Posts Tagged ‘currencies’

Money’s Swan Song

August 11, 2019

In the beginning God created the heavens and the earth.

Well a lot has happened since then.

Our Creator had done some amazing creating through that original sparkle, and has given us the wherewithal to jump in there and participate in the creative playing out of all things in our domain.

The power to create was not given to other species on our planet—only to us.

We humans have done some pretty amazing things with our God-given talents.

After hunting and gathering, we planted, harvested and ate the fruits of our labors.

in the course of history, we have moved far beyond just eating, drinking and homesteading.

It’s been ever onward and upward for us, since we got a hold of this divine spark thing that we call creativity.

We’ve built pyramids and great walls, temples, mosques, cathedrals, skyscrapers, great bridges and machines that move across those bridges.

We’ve built roads, rails, blazed trails, had great successes and fails. We’ve devised tools, schools, lots of rules; we’ve forged implements, arts, coins, currency, and we’ve maintained a steady errancy.

We’ve painted, sculpted, interpreted the real world as works of art. We’ve disrupted, interrupted, corrupted and upended nature itself.

Now our carbonized creation turns—in some ways—against us.

Back at the olden time, when we received the power to cultivate earth, we were instructed to subdue those elements of the natural world that seem to be active against us—like, say, lions and tigers and bears. Such critters we had to subdue, so they would not make mincemeat of us.

Earthquakes, volcanoes, storms, tsunamis, etc.— these adverse forces we could not subdue, so we took shelter. As the ages rolled by, our sheltering instincts developed into elaborate structures.

And we have done pretty well with that. We homo sapiens have taken control of the planet—or at least we think we have. The planet may yet rise up to bite us in the ass. We shall see what happens with that.

A major sea-change that happened along the long odyssey of our progress was: we devised ways to substitute real goods into artificial representations of wealth.

Better known as making money.

MoneySwan

Land, food, livestock, clothing, shelter and such commodities that are essential for survival—all these are now exchanged by monies, currencies, paper-backed assets. And the latest thing is: electrons seem to be our new currency.

Our ancestors carved trails out of the wilderness. They gathered grains, sowed seeds, domesticated animals, and sold to neighbors or merchants all the produce thereof.

As those primary goods coalesced over the ages as markets, their value was measured and traded as money. This we called trade. Then we called it commerce, then business, and now. . . economics. We humans invented the system a long time ago because . . . well, because . . . I don’t why.

lt’s just what we do I guess.

For one thing, it made the process of manipulating wealth easier.

In economics, wealth was and is evaluated in terms of dollars or yuan or yen, or marks, francs, drachmas, denarii, zlotys, rubles, pesos, pounds sterling, etc.

Euros are the new kid on the block. They seem to have trouble making that one work.

The difficulty with retaining true value in these currencies is related to the fact that they’re—in real survival life terms—not really worth anything.

They only represent wealth. But they are not really the real thing.

I say the EU is having trouble establishing the value of their Euro. This goes way back.

The Brits, for instance, were having trouble in the 1930’s retaining the value of their pound. It seemed that their constructed currency could not maintain its value compared to gold.

Who the hell can compete with gold?

Gold goes way back.

Way back.

The second chapter of Genesis, for instance, mentions gold.

“The name of the first (river) is Pishon; it flows around the whole land of Havilah, where there is gold.”

I suppose there’s a reason why gold goes way back in our history. Even though you can’t eat it, drink it, or keep your household warm with it, it is . . .

quite shiny.

Beautiful stuff, that gold. Precious!

Back to the Brits. As the world economy was falling apart back in the ’30’s, many savvy persons decided they would trade their British currency—pounds—for gold.

So many savvies were wanting to get back to gold, that the British government quit selling it.

What would happen after such an arrangement?

I think it was that fellow Keynes who figured out that—guess what—the economy just kept on cranking—all the goods and stuff and commodities and products and financial instruments and whatnot—just kept swirling around in international commerce.

The world didn’t stop turning. Business just kept on doing their thing. Rich get richer and poor get poorer and hey what else is new.

What else is new? Nothing. Nothing new under the sun.

Guess what. We didn’t really need gold to back currency! It was just a phase we were going through—the golden age of gold.

Back in ’73, Nixon pulled the same trick as the Brits had done in the ’30’s. He and his Bretton Woods powers-that-be decided we could no longer afford to sell gold for dollars. Too many folks wanted the gold instead of the dollars.

So we see that man-made currencies are not foolproof, and the gold bugs are always trying to make a comeback.

Money is a habit; that’s all. A very old habit.

Folks are born and bred into this modern economic world.  We are commercialized, or socialized (depending on your politics) to just keep spending those pounds and dollars and cents and euros and yuan and yen and SDRs and thusandsuch.

Nowadays we don’t really even use the money any more. Now it’s just electrons flowing around that represent debits and credits.

And that’s why—I suppose— the central banks of the world can keep cranking out their reserves, because the right to assign value is now reserved to them. It has nothing to do with gold or fiscal guarantee.

