I have been thinking about this topic a lot. If one looks across almost all sectors of society, one notices that the price in dollars for nearly everything is not what it used to be.

The stock market reaches all time highs while regular and low income people struggle to pay for everyday things. How can this be?

To me, it is easy to see. Our printing presses run non-stop, both physically and by adding a "zero" from the Federal Reserve.

The Federal Reserve (which is neither Federal, nor a Reserve), has the power to insert Reserve Notes (what used to quaintly be called 'Silver Certificates") into our economy ad-infinitum.

To me this means that the whole economy is built on quicksand. Why? Because if we look at what constitutes "money"; it has always been agreed by people that reliable currency is constituted from multiple factors: Scarcity, Divisibility, Non-Counterfeitability, Portability, Transferability, and Fungibility.

Under normal circumstances, would any of you trade one of your Smith and Wessons for air? I wouldn't. Why is that? Air is virtually worthless (unless an artificial market is created) because it is virtually limitless. The same goes for any currency that can be created out of thin air. All the Fed can do now is print money out of thin air in order to stimulate spending. They can't lower rates any more (unless we talk about negative interest rates).

What does this all mean?

-They are robbing anyone who has saved a great deal of "money" and relies on it as a store of wealth. Debasing your purchasing power to inflate the liquidity of the markets and pay for the government's liabilities

-I still work, and am a long way from retirement. For me personally, my wife thought I was nuts when I drastically (by 80%) reduced the amount I put into my retirement portfolio each month and started buying guns, gold, and other durable goods as a store of wealth. I'm not going to be sitting there "holding the bag" when confidence in the dollar collapses and the world no longer uses it as the worlds reserve currency. A lot of Americans will be hurt when that "bill comes due". I'm on wife number two now anyway, and we do not share bank accounts. She is welcome to have any opinion she likes, but has zero discretionary power over my finances. She thinks I'm a wizard because she sees me sell a gun for twice what I paid for a few years ago. I explained to her there was high demand for guns but low demand for dollars relative to the past.

-There is a temptation to store ones wealth in the purchase of real estate. This will only retain its value if 1) the government does not violate the peoples rights by seizing real estate or limiting ones ability to own it 2) one can pay ever increasing tax assessments due to the inflationary pressures of the printing press

-People who live paycheck to paycheck will continue to see their meager wages fail to meet their basic necessities. As this expands, expect more crime by those who need to steal in order to make ends meet, as well as by those who are perpetually disillusioned by the hopelessness of their station in life. Also expect plenty of government "saviors" who tout their hand-out programs that need to be paid for by printing more money. Also expect confiscatory retro-active taxes where an AOC-type raids your retirement savings and gives you an "I.O.U." It will be "only fair", anyway.

- There will be balkanization. Some areas of the country with good fiscal sense will wish to retain their wealth and sense of principles that got them there. Think Rural vs. Urban and suburban divide. You could see something like the 9 northern counties of Colorado start to use alternate currency and enforce their own laws over those of the central government. North Dakota giving the finger to the central government and instructing its state enforcement agencies to ignore federal mandates as they relate to financial matters.

- If communities of people do not band together using common sense, nobody is going to come along and actually save us. There will be some winners and many, many losers.

- The whole thing may act as a great "reset", and force what is left of the nation to get back to principles that made it prosperous in the first place. This won't happen without untold pain and misery suffered by people who had zero part in creating the smoke and mirrors game

-Buy your Smith and Wessons now, because we are in a constant state where the junkie (spender of money), is trying to chase the dragon (get value for money), but the high (relative purchase power of the dollar) is not as good as the last previous transaction

Final thought: The constitution gives the central government the power to "Coin Money". Maybe our founders knew some things that we have forgotten?

My Two Cents (and 2 cents can't buy what it used to)!



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Here's some examples in "real time." It is an example, not .gov stats. Look at "derivatives." Almost $700 TRILLION. Joe
U.S. National Debt Clock : Real Time

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Wisdom chases me; I'm faster

The same “officials” who cry inequality and the demise of the middle class created it.

Perhaps the most sinister of all is the idea of the gov’t taking over your retirement savings and doling it out to you in the form of an annuity, like SS, with the carrot that you’ll never run out of money.
Who else will benefit from my savings?
No thanks, I saved, I want control of my own money.

