, bars, and bricks. Civilizations have consistently used gold as a material of value.

*** MD: This is the “can’t destroy it” and “precident” argument for gold stuff as money. Again, he started with a false premise and he brings forth false arguments. What’s not to love about the process?

Perhaps modern societies would be well-served by looking at the properties of gold, to see why it has served as money for millennia, especially when someone’s wealth could disappear in a click.

*** MD: The gold bugs would be well-served to look at societies, both modern and otherwise, for the real definition of money. In “no” society can you point to a case where money is created that a ‘trader” is not involved in its creation. Money is obviously and provably “an in-process promise to complete a trade over time and space.” It is always and only created by traders like you and me … making promises and delivering with time payments … like for a house or a car.

https://www.zerohedge.com/news/2019-06-21/blain-facebook-last-place-we-should-trust-banking-hub#comment_stream

This article on zerohedge addresses the new overture by Facebook to create a new money (Libre). Knowing what you have learned here about money, it is a fun exercise to take articles like this and blow them full of holes.

Money is an “in-process promise to complete a trade over time and space.” It is always, and only, created by traders (like you and me buying things with time payments). It is always properly destroyed by traders delivering as promised. If the trader defaults or if counterfeit money is found, it is immediately mitigated by interest collections of like amount. The operative relation is INFLATION = DEFAULT – INTEREST = zero.

A proper Medium of Exchange (MOE) process monitors the creation of the money and the delivery on the promise. It guarantees a perpetual perfect balance between supply and demand for money while also guaranteeing perpetual free supply of money.

The money creation process and delivery is never anonymous or done in secret. However, in the interim between creation and delivery, the money circulates in private and anonymous simple barter exchange. In today’s technology (block chains) this can be done with great efficiency and robustness. It can employ the greatest deterrent to cheating … that being transparency.

Now all governments are instituted by money changers. They are designed to protect the money changers “banking” operations. These operations just co-opt the trading process, claiming tribute (INTEREST); manipulating supply and demand to keep traders off balance (the so-called business cycle); and funding governments (traders who never deliver as promised) through INFLATION.

If Google (or better yet Amazon) institutes a proper MOE process, they blow this long running conspiracy out of the water. They return the money process to the traders who created it in the first place.

That ain’t gonna happen. Too bad. If it did happen this planet would be a far more pleasant and safe place to waste about 80 years of your time … the only time you will ever get by the way.

So it goes.

Bernie Sanders, Ocasio-Cortez Propose 15% Cap On Credit Card Rates; Visa, MC Tumble

https://www.zerohedge.com/news/2019-05-09/bernie-sanders-ocasio-cortez-propose-15-cap-credit-card-rates-visa-mc-tumble

MoneyDelusions: We’re going to get this from people who don’t know what money is … and nobody but the money changers seem to know … and they’re liars.
It is easily proven: Money is “an in-process promise to complete a trade over time and space.” It is always, and only, created by traders like you and me. For example, when we promise to buy a house with 360 monthly payments … or a car with 60 monthly payments … we are making a promise spanning time and space. To do this we create a “money obligation” and get it certified by the process … which then monitors it for performance. In most cases it is just an entry in a couple ledgers. One ledger (the money process’) keeps transparent track of the performance on your promise. The other ledger (yours) keeps track of how much performing you have done and have left to do.

In the mean time, this money you created exchanges as the most common object in every simple barter exchange.

Should you fail to meet your performance promise (i.e. DEFAULT), a proper Medium of Exchange (MOE i.e. money) process immediately recovers your DEFAULT with an INTEREST collection (from other irresponsible traders) of like amount. In this way it protects everyone using money to make trades.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero

‘So INTEREST is absolutely “objective”. It’s not dictated by the likes of Sanders or Cortez … or the money changers … or the governments the money changers institute to protect their scam. INTEREST is guaranteed to be zero for responsible traders (non-DEFAULTERS) and adjusted according to a trader’s propensity to DEFAULT (i.e. irresponsibility). Past irresponsibility can be cleared away by simply making up the DEFAULT.

The money itself has no intrinsic value … so precious metals are not money. The money itself is not created from waste … so BitCoins are not money. Money maintains a perfect perpetual supply/demand balance, thus also ruling out precious metals and so-called crypto.

