Gresham's Law: Take the Dollar Back to "Good as Gold"

Gold bugs have been called a little bit nuts at times and often discredited by the "real" market makers since gold doesn't really "produce anything."  (Referencing to Buffet and others saying that gold is only a hedge and that it has no productivity value).

No, the shiny yellow metal may not have a lot of productivity appeal (more than that of making a lot of coins, bricks or jewelry).  Though, recently, even mainstream publications have been running editorials calling for a return to the gold standard.  The mere fact that a blogger for Forbes is saying we need a return to some form of gold standard is telling in and of itself. 

I've made no bones about being a fan of the DailyReckoning.com who has made a simple case for years on how "gold takes away the meddlers' ability to meddle."  In one of their posts today, they discuss how a man has been convicted of coining his own silver "Liberty Dollars" in an effort to circulate them and have them compete with the Federal Reserve Notes.  Obviously, this landed the man in jail but oddly enough the charged levied against him by using "The Constitution – Article 1, Section 8, Clause 5 – gives Congress the power to issue money," disappeared at the trial.  As Bill Bonner of the DR notes, "Apparently, it makes it a federal offense to compete."

So, that leads me to the big hitter of this post.  While several states have been contemplating coining their own money (too which we are sure the FedGov will backlash), Utah has become the first state to buck Gresham's Law by removing the tax implicating penalties associated with the float of gold's price.  (After all, the dollar floats too but only in the devalued form of cotton against the rising cost of goods). 

While I am not a personal gold bug (as finances and commerce still have to be conducted in the worthless cotton/linen mix), I would feel far more secure and happier if I had some shiny "dollar" hedge of my own.  After all, Warren Buffet is correct, gold is just another store of value that has no productive attributes, it just means that the big .gov and its crony / zombie capitalistic brothers can't stealthily steal from me as much.  I think I speak for most of America by saying that we just want the ability to be able to pay our bills and not have to chose between food, heating oil, or mortgage payments, as our wealth is wiped out on the efforts to default the debt. 

Finance Friday (In Short form): Virginia Alt Currency

As I get back into the swing of things for the new year, I will get back to some meaningful finance Friday posts, but this one could NOT go over looked for the week.  The Virginia State Legislature has created a subcommittee to study an alternative currency to the US Dollar should it fail to remain stable (haha as if it is stable) and disintegrates into a black-hole.

When states start to look at currency alternatives, as well as Bullion Vault running out of gold and silver, and the US Mint hitting it's highest level of sales of silver ever, it might be time to rethink green backs. 

QE 2 & Monetary Treason; A Tale of a Banking Coup

We find ourselves roughly 96 hours away from the close of the polls on potentially the biggest election of our lives.  Unfortunately, we also find ourselves roughly 110 hours away from the biggest announcement the Federal Reserve has ever made.  The perverse part is, the results of Tuesday will largely be outweighed by the actions that the Banking Cartel takes starting on Wednesday.  The Banking Coup of the United States that will start with the QE2 on Wednesday will make South American military coups look like bake sale fundraisers by comparison.  So continues the tail of our decline.  

If you’ve been reading and following along, we have been talking about a lot of financial items over the course of the last week.  Hopefully my readership has picked up on the feed burner known as Zero Hedge and has been reading their raw and unfiltered reality that is our crackerjack economy.  So it should come as no surprise that Helicopter Ben’s Federal Reserve has ceded all of its authority to the primary dealers of market securities.  Effectively, the Fed is dead, and Zero Hedge isn’t the only one to opine (though not so openly) as to the conclusion of these un-Constitutional facts.  

Are we in the early stages of a USA, Weimar Republic?  Considering Congress has failed to do its Constitutional duty for the last 80+ years and regulate monetary policy and our currency, the writing appears to be on the wall.  I am pretty sure that Thomas Jefferson warned us in the early years of our country that a Central Bank’s singular control of the money supply was more dangerous to freedom and our republic than any foreign enemy could ever become.  What would he have said about an all out banking coup?  The primary dealers telling the Fed, directly, how much money to print and pump is the kind of action that we would expect to see in Zimbabwe and other banana republics, not the United States! 

Is this the story of our demise?  Rich Wall Street shysters make their shills at the Federal Reserve print up worthless paper in an effort to absolutely destroy the democracy by entrenching the people in a perilous fight for bare necessities as they sky rocket in price and continue to pile up a mountain of sovereign debt?  If your eyes are shut, then the answer is no, but to those whose eyes are open, it isn’t hard to see why it is important to cast your ballot for freedom on Tuesday.  Is it our only shot at saving our way of life?  Potentially not, but it could be the last, so why take the chance?

