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http://dailyreckoning.com/fiat...

Unfortunately, it is this kind of thinking that has caused California to be flat broke. You thought this last economic downturn was bad, just wait until California runs out of ways to juggle its debts and declares bankruptcy. While this article is a bit dated, this article seems to cover it nicely (and there are many more like it).

This isn't to say a good earthquake warning system isn't money well spent simply that California should be less knee jerk about all the projects that they spend their citizens money on.

> We need a huge shift in how we create and manage money. We need to drastically shrink the parasitic financial sector, wipe out the loans that represent most of our money supply. And replace the money created with credit cards and home loans

Indeed.

What's funny is that there _already_ are solutions to this problem in other sectors, **thousands** of years ago, that we blindly ignore the wisdom off, all in the name of greed.

Ask any farmer if they constantly have their land produce or if they allow it lay fallow one year so it can regenerate.

Jordan Mechner in this "How I applied my life to making games" says "Burnout can be a good thing. It allows your creativity to recharge".

> with government fiat currency, given directly to the people.

Fiat currency is exactly part of the problem, not the solution.

**Every** fiat currency has failed. Why do you think "this" time will be any different??

* http://dailyreckoning.com/fiat...
* http://mises.org/sites/default...

The 2 biggest problems with the financial sector is:

* Usury
* No debt forgiveness every X years, where X is 50 or 100 years, etc.

  Wipe out usury and we'll be making a step towards a stable economy, not magically pulling money out of our asses that can never be repaid.

My point was that people who advocate the purchase of gold know that in the long term the price of gold in terms of dollars or other fiat currencies has never gone down. Gold is a good means of preserving wealth, but not for deriving income from such wealth.

Excellent point on wealth versus income, I see you know your balance sheet. I was soul-searching to discover why gold-over-time comparisons tickle my funny bone, aside from being generally perverse. Not so savvy as Karl Denninger who has his reasons to be bearish on gold as an investment or plaything. As one who has never owned any gold or even more than a fistful of dollars I don't implicitly trust either, so I find it easy to make light of the choices that people of wealth are facing right now.

While pondering the dollar and gold I grew bored and made a sandwich, and contemplated that instead. Bread you can sink your teeth into, and throughout history love of it has transcended love of fiat money and precious metal.

Looking into bread vs. gold, I found this, "it is said that an ounce of gold bought 350 loaves of bread in the time of Nebuchadnezzar, king of Babylon, who died in 562 BC" (cited here)

Fascinating! What if you view bread itself as the exchange pivot plotted against on gold (for the US via the dollar)? A quick search did not reveal anyone who had done it, so I gathered gold fixes and one-pound-loaf statistics for the hundred years of 1913-2012 and created a gold:bread ratio. How many loaves/pounds of bread 'buys' an ounce of gold. Here is my resulting chart and data.

So in 1913 the gold:bread ratio was ~337.9 which is comparable to Nebuchadnezzar's time. It stayed more or less in the same magnitude until the 1971 Nixon Shock when gold heads through the roof. Bread rises steadily but gold's rise is meteoric.

1980 is the worst-ever year for bread, with ~1,281 loaves to purchase an ounce of gold. We're so used to seeing things from the dollar/gold point of view but 1970 and 2001 were really great years for bread, with gold purchasing power twice what it had in Babylon.

Then we went to war and everything went to hell. But the gold:bread chart does offer one surprise: even though gold is massive right now, the actual gold:bread ratio is similar to what it was in 1980 before it started to fall.

So what we need right now is a Reganomics sandwich.

All fiat currencies in history since the roman invented them have collapsed. Only to be replaced by gold and silver. They always end up the same way: government starts printing a lot of it until hyperinflation kicks in and people abandon it in favor of more stable alternatives. The current fiat currency is strictly speaking only 40 years old, and if history is any indication, it is destined to fail.

It is perfectly possible to save more than you spend. Simply because people do not save money, they save capital. Meaning, they invest the money, the accumulate stock, open new companies, accumulate commodities, etc. The amount of money is irrelevant so long it remains constant. People are not richer because there is more money, they are richer because there is more capital.

