Category Archives: The Nature of Money

Is Mexico Going to Back the Peso up with Silver?

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A silver backed peso has been talked about for a few years but now maybe things are heating up again.  Mexico has vast silver mining capacity compared to many other countries and a silver backed peso could give Mexico a huge economic advantage.  In fact, any country backing their currency up with a precious metal would have a large economic strategic advantage because of the rampant devaluations going on around the world by each currency’s respective government (or central bank).  A precious metal backed currency would be a safe harbor.  The U.S. dollar used to be the safe harbor for the world because of the size and health of the American economy, and the America’s superpower status.  Today, things have changed, U.S. government has gone from the world’s greatest lender to the world greatest debtor.   The U.S. government is trillions in debt and is seen as totally corrupt not only by many of its own citizens but from people around the world.  The last 20 years have seen boom after boom created through monetary inflation.  Each boom has resulted in a bust that has destroyed trillions in capital through the misallocation of resources through Federal Reserve manipulation of interest rates.  This has not only affected our economy, but it has affected the economies around the world as well.  Now, America’s major export is cheap dollars sent around the world to buy goods that American’s would not be able to afford in a real world economy.    The U.S. dollar is artificially demanded because of its role as the world’s reserve currency and its petrodollar status.  Now things a changing, the tide is turning.  There is no way out. The economic day of reckoning is coming.  The U.S. Federal Government has no way to pay off its debt and its future liabilities. Governments around the world know this.  No government wants to be the first country to pull out of the dollar but no country wants to be the last either. Mexico wants out.  Mexico has a way, a silver Peso.   Will Mexico’s banking interests allow this to happen?  Will the U.S. government?  I remain doubtful, I think it will come from the east.  Either Russia or China, but who knows.

 

 

The FED pumped in 7.7 Trillion

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The Federal Reserve pumped in 7.7 trillion into the banking system in 2008 to keep the American banking system afloat.  This had been secret information until Bloomberg used a freedom of information act request to get these numbers released (thank god we still use the FIA).  This number is almost unimaginable.  For those that believe that the Federal Reserve should not be audited, they should really think about what a mind boggling sum of money this is.  I heard not so long ago that a trillion dollars in one thousand dollar bills would create a stack of money 67 miles high. 7.7 trillion would make that stack 515 miles high.  I read on another website what 7.7 trillion could buy:

  • 199 Warren Buffets.
  • 22 Apples (the multinational corporation, not the fruit).
  • 10 Manhattans (the major metropolitan area, not the cocktail).
  • 71 times the cost of Hurricane Katrina.
  • 76 percent of the value of all the gold mined in human history.
  • About half the entire U.S. national debt.
  • $24,624 for every man, woman and child in the U.S.

The whole idea that the country and the stock markets are concerned about our national debt when the Federal Reserve can create half of that amount at the stroke of a pen without any congressional oversight is almost unbelievable.  I should not have to remind people that at least a couple trillion went to foreign banks!

The inflation from this huge surge of liquidity into the monetary system has not been felt as of yet in the economy.  The banks are still holding onto large amounts of this money.  But, this can not last forever.  When this money does start finally rushing into the economy, we can expect a massive surge in prices in all the items that people need most, like food and fuel.  If this is not a large enough number to make people wonder about the stability of our banking and monetary system, then I do not know what is.  If you have the resources, you should invest some money in commodities.  If you do not, you should try to buy the necessities that you use everyday ahead of time instead of waiting for the coming inflation. If you like stocks, you should buy them in commodity rich countries with strong currencies like Norway, Australia, and New Zealand.  Or maybe you just want to sit like a bump on a log and trust our wise Federal Reserve bankers.  The choice is yours.

 

 

 

The Nature and the History of Money

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I have a bachelors degree in history.  But, after doing some research I realized that I was not taught anything about the history of money and, to be quite honest, I didn’t even really know what it was fundamentally. Money is literally the lifeblood of civilization.  When it is disrupted or tampered with, misery results.  Although money is so important to our daily lives, we often think little of it.  After all, it is always there and it can always buy stuff, right?  Monetary history is probably the most important history of the United States.  Nothing today has shaped our country more than money has.  It has been the topic of almost every presidential debate from George Washington until World War II. Each political party and philosophy had its own opinion on the nature of money. Thomas Jefferson, Abraham Lincoln, William Jennings Bryan all discussed money during their presidential campaigns or while they were in office. This history is almost completely lost on the American people, though it was not too long ago when it was regularly discussed by the public. Only in the last 50 years has it become taboo to talk about the nature of money itself.  But this social norm is changing.  Here are some good resources to start your study of money’s history.

 

All of Rothbard’s books are excellent at describing the nature of money.

www.mises.org/resources/6131/Case-for-a-100-Percent-Gold-Dollar-The

www.mises.org/resources/617/What-Has-Government-Done-to-Our-Money

A History of Money and Banking in the United States

 

Money Banking and the Federal Reserve (this is a good video from the Mises Institute)