The central banks, in the fatal footsteps of every financial crisis, have reserved the right to “create money out of thin air.”

I told you we were creative!

The greatest discovery of the modern world:  we don’t even need anything to take the place of gold.

Money is just an old habit we have; we’ll never put it to rest. So somebody has to be “printing” it somewhere.  We spend so much money that all the .govs of the world are running deep debts trying to keep all the citizens fat ‘n happy.

There’s so much liquidity in the world today that the dark swan of excess has smooth sailing. Someday, some Leninish strongman will come along and dissolve all that debt into even more liquidity.

It will be a meal ticket for everybody. Yes, Virginia, there is a free lunch, doesn’t matter who’s paying for it.

It’s only money.

Glass half-Full

Yes, Toto, we’re in a brave new swirl.

January 28, 2018

Today while perusing a post on the Seeking Alpha financial network I came across what appears to be a very sensible explanation of what we see in the world of finance and business today.

This no-nonsense analysis is occasionally echoed by other writers on the SA site, most notably Mr. David Stockman, former budget director for President Reagan.

He was a high-flyer back in the day, the pre-Greenspan days.

But here I make reference to a different contrarian analyst, Mark A. Grant,  upon whose article I stumbled upon this morning.

  https://seekingalpha.com/article/4140703-universe-edge-restaurant?sht=p3a1ld&shu=8wcf#comment-77507865

From a distance, I’ve been following the contrarian school of thought ever since the fall of ’08. I say “from a distance” because I am neither an economist, nor a significant investor. I am a mere citizen who happens to be a consumer, an American, an author and a semi-retired person, age 66.

This contrarian school of alarmist financial analysis generally demonstrates a perpetual amazement; their astonishment revolves around the credit-mongering house-of-cards built by the central bankers of our preset world (the Fed, EuroCBank, Bank of Japan, People’s Bank of Japan, etc.). It’s not that the contrarians have much respect for of the central bankers’ delicate arrangement of interlocking currencies and trade incentives; rather, their astonishment arises from the mystery of why it has not yet fallen apart and produced a new crash.

You see, this new international construct is not founded upon traditional economics, but rather (as it appears to this layman) upon that (at the time) new-kid-on-the-block upstart school founded in the 1930’s by Mr. Keynes; it’s all about governments and banks perpetually tweaking national/international money spigots to produce certain desired effects.

Our current zombified house-of-cards scenario has been at work for a decade or so now, ever since the crash of ’08, with its aftermath of Great Recession or great whatever-it-is.

Getting back to the source of this present article: This morning I was reading Mr. Grant’s take on the present situation and comparing it for the umpteenth time to the contrarian undertow that continues to make perfect sense. This bearish complaint corner has been going on for so long I’m beginning to wonder if the fiat-wielding central bankers have actually managed to change, by their manipulations, the fundamental nature of money.

Maybe we actually are now in a brave new world where the old rules of debit/credit will never again apply.

With all these electrons flying around the planet–all these monetized digital representations of presumed wealth and bank-enabled assets–haven’t we truly ditched the old gold-backed world of currencies-dollars, pounds, francs, marks, drachmas, denarii, Euros, rubles, shekels, yen, yuan, SDRs and zlotys?

Could Bitcoin and such be nothing more than a flash-in-pan death-throes sparkle signifying the end of our great age of post-BrettonWoods expansion? 

Might this extended wave of central banks’ Quantitative Easing actually turn out to be the debt-driven tidal wave that propels us into a land that prime forgot, where all the rules and practices of days gone by are tossed aside forever in the liquidity flood and trash heap of history?

ShipWrek

We’re getting to a precarious place now where the only solution will be to tear up the score-cards, balance sheets, and start over. The central governments of the world are forever indebted to the central banks of the world. It certainly seems that way to this observer. I’ll be surprised if we ever get back to what Mr. Smith called “the wealth of nations.”

We ain’t in Kansas any more, Toto. Exactly where we have landed is unclear. And it just might be that tapping our ruby-slippered heels of old-school analysis are gone with the wind.

When this whirlwind of fiat-instruments does wind down to a dull roar and all the chips fall where they may, who/what institutional entities  will have wrangled control of the new asset-spewing beast? Whatever that entity turns out to be–it (they) will be in a position to dole out the newly-zombified assets to the world’s surviving movers and shakers. I guess most of us out here in lala land will be quakin’ in our boots.

As for us commoners, we may all of us have to settle for a mere meal-ticket while the big chips get re-assigned.

A meal-ticket  on a card or a chip, of course.

What troubles me is: what new rules or allegiances will be demanded by the powers–that-be?

What will it cost us, John Doe/Jane Smith, to even get in the game?

King of Soul

There’s funny money in them thar hills

August 20, 2011

What’s funny is that, every now and then in history, gold re-establishes itself as the de facto invisiblo reserve currency, in spite of what the central bankers and talking-head journalists of the world try to do otherwise.