So, this weekend, as we go from undecided to the polls, research, think, examine critically, and then swear to yourself, your family, your friends and most importantly, future generations, that we cannot maintain this course of print, pump, spend, and fail.  Promise to be ever vigilant, wherever and however in the education process of our youth, our spouses, our parents and others ignorant of history and the money meddlers.  It is a track that has been tried centuries over and is a failure that is timeless. 

QOTD: Putting and Monetary Policy, the Latest Econ Course Offered at Your Community College

Economic news lately is well, depressing a best.  If you follow what is the truth in the world, you find there is no news in the truth, just more doldrums.  If you are a Zero Hedge reader you might have seen this quote this morning:

Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter.

The Fed has found themselves in a severe catch 22 (or liquidity trap), and now they are using golf as the fundamental "new tool" to bring us back to pre-crisis levels.  As Zero Hedge's articles and authors stated in the link, we're learning as we go?  This from the one organization that is supposed to remain politically and economically neutral?  Putting our way to prosperity will only further sink us into our own Japanese style lost decade, but the concerns of the public and certain Fed Governors are falling on deaf ears to Mr. Bernanke.

Perhaps I'm too negative, cynical, and pessimistic, but what we really should be doing right now is praying Nov. 2 goes the right way. 

QOTD: Bubbles Bubbles Everywhere

If for nothing more than just a few inflation hawks inside the Fed Reserve, than we'd be already melting down.  Or, at least, that is the current convictions of this and several other authors out there in the world.

In a speech just released today and picked up by The Hedge (readers should know that I am referring to Zero Hedge), Dallas Fed Res Bank Dick Fisher (no pun intended, but preferred in this context) had the following remarks:

In my darkest moments, I have begun to wonder if the monetary accommodations we have already engineered might even be working in the wrong places.  A great many baby boomers or older cohorts who played by the rules, saved their money and migrated over time, as prudent investment counselors advise, to short- to intermediate-dated, fixed-income instruments are earning extremely low nominal and real returns on their savings. Further reductions in rates earned on savings will hardly endear the Fed to this portion of the population.

It is nice to see that someone inside the Federal (private) banking cartel has finally admitted that their monetarist, neo-Keynesian policies don't work.  To those of us whom have studied history, it isn't hard to say, "ah yeah!  No shit Sherlock!"  That said, Fed Fisher and his counterpart at the St. Louis Fed should be commended for their hawkish outlooks on inflation and money creation.  Unfortunately, as Zero Hedge opines, they will probably resign be forced out. 

Quote of the Day: When Money Dies, Double Edition

On 7 August, I told you I would be reading the book When Money Dies: The Nightmare of the Weimar Collapse.  After relaying my start of the book, I didn't make it past the prologue until this weekend.

Before I get to the main Quote of the Day (QOTD), I will give you this one that is too important to overlook from the last paragraph of the prologue:

"This is, I believe, a moral tale.  It goes far to prove the revolutionary axiom that if you wish to destroy a nation you must corrupt its currency.  Thus must sound money be the first bastion of society's defense. 

With this in mind, Adam Fergusson's book isn't so much economic theory, as it is historical context of what happens to the people in an economic crisis of epic proportions.  No need to hold an economics degree to follow this writting because Fergusson thus far, has done an excellent job of recanting the almost mind numbing price escalations and the corresponding fall of the German Mark and Austrian's Krone in a post WWI environment.  So fast was the devaluation, we have the main QOTD:

"A Roman who was born under Theodosius and died under Romulus Augustulus had seventy years in which to pass through the changes which Austria has seen in three."

It leaves us to wonder, where exactly are we headed as we leave interest rates at near zero percent rate for such an extended time frame (approaching two years).  It is apparent that we are headed towards a currency devaluation that as Fergusson has already eluded to in three short chapters transferred wealth from savers, retirees, and those of nobility, to the political class, the paupers, the debtors, and the wealthy bankers.  What we are seeing in this crisis is ultimately a greater groundwork for a revolution that may not necessarily be for the better.  If history repeats itself, the misery depicted through the end of chapter three is one that will cause "joyless streets" for an extended period of time.

More updates and comments to come.

Planet's Best Reporter: The Death of Paper Money

One of a couple stories that cropped up last week that flew under the radar was this one from Ambrose-Evans Pritchard of the London Telegraph.

It seems that the economic downturn we are now seeing (Thursday's jobless claims surged higher than "expected") he is predicting will persist on a bases of deflationary prices for the near term.  Unfortunately, that means ONLY the near term, due to the quantitative easing polices of the Easy Money Fed and Helicopter Ben Bernanke. 

The major scare last week (though, it wasn't much of a scare) was that a particular book is in high demand amongst international traders, bankers, and other finance ministers.  I have procured a copy of When Money Dies: The Nightmare of the Weimar Collapse  on loan from AKFan and will be starting it this weekend.  You, my dear reader, will get the full advantage of the best facts without the hassle of reading it or paying $800 for a copy.

Until the next update, enjoy your weekend!