According to the Debt Clock, “taxpayers” owe almost 3x more than each “citizen”, frightening.

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Sure you did

I'm trying! I'm trying!

I sure hope you mean vintage Smith & Wessons because there is no lasting value in plastic anything and I'm not at all sure that S&W's current production revolvers make any sense from an investment (i.e., store of wealth, not profitability) point of view. Only time will tell and I haven't got that much time left on earth to wait around to find out.

Sounds like you think there might be Ruff Times ahead.

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Georgia On My Mind

Welcome to the United States of Venezuela. They also started by willingly surrendering rights for the illusion of safety and security, deciding that government was the best provider, not the individual. Now they use their currency as wallpaper.

Please send all of your worthless money to me.

Wow!! Any other post will have me dinged. Interesting subject.

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Hue 68 noli me tangere

This was an interesting rant ... Part of which I agree with and another part that I simply can't buy into. Sorry!

I have lived my entire life with a "no debt" philosophy. I never bought a car or truck unless I had the cash to pay for it. Making payments, which includes interest costs, on a depreciating asset just doesn't make sense.

I sent my kids to college and paid all their costs specifically so they wouldn't leave college with $250K in school loans. No sir, not for me.

My house is paid for. My vehicles are all paid for. My personal property is all paid for and at the end of the day, the only expenses I have are the "monthly" bills (Utilities, etc.) that I can't avoid.

I think the OP may have enjoyed a few too many cups of coffee

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I only take a knee for God

If'n you check the "debt clock", $102 TRILLION of the $130 Trillion of "US National Wealth" is "household." Just what you are talking about. Joe

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Wisdom chases me; I'm faster

Pretty much the same as you. Paid a little interest on autos when I was young, but none in 25 plus years.

They can do this with guns and gold too. In the case of gold they actually have in the past.

One proposal has been a wealth tax. Due to obvious Constitutional issues with a Federal tax on wealth the work around they are now proposing is a tax on unrealized capital gains. There's also nothing that prevents states from having a wealth tax.

Much of what you say is true, though I would point out that we still have the highest standard of living in the world in spite of centuries of inflation. Wages inflate too. The problem is lack of economic mobility which is a bit of a different issue. A very complicated issue that has a lot of variables.

Gold, OK


Guns??? You invest in guns, then what do you get when you sell them?? Money which you say is worthless?? Going back to the barter system??

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Still Running Against the Wind

Nothing you said is in contradiction with anything I posted. In fact, you reinforce my point.

You have lived your life in a way that is exactly opposite to the way I described our government running things.

And hence, you are credit worthy, no doubt. My point is that some time in the future, the US won't be credit worthy due to its profligacy.

Thank you for proving my point.

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You have obviously led a very successful charmed life... and that's really great. I feel good for you and your family. Some of us, for different reasons, have not had it so good... but no matter. The point is that if you should still be able to see what the OP is saying... namely that the government printing money non-stop and having State and Federal debt & obligations spiraling out of control isn't a really good thing for anybody long-term.

Not all for sure, but some of us and our children and our grandchildren are going to pay a mighty price for this someday. Fortunately, I think I'll be gone before the worst of it comes home to roost. Unfortunately, my children will still be around and one of them falls into the 'working poor' family category that will never own a house, a new car or have any sort of real retirement. You have to be invested in something today or you'll never be able to keep up with the inflation that's coming on wages alone. It would be nice to be able to stop it or at least slow it down a pinch, but I fear we are past the point of no return.

Inflation is real and unavoidable. But you make some good points... we need a small government, not a big one.

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Jorge

No. I use money only temporarily for transactions. And I dont store cash as wealth. I use it within a time window that minimizes its loss of relative value.

FDR sure did seize gold. The EO did not allow the seizure of jewelry.

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I think he proved my point. He is saying "I wasnt profligate, I didnt live on debt spending. Look how prosperous I am."

This is my precise point about our government. It is living beyond its means and we are all going to feel the effects.

He made my point.