We know that democrats, socialists and populists do not like this trend, but the sequestered “rich”, who lurk acquisitively in the holds of their yachts and in the shadows of their McMansions, do like it. The rich get richer and the poor get poorer. So what else is new.

All this talk about dividing folk into classes and then setting them against each other is Marxian boilerplate hot air to inflate riotous passions and fiat currencies. And although there is certainly some truth to it, all this class-identity disruptive rhetoric is no excuse for rabble ruffians to be  running roughshod over small mainstreet business establishments in Wisconsin or Philadelphia or London or wherever the discontented are roused from their couches. Nor is it defensible moral fodder for severing privately-owned, publicly-utilized fiberoptic communication lines.

Back in 1896, William Jennings Bryan pointed out to his grassroot-gathered supporters that there are two types of government:

There is the (paraphrasing) Republican trickle-down type, who legislate to make the well-to-do prosperous. Then the wealth ostensibly drips down to everybody else. You’ve heard of this; the analogy became widespread during the Reagan years.  I would point out that Marie Antoinette had, back in 18th-century France, infamously embodied the upper end caricature of this economic arrangement when she had heartlessly uttered the slogan of the Bourbonites, Let them eat cake.

But here in America, a hundred or more years later, William Jennings Bryan described his second category of government as the (paraphrasing) Democratic percolate-up type. They legislate to make the masses prosperous. The wealth then percolates up from the laboring, resource-driven productivity of the people, and thus nourishes the upper social regions as it passes through industrially.

And the esteemed Mr. Bryan said, famously, at the Democratic convention in Chicago in 1896, that the rich Republican crowd were trying to nail the working folks to a cross of gold by insisting on the rigid gold standard instead of the more malleable, accessible silver standard.

Though he was a fiery orator and a charismatic leader without parallel, William Jennings Bryan lost that 1896 Presidential election to the Republican,  William McKinley.  And then they had, amazingly, an uninstant replay four years later when McKinley was re-elected in 1900.

That 1900 election was a kind of sitcom pilot for the cyclical reruns that would characterize much of 20th century American politics, especially the Bush-Gore contention that came exactly a hundred years later in 2000.

Dems and Repubs are always at each other throats, some times more than others. Just now though, the fireworks, rhetoric and bluster seem to be intensifying. The Dems see their liquidity-easing policies as justified, beginning a third of the way through the 20th century, by their anointed prophet, Maynard G. Keynes–or excuse me, that’s John Maynard Keynes. Now Krugman and Reich and that stimulus-addicted crowd want to liquify the rigid constraints of the bogeyman Corporate “rich” so that the greenbacks  will percolate, William Jennings Bryan style, up through the fissures of job-generating governmental largesse. Those fissures should be facilitated and regulated by community organizers and unionbosses and government employees instead of, say, corporate directors, “rich”  investors, and Texans.

While everybody is arguing about politics and money, as if there were a difference between them, the smartest guys in the room (or so they think themselves to be and they may be correct in their assessment)  are buying gold like crazy.

Those gold-acquirers are looking for some incorruptible way to consolidate their wealth into a specie that escapes devaluation. They are buying the precious metal now because, well…

Who you gonna call when you need some reál value?, amidst debt crisis in America, sovereign debt precipice in Euroland, and the Chinese, who are bellyaching because all their meticulously-gathered dollars are being devalued, and their renminbi is still yuaning like an adolescent who just got up at noon and stumbles onto the world monetary stage.  Who you gonna call?  Ben Bernanke? Ron Paul? Angela Merkel? Who’s the grownup in the room? Harry Reid? Pat Toomey?

So I think it inevitable that the gold standard in some form or another is probably going to re-emerge, as has happened cyclically in the histories of human commerce, in spite of all the special drawing rights and myriad currencies that float flotsam-like upon the oceans of global liquidity. And I suppose that all those day-trading smartest guys, riding high on their speculative see-saws of  keyboard frenzy, in bubblesome combo with the methish high-freq hedgehogs,  will emerge as the new kings of the western-hemisphere hill when th detritus of international wealth settles into a pile, two or ten years from now.

Or maybe all of commerce, accounting, and wealth will go electronic, and those elusive gold reserves will be soldered as conductors  into smart circuitboards that will determine every person’s caste,  class and purchasing power when they’re standing in the checkout at World Mart.

… while Horatio Alger hides in an ally somewhere near MainStreet. Or, if you’re a Brit, HighStreet.

I’m not saying we should get back to the gold standard as a means to establish predictable value in the world marketplace. God knows I don’t have any of the stuff, except for the little ring that’s been on my finger for thirty-one years (which is the true wealth in this life.) But I do know that numerous entities and persons with assets are buying gold like its goin out of style, as it has done numerous unsustainable  times before. This feverish demand for the precious yellow stuff is driving up the price up to boot, in anticipation of fiat paper descending to its authentic, incendiary value.

Somewhere, somehow, when you least expect it, the battle between real wealth and perceived wealth will be settled in a showdown, maybe at high noon in the OK corral, or maybe in your own backyard.

Got heirloom seeds?

Glass Chimera