Punchinello’s Chronicles

May 24, 2011

Why Use Digital Money?

We all live our lives with different levels of activity, based on different circumstances. At the most basic level, we survive with water, food, shelter and clothing. Much of our time is spent getting food and shelter, and that’s been true throughout human history. Long ago, we actually went out hunting for food and water, living in caves and discovering agriculture. Nowadays, we use money of some sort in exchange for these basics.

When we’re at the basic survival level, our own survival comes first and we take whatever resources we find to ensure that survival. Depending on circumstances, we’ll share limited resources in order to help the survival of people close to us. Think of a ship wreck and lifeboat. We need to survive individually, and if there’s enough water and food, we’ll try to help others. Presumably, each of us acts the same way, but we know that’s not really true.

It’s only after we’re fairly sure of our own survival and we can get our own resources that we move upward to the next step. With additional resources, we begin looking around for things that we’d like to have, in addition to things we need to have (what we must have). That’s where a modern economy begins to introduce whole new concepts. In today’s world we really do need transportation, an address and a connection for communication. We need income, and in most cases that means a job. Otherwise, we have to create a product to trade.

The most basic economics involve the idea of exchanging something of value. That value is in the eyes of the beholder, not in the eyes of the owner! I might have something I think is junk, but if someone else “beholds” that thing and decides they want it, then they’ve placed a value on the thing. Regardless of what I might think about that thing.

Exchange: That’s the fundamental concept.

As societies got more complicated, people started using various commodities as symbols of value. Among the most well known are gold, silver, diamonds, copper, and other metals and jewels. Because those items were considered to be equal with actual “stuff,” they became precious metals and precious jewels. “Precious” means that which has a high value to people.

If you work all day underground digging out coal from the bowels of a mountain, you’ve sacrificed your comfort, your time, your energy, your muscles and so forth. At the end of the day, you have a pile of coal that’s as valuable to you as the sum of all that labor and sweat. It’s physical coal. You own it because you dug it out of the ground. But you can’t eat coal, so you want to go buy some food.

A farmer might want some coal to keep a fire going, so that farmer is willing to give you some food in exchange for some coal. The exchange is a real one, and both of you continue to have in your possession something each of you values. The farmer now has in his possession the coal, and you have the actual food. The farmer doesn’t care about your muscles, your time or anything else. The farmer “sets the value” to himself, and YOU decide if that’s “fair.” If it is, then you exchange products.

Symbolic money is no different. If you do whatever it is that gets you a piece of gold, then you have a physical piece of precious metal. When you exchange it, you first want to get something of equal value. Secondly, whatever it is that you trade for, you continue to have something physical.

The problem with a “gold standard,” where it refers to money is that there isn’t enough gold to match all the stuff in the world. Not only that, but there isn’t enough gold to match what stuff MIGHT enter into the world. There might be enough gold for all the current stuff, but what if you want to start a business making new stuff? There isn’t enough gold.

To solve the problem, societies create money out of something that’s more readily available. Those societies arbitrarily declare the value of that new item, and it becomes real money. “Real” means that you can pay bills, pay taxes, and make legal claims based on the exchange of that money.

So what’s the difference between, say, paper money and “fiat” money?

Social money has two basic requirements. First, it MUST associate with and match some underlying real-world value. Secondly, whomever is in charge of that money MUST be honest!

For example, we might decide to use pearls as money. We know we can find a fairly large supply of pearls, but they’re not so easy to find that anyone could pile up a whole lot of pearls. When we make the decision to use those pearls, we have to assign a value to them. We have to say that pearls, from now on will equal the amount of all the food in the world. If surplus food shows up after a good harvest, then the value of each existing pearl will go down. If there’s a shortage of food, then the value of each pearl will go up.

What matters fundamentally is that the person in charge of keeping track of all the pearls in the world, MUST be honest in their numbers! They have to tell us the truth as to how many pearls are floating around. Otherwise, how would we know if the pearls should be more or less valuable? That person, therefore, must also know the truth about how much food there is in any given year.