There is a reason gold has been the currency of the world for thousands of years, and has always come back after every failed fiat currency.

Here are just a few samples of how failed this system has proven to be. It isn't hard to find hundreds more.

You are far closer to the truth than you think. Cash transactions over 5000 Euros are now illegal in Italy. Greece also wants to make cash illegal for some transactions. Oh it's all being done in the name of preventing crime and money laundering, but it's fairly obvious that since electronic transactions are much easier to monitor, governments are salivating at the thought of forcing us all under their microscope.

First they make a law but only apply it to large transactions that people don't normally pay cash for anyway - buying a house, or a car. Then two things happen. First, they can move the goalpost closer to zero over time. Secondly (and this is the magic part), inflation will move everyone over the barrier over time anyway. In 40 years or so when a grocery bill is 5000 euros, or 100 years when a pack of chewing gum is 5000 euros, then effectively all cash transactions will be illegal without actually having to do anything at all. Governments are dangerous - the only thing they can ever do is take from you. They can never give you something you didn't already have. But people just don't care.

But...

They paid back the TARP with money they got from quietly selling illiquid MBSs to the Federal Reserve.

http://dailyreckoning.com/outing-ben-bernanke/

So, yes, the Treasury got paid back. But now there is a bunch more junk on the Fed's balance sheet that will eventually have to be written down.
But Goldman came out OK, so that's nice.

The dewy Democrat rolled along smartly in his new "change-mobile." Then, under pressure from the knuckleheads in his own party, he reversed to pick up that babbling hack, Joe Biden, as his running mate - and ran right into his own fraud. Biden is to Obama what Monica Lewinsky's blue dress was to Bill Clinton - the dumb thing that reveals the spoken lie.

Biden demolished his own presidential campaign in 1987 by pretending to be British Labor politician Neil Kinnock. Not only did he recite Kinnock's lines about being the first in his family to go to university, he also stole his identity, claiming that his father had worked in the coalmines. His own father was actually a polo-playing car salesman from Baltimore. But if the media hadn't stopped him, he probably be collecting Kinnock's pension by now.

Apparently, the better you know Biden, the less you like him. In his home state, 97% of voters refused to back him in the presidential primary. But that was Biden in the '80s. In the '00s, Biden is, supposedly, on the ticket because he knows who Saakashvili is. In truth, he's there because the old nags in the Democratic Party wanted someone they could trust on the ticket - a real go-along, get-along backslapper. They turned to Biden, in other words, not for change, but to avoid it. And now, Obama and Biden are trailing in the polls. Americans don't mind a liar in high office; but they're suspicious of one who can't keep his lies straight.

Meanwhile, over in the Republican camp, that tough old salt, McCain, has come about smartly, outmaneuvering the Dems by choosing a baroque woman from Alaska as his #2. But here too, he's run into his own humbug. If military experience were so important to the nation's top office, you'd think he - at 72 years old - would want a serious chief mate to take command if he were struck down. Ms. Palin's military experience is limited to 22 months as captain of the Alaska National Guard. Then again, she might be an improvement over McCain anyway.

His right to rule, McCain says, comes from his superior command of the military situation. But the claim looks counterfeit. During his tour of duty McCain, lost five U.S. Navy aircraft, four in accidents, one in combat. The first one went down in Corpus Christi Bay when he was practicing landings. The second crash occurred over Spain, when he was flying too low. He took out some power lines and bailed out. Number three was wrecked when he was flying into Philadelphia for an Army-Navy football game. The fourth one, at least, was not his fault. An accidentally-fired rocket hit his plane when he was waiting to take off. The resulting explosion killed 134 sailors, destroyed 20 aircraft and nearly sank the ship. Finally, in 1967, he got shot down, roughed up.and then, by his own admission, collaborated with the enemy in order to save his skin. Maybe getting shot down was just bad luck too, but sailors are a superstitious lot. They'd probably give the heave-ho to this right Jonah rather than set sail with him as captain.

