Our Gold Bug friends over on Zero Hedge have been very active lately in promoting a few Theories regarding the underlying cause of the collapse of the current Fiat based monetary system, with one particular Aussie newsletter promoting the idea the whole problem stems back to the creation of the Nanny State by Otto von Bismark prior to WWI.
The problem with this theory is that it completely ignores all the PRIOR crashes of the monetary system going back at least as far as the Dutch Tulip Bubble, crashes including of course the Long Depression of the 1870s following the Civil War here in the FSofA. All these crashes predated Otto by decades at least, centuries in many cases. Remember ALSO that Europe was in an almost constant state of Warfare from1700 through 1900 and this was all happening under the “wonderful” Gold standard.
Now, let us take a closer look here at what the problems really are with using Gold as “sound money”, both in the past and progressing into the future following the final crash of the Almighty Dollar. (Parenthetical Note: Its interesting that the “Almighty” modifier is only used in two ways, either for God or for Money. Something to think about.)
The first argument you get is that unlike Paper or Digital Fiat money, Precious Metal coinage cannot be so easily debased. This is obviously untrue, since the Romans debased their coinage by alloying with other base metals, and this just is not very hard to do. Assuming we did start passing around Double Eagles here as currency, a counterfeiting industry would rapidly develop taking Gold Eagles, melting them down and then plating over Tungsten Slugs. Since the specific gravity of Tungsten is so close to that of Gold, you wouldn’t be able to tell the difference by Archimedes style testing, and every time you exchanged money you would have to have some very good equipment to test any coins you got in return for your transaction. I am talking REALLY good equipment, here, you would need some kind of induced magnetic field to pick up on small differences in the electromagnetic spin of Tungsten vs Gold to pick out the debased coinage. I’m not even sure that would work, since I don’t have a Periodic Table in front of me at the moment. Needless to say, this would make commerce quite difficult even if you could make a pocket Coin Assayer that would work well enough..
The next big argument for Sound Money in the form of Gold is that you can’t make Infinite amounts of it, the Supply is fairly stable. Really nowadays for Gold more the quantity is more stable than ever, since most of the easily mined up supplies have been harvested already, and in new mines cost of production is around $500/oz, according to Gold Bugs themselves. Remember that cost of production revolves around relatively Cheap Oil used to power the Heavy Equipment used at these mines, along with big smelters to melt out the gold and then skim it out of the pool of liquid metal you heat up. These mines aren’t generally seams of pure gold, its mixed together with other minerals so at the very least you have to crush it up and pan it out. Anyhow, as time goes by here, you can be pretty sure a whole lot of Gold will not come flooding the market as it did after the Conquistadores ripped off all the Aztec Gold in the New World.
The problem here is that since its fixed in supply, what happens when inevitably some industrious folks with squirrel-like tendencies start SAVING their Gold coins for their Retirement or for a Rainy Day? Said Gold coins will go OUT of circulation and fewer will be left circulating in the economy, slowing the economy to a crawl. A Gold Bug version of JMK’s Paradox of Thrift of course.
The Capitalist “solution” to this problem is to encourage Savers of Gold to recirculate it by “investing”, which is to say loaning it out to others at some rate of interest, so without Working at all you “make money with money”. The problem here is precisely what the Gold Bugs say is an advantage of Gold making it Sound Money, which is that you CANNOT make more of it. The overall Pile of Gold cannot significantly increase here to pay off all the Investors who loan out their Gold to keep the velocity of money moving here. You could only pay them off with other “Assets”, but what happens when those other Assets lose value? Everyone tries to divest themselves of those now losing value Assets in exchange for Gold, but there isn’t any more Gold than there was at the beginning of the whole process! Needless to say, SOMEBODY is going to get left holding the bag on a Worthless asset and NOT be able to get any Gold in return for it. Exactly the kind of deflationary collapse we have going on here now! It doesn’t matter whether you start with Fiat or Gold, the “Wealth” of the Civilization is really measured in other Assets which can become worthless or even Liabilities as circumstances change.
The “solution” to this problem was the creation of Notes representing Gold and Fractional Reserve Banking, but of course there is nothing really to stop Banksters from creating far more notes on their reserve of Gold then they actually own, and then for one reason or another when Asset Values collapse and there are margin calls said banks are found insolvent and short of the Gold necessary to pay out on all the claims on their Gold. At this point the Bankster reneges on his Notes, absconds with the Gold in the safe and heads somewhere else to pull the same shtick over again. Welcome to the world of the Illuminati going back to the Medici Era. Fool everyone for a while by extending credit on a small pile of Gold until the Civilization stops expanding, then retract the credit, call in markers and make margin calls and take the physical assets of debtors and then reboot for another iteration, as long as expansion remains possible. THIS IS CAPITALISM as it has been practiced for 500 years! Live with it. It’s the TRUTH.
Anyhow, the failure of the current monetary system has very little to do with Otto von Bismark and his Welfare State and is fundamentally rooted in the impossibility of Infinite Growth in a Finite world and paying Interest out to savers of money when there simply is not any more money being created here to pay that interest with! What you really need is some form of money that has REAL intrinsic value, that you can create more of and that is durable and lasts about a human lifespan. I have a NEW idea for this!
Technology allows us nowadays to take raw food and package it up in ways that last a very long time, through techniques like Freeze-Drying and Vacuum Sealing. I would bet you could create a “coin” of say 500 calories in carbs and fats containing a balance of amino acids and vitamins such that 3-4 coins per day dissolved in Boiling Water would provide all the Nutrition you need for the day. Said “coin” would be Vaccuum sealed inside a plastic casing to keep out moisture, but if you ever get really hungry, you simply eat your money by slitting open the plastic, dropping it in boiling water and enjoying a nutritious meal!