The US Treasury and the Federal Reserve are in charge of telling us how many paper dollars there are in the world. The Bureau of Labor & Statistics is in charge of telling us how much food, work, service and product there is in the world. Both of them are lying.

In theory, at any given time you or I could go to the person counting pearls and ask to see those pearls. We could walk around and count up how much food there is, then match that food to the pearls. A “standard” means that the “thing” being used for money matches the “stuff” being exchanged as valuable.

When someone arbitrarily decides to make more money, they have to also arbitrarily tell us how much that money is worth. They make a declaration by “fiat,” and so we end up with fiat money. Fiat money is a symbolic form of exchange based on nothing at all other than someone’s say-so.

Long ago we had a gold standard, where people could physically exchange a piece of gold (or silver) for something of value. In 1913, we decided once again to go with paper money. At that time, the US Government assigned 35 pieces of paper to 1 ounce of gold. The gold was supposed to match the amount of work and production in all of America.

In 1975, we decided not to use gold anymore. (Well actually the government decided, not you and me.) The government said that we would print paper dollars in enough volume to match the entire production of the country — the United States Gross Domestic Product.

They also said they’d be honest, and tell the truth about how much paper they were printing, and how much stuff America was producing. Since then, nobody has ever been able to audit the Federal Reserve, just to…say…check to see if they’re being honest. They say they are, though, and that’s good enough for Congress.

Likewise, nobody actually audits the Bureau of Labor & Statistics, except for weird (extremist) alternative blogs and strange financial analysts. Nothing the BLS prints makes any sense, but nobody minds really. It’s good enough for the financial news reports.

Meanwhile, people got used to exchanging actual pieces of paper for actual stuff. If you bought a candy bar, you handed over some paper and metal and you got the candy bar in exchange. You could actually put that candy bar in your mouth and eat it. The store owner had to trade the paper and metal for either more candy, or for something else he or she valued.

Since the mid-1990s, the amount of paper the government needs has been growing so fast the printing machines are in danger of exploding. NONE of that paper is matched to a damn thing! They “say” it matches the US economy, but that’s a lie.

Even so, the rest of us still like to know that we have something valuable in our pocket, wallet or purse. We like to actually see our paper money in a box, an envelope or under the mattress. But we’ve been learning how to use futures contracts for money, in the form of checks.

You give me a hamburger today, valued at $1.00. In exchange, I give you a contract that tells you that sometime in the future you can go to a special place and the people there will give you a dollar. In other words, I write you a check for a buck and you hang on to it until you cash it at the bank.

That was all fine and dandy, until we discovered computers. That led us to credit and debit cards and electronic gift cards. What actually does that mean?

When we used paper money, the only reason we needed checks and checking accounts was to handle long-distance transactions. That distance might be physical, or it might be distance in time. But one way or another, a bank actually had to have a certain amount of paper money in its vaults to match the numbers in their accounting books.

The problem is that money started moving around so fast, nobody could keep up with the actual transfer of dollars! There weren’t enough trucks to move that amount of money from bank to bank. Prices started going up as more and more paper flooded into the economy. (Those pearls suddenly started being made out of plastic, and everyone who could started making pearls.)

Instead of a house needing $35,000 pieces of paper moving from one bank to another, that house required $300,000 pieces of paper. All that paper was taking up room! BUT!….no matter how screwed up, at least there was some amount of paper that matched some amount of stuff.

The problem is that we now have such a massive amount of paper, there isn’t any room to store it anymore! Not only that, but none of that paper is worth anything other than as toilet paper or kindling. It costs more to print and move that paper than it’s worth!

Enter the final disaster: Digital Currency.

This digital currency is electronic money. Now we don’t even need a “thing” to represent underlying value. No, with digital currency we can just pretend that some “thing” exists, even when it doesn’t. At that point, we no longer even need to have fiat money! From now on, we can arbitrarily move numbers around on computers, none of which mean anything at all.

It’s already impossible to comprehend 14 Trillion Dollars. The paper would be mind-boggling, or we would have $1-billion bills in our wallets. Therefore, why bother? Why not just have numbers in a machine, totally disconnected from any kind of meaning at all? You get Direct Deposit for your paycheck? Well then, why not just pay you $1-million a year? Who cares? They’re just numbers, and there’s no need to carry around actual paper in an actual wallet!

