Currency reset

[Dan in MI]

I don’t know what else to call it.

The current change in the prices of things got me wondering.

I don’t remember one this bad except the mid 70’s. I know there was some version in the early 90’s and again ~2009.

Not sure what I am getting at beyond I don’t remember such drastic changes in the recent past “corrections.”

 

[Johnnu2]

What goes around, comes around.
I have no knowledge on the subject of $$$$$, BUT I can tell you:
In the late 60's I tried to re-finance a building my late father owned; the knowledgeable, MATURE bank manager told me: "Kid, you'll never see a 4% mortgage again in your lifetime. Appears he was wrong.
In the 70's IIRC, I had a mortgage at 17%. I figure that somewhere around my 108th birthday, I may see some more "impossible" things. Either way, I really never worry about stuff like that because 90% of the things I used to worry about came and passed right by me while I was watching TV.
J.

 

[Joe Chartreuse]

Since the dollar stopped being based on gold or silver there are no currency "changes" The dollar's value is based on faith in the strength of the U.S. government's ability to continue, and faith in it's ability and willingness to pay it's debts. Right now the dollar is not even in the top ten strongest world currencies. The only thing propping it up is it's position as a world bank currency. If that happens to change, say, to Euros or BRICS, our dollar won't be worth the old Iranian Real. Also dollars are supposed to be printed based on U.S. assets. If they are printed- as has happened lately- without any basis, ALL dollars lose value.
If this worries you, you are not alone. So far 12 states have made the use of precious metals as currency legal, and others are working on the same.

It's not just the tariffs that we are paying that is doing it, but also doubling the minimum wage almost overnight instead of in increments kicked things up as the economy compensated as it always has and always will. The wage doubling so quickly- wasn't even governmental. The biggest companies such Amazon / Whole Foods and so many others decided to do it that way on their own, and others followed. Unbelievable.

 

[DGW1949]

I don’t know what else to call it.

The current change in the prices of things got me wondering.

I don’t remember one this bad except the mid 70’s. I know there was some version in the early 90’s and again ~2009.

Not sure what I am getting at beyond I don’t remember such drastic changes in the recent past “corrections.”

What you are seeing is quite-normal for fiat currencies....If you care to look, the buying power of ours has presently dropped about 97% since the first FRN rolled off of the press after the Federal Reserve Act of 1913. If you care to research the matter further, there are several websites that show inflation rates throughout various years, decades, etc, up until today The important thing to note relative to what you are expressing though, is that the surges of the mid 60's, 70's and 80's were due to our central government taking our currency off of the old silver-backed system, and then later, defaulting on it's own debts that were to be paid in gold...In other words, our Country has become functionally bankrupt, so it's taking more and more of our so-called "dollars" to buy an x-amount of goods....and it's worth a bit less every time more is printed...I can only venture a guess as to how long it will be before it's value drops to zero, but I can say with certainty that it's not going to be much longer. That much is just simple common sense.

DGW

 

[Dan in MI]

I understand the fragility of our fiat currency. I guess what I’m getting at is the every 10 years or so big hit by “inflation.” The small annual increments don’t seem to be noticed but every ten years or so they go for a big hit. It just seems the hit of the 70’s and now seem to be larger than the average 10 year theft.

Much like the stock market. Every 10% loss requires 11% gain to catch back up.

 

[mirglip]

Since the dollar stopped being based on gold or silver there are no currency "changes" The dollar's value is based on faith in the strength of the U.S. government's ability to continue, and faith in it's ability and willingness to pay it's debts.

The dollar is also based on the media's ability to protect it from scrutiny. If the teevee watching, lottery ticket buying, pastry eating, fashion following, soda pop drinking masses knew what the Federal Reserve was, it's value would drop to zero overnight.

 

[Yaworski]

So far 12 states have made the use of precious metals as currency legal, and others are working on the same.

