They missed the big one: SOUND CURRENCY
I'm usually onboard with most things coming out of the Heritage Foundation. This one, however, was notable in missing the single biggest factor impacting inflation: sound currency (based on precious metals).
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Blarman, you got it exactly right. đź‘Ť
It's all a result of banketers creating USD from nothing to insure their power and line their own pockets at the expense of everyone else.
And "sound" money does NOT have to be based on Precious Metals. It could be based on BTC.
The trick is that it has to be decentralized, AND FINITE, with ENERGY required to "Mine" it. Just like Gold.
In fact, I will (and have) argued that any growing civilization produces DEFLATION. Because society stands on the shoulders of prior generations. Each new invention is another step in reducing costs, increasing efficiencies. Thereby lowering effort required to produce the same or better works.
Todays computers are how many TIMES faster and better than our old computers? Our A/C units are how many times more efficient? Now, the price of such things is inflated because the CURRENCY is NOT "MONEY"... As we have seen.
"In fact, I will (and have) argued that any growing civilization produces DEFLATION."
There is no question that technological improvements lead to efficiencies and lower costs in relation to one's currency. But the currency's value itself is largely determined by the amount of currency in circulation, which has largely been solely regulated by government. If the money supply doesn't expand somewhat to accommodate a growing population, there could be some minor deflationary effects, I agree, but this is because of currency supply - not because of the population itself. Even a modest effort to mine more precious metals for circulation as currency can offset this.
Now, the price of such things is inflated because the CURRENCY is NOT "MONEY"
Spot on.
However the face value is NOT the actual redemption value neither is it a dollar of gold or silver. It represents the value Government and the FED assigns to it. Your dollar is only worth a few pennies, if that. Prices only equalize to the underlying value of the Notes. So the 100 cents you used to be able to exchange for the dollar note in 1923 has dwindled down to pennies.
Comics that were 10 cents in the 60's are now 4 dollars not because of greed but because the underlying value of the Dollar note is 2 cents. So you are getting a discount from the FIVE dollars it would take to garner 10 cents of value to pay for the comic. .
The government always and forever will increase the debt owed. If the government pays back it's debts there will be no currency.
Rough Fix: M1, M2, M3 Money supply.
M1 is the money created by the government SELLING Bonds.
M2 is (my understanding) the direct ability of the FED to grow the M1 electronically loaning money against.
M3 is CLEARLY the money supply after the banks LEVER IT UP (at the FED window, borrowing against DEBT instruments, like existing loans).
Banks do NOT make the difference between 3% mortgage and 1% CD Rates. Sorry. They cannot survive on that. Banks make that much on the FIRST of MANY levers.
Then, they go to the FED Window, with the mortgage as Collateral. They borrow THAT much against DEBT. And then pay the FED rate to the FED. (This multiple averages about 15 times the M1 supply). Citibank levered 42 times back in 2006. (So, if they were making 2% on each lever, they cleared 84% returns on deposits).
The simple fix. Every lever that the banks get at the FED window... Should come with a 0.25% (25 basis points) rate PAID to the Treasury to pay down the interest on the debt. And above 10x levers, then it becomes 0.5%
Just using a 10x Average Leverage. It drives the cost of the money to the banks up VERY LITTLE. (so, they make 1.75% instead of 2%... Whatever).
But .25% x 10 (times M1) = 2.5% of M1... Hmmm, with government interest driving what is killing us.
This solution seems PRETTY FRIGGING OBVIOUS.
And at 15x, with the 0.5 kicking in for 11-15 => 2.5% of M1... Then, WOW, we have 5% of M1 coming in.
We could NOT ONLY PAY OFF the interest every year, we could actually be paying down the debt!
Furthermore, Risk On/Risk Off scenarios.... The Treasury could control the M3 simply by raising the second rate even higher. Which would FORCE the banks to offer BETTER rates to customers holding savings, so they could start from the bottom and avoid the higher leveraged rates.
Advertised well... This should be stated as "For centuries, the bankers have always paid themselves first, and enslaved everyone else to debt, while offloading their risk to the public, leading the to inequities we see today. This one change makes the Bankers pay their fair share, encourages them to encourage savings, and will slowly allow our children to remove the yoke of debt slavery the banks have so willingly placed around their necks, with the help of our corrupted government officials!"
Spot on.
Also sincerely appreciate the rest of your comment. Explanation is fantastic!
All of these problems are solvable. But the corruption that exists today prevents it from being Taught in schools. Prevents people from speaking about it. Prevents others from understanding/grasping it.
Imagine another American Revolution, where, knowing what we know now, what we could achieve with a rewriting of the rules to prevent the very corruption we are living through. Our forefathers did an amazing job in America 1.0... America 2.0 could be equally impressive... Leading to a Sci Fi future, not the Dystopian Future of the Globalists!