This all works only until people who actually produce things stop exchanging!

When that coal miner, who sweats and digs to pull physical coal out of the ground no longer will accept “a number” instead of real value, we’re finished. At that point, no doctor will perform services. No farmer will sell food. No mechanic will fix a car. No store will sell candy. No weaver will make cloth. No plumber will fix the toilets.

Digital currency means that we can instantly give everyone with a food-stamp card $1,000 a month. We can increase your credit card limit to $18-billion. We can increase your wage to $10,000 a month. It’s like…magic! We can give everyone as much money as they want, and never have to use chopped up trees or ink or printing presses! Nobody has to do anything, we just push a button and BLAM!….you have a new minimum wage!

Until nobody agrees anymore to give up real and valuable things!

The reason the whole world wants fiat digital money is because there’s still a limit on how much money the government can print. It’s hardly a limit at all, but the amount of paper money necessary to pretend we have an economy is still that limit. Get rid of paper money, and there’s no more limit whatsoever. At that point, the government can spent quadrillions of dollars a minute, and the only thing that changes is a computer register.

May 11, 2011

Gold Standard? Not So Much

Filed under: Word of the Day — Punchinello @ 5:40 pm
Tags: , , , , ,

Steve Forbes has come out with a statement suggesting that the US will likely go back to a gold standard. Several potential 2012 presidential candidates are also jumping on this bandwagon. I have to admit that not so long ago, I would have thought this was a great idea. But I’ve taken the time to learn a bit about economics, and I now understand that a gold standard would be foolish.

What’s money in the first place? Money is simply stored work and effort. It’s a symbolic “something” that’s easy to carry around and exchange in various ways. Paper money (cash) is easy to use between people for everyday transactions. Checks are useful to mail payments. Electronic transactions use digital numbers to represent whatever money is in a bank account. All in all, money is “something” that we can give to folks or get from folks, and use it to buy stuff.

We “get” money through some sort of work and effort. If we have no money, then we have to somehow figure out a way to get shelter from the weather, put clothing on our body, grow food, collect water and all the other basics of survival. The next step up is to grow or build enough surplus that we can trade our surplus for someone else’s surplus. Trading and barter make up a basic, primitive economy.

The problem with barter begins when we have a larger society, separated by geographic distance. The next immediate problem is when needs are separated in time. For example, if you mow someone’s lawn today, you might not want to immediately trade that service for a fried chicken dinner. So how do you store your lawn-mowing work until such time as you want the chicken dinner?

Another example would be that you want to trade your lawn-mowing service for a sweater made by someone 500 miles away. It’s not so easy, first because of your having to travel the distance to mow their lawn, and secondly because they might have someone closer at hand. Not to mention the travel involved to pick up the sweater. You want a way to assign your work to “something” that you can put in the mail.

Money is a way we can store our work and effort so that we can postpone an exchange. We can store up a lot of work in order to exchange that work for something more “expensive.” Maybe the knit sweater is worth 4 mowed lawns. How do you do that, unless you postpone getting the sweater until after you’ve mowed the person’s lawn four times.

A better way would be to mow four different people’s lawns in one afternoon, then trade all that work for one sweater. Now the problem is that you only mowed the sweater maker’s lawn one time. What about all that work you did for the three other people?

Throughout history, people have come up with a symbol of some sort that represents value. The value is work and effort. We might say that mowing one lawn is worth 1 pearl, 15 shells, 40 beads, 2 packs of cigarettes, 12 bullets, 2 rabbit pelts, or whatever else we want to make up. What matters is that EVERYone agrees on the basic symbol.

The problem with assigning a symbol is that we also have to work out some kind of formula that connects the symbol with work and effort. How many plastic beads will equal one mowed lawn?

Another problem is the exact specification of the symbol. What kind of plastic, in what colors, made under what sort of engineering specifications?

Finally, we have the problem of counterfeiting, where someone can make copies of the symbol we’re using for money, but there was NO work or effort behind the symbol.