The obvious indicators that you are immersed in a defective MOE process is concepts like “monetary policy”; “stimulation”; “unemployment”; “inflation targets”; “usurious interest”; etc.

https://www.zerohedge.com/news/2019-04-29/boomers-are-facing-financial-crisis

“Using faulty assumptions is the lynchpin to the inability to meet future obligations. By over-estimating returns, it has artificially inflated future pension values and reduced the required contribution amounts by individuals and governments paying into the pension system.”

[MD] The quote above is taken from the link to an article at ZeroHedge.com (where everyone seems to be clueless about money … yet claims unending depth of knowledge on that subject.) Look at the quote and if you’re interested follow the link. When you do, keep in mind the obvious facts laid out below. Think!!!

A proper MOE (Medium of Exchange) process makes a huge difference in planning and providing for periods of “failure to be of value”. Life is about being of value and trading that with others. If you’re not of value and you haven’t saved value, you are pretty well doomed in a “real” world. Our current flawed MOE process (1) targets inflation at 2%; (2) delivers inflation at 4%; (3) takes 3/4ths of the fruits of everyone’s labor; and (4) sanctions tithing (to the money-changers) of all trades … it’s their corrupted definition of INTEREST.

In a proper MOE process, traders (and only traders) create money. They do it by making a “promise to complete a trade over time and space”. You do it when you buy a house or car with time payments. That’s what money is … an “in-process promise”. As traders deliver on their promise they return the money they created and it is destroyed. And in the mean time that money exchanges as the most common item in every simple barter exchange. To the extent traders fail (DEFAULT), that failure is immediately mitigated and recovered by an INTEREST collection of like amount. The operative relation is INFLATION = DEFAULT – INTEREST = zero.

With guaranteed perpetual zero INFLATION there is “no time-value of money”. All of finance hocus pocus goes out the window. People can put their surplus value (money) under a rock and it maintains its value perfectly and perpetually. They have no reason to risk it for a return to cover inflation. In fact, the best unit of measure of this value is the HUL … Hour of Unskilled Labor.All of us have been a HUL at one point in our life … usually summer jobs in high school. On average, workers today are able to trade their time at 3 HULs per hour … about $50,000 per year. This was true 50 years ago when I started my career … but then the HUL was valued at $1.50 per hour, not $8.00/hr as it is today. But that HUL 50 years ago traded for the exact same size hole in the ground that it trades for today. It’s the dollar that has changed. The HUL hasn’t changed throughout history and won’t change in the future.

In our confused system, traders think money-changers and the governments they create to protect themselves are the creators of money. They obviously are not. You can point to only one instance where money is created without a trader involved … and that is counterfeiting … and that is far and away done exclusively by the money-changers and their governments.

Throw off that yoke of confusion (educated into traders by the money- changers) and it’s a whole different ball game. Money-changers and governments wilt on the vine. They can’t compete. And the world is a far better place … a far more friendly place for planning for down time under the comfort of guaranteed zero INFLATION.

Think about it.

https://www.zerohedge.com/news/2019-04-02/mmt-recipe-revolution

[MD] At MoneyDelusions we are under no delusion about what money is. It is clearly “An in-process promise to complete a trade over time and space”. It is only and always created by traders … not money changers or the governments they institute.

Here we examine articles that display obvious delusions and expose them. ZeroHedge is full of such articles. They recognize that the current money process is flawed, but they don’t know what money is. Therefore, they repeatedly propose equally or even more flawed alternatives. The [MD] Money Delusions annotations reveal and correct their confusion.

From ZeroHedge: MMT: Recipe for Revolution
https://www.zerohedge.com/news/2019-04-02/mmt-recipe-revolution
Authored by Robert Wright via The American Institute for Economic Research,
Historian Stephen Mihm recently argued that based on his reading of the monetary system of colonial Massachusetts, modern monetary theory (MMT), which he cheekily referred to as PMT (Puritan monetary theory), “worked – up to a point.”

[MD] The Federal Reserve system we employ works up to a point. That point is 4% short of optimum … i.e. it yields a 4% annual inflation… on purpose. But worse, it enables an encroaching government that freely counterfeits the money.

One can forgive him for misunderstanding America’s colonial monetary system, which was so much more complex than our current arrangements that scholars are still fighting over some basic details.

[MD] What was so complex about it? Let’s see if he ever tells us. Hint: No he doesn’t.

Clearly, though, America’s colonial monetary experience exposes the fallacy at the heart of MMT (which might be better called postmodern monetary theory): the best monetary policy for the government is not necessarily the best monetary policy for the economy. As Samuel Sewall noted in his diary, “I was at the making of the first Bills of Credit in the year 1690: they were not Made for want of Money, but for want of Money in the Treasury.”