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The economist Stephanie Kelton, with a real life example, of why government printing presses running off seemingly limitless paper dollars in fact works very well for our economy:

“Mr. Mosler had a beautiful beachfront property and all the luxuries of life anyone could hope to enjoy. He also had a family that included two teenagers, who resisted doing household chores. Mr. Mosler wanted the yard mowed, the beds made, the dishes done, the cars washed and so on. To encourage them to help out, he promised to compensate them by paying for their labor with his business cards. Nothing much got done.

“Why would we work for your business cards? They’re not worth anything!” they told him. So Mr. Mosler changed tactics. Instead of offering to compensate them for volunteering to pitch in around the house, he demanded a payment of 30 of his business cards, each month, with some chores worth more than others. Failure to pay would result in a loss of privileges: no more TV, use of the swimming pool or shopping trips to the mall.

Mr. Mosler had essentially imposed a tax that could be paid only with his own monogrammed paper. And he was prepared to enforce it. Now the cards were worth something. Before long, the kids were scurrying around, tidying up their bedrooms, the kitchen and the yard — working to maintain the lifestyle they wanted.

This, broadly speaking, is how our monetary system works. It is true that the dollars in your pocket are, in a physical sense, just pieces of paper. It’s the state’s ability to make and enforce its tax laws that sustains a demand for them, which in turn makes those dollars valuable. It’s also how the British Empire and others before it were able to effectively rule: conquer, erase the legitimacy of a given people’s original currency, impose British currency on the colonized, then watch how the entire local economy begins to revolve around British currency, interests and power. Taxes exist for many reasons, but they exist mainly to give value to a state’s otherwise worthless tokens.”

Learn To Love Trillion-Dollar Deficits
Opinion | M.M.T. Shows the Trillion-Dollar U.S. Deficits Are OK - The New York Times

I have a hard time wrapping my head around the argument, but it is thought provoking. It’s worth reading the entire article. Maybe her book, too. Kelton has just published, The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy, on this.

I think the National Debt calculator shows all the money government owes its lawful citizens.

We need a lean government!

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Jorge

Fear not! a second stimulus check will be coming to further boost the economy.

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Still Running Against the Wind

I read that book! One thing the authors failed to take into account is that their model only works if the Dollar remains the world's Reserve currency. Right now, foreign nations prop up a significant portion of our debt (and help to subsidize our standard of living).

The position as world reserve is a very privileged one, but one that we may not always rely on.

Of the dollar is removed as world reserve, then you will see a massive flood of dollars onto the world market, as people try to cash in their holdings for something of better relative value.

This will be the needle that "pops the bubble".

The whole thing is based on faith. Now, how well is the US managing its image as a stable economic standard bearer? I would argue that its not doing a good job.

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Kudos to you for reading the book! I have always found “the dismal science” sobriquet apt, so most likely will not.

I disagree with “the whole thing is based on faith,” though. Like the father of a household, the feds have the power to force you to pay taxes. They’ll confiscate your property and throw you in jail if you don’t.

Faith equals 'smoke and mirrors'. It only SOUNDS nicer.

I just notice that a lot of prices of important items are really high.

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"He was kinda funny lookin'"

I read her bio, no thanks.

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Sure you did

"A national debt if it is not excessive will be to us a national blessing;”
A. Hamilton

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Georgia On My Mind

Interesting theory I had not considered. Thank you for sharing.

That doesn't matter much.

The World Bank actually recognizes 8 world reserve currencies, the dollar just happening to be the biggest. And that's what it will remain, the only two serious runner-ups having serious issues. The euro has too many issues with political stability, and the renminbi isn't freely convertible.

And those foreign nations don't "prop up our debt", they park their money in our securities despite low to non-existent returns because they know that the US is still by far the most stable and secure place to put money. So people who actually know about money don't seem to share this sense of threatening calamity.

Also, there are plenty of stable currencies in the world that aren't anywhere near reserve status.

All this doomsday stuff about the worthlessness of money would have more credibility if I hadn't heard variations of it for the last 40 years or more, mostly originating with folks who want to sell you gold or other assets at inflated prices, or who want to sell books on how to escape the coming financial apocalypse.

In the real world, the Fed manages the money supply quite well; inflation has been low, and anecdotal observations to the contrary don't mean much. Of course investing in certain assets can and usually will be more profitable than holding money in cash, IF you know what you're doing, but that's always been the case.