What does that even mean? We've always been able to exchange precious metals for goods and services. Will your property tax bill say "$2,000 or 1/2 oz gold"? Will McDonald's post prices in both dollars and silver?

 

[GasGuzzler]

2008 not 2009. Gas went to $4+ here in the land of oil (Texas), I bought a $5K tool box and a used car, my 401K lost half of it's DOLLARS (can't use the word "value").

 

[Kevin]

What does that even mean? We've always been able to exchange precious metals for goods and services. Will your property tax bill say "$2,000 or 1/2 oz gold"? Will McDonald's post prices in both dollars and silver?

And wouldn’t the ability to legalize precious metals as currency be a federal issue? Not state?

 

[Kevin]

I don’t know what else to call it.

The current change in the prices of things got me wondering.

I don’t remember one this bad except the mid 70’s. I know there was some version in the early 90’s and again ~2009.

Not sure what I am getting at beyond I don’t remember such drastic changes in the recent past “corrections.”

I don’t quite get what you’re trying to say? Are you talking about inflation and just a resetting of what people perceive as normal?

As with the stock market market, there are corrections every so often. And they usually just set a new base for what the stocks trade at. But I think you probably know more about that than I do.

 

[Jakeintexas]

Inflation — or currency devaluation— is exclusively caused by governmental action and public debts.

It’s important to realize that inflation acts as an inverse of interest. In other words it’s exponential (1+inflation rate) to the nth where n is time. Compounding on itself. A little goes a long way. The thought that a fed would desire 2% is absurd; the goal should be zero. In practice it’s higher than declared; excluding energy, food, and housing. The idea behind it to use inflation to erase public debt and decrease public pension payouts. But you never get something for nothing and this erases savings and makes people work more for less in that wages and COLAs lag inflation.

 

[Ale-8(1)]

Thanks for that link.

 

[Johnnu2]

YUP........... I KNEW ALL THAT...

J.

 

[mirglip]

Inflation — or currency devaluation— is exclusively caused by governmental action and public debts.

It’s important to realize that inflation acts as an inverse of interest. In other words it’s exponential (1+inflation rate) to the nth where n is time. Compounding on itself. A little goes a long way. The thought that a fed would desire 2% is absurd; the goal should be zero. In practice it’s higher than declared; excluding energy, food, and housing. The idea behind it to use inflation to erase public debt and decrease public pension payouts. But you never get something for nothing and this erases savings and makes people work more for less in that wages and COLAs lag inflation.

I'm no fan of Friedman. He takes the heat off the bankers and put's it on "Washington". He never reveals how the Federal Reserve is structured. I think he's just looking out for his tribe.

Also he states that inflation is caused exclusively by government. But that's only public debt. What about private debt? Doesn't that cause inflation too?

 

[Dan in MI]

I do this occasionally. I get an idea that I can't express properly until I start getting some feed back. I'll try to define it better.

OK we all know about the Creature from Jekyll Island. We know that $20 in gold was $20 in gold for ages until the great socialist confiscated private gold. Then they (the Fed and pre-Fed) slowly worked their way to completely removing gold from the system. ('71/72 ish)

The Fed takes a cut from us every year. Their stated goal is 2%. We know they manipulate the rate. At the same time they also slowly change how the rate is perceived by the public. They offer the cost of living number. Only they change how it is calculated by removing the big hitters (fuel etc...) a piece at a time to make the number look smaller than it truly is..

That means we (Americans in general) cruise along fat dumb and happy giving back 2%, then for some reason they trip something and we get a major shift in interest rates and prices. This often sets a new normal, but also sometimes just is a big bump that mostly drops to previous levels. I'll use a couple recent events as examples. (the numbers will be bogus as just examples)


**** 2009 - prices jumped a bunch let's say 8-10% Gas doubled but things slowly reverted to normal, or just a tad above normal. let's use 2-3% above the pre-event prices, and we cruise along and take it with minor headaches.