Imagine if someone started manufacturing plastic beads by the truckload, and used them to buy real goods and services! This is what the Federal Reserve is doing, in cahoots with the US Treasury when they both print dollar bills that have no connection to gross domestic product (GDP).

The key here is the connection between a money symbol and the underlying, real-world goods and services. There must be a true connection between work and effort produced by real people, and the “something” the society is using for money.

Until I did some studying and learning, I thought that a good money symbol should also be limited in access and quantity. Gold, for example, is limited. There’s only a small supply of gold in the world, therefore it would be very hard to counterfeit. But there’s a fundamental problem with that concept!

  • What happens when there are more and more goods and services, and more and more work and effort, but there’s only a limited amount of gold?

It isn’t the symbol that matters. It’s who controls the symbol!

Back in 1913, the United States made a decision to use a Gold Standard for money. That simply means that the US assigned 35 pieces of paper to equal 1 ounce of gold. They called the pieces of paper “dollars.”

Now comes the major, major, really big problem: Who connects how many pieces of paper with how much work and effort?

There are two basic theories about how to assign work and effort to a monetary symbol. The one theory comes from John Maynard Keynes and gives us the Keynesian school of economic theory. The other theory is from Friedrich August Hayek, producing the Free-Market Capitalism school of economics.

Keynes tells us that a central authority, a government or state will determine how much symbol should equal how much work and effort. This has become known as “top down” economics, where someone at “the top” tells everyone else at “the bottom” how much money they can have for how much work and effort.

Free-market capitalism tells us that “the market” will determine how much symbol will equal what amount of goods and services. This “market” means every individual in the society, working on their own, in their own self interest, figuring out how much they’re each willing to exchange for whatever they want.

Hayek’s concept has become known as “bottom up” economics. The individuals at the bottom of the process each, individually determine prices and value, which eventually comes together to form statistical “market prices.”

When the US government made the determination that 35 dollar bills will equal 1 ounce of gold, that was a top down decision. When the State of Illinois government tells you that 1 hour of work and effort will equal $8.25 (eight and a quarter pieces of paper), that’s a top down decision.

Everything is still okay, as long as whomever at the top makes sure that the number of symbols (paper dollars) matches up with the amount of work and effort being produced by the entire society. In theory, the amount of money in circulation is supposed to match up with the total production of everyone in America’s work and effort. That total production is the gross domestic product — the GDP that you hear about all the time.

  • When money symbols can increase with the amount of goods and services, we have fiat money.

A gold standard would mean that “someone” would have to be in charge of storing all the gold somewhere. That gold would be the representation of real work and real effort. That “someone” would then issue pieces of paper (dollars) in an exact formula. Back in 1913, you could take 35 pieces of paper, go to “someone” and redeem the paper for 1 ounce of gold. The gold (in theory) was stored in Fort Knox.

What happens if that group or person who stores the gold is corrupt? What if they start printing more dollar bills then there actually is gold?

It’s no different than when a corrupt person or group prints more pieces of paper than there actually is real production!

It doesn’t matter if we use gold or we use yours and my work and effort to “back” the value of our dollars! Nobody cares, and it means nothing at all to the world economy! What matters is ONLY that the amount of symbolic money matches the real, underlying “stuff” the money symbolizes!

Bottom-up economics, as advocated by Hayek and the Chicago School of Economics is pretty simple. For each person’s work and effort, the servant government then produces “money.” Only after a product or service has been created does “someone” produce the money to match that real stuff!

  • Top-down economics allows whomever is in control to produce arbitrary amounts of money. In theory, that will therefore cause products and services to magically appear! (In the same way, producing more and more gasoline will cause new cars to magically appear.)

Every time you hear about “stimulus” and how QE1 or QE2 or QE-whatever will “grow job and stimulate the economy,” you’re hearing the fantasy of Keynesian economics. They believe that printing more money will somehow produce more real-world work and effort.

At the same time, more and more people are doing NO work, expending NO effort. Unemployment benefits, welfare, food stamps, and every other government benefit or entitlement program is producing yet MORE paper money without a connection to goods and services.