"Imagine another American Revolution, where, knowing what we know now, what we could achieve with a rewriting of the rules to prevent the very corruption we are living through."
I've often thought about that, but I keep coming back to one observation from John Adams:
"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."
Our people have lost their morals and allowed for the election of representatives who have no morals. Until We The People comprehend our inherent rights and moral purpose, our nation will degrade until it is destroyed and we are forced to rebuild it. Can we "solve" the problem of immorality through rules on paper? I don't think so. We have to teach morality to our children.
The Moral and Religious Levels of the Authors...
Was SIGNIFICANTLY Higher than that of those they sought to govern!
I think it was similar in magnitude. They had corrupted Magistrates. The same crap we have today. And they authored away. The same I think we have to do here. I don't think the position is that different, except the new colony never stood a chance against England! Until they did!
That being said, was there corruption? Assuredly. Just not on the scale of today. And where corrupt judges would get run out by either party back in those days, today one party celebrates them and the other party looks the other way.
That being said, I have several additional Amendments to the Constitution I would offer if a Convention of States were ever to convene. I would certainly repeal the Twelfth and Seventeenth Amendments to start. I would also put in a campaign financing provision that invalidated any candidate who took money from someone who wasn't a direct and legal constituent.
100% agree, especially the last part. Nobody should be able to give to a candidate they cannot legally cast a vote for!
I also would like to see a tax of 90% on all political ads that MENTION another candidate, or mention a candidate that did not approve the ad.
I will still argue that Jefferson, et al were a notch above their peers, and the average farming family in education.
Most of them had learned multiple languages, and were incredibly well read... at a time where the literacy rate was how high? But that aside...
Given what we know now. Given the time and a few skilled writers, I think we could do better than we have today.
Have you read any of the white papers?
Have you read why they were created?
Our current "dollar" is clearly a ponzi scheme. But since it is government sponsored, that's okay.
I admit, at one point, that is what I thought. But take the time out to imagine what a CURRENCY that could travel the world, cross borders and not be controlled by a central bank (who would corrupt it)!
Now, there are a ton of Crypto Projects that aren't worth the time to discuss. But looking at just BTC.
it is Digital Currency without a central control mechanism that can prevent you from exchanging it.
Having known people who have had their accounts frozen... Try hiring a lawyer when you don't have access to your property.
Why does mining BTC take so much CPU and Electricity? Because that gives it a COST to make, and helps set the value. But even better. At some point. There is a finite amount left. (21 million). No more can be created. It cannot be inflated.
And, all transactions are traceable. Not great for freedom lovers, but a wonderful thing if govts were forced to use it. Because you could see where it flows to. Oh, wouldn't Ukraine be interesting if we had irrefutable proof the the USA gave money to crooked bankers, who funded Oligarchs, who then paid off the Bidens, etc.
Meanwhile, Square, PayPal, etc. are all finding ways to work with Crypto! Why?
Because the internet has just dematerialized Photos, Memos, Mail, Bills, Messaging, Meetings...
And Shortly... MONEY.
As someone who transfers money around the world, I can tell you the sick truth. It costs $15 to send $50 to Europe, and most other places. In some countries, the inflows are feed to the tune of 60% before they reach the people they are intended for.
Imagine being able to send $50,000 for less than $1. Been there, done that. Using LTC.
deriding crypto because you REFUSE to see the current problems with the bankers being the consummate middle men on every transaction, and the costs to the people on the lowest rungs in the world is UNFORTUNATE.
Because it WILL happen. It is happening. It is NOT a get rich quick scheme. Heck, BTC is NOT bigger than GOLD just yet. But it will be. Because GOLD has failed as an inflation hedge.
But you have to start somewhere. And I would PREFER we did not start with CBDC (Central Bank) Controlled digital currencies.
Which, as you DERIDE BTC/Cryptos... You are speaking the FUD of the bankers/globalists. Which I assume are not the groups you intend to support.
Finally, anything ONLY has the value that you can reasonable expect to derive directly, or through selling it to the next buyer. Houses come to mind. Are they worth what they are selling for right now? Are people buying them expecting bigger fools to pay more in the future? Does it make buying homes a Ponzi?
"That's as close to a 1st graders explanation of Crypto Currency that I have ever heard." I guess I'm in the first grade class as well because I see crypto currency as a big Ponzi that will work as long as the next believer is willing to buy it. Yes, the USD and many other currencies are on that road as well.
The "energy" it takes to make something like crypto is just plain lost into the ether because there is nothing to show for it but a pretend idea that, hopefully, the next person will pretend it's worth something.
"Because the internet has just dematerialized Photos, Memos, Mail, Bills, Messaging, Meetings..." Very true and it all goes away when the SHTF and crypto with it. Smiling - At least if I have a closet full of worthless USD, I'll still have something I can throw into my wood burner in the winter. I'm sure there are much better things to have in my closet if that day comes.