****2020-now - prices jumped 30-40% and they are slowly dropping but are going to, or have settled in the 15-20% range above previous levels.


What causes these cycles? Yes, the Fed, but how, or why?
-----Miscalculations in their predictions, manipulations, and their envisioned end result?
-----A specific greed/need they have but we are unaware of?
-----Simple greed by the ultra-mega rich that control the banks?
-----Is it to exert/take more control without anyone noticing? (hmmmm, maybe I just answered my question)
-----Is it just a form of profit taking like stock market dips? (with miscalculations?)

Hopefully this will get the discussion towards what I am trying to figure out, although it is still not well defined. (at least their are specific questions now )

 

[s4s4u]

From 2020 to now, inflation and price jumps are largely due to the gov't over-reaction to COVID.

Nearly a trillion dollars was "gifted" to people to compensate for lost wages that should have never been lost.

Flatten the curve.....right....

 

[Jakeintexas]

I'm no fan of Friedman. He takes the heat off the bankers and put's it on "Washington". He never reveals how the Federal Reserve is structured. I think he's just looking out for his tribe.

Also he states that inflation is caused exclusively by government. But that's only public debt. What about private debt? Doesn't that cause inflation too?

No. Private debt doesn’t cause inflation although private entities can pressure government officials (and the fed) to monetize government debt at an increasing rate which leads to inflation. Which benefits people who take out large amounts of private debt in that it erases that debt in terms of current money value and also negates the interest they’re paying on the private debt.

I don’t agree that Friedman lets the fed off the hook. The government debt just kind of sits there (although we pay interest on it) unless the fed prints money to cover it (which they do). Under the false premise of spurring economic growth rather than keeping a dollar’s value constant (which is their primary mission).

While the Fed is a private entity, there is an unholy alliance between it and government (and perhaps influential businesses) that sacrifices monetary value to plug cheap money.

 

[mirglip]

No. Private debt doesn’t cause inflation although private entities can pressure government officials (and the fed) to monetize government debt at an increasing rate which leads to inflation. Which benefits people who take out large amounts of private debt in that it erases that debt in terms of current money value and also negates the interest they’re paying on the private debt.

I don’t agree that Friedman lets the fed off the hook. The government debt just kind of sits there (although we pay interest on it) unless the fed prints money to cover it (which they do). Under the false premise of spurring economic growth rather than keeping a dollar’s value constant (which is their primary mission).

While the Fed is a private entity, there is an unholy alliance between it and government (and perhaps influential businesses) that sacrifices monetary value to plug cheap money.

Private debt introduces more money into the economy, so why do you and Friedman claim it doesn't increase inflation?
Has Friedman ever disclosed how the Fed is structured, showing where the money comes from, where the principal and interest goes, showing accounting examples of public and private debt so all can see and understand it?
Influence is a closely guarded commodity. The best yardstick to measure those who have influence is by what they omit.

 

[Yaworski]

And wouldn’t the ability to legalize precious metals as currency be a federal issue? Not state?

Maybe not, a chip is currency within the issuing casino.


Also, to be currency, there has to be be a standardized value so coins marked with a value would have to be minted.

I wouldn't take a lump of gold as payment for anything because I have no way of telling if it is gold or how pure it might be.

 

[bobski]

i know p-metal owners who when they buy, they drill into the bar to see if its gold or silver all the way thru. if you buy big gold or silver bars...youll see these holes on occasion.

 

[DGW1949]

2008 not 2009. Gas went to $4+ here in the land of oil (Texas), I bought a $5K tool box and a used car, my 401K lost half of it's DOLLARS (can't use the word "value").