[MD] In a proper MOE (Medium Of Exchange) process, there is no “policy” at all. It is perfectly objective. The article tips its hand by the second paragraph. Samuel Sewall should have noted “I was at the ‘counterfeiting’ of the first Bills of Credit…” He alludes to money being created by something or someone other than government as being the norm. But gets that close and still doesn’t get it … that it is always and only created by traders.

While true that colonial governments controlled the money supply by directly issuing (or lendin) and then retiring pieces of paper, their macroeconomic track record was abysmal, except when they carefully obeyed the market signals created by sterling exchange rates and the price of gold and silver in terms of paper money.

[MD] Note use of the words “lending” and “issuing” but not the word “creating”. In a proper MOE process it is not “lended” nor “issued”. Money, being a promise, is “created” by the promise maker… a trader. It is “destroyed” as he delivers on his promise. If he doesn’t deliver (i.e. he DEFAULTS), his default is immediately mitigated by INTEREST collection of like amount. This guarantees zero inflation by the operative relation: INFLATION = DEFAULT – INTEREST = zero. He recognizes that money is ultimately destroyed (he says “retired”) but then loses it as he addresses the fictional “macroeconomic track record”.

MMT in the colonial period often led to periods of ruinous inflation and, less well-understood, revolution-inducing deflation.

[MD] A proper MOE process “guarantees” perpetual zero inflation.

South Carolina and New England were the poster colonies for inflation, in part because they bore the brunt of colonial wars against their rival Spanish and French empires. Relative peace and following market signals eventually stabilized prices in South Carolina.

[MD] Fails to elaborate by revealing that they were commodity based economies, and thus took the brunt of the “tariff” load that rewarded the money changers and funded the governments they instituted.j.. and put the load on the traders and their customers.

In New England, however, Rhode Island for decades was able to act as a “money pump” that forced inflation on other New England colonies until they abandoned MMT entirely in the early 1750s.

[MD] In a proper MOE process, “traders” are the only money pump. And they won’t pump promises they can’t see clear to delivering.

In New York, New Jersey, and Pennsylvania, by contrast, legislatures followed market signals and were never pressed as hard militarily as the buffers to their north and south were. They therefore did not inflate away the value of their paper moneys by issuing too much.

[MD] “Market signals”? Like wetting the finger and holding it in the air? In a proper MOE process there is only one signal. That is DEFAULTs. And proof that nobody gets it? Show me anywhere a time series of DEFAULTS. You can find innumerable time series for INFLATION and INTEREST. Why do you suppose that is? In a proper MOE process, only the exact correct amount of money is ever “issued”. It’s not subjective at all.

After the French and Indian War, however, the Middle Colonies suffered from a large deflation rooted in wartime excesses, structural economic changes, and new imperial regulations. Real estate prices plummeted and debtors’ prisons overflowed. The direct result was colonial unrest over the Stamp Act, which quickly escalated into a pamphlet war, a trade war, and then a shooting war.

[MD] All due to confusion of what money really is … and who creates it and why.

About the only time the colonial monetary system functioned effectively was when paper money circulated in tandem with full-bodied gold or silver coins (specie). When the government found itself in dire straits, as it did during the American Revolution, the value of paper money vis-a-vis specie slipped.

[MD] And here is the “monetary” nonsense… “in tandem with specie”. The last sentence should read “when the government counterfeited, the value of the money slipped”. This is obviously because they had no mechanism of linking defaults to interest collections for the automatic negative feedback mechanism needed for stability.

This was the market’s way of signaling that too much paper money was in circulation at the current price level and that further emissions would spark inflation. This is precisely what happened. Yes, America eventually won the war, but only after returning to a monetary system anchored by the precious metals.

[MD] The monetary system had nothing to do with winning the war or precious metals. What really happened is that the American trader prevailed in spite of government and money changer bad behavior.

While the prospect of returning to a more solid monetary anchor after the inevitable failure of MMT may intrigue some, the socioeconomic costs of hyperinflation would be enormous. With everyone’s savings destroyed, as in Germany in the 1920s and Venezuela today, the end result is impossible to predict, but undoubtedly thornier than rosier.

[MD] The “end result” is well known. You have a reset; responsible traders get screwed; manipulators and speculators walk; and it starts all over again. Institute a proper MOE process that knows what money really is and the problems are extinguished as long as it is employed.