Why Does Fiat Seemingly Work?

Fiat is a perversion of value, it may act as a medium of exchange but it is conceived in deceit, backed by violence and reliant on the apathy, ignorance and insouciance of the slave population. There are no surviving long term fiat currencies that hold or behave as a store of value, they all have a 100% mortality rate in the long term but gold and silver on the other hand…as Mark Twain said: ‘It is easier to fool someone than convince them that they have been fooled’.

To clarify Gresham’s Law below that ‘bad money’ drives ‘good money’ out. By looking to the work of Carl Menger on hoarding and marketability, one can achieve a greater understanding of the errors in Gresham’s Law and by definition, bad and good are dualisms and bad money is not money! Courtesy of Peter Tenebrarum @ Acting Man:

Introducing Money

Imagine three men living on a small island. Toni is mining the local salt mine, and apart from him there are Pete the fisherman and Tom the apple grower and their families. They have a barter trading system set up: Toni exchanges his salt for Pete’s fishes and Tom’s apples, who in turn exchange fishes and apples between each other.

One day Pete says: “I have an idea. Instead of fish, I will from now on give you pieces of papyrus with numbers marked on them”. Papyrus grows in great quantities nearby, but has so far not been of practical use to any of the islanders. Pete continues: “One papyrus mark will represent 1 fish or 5 apples or 2 bags of salt (equivalent to current barter exchange rates). This will make it easier for us to trade among ourselves. We won’t have to lug fishes, apples and salt around all the time. Instead, we can simply present the pieces of papyrus to each other for exchange on demand.”

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John Law at a young age – the world’s first Keynesian economist

Painting by Casimir Balthazar

In short, Pete wants to modernize their little island economy by introducing money – and he already has one of those new papyrus notes with him, which he is eager to trade for salt. However, the others would immediately realize that there is a problem: the papyrus per se is not of any value, since none of them have found a use for it as yet. If they were all to agree on using the papyrus as a medium of exchange, its value would rest on a promise alone – Pete’s promise that any papyrus he issues will actually be “backed” by fish, which would make Toni and Tom willing to accept it in exchange for salt and apples. Continue reading

ISIS Unveils Its New Gold-Backed Currency To Remove Itself From “The Oppressors’ Money System”

Just waiting to be put on a no-fly list and classed as a non-violent extremist but there’s no mention of bills of exchange…there is hope, though bare in mind that the ISIS psyop is doing well. I wonder who is buying their oil and thus funding the ‘terrorists’. Courtesy of ZeroHedge:

It appears the rumors are true. Islamic State is set to become the only ‘state’ to back its currency with gold (silver and copper) as it unveils the new coins that will be used in an attempt to solidify its makeshift caliphate. ISIS says the new currency will take the group out of “the oppressors’ money system.”

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As Zaid Benjamin notes, ISIS releases details of its new currancy with golden 1 & 5 dinar, silver 1, 5, 10 dirham and copper 10 & 20 fils

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* * * Continue reading

Gold and Silver – The Eternal Monetary Couple

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Courtesy of Dan Popescu @ Goldbroker.com:

Roy W. Jastram, in his book, The Golden Constant, says, “When we go so far back into price history as I do here we are like the archeologist. We nurse together the evidence that has survived with as much test of its validity as is available to us. Statistics, like archeology, is an inexact science when practiced on numbers that are remote and fragmentary.”(1) This should always be kept in mind when analyzing economic data of any kind.

Just when they announced the end of gold and silver in 2000, both started shining again. It seems that it is not the death of gold and silver as money that will happen, but rather the death of fiat money. For more than 2,000 years, gold and silver have been used as money under different forms and have outlived any other form of currency (graph #1). We should not ignore also Dr. Copper. Gold and silver are called the eternal monetary couple, but I would also add copper and call it the eternal monetary trio.