Of course, you do have the problem here that Counterfeiters would pull the same stunt as Gold Coin counterfeiters, in that they could easily take a Food Coin and mix in non-nutritious ground up cellulose, reducing its actual calorie count so the same weight and size coin now only has 400 Calories instead of 500.
So in two paragraphs I have now nixed my own idea for Money which is fungible and lasts a long time, due to the old problem of counterfeiting which affects all monetary systems. Bad as counterfeiting is when “crooks” do it, when it really becomes a problem is when the people who are responsible for money creation in your society start doing it, namely the Banksters and your own Goobermint. This happens over and over again in all Civilizations as they reach the end of their Growth period and in order to retain the ILLUSION of Growth and their own POWER the Money Creators of the society start Counterfeiting as a substitute for real Wealth creation. This has been the problem in Amerika since we reached Local Peak Oil back in the 1970s and became a net Oil Importer. Ever since, Debt Money has been substituted to replace real Wealth harvested from the Earth in the form of Fossil Fuel Energy. By using our Military and Finance to control the rest of the World and direct resources here, we have been able for the last 30 years or so to keep the game going a while longer. Now the Jig is UP because GLOBALLY we have reached Peak Oil so you can no longer pull that wealth from one place and give it to another without starving SOMEBODY of the energy needed to run an Industrial Society. All the industrialized countries, including the Rookies like China and India and Brasil along with the Veterans like Germany and England and of course the FSofA are all competing for the same ever decreasing pie of easily accessible energy, and they all are going to suffer as a result while they go through the period of de-industrialization and power down necessary to come back into a Pay-as you-Go balance with available energy that can be harvested up here. Needless to say, the amount we can harvest up at this point in the absence of cheap fossil fuels is much lower than the amount needed to support the current population living on the face of the Earth, thus the inevitability of a Die Off.
It continues to astound me that the Chinese are following exactly the same model here and somehow think they will be able to continue to rev up industrial production with ever decreasing world wide supplies of Oil, and nobody with any money to buy whatever products they manage to make utilizing said oil, but of course the model does die hard here. In any event, even IF one of these countries was able to secure enough Oil to continue to run an industrial production model, they would be doing so at the expense of the other ones, which would leave no export market, so there is no way to keep earning money to buy more Oil, which means of course you have to STEAL it. The Chinese are a Day Late and a Yuan short in the game of STEALING Oil from others also, all the good theft has already been done here.
So here we have the End Game of the Age of Oil, with about 4-5 Major Players all engaged in manipulating finance and military assets to try to keep themselves floating on an industrial level. You have the FSofA of course with the Big Military, the Chinese with the Big Population and current account balance of tons of worthless toilet paper, the Krauts trying to control all of Europe through Finance, the Ruskies who still have a decent military machine AND Oil on Home Soil and of course the diffuse Mooslims serving as a Wild Card in this whole operation since they still live on top of quite a bit of the remaining easily accessible Oil and are pretty pissed off that they got left OUT of enjoying the benefits of that Oil except for the Mooslim Illuminati in the form of the House of Saud. Who will come out ON TOP of this mess as it spins down? That is the question Illuminati ask themselves, because they want to take their Gold Bars and run to the best place to keep their Heads safely attached to their Bodies.
As it appears to me right now, NOBODY is going to come out “On Top” once the props of CB printing and competitive devaluations go into “blowback” or “unintended consequences” mode. The economies of China and the FSofA reciprocally depend on the other, and once either one fails, the other one does also. Japan is a demographic nightmare and Germany is sitting right next to Striking Frogs and will never collect anything on their loans to the PIIGS or Eastern Europe. The Ruskies are currently involved in depopulating their own country through Alcohol Poisoning and the Mooslims are still living in the Seventh Century. Not a single one of these places is a World Beater, they are ALL LOSERS and they will all also be in even worse shape once the monetary system fails. The only thing ANY of them would be “On Top” of here is a pile of smoldering rubble anyhow, so the whole scenario is Lose-Lose all around.
The bottom line here is that there is no place on Earth for the Illuminati to go this time and reboot the system again. Capitalism is FINISHED as the means to enslave the world through economic sleight of hand, conjuring up money out of nothing by the Illuminati with their TBTF Banks, the subsidiary Federal Reserve Bank they OWN and then rewarding the creators of that money with piles more of it as the Earth was raped for resources. Those of you here who believe that Capitalism was EVER anything more than a Ponzi designed to perpetuate the power of the Illuminati simply are a few cans short of a Six Pack and believe the HYPE you were sold in school without spending adequate time and mental energy on studying how the whole game was REALLY played through history. I will give most of you here the benefit of the doubt and not assume you are just plain stupid, rather I think most of you were just played for fools and bought the education you were sold. I never cease to be astounded at how incredibly IGNORANT people who call themselves “Capitalists” are of the history of Money and how it has been used here for the last 5 centuries. Pick up Carroll Quigley’s “Tragedy & Hope: A History of the World in Our Time” and EDUCATE yourself a bit! The information is all out there to read up on. The most likely scenario is the Illuminati go ALL IN on the War Machine and try to rule the world by Force and Fascism as Capitalism fails, but this scenario is so dependent on Fossil Fuels to run a Global Military machine it will collapse under its own weight in short order. Thus you get the devolution of the One to the Many. In this scenario, again, the best place to be is in Zones with good water, food and energy resources and low populations. Pick your Hole and Bunker up NOW, while you still have time. The Clock is Ticking, and the Window is closing fast.