The best part about crypto is it's ease of use over the Internet while the belief lasts. My main credit card is rather liquid in that sense, too, but there are no other believers making it temporarily more valuable than it is - it's really only as valuable as the card company thinks I can pay it back. I suppose one could say USD or other world currency was transferred (plopped down on the table) to cover the buy of crypto and, therefore, the underlying value of the crypto is the fiat currency spent to buy it. But now we're going in circles.
Good discussion.
My best guess is that Rand herself would support Crypto.
And it is the Wild Wild West out there. A lot of risk. A lot of shady things.
But I will be honest. yes, if we lose the power grid, and the internet... This stuff will be lost.
But let's back up a bit. If we lost all of that. We are looking at Mad Max Scenarios. And Paper Dollars?
Bank Accounts, Stocks, Retirements?
Again, credit cards. Taking 2% of every transaction, but I PREFER to pay with CC. I have the ability to FIGHT BACK. This stuff is missing from crypto. Also, we have issues with TOD (Transfer on Death). Property Rights. Ability to take it somewhere else and sell it to avoid the taxes.
We live in a world where the banks own/control the 4 companies (Vanguard, BlockRock, etc) that control/own 90% of the transactions, and they pay the politicians to ignore it. Heck, we are not allowed to KNOW who owns/controls Vangaurd, or our own central bank! And they shipped TRILLIONS of dollars out without a word, until they were caught.
Thanks for the support. And while "BTC is digital", it was 4 for $1 at one point, and it has managed to grow faster than even the internet grew.
Finally, Web 3.0 is where this is going. A Decentralized Internet, where our ID is in our control. Imagine BlockChain DNS, so people like AWS cannot just make you dissappear. Or attack your payment systems.
This is all related, which is why I find the Galt surprisingly uninterested/net-negative... DAOs will be virtual Gulchs.
Abandon your biases and watch “The BitCoin Psyop” by James Corbett.
Is BitCoin a useful investing tool? Sure! Empirical Evidence proves this. But to my thought process it’s a terrible store of value.
Just another Tulip Bulb.
I don’t think Rand would approve of crypto.
In the Gulch they didn’t use “Galts”. Which they easily could have. They used Gold.
Just my 0.0000000000000027 BTC. I can always be wrong.
Excellent discussion however.
"Why does mining BTC take so much CPU and Electricity? Because that gives it a COST to make, and helps set the value."
Not denying any of that. But there is also a thriving market for rare equipment in many popular video games such as World of Warcraft. It's all still digital; ephemeral. No intrinsic value whatsoever.
Here's the second big problem many of us see in crypto: volatility. The prices are all over the board from one day to the next. That's NOT what you want in a currency. Stability is critical for business adoption.
"Houses come to mind. Are they worth what they are selling for right now?"
Don't get me started on the housing market. I live in the #1 most-overvalued housing market in the United States of America. I've seen my "assessed" value - and the corresponding taxes - go up 200% in the past five years. And what is driving this? It's these same central bankers attempting to leverage worthless, inflated currency into real assets - assets with intrinsic value like land.
But prices being all over the place, are ALL ABOUT a Free (and immature) market, doing price discovery. By the time it is stable, about 5 years out, I assume... The early adoption phase will be mostly gone.
And I don't do NFTs. But again, it becomes about value. One crazy kid said he would rather pay $30,000 for a Digital Lambo, than EVER buy a real one. As his friends are all on-line, and what we he do with a real one? Buy insurance, and drive it to get groceries? (I laughed at the insanity, but realize many kids don't even WANT to drive today). I have to assume it's like my grand parents trying to understand Hard Rock!
Again: it shouldn't be the currency's value which is fluctuating. And let's examine WHY it is fluctuating. First and foremost, it is because people are treating it like a stock - not a currency. It's a fad investment to most people - not a medium of exchange. In reality, you can't call any of these cryptos actual currencies until that changes.
If the value of crypto stabilizes - and that's a big if - then we can start considering it for widespread adoption as currency. I saw an interesting note the other day that showed the price of a suit in gold 100 years ago vs today. They were the same even though the price in dollars had skyrocketed. Gold's intrinsic worth has held true for all that time.
Crypto faces another problem, and its the same one faced by the Chinese yuan or renmibi: it's value is dependent on the US dollar. In order to be considered a true currency, BitCoin et al must be considered independently valued rather than being dependently valued.
No one is saying that crypto currencies can't work. All we're saying is that there's still a lot of work (especially in public perception) that has to happen before they will become true currencies with stability of value and widespread adoption.
With all due respect, the original comment was calling them Ponzi Schemes, and saying they should be illegal.