Ah yes, the infamous "too big to fail" crash of 2008. I didn't loose anything out of my 401k on that one because I was in the "low risk-low return group". When I saw others loosing most (or all) of theirs though, I started pulling all of mine out and buying physical gold instead. I still kept my 401K active because Halliburton was matching a lot of what I was putting in....but...every time my account grew enough that I could get an after-tax check for $1000 or more, I'd empty it again and buy more gold....I kept that up throughout 2008 and on into most of 2009....At the time, everyone was telling me how crazy I was, but given that gold has since seen an increase in buying power of some 400% while at the same time my 401 was only growing by 3% a year, all I can say to that is that I should have bought more..LOL.

DGW

 

[wheelgun1958]

My brain hurts.

 

[mirglip]

Ah yes, the infamous "too big to fail" crash of 2008. I didn't loose anything out of my 401k on that one because I was in the "low risk-low return group". When I saw others loosing most (or all) of theirs though, I started pulling all of mine out and buying physical gold instead. I still kept my 401K active because Halliburton was matching a lot of what I was putting in....but...every time my account grew enough that I could get an after-tax check for $1000 or more, I'd empty it again and buy more gold....I kept that up throughout 2008 and on into most of 2009....At the time, everyone was telling me how crazy I was, but given that gold has since seen an increase in buying power of some 400% while at the same time my 401 was only growing by 3% a year, all I can say yo that is that I should have bought more..LOL.

DGW

I cashed mine in and bought silver at around $6.05 an ounce about 23 years ago. It sure looked like a no-brainer for a contrarian investor like me. I walked into the local coin shop pushing a hand cart and carrying a thick stack of $100 bills once a month. No one else seemed to be taking bullion off their hands. No regrets.

 

[mirglip]

Maybe not, a chip is currency within the issuing casino.


Also, to be currency, there has to be be a standardized value so coins marked with a value would have to be minted.

I wouldn't take a lump of gold as payment for anything because I have no way of telling if it is gold or how pure it might be.

The value denomination is troy ounces.
Green pieces of paper should have the same troy ounce denomination. But they don't because they aren't real money. Why should real money have a phony "dollar" denomination on it?

 

[mirglip]

i know p-metal owners who when they buy, they drill into the bar to see if its gold or silver all the way thru. if you buy big gold or silver bars...youll see these holes on occasion.

1000 ounce Comex silver bars require an assay to re-sell to comex, that's what the hole is about.
I can take two 100 ounce silver bars and ding them together and tell acoustically whether they are silver.

 

[Yaworski]

The value denomination is troy ounces.

I should block you but you're too entertaining.

 

[Jakeintexas]

Private debt introduces more money into the economy, so why do you and Friedman claim it doesn't increase inflation?
Has Friedman ever disclosed how the Fed is structured, showing where the money comes from, where the principal and interest goes, showing accounting examples of public and private debt so all can see and understand it?
Influence is a closely guarded commodity. The best yardstick to measure those who have influence is by what they omit.

Given a fixed money supply (by the fed) it’s not possible for private debt to introduce more money into the money supply (and as such absent governmental intervention to bail out a lender cannot cause inflation). The lender must have the money (or the good or service being bought) to begin with.

Let’s say you run a bar or grocery. You produce drinks or food and give those to someone on credit. You’re out those tangibles until the debtor pays you back (presumably with interest). The government’s not involved nor is there any change in the money supply. If a third party intervenes (like with a credit card company) it’s not materially different. The public money supply isn’t affected and someone is stiffed (whether it’s the retailer, credit card company / bank, both, etc) until the money is paid back. No change to inflation.

Where things CAN go awry is if there’s a massive default and the government / fed decides to get involved (namely through the credit card company which usually involves banks of some sort). If the government/fed stays out of it there’s no change to inflation.

This is what essentially happened during 2008. The government bailed out entities that lent money poorly (partially enabled by the government to begin with with the community reinvestment act which existed since Carter). Not surprisingly the fed would follow suit and do several rounds of quantitative easing (printing money). Which devalued currency by a factor of two during the years they did it (gold goes on bubbles and isn’t completely reliable but is a barometer of dollar value). Stable gold prices would go from 800 dollars an ounce at the onset to double that during the Obama administration. And during the various rounds of QE (even though there wasn’t much ‘official’ inflation declared).

