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June 17, 2011 / 74

De-fanging the Money Manipulators

So… we have Greece, we have the USA, we have Russia, China, the EU, etc. What do all of these places – indeed the vast majority of the world – have in common? Not a single one of them uses real money. All of them use pretend money – fiat money – money that is money by virtue of government decree.

Fiat money has no value. Fiat money can be printed up at the will of the government, destroyed at the will of the government, or undermined, strengthened, traded and otherwise debased or made more or less valuable by third parties – and who loses when this stuff happens? The worker; the person who rolls out of bed, or gets up from his pallet, and goes to work; the individual who spends his days and or nights giving the precious hours of his/her life in the creation of wealth by working.

So this person works, and maybe, if they make enough to have a small surplus, tries to save so that when they are old and can’t work any more, they can eat and have a warm, dry place to sleep.

But can they? CAN a worker “save” some of the fruits of his hours of labor for his old age, or for when he is ill and cannot work?

There is an unbreakable rule, a financial law if you will that says no. The worker cannot “save” for the future. It says:

CURRENT COSTS MUST BE PAID WITH CURRENT RESOURCES.

And the reason for this rule is that the worker, the corporation, the government, cannot see the future. The dollar earned and saved today would buy a cup of coffee. With inflation, deflation, currency fluctuations, etc, the worker has absolutely NO idea what that dollar will buy when the time of need arrives – or what it won’t buy. WILL they be able to buy a cup of coffee the day after they retire with that dollar? Or will they be able to buy FIVE cups of coffee, or maybe it will take FIVE dollars to buy that same cup of coffee.

Social Security is a contingent liability – which is to say that it’s a “maybe” expense, not a real one. All it would take for Social Security to become insecurity would be an act of Congress signed by the president and that “retirement” income that you figured as part of your old age support is gone. And they don’t even have to eliminate it – just change the formula that determines how much you get, or how much you don’t get.

In terms of planing for retirement, for the “future”, 401Ks are pretty much worthless. Retirement “plans” are futility wrapped up in financial jargon, and the banker or investment guru who tells you how much you “have to put aside today to be comfortable when you retire” is as full of BS as a farmer’s prize breeding bull. Argentina already confiscated their citizen’s retirement “plans” to pay for debt caused by excess spending. Can the desperate USA be far behind?

But this article isn’t about how to plan for your future. It’s about how to fix the reason that makes it impossible for you to do so.

As I see it, the main reason that all these uncertainties exist, that inflation eats the value of savings, that government spending guarantees that your future will be spent in poverty, that sovereign debt is theft of the worker’s lives, is fiat currency.

I think that  if we could eliminate fiat currency, we’d maybe have a chance at stabilizing the global economy, at making it reasonable to try to save for old age, or for unplanned issues that may arise. And how do we do that?

Well… in the past they established a gold standard – ie they made gold the basis of all money, and the currencies were valued at a fixed rate compared to gold. The last time they fixed the value of gold, and thus the value of the currency, they fixed it at a specified number of monetary units. IIRC, in the US it was $35 an ounce (fixed by international agreement at the Bretton Woods conference in1944.) And it worked for about 28 years… until the value of the gold expressed in other currencies ran away from the value of the currency in US currency.

If the Powers That Be examined what went wrong, and fixed it, then re-established a new agreement, it would eliminate all of this hyper-inflation, deflation, and uncertainty. Governments would not be able to fudge on their budgets. Wages and prices of goods would be set by supply and demand and quality and productivity, and economics would become an art – not a Ponzi scheme run by a cadre of crooks.

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