Yea 'Peak Oil' is suck a lie. If prices got high enough we'd just mine the US oil shale reserves which are 1.5 Trillion Barrels (5 times Saudia Arabia's reserves). It's just too expensive of a proceedure right now. http://www.dailyreckoning.com/rpt/OilShale.html

After the rate cut that the Fed announced, fellow-liberal Jon Stewart asked Greenspan pointed questions of whether America is a free economy given the invisible hand of the Fed that favors "investment over work", these guys have been wondering what kind of "flation" we will have to live with.

The Fed chose to cut rates to prevent deflation. The Slate article seems to suggest that deflation has only been postponed and companies will be hit in the long term. But the price cuts are held often - think Thanksgiving or Labor day weekend sales. The fact that there is (almost certainly) a chance to get products way cheaper at a certain point in time does not mean that sales at other time will slow down. The iPhone price cut debate is over - atleast on Slashdot. We all agreed that there will always be early adopters who don't mind paying extra to be the first ones to own a cool piece of gadgetry. That is the very definition of early adopters.

What is capitalism worth when an increasingly socialist/fascist government can just print itself as much money as it needs? How can you call a system capitalism when it abandons the primary tenet of capitalism, it's golden rule: TAANSTAFL (There ain't no such thing as a free lunch).

Reckoning day is coming, and that right quick!

But that's only the beginning of why pennies ought to be eliminated.

Oh, how I long for the day that a penny could buy something meaningful...

Rather than focusing on waging war against the poor humble penny, why not focus your attention on the federal policies that have made it nearly worthless? I'm talking about perpetual deficits and the federal reserve printing 'dollars' like there's no tomorrow.

If we had a rational monetary system in the U.S., there couldn't have been a housing bubble, nor a tech bubble... Take a look at this graph of the (m3) money supply - there is an inflection point is right around 1/1995, when the federal reserve started 'printing' money. The tech bubble followed soon thereafter. After that bubble popped, all that money started flowing into housing. Now a lot of people are getting screwed because they can't afford their two investment houses and the condo in the mountains, and can't sell because they're now upside down. Sure, it's their own fault for overextending themselves, but it's mainly the bank's fault for lending them the money to make it possible.

Excellent analysis. I've just one little point that I'd like to reply to:

You americans are spending your capital, and taken to it's extreme it means that you will no longer own your economy.

'We [poor] americans' are simply playing along in an economy that's rigged to benefit bankers and globalists, mostly because we don't know any better, and partially because it's hard to break out of the trap when 'everyone else' doesn't realize that there's a problem.

The banker/populace tension really goes back to the revolutionary war, according to Misdirection Conspiracy (link in this post. When word that the british had surrendered spread to New York City, people went skipping through the streets, chanting how the colony had kicked the mother country out... But the banking class, who enjoyed a certain degree of privledge under british rule, muttered under their breath: "but we like the british...", and starting plotting America's return to the British Empire. War of 1812, Rhodes Scholarships (Bill Clinton), Bilderberg, etc.

One objective has always been to establish a national bank. I'm a little sketchy on ups and downs of the national bank, but the Federal Reserve bank is the current incarnation thereof. It's supposedly "public", but the congress only gets to appoint the board as figureheads, and the bankers choose acceptable candidates anyways, so the "congressional oversight" is meaningless.

This is a long-term process, so don't get all disappointed when the economy doesn't assplode next year.

It's taken a very long time to get to where we are today (most of a century), and I'm sure the end of the present economic order is very near - certainly within 6 months. Then again, we might see a 1929-style "black thursday" in October, what with the way housing & everything else is breaking down. The media (owned by the banking class) try to hide the signals that recession is imminent, but independent analysis online is getting the word out to people that seek. See Mish's blog, the Daily Reckoning, etc.

Let me clue you in, pal... if everyone abstained from credit cards whose income was highly vulnerable, the economy would tank and your comfortable, pull-yourself-up-by-your-bootstraps universe would collapse anyway. Our economy lives and dies by consumer credit card spending: it is that huge a factor.

Ah yes, the fabled "consumer economy". Mainstream Media tells us that it's alright that the other half of the economic equation, production, has mostly moved to China in recent decades (... due to mismanagement of the economy by the Federal Reserve, but that's another post). They say this transfer of production is alright because we now have a "service economy".

