ink and paper

Now I really wanted to call this post “Uncle Tom’s Dollar”, but I wanted to show I am not as uncouth, incorrigible and uncultured as I really am. Plus, If I did, I would have to point out how dumb and stupid and ill informed the folks many who may read my blog get they news from (folks on Fox and CNN) really are and I did not want to insult their ill informed and poorly readness (yep I made the word up). Besides I’m sure folk on TV have to spend their time looking at the cathode ray tube unlike me who would rather read a coupla few books and newspapers a week – especially when I don’t have to have a person select and pick what they think I want to hear or worse need to know. Now I have learned from my prior post that folks don’t like reading, even if it is between a page or two in length, and have limited knowledge of history. Well really, I have observed such and have not learned anything whatsoever for I am about to do the same thing again.

I have an affinity for loot, money, the dollar bill. But slowly I am loosing that affinity for it is not able to buy as much as it used too. Frankly I am afraid for if it keeps loosing its ability to get me the things I want, or if I have to use more of them to get what I want, then I speculate we will miss no longer being on a gold standard. I could go back to the Romans, or Hungary or even Serbia to explain what I see from what I know has happened in the past, but I wont. But I will say that what we are experiencing is eerily similar to what happened in Germany before the rise of Hitler and even more recently what has been going on in Zimbabwe. Zimbabwe is the first country in the 21st century that I know of to suffer from hyperinflation. On one extreme, which is extreme, we may find ourselves in the same position of Zimbabwe with respect to their hyperinflation. True, we aint taking land back from white farmers and giving to poor folks who don’t know how to run large farms and end up mismanaging them. But Obama is dead set on this redistribution of wealth as was (is) Mugabe. In Zimbabwe (a place I have been and surprisingly makes great wine also) put so much into spending on printing loot. Why, because the demand for cash was so great. Here, just like there, the depreciation of assets is way greater than investment, which led the to import capital from abroad.

This is very scary for a few reason, namely because they had to replace the Zimbabwe dollar with a foreign currency that was fully backed by a foreign reserve currency freely convertible at a fixed rate on demand. It was so bad there that commercial banks maybe in a position to issue their own private notes without government regulation (as was the case here before the civil war prior to Lincoln issuing the Greenback).

The Germany situation is a lot more closer because the devaluation of the Mark they suffered was the result of waging a war they loss (can you say Afghanistan and Iraq). After WW 1, Germany had to make reparation payment as well as keep its industrial economy running. Problem was that they were no longer on the gold standard. When mark lost value, corporations cut jobs, paid workers less and produced cheaper goods for exports. This is especially true when there is in an economic crisis or a war, the pressure to inflate becomes overwhelming.

Now I don’t THINK we are or will be experiencing hyperinflation. But I do several things I have observed now and before in history. One, that as in Germany, retailers shelves are not selling and are not as stocked as before the recession, meaning its hard for us to make a profit. Two, I see more empty commercial real-estate. Three, the government has no adequate income thus I think will be forced to raise taxes (which they will not collect given the present climate and will have to print more money or worse borrow more abroad).

In essence our government will monetize debt. I mean what else can you do when we build a big azz deficit. All the Federal Reserve does is buys bonds trying to stabilize the market, which means they just printing loot on the invisible security of these bonds. If history teaches anything, it is that government cant be trusted to manage loot as this clock shows with respect to the US. When currency is not redeemable in gold, its value depends entirely on the judgment and the conscience of the politicians. All money is a matter of belief and the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. Problem is that world wide folks getting rid of dollars with the quickness. Even here in the states. Banks are increasing foreign currency holdings and since 1999, holdings in US Dollars have dropped from 63 percent in 1999 to 37 percent currently. Yep, the dollar is almost worthless, but why shouldn’t it be, after all its just paper and ink.