So, no it’s not just the fed. While the fed is supposedly an independent (private) organization in practice it’s not. In 2008, Bernake (fed) and Paulson (government) would meet and hatch a plan. Overvalued properties would be ‘bought’ by the fed, cash would be printed to bail out the lenders (banks) and the taxpayers would have their currency devalued by a series of QE events injecting more money into the economy until the value of those fixed assets (property) climbed (due to inflation) such that they could be resold at face value (which was at the time seriously overvalued). The taxpayers absorbing the difference between the current inflated value of the properties and the real value of them. This TARP was responsible for the Obama currency devaluation and was a joint effort between the treasury secretary and the fed.

So, no it’s not the fed. It’s the unholy alliance between the fed and government which causes inflation. Causing the fed to abandon its primary mission of keeping a dollar a dollar.

Even Trump wants the fed to lower interest rates (ie print more cheap money) even though we still have significant inflation.

And it gets even better ….

Since Clinton (or maybe even before) social security has been REQUIRED to invest any surplus debt not in something safe (like CDs or gold or whatever) but buy government debt. So for years surpluses in SS have been funding public debt (this was that lockbox idiocy that Algore was using as propaganda). Usually it made more than it sent out in payments and the surplus was spent on buying government debt treasuries. That stopped under Biden (due to the increasing amount of people receiving SS benefits for whatever — potentially even being laundered to illegals) and now SS is ‘cashing in’ those vouchers; at present spending rates they run out around 2032. To boot, all those treasury vouchers now (with SS having a negative cash flow) need to be paid by a government 38 trillion in debt. Guess how ? Monitizing even more debt.

 

[mirglip]

Given a fixed money supply (by the fed) it’s not possible for private debt to introduce more money into the money supply (and as such absent governmental intervention to bail out a lender cannot cause inflation). The lender must have the money (or the good or service being bought) to begin with.

Let’s say you run a bar or grocery. You produce drinks or food and give those to someone on credit. You’re out those tangibles until the debtor pays you back (presumably with interest). The government’s not involved nor is there any change in the money supply. If a third party intervenes (like with a credit card company) it’s not materially different. The public money supply isn’t affected and someone is stiffed (whether it’s the retailer, credit card company / bank, both, etc) until the money is paid back. No change to inflation.

Where things CAN go awry is if there’s a massive default and the government / fed decides to get involved (namely through the credit card company which usually involves banks of some sort). If the government/fed stays out of it there’s no change to inflation.

This is what essentially happened during 2008. The governments bailed out entities that lent money poorly. Not surprisingly the fed would follow suit and do several rounds of quantitative easing (printing money). Which devalued currency by a factor of two during the years they did it (gold goes on bubbles and isn’t completely reliable but is a barometer of dollar value). Stable gold prices would go from 800 dollars an ounce at the onset to double that during the Obama administration. And during the various rounds of QE (even though there wasn’t much ‘official’ inflation declared).

So, no it’s not just the fed. While the fed is supposedly an independent (private) organization in practice it’s not. In 2008, Bernake (fed) and Paulson (government) would meet and hatch a plan. Overvalued properties would be ‘bought’ by the fed, cash would be printed to bail out the lenders (banks) and the taxpayers would have their currency devalued by a series of QE events injecting more money into the economy until the value of those fixed assets (property) climbed (due to inflation) such that they could be resold at face value (which was at the time seriously overvalued). The taxpayers absorbing the difference between the current inflated value of the properties and the real value of them. This TARP was responsible for the Obama currency devaluation and was a joint effort between the treasury secretary and the fed.

So, no it’s not the fed. It’s the unholy alliance between the fed and government which causes inflation. Causing the fed to abandon its primary mission of keeping a dollar a dollar.