The main problem, as I see it, is that China doesn't much need our "services", and the U.S. economy is now in the process of collapsing (beginning with the housing bubble). There are consequences for record budget and trade deficits, you know.

The collapse of Ford and General Motors will mark the acceleration of the trend, as hundreds of thousands of Americans depend on those two giants for their paychecks. General Watch also chronicles the decline and fall of General Motors.

Other sites whose economic analysis I've come to appreciate include The Daily Reckoning and Mish's Global Economic Analysis.

I myself am slowly running up the balance on my credit cards. Used to pay 'em off every month, but I'll need supplies for when the banking system goes, and there will be so many "bad debts" that I expect no one will come collecting. I'm not buying frivolous crap, mind you, just some bulk food items and other "stuff" I think will be useful.

I usually give links to back up what I say...

See John Perkin's Confessions of an Economic Hit Man for more on the Feral Government's response to the 70's oil crisis. Before "we" got involved, the Saudis let goats eat their garbage, because they were all so good that none of them would stoop to the level of garbage collector. Now they import asians to pick up the trash. And so on...

The commentary on the petro-dollar were largely inspired by a recent Freedom Report from Texas congressman Ron Paul (not online at that site; I got a hardcopy in my now-deceased Grandmother's mail earlier this year - March or so?). I don't have my copy handy, and the scan is on another computer. But this looks like it might be what I read: The End of Dollar Hegemony - Part I, Part II

I usually give links to back up what I say...

See John Perkin's Confessions of an Economic Hit Man for more on the Feral Government's response to the 70's oil crisis. Before "we" got involved, the Saudis let goats eat their garbage, because they were all so good that none of them would stoop to the level of garbage collector. Now they import asians to pick up the trash. And so on...

The commentary on the petro-dollar were largely inspired by a recent Freedom Report from Texas congressman Ron Paul (not online at that site; I got a hardcopy in my now-deceased Grandmother's mail earlier this year - March or so?). I don't have my copy handy, and the scan is on another computer. But this looks like it might be what I read: The End of Dollar Hegemony - Part I, Part II

"And as an institution degenerates, so do the attitudes and habits of the people who run it. Investors, for example, come to think that they want companies to deliver 'shareholder value' - and deliver it right away. They want the easy money, the fast money. So, they only care about quarterly results and what happens to the share price. That's what those financial news programs on TV are all about. They report the latest quarterly results and then, they watch investors' reactions. If a company doesn't come up with good numbers, investors dump it. Is that capitalism? Well, maybe, but it's of a particular sort. It's a kind of casino capitalism where everyone hopes to get rich, but not by genuine work, investment or innovation.

"The managers - who are rarely real capitalists or real entrepreneurs themselves - have the same attitude. They want to get as much as they can out of the business for themselves and then move on. So, it's no wonder that no one wants to make the hard, long-term investments necessary in order to compete in the auto business. Everybody just wants something for nothing...as soon as possible. The unions want their health and retirement benefits. The executives want their golden parachutes. Investors want the share price to rise. Who really cares about the auto business? So, everyone borrows, spends, refinances; they watch stock prices and want to know how much the house down the street sold for. Save money? Invest for the long term? They wouldn't dream of it.

"And it gets worse. Gradually, the whole society becomes more and more corrupt - everyone has to lie and delude him or herself in order to keep up pretenses."
-- Something Wicked This Way Comes -- Bill Bonner

Thats just silly - the US has lots of interest in Canadian tar sands - Dick Cheney has visited them several times within the past year...

As for how much oil is extractable from them, thats the subject of a lot of debate - the process involves a lot of natural gas and north american natural gas production is in decline. There are some plans to start building nuclear power plants in Alberta just to run the extraction process...