And the price stability is REALLY GOOD.
1 BTC is still worth 1 BTC. We have a faulty system where we compare everything to USD.
And USD instability. Which Michael Saylor tells you, the Dollar is the worse currency, except for 98% of the other available currencies (where their own population would prefer to hold USD... Think Turkey, Iran, etc)
The simple fact that Central Banks are looking into this. This is coming. I simply prefer one that is NOT controlled by Banksters!
And you're welcome to disagree with that sentiment. According to what I've read, BitCoin is the only crypto which - because it isn't controlled by an oversight group - may be hardened against manipulation. All the others, however...
"And the price stability is REALLY GOOD. 1 BTC is still worth 1 BTC."
Which is completely irrelevant. A currency is a medium of exchange. Because crypto currencies have no real value except what they may be exchanged for, one must measure their value in those terms, i.e. their exchange value. If those values are constantly changing (i.e. volatile) then there is no stability - which was and remains one of the two primary concerns about its nature.
"We have a faulty system where we compare everything to USD."
I agree 100%. But (to use IT parlance here) no one is proposing an orderly "upgrade" plan. And much of that plan must revolve around stabilizing the value (an inherently tricky proposition I admit) and widespread adoption as a currency rather than an investment. That's something precious metals inherently provide.
"The simple fact that Central Banks are looking into this. This is coming. I simply prefer one that is NOT controlled by Banksters!"
Again, I don't disagree with you. The one major advantage the Central Banks have over the independent crypto currencies is legitimacy via government sanction. I don't like it and I take from your comments you don't either. But it is still a barrier to entry that the independent cryptos are going to have to solve if they want to stick around.
20+ ozs in every electric car. All green energy needs silver. Solar panels to wind generators all require the sterling. When , not if we go back to a metals based currency silver should climb in multiples from today. Just scored 354 ,1964 Roosevelt dimes to add to the stack.
I, too, would like to see a Federal Reserve that acted appropriately. It's never going to happen, however. The Fed was created under false pretenses and has only every operated under such. It is contrary to its mission and purpose to operate for the betterment of the nation as a whole. The only thing that could come close is to abolish the Fed and re-institute something like the first national Bank of the United States. And it had similar problems because the primary issue isn't mechanical but moral.
If you are referring to the process by which the Fed constantly sets an inflation target of 2% to continuously erode the value of our currency and enable it to continue to print money and siphon real value into its own pocketbooks, I am in complete agreement!
"Here's another confounding factor, the massive trade deficits run by the U.S. have cause trillions of dollars to exfiltrate the US domestic economy."
This one actually gets bandied about by many people but the causes and solutions are a bit more diverse than simple policy issues. For starters, many other countries without a stable monetary supply or currency use American dollars as a secondary currency. They can't do that unless there are dollars floating around external to the US trade cycle.
Second, a nation's currency is only valuable insofar as another nation is using that to purchase things from the original nation. Most other nations maintain fairly large reserves of US currency because it is useful not only for buying things with the United States, but also from each other because of the strength of the US dollar. The real problem comes when the US dollar is no longer the de facto currency of trade. Then all those dollars are going to come flooding back to the United States and cause a crash the likes of which the US has never seen. It will destroy our economy. It hasn't happened yet because there are only two other nations which could back their own currencies with gold: China and Germany. Every other nation would destroy their own economy by dumping US dollars, creating a circular firing squad.
Yes, it is quite the Gordian knot scenario. And our rising debt will be the catalyst that forces the issue. Sooner or later the whole thing will come crumbling down and the US will be economically destroyed overnight.
True, and so will the economies of every other western country, not to mention the other countries who sell products to the US who will have massive excess production with few customers. Almost as if John Galt was pulling the strings.
The motor of the world will grind to a near halt and most will be happy to accept chains from anyone that will feed their families. (The oil producers will still have customers in the countries who can produce food.)
Millions will starve, unless good men do something to stop it. I wish I knew what actions would be most effective.
In the early days of the Republic (the United States of America), the problem with many banks is that they published their own bank notes in lieu of specie on deposit but there were no standards for how much said specie was on deposit relative to the lending. Thus the multiplication of "money" (really bank notes) in the system with little or no physical backing. Many banks rose and fell as a matter of course when they overextended credit or when a bank run crippled them and closed them down.
That said: This country has never needed anything more than the full faith and credit of the American people to back our currency.
It is the FED, (read: the cabal) that needs to get the boot. The FED is illegal, unconstitutional, it is a violation of everything this country stands for.
We have all the tools needed to financially run our lives. With or without precious metals backing.
This might come as a surprise to some people, but there is one superpower in this world who just kicked the cabal out of their lives: Russia. And you can bet they are much better off for it. For whatever you think of Putin, he is a master chess player of the world of political gamesmanship.