Going to a gold standard would do absolutely nothing! Zero, zilch, nada! In fact, what it would do would be to limit even more the free market determination of prices and value. What if you want to start a business and borrow some money for a machine? What if there isn’t enough available gold to generate the money for you to borrow? Then what?

The solution is NOT a gold standard! Instead, the solution is to get rid of the corruption taking place in the government and the banking system. People should be in jail by now! Remove the phony statistics from the Bureau of Labor & Statistics. They’re busy telling us how all the magic money pouring into the economy “matches” the GDP! It’s total hogwash designed for a single purpose: to give the super-rich more and more paper money.

We can use gold, silver, wooden sticks, or Kryptonite as the underlying basis of our money. It doesn’t matter! What matters is only who controls the supply of that underlying basis. When you and I, in a a free market, with only the most basic regulatory oversight systems — when we control the supply (and demand) of money, then we’ll have a solid economy!

Government should serve the people, not the other way around! And that service is to only print new money whenever new products, goods and services enter into the market. That’s it! That’s all she wrote! No more, no less, but a government BY the people, FOR the people, which SERVES the people.

Okay…that’s the end of my rant for now.

April 28, 2011

What Do We Do Right Now?

Month after month we hear the bad news. It really doesn’t matter anymore what particular story comes to light. We’ve passed the tipping point. It’s a bit pointless to discover more corruption, more regulations, more hypocrisy, more fraud and more of everything. The stage was set decades ago, and we’re in the end game now. Free-market capitalism, centered in the United States of America is under final assault. The bad guys are winning, but the US citizens are waking up. So what’s the next step? What do we actually do?

Let the investment banks and financial wizards all fail! Get Toto to pull back that curtain!

The first thing is education. Instead of watching “American Idol” and reading the so-called mainstream news reports, spend some time asking questions. Grow up, learn how to balance a budget, get rid of unsecured credit cards and loans, and move toward a cash-only basis. That’ll help you survive the collapse of paper money.

The next thing is to learn how to actually take care of yourself in an inconvenient world. Do you know how to shop for your basic, everyday necessities? Do you know how to cook some simple meals? Can you entertain yourself without the help of 10,000 TV channels?

But of all the things that we can do, the single most effective is quite simple: Let Them Fail!

There’s a good reason we have competition in the world. Survival of the fittest wasn’t invented by Charles Darwin, and it didn’t apply to the biological world. It’s an economic principle, and Darwin adapted it to biology. But that’s okay, let’s stick with biology and consider bacteria.

Bacteria have a simple and basic attribute that helps to understand evolution and natural selection: they breed exponentially, really fast! Start with a single cell, and within days you get millions of cells.

With millions upon millions of a particular bacteria, we invent some sort of antibacterial agent; penicillin, for example. It NEARLY wipes out that massive colony of bacteria. Even so, with hundreds of millions (if not billions) of cells, there’s a very high chance that at least 1 cell will survive. It’ll have some strange mutation or DNA variant that’ll allow it to survive the onslaught of penicillin.

With that one, single cell that’s immune to penicillin, the rapid breeding cycle of bacteria allows it to create hundreds of millions of replicas, ALL of which are now immune to penicillin. It’s basic natural selection, survival of the fittest, and leads to what we now call Super Bacteria.

We absolutely must have life based on survival capabilities, and death based on obsolete or insufficient survival attributes. Without death, there wouldn’t be enough parking places, for cryin’ out loud!

In today’s world, the single cause of just about everything we’re witnessing in the collapse of the American empire begins with government (state) support of dead, dying, or failed entities!

Fortunately, with the Internet and World Wide Web, people everywhere in the world have become more powerful as individuals. Knowledge is power, after all, and with that knowledge comes completely new and different survival skills. One of those new skills has to do with forcing the world banking system to adopt a metals-based money system. It doesn’t matter if it’s gold, silver, copper, palladium or platinum.

Paper money, simplistically speaking, is called fiat (fee-yott) money. The value of the money is set by declaration of some controlling authority. Such a declaration is a “fiat” declaration — an arbitrary decree or proclamation, such as a royal decree.