Even Trump wants the fed to lower interest rates (ie print more cheap money) even though we still have significant inflation.

And it gets even better ….

Since Clinton (or maybe even before) social security has been REQUIRED to invest any surplus debt not in something safe (like CDs or gold or whatever) but buy government debt. So for years surpluses in SS have been funding public debt (this was that lockbox idiocy that Algore was using as propaganda). Usually it made more than it sent out in payments and the surplus was spent on buying government debt treasuries. That stopped under Biden (due to the increasing amount of people receiving SS benefits for whatever — potentially even being laundered to illegals) and now SS is ‘cashing in’ those vouchers; at present spending rates they run out around 2032. To boot, all those treasury vouchers now (with SS having a negative cash flow) need to be paid by a government 38 trillion in debt. Guess how ? Monitizing even more debt.

I don't think the money supply from the Fed to private loans is fixed at all. But since there is no transparency all we can do is argue "my information is better than yours" and information on both sides are often supplied by the same entity.
I think the unholy alliance is already bought and paid for before it begins. The stakes are too high to include any disinterested third parties. Any Congressional oversight is most certainly the property of the banking elite. They might stage conflicts between government and the Fed to make us think they aren't in bed together, that there is accountability, but there is no way to prove or disprove the theater.
The Feds primary mission is to serve the interests of the banking elite in any manner they see fit, let's not be swayed by stated intentions.
If it were anything like they pretend it is, they would have no reason to fear transparency.
The Fed is a secret monetary system. There is no banking or government document which explains coherently how the Fed is structured. All they provide is clever obfuscation.
You could go to college and get a degree in economics and know less than we have discussed in this thread because they have covered those bases.
What about the final path of the principal? Supposedly it gets "removed from circulation". If I were in charge of removing principal from circulation, I would use that money to buy all the information sources that have any capacity to explain what I'm really doing with the principal.

This is the closest thing I have been able to find anywhere which explains the structure of the Fed in a manner intended to inform rather than confuse and omit.
https://hblazer.substack.com/p/comprehensive-foundational-info-on

 

[Jakeintexas]

I don't think the money supply from the Fed to private loans is fixed at all. But since there is no transparency all we can do is argue "my information is better than yours" and both sides are probably supplied by the same entity.
I think the unholy alliance is already bought and paid for before it begins. The stakes are too high to include any disinterested third parties. Any Congressional oversight is most certainly the property of the banking elite. They might stage conflicts between government and the Fed to make us think they aren't in bed together, that there is accountability, but there is no way to prove or disprove it.
The Feds primary mission is to serve the interests of the banking elite in any manner they see fit, let's not be swayed by marketing.
If it were anything like they pretend it is, they would have no reason to fear transparency.
The Fed is a secret monetary system. There is no banking or government document which explains coherently how the Fed is structured. All they provide is clever obfuscation.

This is the closest thing I have been able to find anywhere which explains the structure of the Fed in a manner intended to inform rather than confuse and omit.
https://hblazer.substack.com/p/comprehensive-foundational-info-on

I think it’s pretty obvious that the government and the Fed are in bed together. Not just because the President appoints its members but in every action they do. If there was any question about it that should have been erased in the actions of the Fed post 2008. But the signs of gross monetization of government debt by the Fed existed since at least the mid 60s/early 70s when the US went off of any semblance of a backed currency and went into straight fiat currency. Which was obvious to Friedman when he made the video in the link.

And likely has been the case since the 30s. It just got its big boost once our currency was wholly unmoored from any form of objective backing. Ayn Rand wasn’t shy about the dangers of a fiat currency and she wrote her stuff in the 50s IIRC.

Equally obvious is that Wall Street and bankers are in bed with both. Why else would Bear Sterns and Lehman collapse while Goldman Sachs et al survive and be bailed out ?

 

[Yaworski]

I've been wondering, does Mr. Glip ever post anything about Rugers or any guns or does he just come here when he escapes from his foil lined room?