Even the most optimistic projections of Canadian government don't show more than 3 million barrels per day being produced from tar sands by 2025 - current consumption is over 80 million barrels - even a small depletion rate for regular oil will result in a massive deficit in 20 years time (part of which will be made up for by coal to liquids plants).

http://dailyreckoning.com/Featured/King021406.html

http://peakenergy.blogspot.com/

• http://www.fxnetworks.com/shows/originals/oilstorm /main.html
• http://www.dailyreckoning.com/Issues/2005/DR070905 .html
• http://www.imdb.com/title/tt0461695/

"If you didn't see the movie (when it aired in mid-June), here it is in a nutshell: a category four hurricane destroys a vital pipeline in the Gulf of Mexico...panic sweeps of the nation...speculation drives the price of crude higher and higher...U.S. government turns to Saudi Arabia for oil...Saudi extremists commit terrorist attacks, killing 300 American oil workers...America sends troops to Saudi Arabia...still major lines at gas stations...Americans begin to turn against each other...the U.S. government decides to turn to Russia for oil...the Russians help in return for an investment in the upgrade of their pipelines...oil falls from it's high of $153 a barrel down to around $77...and all is right with the world."

I'm kidding, of course. (I have to laugh or I'll cry, my insane girlfriend has been going crazy with our joint credit cards lately, including one she opened without telling me about it. Yeah, it's identity theft, but if I'm not willing to put her in jail for it, I'm responsible for the charges. I also imagine that, now that I know about it and I haven't done anything about it, it won't matter if my job goes to the "global south" and I try to press charges then.)

http://www.financialsense.com/ http://www.dailyreckoning.com/ http://www.lewrockwell.com/ A number of sites out there with plenty of information explaining how Federal Reserve policies will be probably be very disasterous. We have a centrally managed economy, make no mistake, and the devaluation of the dollar thanks to a whirlwind of easy credit (thanks Federal Reserve!) over the last 3-4 years will have serious ramifications.

You're looking at the wrong libertarians.

Allow me to recommend a very insightful bunch who
definitely understand the various forms of fraud Governments can play on people:

The Daily Reckoning

In addition, the very statistics our government uses to compile thase numbers are flawed. The quote below comes from The Daily Reckoning

"By now my readers should have a PHD (pretty high disdain) for Capitol Hill math," writes Crudele. "This one, though, is a cake taker. I'll translate: Included in the 112,000 new jobs in January were 76,000 jobs that supposedly exist because people who weren't hired in December couldn't be fired in January. Got that? They didn't get hired in December, or fired in January, so they showed up as new employees in January as a statistical fluke. So, really there were only an abysmally small 36,000 new jobs in January."

In other words, the 76,000 jobs are a fraud. "Weak holiday hiring," wrote the Labor Department in its release, "... meant that there were fewer workers to lay off in January, resulting in seasonally adjusted employment gains for the month." The key words here are 'seasonally adjusted' - meaning that although holiday hiring was weak, government quants went ahead and added imaginary seasonal jobs to the total figures anyway. [unquote]

So don't tell me that the unemployment numbers are going up. The real indicator of new job growth is the number of overtime hours being worked. When that number starts getting bigger then it indicates an increase in jobs is about to occur. But overtime hours have been flat for months. These "lower unemployment" numbers are a total fraud.

To paraphrase an article I read their recently, You can no more understand the modern world without understanding econimics than you can understand the renasance without understanding religion.

For instance they recently had a great article on the real nature of deflation. It's contraction of the money availble to the system and a not directly related to prices falling (although that is a possible side effect.) Despite Greenspans rantings, It is actually a healthy and normal good thing.

If you look through their cast list you will see it is quite an impressive list of economics professors, market anaylists, politicians, and venture capitalists. They mention Linux as an inevitable market motion too, which is always a good sign. ;)

To paraphrase an article I read their recently, You can no more understand the modern world without understanding econimics than you can understand the renasance without understanding religion.

For instance they recently had a great article on the real nature of deflation. It's contraction of the money availble to the system and a not directly related to prices falling (although that is a possible side effect.) Despite Greenspans rantings, It is actually a healthy and normal good thing.

If you look through their cast list you will see it is quite an impressive list of economics professors, market anaylists, politicians, and venture capitalists. They mention Linux as an inevitable market motion too, which is always a good sign. ;)

Jim Davidson & Lord Rees-Mogg also publish a monthly newletter, parts of which are available on-line at the Daily Reckoning, although this is mostly investment-oriented.