When any country first creates paper money, it typically sets a relationship of some amount of paper to some amount of physical “something.” Back in 1913, the Bretton Woods agreement defined the US dollar as having a value of 35 pieces of paper dollars being equal to 1 ounce of solid gold. That was known as the Gold Standard.

Although this is a proclamation of value, whomever is doing the decree can’t just make up some arbitrary number. They’re basing the value on a more solid foundation, such as gold.

In 1975, President Nixon took the United States off the gold standard. That means he unlinked the value of a dollar from anything other than some badly defined concept of the gross domestic product. Nobody but the government can figure out what’s the total amount of “stuff” the country produces, so the government effectively can call the value of a dollar whatever it wants.

Nowadays, we have a world economy where many nations bid for goods and services around the planet. Money from each country is constantly being converted back and forth. To accomplish that, we have “currency exchanges,” and each country sets the “exchange rate” for its money.

The problem is that if one country starts printing too much money, other countries won’t agree with the exchange rate. With computers and instant, world-wide trading and banking, we now have a “market” made up of many different countries. Those countries agree or disagree with the exchange rate set by a country’s central bank.

The world right now disagrees with the exchange rate being set by the US Federal Reserve. Therefore, the true value of the dollar is falling in relation to what “we” say it’s worth.

Much more importantly, common citizens and wealthy people all can buy precious metals. Those metals are the same everywhere, so silver is silver no matter what country calls it something in their own language. Silver is a metal, with chemical properties unique and specified on the Periodic Table of elements.

For years and years (decades, even) big banks have been playing a scam. They purchase 1 actual, physical ounce of silver and put it in their vault. They then “sell” 99 additional ounces of silver, claiming they have it, and giving the buyer a piece of paper that says the buyer can redeem that silver…whenever.

All this means that banks are using the fractional reserve system for physical metal exactly the same way they use it for paper money. And THAT means that NOTHING a bank owns is worth ANYthing! They own empty space in their vaults, and only the naive ignorance of their customers keeps the scam going!

In 2008, there was a run on the banks. Goldman-Sachs, in a stunningly stupid move demanded that AIG (insurance company) prove it actually had the money to actually insure all the mortgages and loans they said they could insure.

AIG didn’t have the money.

When the news leaked out, people began grabbing their money out of banks as fast as possible. Then came the gigantic money-market funds, with hundreds of millions of dollars being “managed” for safe-keeping by all the big banks, and by Goldman-Sachs. They instantly, electronically removed their money from their investment accounts, causing a “digital run” on the major banks.

Within hours, hundred and hundreds of millions of dollars were sucked out of the banks in New York City. Just like in the movie, “It’s a Wonderful Life,” massive accounts, managed by human beings came into question. Was the money “really” there? Or was it all just a mirage. Better to be safe than sorry, and they pulled their money.

At that point, ALL the banks that were party to this kind of “air storage” fiasco SHOULD HAVE FAILED! There should have been a catastrophic meltdown of every single bank — any and all of them — that had participated in this kind of fraud, theft and robbery!

It didn’t happen.

The Federal Reserve and US Treasury authorized hundreds of billions of paper dollars to be placed instantly into the many accounts. Congressed instantly passed a money-market insurance fund, similar to the FDIC. Everyone around the world was told not to panic, “We have the money! It’s all here! Nobody will lose their money.” Just like in the Jimmy Stewart movie.

To keep this fraud going, the Federal Reserve has since been printing billions of dollars through the US Treasury. They lend them to the big banks, hoping those banks will then lend them to you and me. We’ll create businesses, buy microwave ovens and color TVs, and take vacations. We’ll spend, spend, spend, thereby causing a demand for more stuff.

Instead, the banks have used the money to invest in the stock market, commodities markets, and hare-brained schemes around the world! They’re not failing, they’re thriving! It’s like a bacteria whose main food supply is penicillin!

To make matters worse, the Federal Reserve is also “buying” any bad loans or failed paper contracts owned by these same banks. The rationale is that those banks are Too BIG to fail! It would decimate the world economy!