Chart #1: International Reserve Currencies since 1400

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In his book, The Power of Gold, Peter L. Bernstein says, “Gold may again serve as the ultimate hedge in chaotic conditions. Its return to its traditional role as universal money is unlikely, however, unless the time should come when the dollar, the euro, and the yen have all failed to function as acceptable means of payment across international borders.”(2) He wrote the book in the late ‘90s and published it in 2000, when the US dollar was at its apogee. It seems that what he did not expect but cautioned against is happening now. The whole international monetary system is barely kept alive and is on the verge of a total collapse, followed by a reset. Now, that is not the end of the world no more than the collapse of the pound Sterling was in the ‘40s. The collapse of the US dollar standard is only the beginning of a reset, whatever the form the new system will take. Until then gold and silver will outperform.

I cannot stop looking at the next two charts and ask myself how this parabolic move of inflation can go on for much longer. This is not natural. Maybe it can go to infinity in the imaginary world of economics that economists call “nominal”, but in the real world that we actually live in, it just cannot. Infinity in mathematics is not a real number, but rather an undefined large quantity. You cannot go to infinity in the real world. What is also striking in Jastram’s gold and silver charts since 1500 is the volatility in the real price of gold and silver that was introduced when paper money replaced hard money. Parabolic moves always end badly. It would actually be more correct to plot the pound Sterling in gold and silver. This would show a parabolic collapse of the paper British pound rather than an increase in the value of gold and silver. Continue reading

The Beginning Of The End Of Precious Metals Manipulation: The London Silver Fix Is Officially Dead

Who knows what sculduggery maybe a foot but the official silver fix is coming to an end, what the new ‘fix’ will be, whether it be HFT or something linked to the SGE, who knows but the price won’t be left to free markets. Courtesy of Zerohedge:

Following a crackdown on precious metal manipulation by various European regulators (mostly Germany’s BaFin, recall “Precious Metals Manipulation Worse Than Libor Scandal, German Regulator Says”), which led to the shocking outcome that Deutsche Bank would pull out of the London gold and silver fixing committees, the London Silver Market Fixing company ended up with a most curious outcome: it would have just two members: HSBC and Bank of Nova Scotia. And, as an even more shocking result, overnight the London Silver Fix announced that after August 14, 2014 it will no longer exist – the first of many victories for all those who have fought for fair and unmanipulated precious metal markets.

From the press release:

The London Silver Market Fixing Limited (the ‘Company’) announces that it will cease to administer the London Silver Fixing with effect from close of business on 14 August 2014. Until then, Deutsche Bank AG, HSBC Bank USA N.A. and The Bank of Nova Scotia will remain members of the Company and the Company will administer the London Silver Fixing and continue to liaise with the FCA and other stakeholders.

The period to 14 August 2014 will provide an opportunity for market-led adjustment with consultation between clients and market participants.

The London Bullion Market Association has expressed its willingness to assist with discussions among market participants with a view to exploring whether the market wishes to develop an alternative to the London Silver Fixing.

Q&A

1. What will happen after 14 August 2014? Will the Silver Fixing cease to exist?

With effect from the close of business on 14 August 2014, the Company will cease to administer a Silver Fixing, and a daily Silver Fixing Price will no longer be published by the Company.

2. What will happen in the period up to that date?? Continue reading

The truth is out: money is just an IOU, and the banks are rolling in it

It’s good for the Bank of England to admit that the ‘money’ we use, correctly called fiat currency, is just a worthless paper IOU and the only thing that gives it value is your belief that it is worth what you think.

It is debt, not money and this monetary setup is gamed for the few and enslaves the rest of us. Gold and silver are money and have been for 5000 years, a return to sound money and The Real Bills Doctrine is what is required to get this country and the world, back on track.

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Courtesy of David Graeber @ The Guardian:

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn’t know how banking really works, because if they did, “there’d be a revolution before tomorrow morning”.

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy”, co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.

To get a sense of how radical the Bank’s new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don’t suffice, private banks can seek to borrow more from the central bank. Continue reading