No, it wouldn’t!

People around the world actually produce things. We actually grow food. We actually build machines. Additionally, people around the world are buying up gold and silver by the tonne! The reason is that people around the world don’t believe for a minute that paper money is worth a mosquito fart!

General Motors was about to fail, mostly because of the same kind of non-productive loans and investments made by banks. These banks are NOT “the producers” of the world! They produce NOTHING! All the do is produce debt, loans, interest payments and mortgages. Long ago, banks used to!…produce economic activity, by loaning money to startup businesses. That’s all finished with.

GM was not allowed to fail! It was Too Big to fail! So the government bailed them out with paper money. Not with taxpayer dollars — there isn’t a chance in Hell that you or I or our descendants will ever in all of time come up with enough money to equal the government’s bail-out. The result was that GM became part of the walking dead. A Zombie! Much like the zombie banks, GM is now a zombie corporation.

Watch any zombie movie and the resulting events are inevitable. The zombies eat everyone’s brains and create more zombies. What’s the answer? Burn them until they’re really and truly, totally and incontrovertibly dead!

GM has to all intents and purposes, finally and at last failed. Their stock is worthless (even the government is trying to get out of it as fast as possible). Nobody give their cars the slightest bit of credibility anymore. If they’d been allowed to fail, there were many OTHER companies, much more organized and run in far better style that would have purchased the shattered remains of General Motors. That wasn’t allowed.

So too with the Too Big To Fail (TBTF) banks. They produce nothing, lend nothing, make nothing, fix nothing, buy nothing, risk nothing, and have nothing. They have no money. “Naked short selling” is basically a contract to sell something you don’t have to some idiot stupid enough to buy the piece of paper.

Right now, the TBTF banks are “short” massive amounts of silver. They’ve sold 99 ounces of silver “air” for every 1 ounce they own. At some point in the year, each month the bank has to either roll over those contracts by extending them, or they have to actually deliver on the silver.

Each bank only gets asked to deliver a small portion of their silver each month. Therefore, they can continue to “store in their vaults” 99 ounces of air for every dollar. And they charge a storage fee!

The world is waking up. People are buying silver. That means there isn’t enough silver for the TBTF banks to buy each month so they can meet their delivery obligations. They’re buying silver more and more desperately! And so the price is going up and up in paper money. In 1969, you could by a gallon of gas for 25-cents. Today, in silver at $48/oz., you can buy a gallon of gas for 13-cents.

Each piece of silver that YOU buy means the big banks canNOT buy it! And that means that as more and more people demand their silver, those banks won’t have it! At some point, they’ll have to declare the truth, in which case it won’t matter how much paper money the Federal Reserve pours into the bank: It will fail.

Do you care?

What actually would happen if all these banks failed? What actually would happen if the entire world economy collapsed? Would it? Or would only the Paper Economy collapse? Would nobody grow food suddenly? Would nobody buy oil suddenly? Would time stop, the seasons end and the sun explode?

Of course not! We’d very quickly move to a barter system, and within only months, NEW banks would be formed that worked with real money — paper money that actually was backed by something of value.

Only the financiers, politicians, and non-producers of fantasy “value” would disappear. Is that such a bad thing?

Don’t confuse real producers who use real capitalism to buy and sell real goods, with bankers and financial managers who only trade paper. We do NOT need to support those “producers” known as billionaires! They do NOT create jobs! They create NOTHING! They don’t even create paper dollars! All they create are promises of paper dollars in the form of certificates —- stock certificates, bonds, T-bills, silver futures, gold futures and so forth.

Before anything can possibly even begin to be fixed; before Americans can get back to living ordinary lives, we must reinstate basic competition! We must let failed companies and failed banks collapse. There’s no way we can fix anything without first getting rid of the pus and infection of the Zit banks.

Since these banks are stealing our houses and converting them to paper money, let’s paraphrase Marie Antoinette: “Let them eat fake!” THEN we can rally like the French peasants and say, “Off with their heads!”

Next Page »

Blog at WordPress.com.