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Here’s more on the US dollar’s prospects, the argument here being decline is inevitable and collapse “unimaginable”:



Dollar Decline or Dollar Collapse: Definition, Causes, Effects

One thing I notice with the chart above is that China plus Hong Kong’s holdings exceed Japan’s.

So will all of the disenfranchised be using their worthless paper for buying guns or buying groceries? I think groceries and essentials. The market for guns decreases exponentially as the price goes up. Factor in shipping and transfer costs, both of which can easily increase, and it can take more than a few years for them to go into the green.
At age 67, I've never been wealthier than I am now, but after owning dozens of guns, I'm now content with just a very few.
I'm not disagreeing with the idea of inflation, nor the idea that some tangibles like real estate can be subjected to all sorts of tax increases, but using it an overlay to justify an investment in a hobby passion, one where there is a different interest between guys of our age and those 30 years younger, isn't a sure bet either.

bernies economic advisor...what could possibly go wrong?

I gave up on this subject 30+ years ago when Congress was to pass a balanced budget amendment in 1988 and the 72 hours before it was to pass BOTH parties pulled the amendment. 23T 331/3T 78 (Long play)T 12345609898989 Gonk dollars its all smoke and mirrors folks...truth be known we were Broke in 1965 up when Silver was removed from coinage. Enjoy the ride folks. Its 1919 Germany or 2020 Most African Nation money exchange, all worthless.

The World Bank actually recognizes 8 world reserve currencies, the dollar just happening to be the biggest. And that's what it will remain, the only two serious runner-ups having serious issues. The euro has too many issues with political stability, and the renminbi isn't freely convertible.
Thats a Joke...World Bank...IMF Please ... 8 world currencies Hows that Euro going, Or the Pound Sterling..hehehehe its all Fiat Money sir.

Agreed, a lot of people use this line of thought to sell other people things. I am not one of them.

But I do feel that your faith in the Fed's capable management of the printing press is misplaced.

A lot of people have proclaimed a calamity over the years. However, the difference is that now, we are approaching Greece levels of debt to GDP ratios.

As a student of history, which I am sure you are too, I do not have faith in the thought that the dollar will always be stable because the Fed is capable and the US is peaceful.

I fundamentally don't have faith in the Fed's ability to "manage inflation". They have buggered up their ability to raise rates. What is left for them to do?

We all know the answer, print more money.

People act in their own interests. Having worked in government for two decades (yes, anecdotal), I have seen the level to which government policies do not serve the public's interest.

Couple government power with an entity that you cannot audit or censure, in my experience, leads to outcomes which are not in the public's interest.

Again, my $.02

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I’m with Mr. Sear!

Thank you DougAZ!

I am in the same situation as you. I've worked very hard. I
made sure my Kids were successful. I live very comfortability.

When I see people smoking, joking, with the latest Cell Phone,
$150/month Cable TV, $60K vehicles, and then say they can't
live on $600 a week Unemployment money; they can go get Bent,
don't deserve it, and get no sympathy from me.

Your damn right I'll take your Worthless money, the whole world
does. The Only difference, I have "Chosen Wisely".

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SD social distanc'n since 1889

Taxing people to prosperity?

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Sure you did

On taxing people to prosperity: Finland Is a Capitalist Paradise
Opinion | Finland Is a Capitalist Paradise - The New York Times

I think it healthy to consider points of view with which one disagrees. I also think the ability to change our opinions, over time, based on new information, is a good thing.

My thinking on a variety of topics continues to evolve. I think that is true of our society as a whole. E.g, the consumption of tomatoes or the virtues of giving women the vote, to take examples from the not-to-recent past so as to avoid upsetting anyone.

I think this evolution is a good thing.

All one needs for a stable currency is for the money supply to be managed in such a way that it matches the level of economic activity it has to support.

If the Fed is creating too much money relative to economic activity, prices rise at an increasing rate and inflation results. It currently isn’t, so the Fed isn’t “printing” too much money.

Instead, with the virus-induced crisis, we have the “trying to push a string” problem, which in a way is the opposite: the Fed can’t make people run with the money and borrow, invest, and spend.

To all the above posters, thanks for a very interesting and thoughtful thread! All my very best my Friends, Joe.

I'm willing to pay the postage.

I think it was Churchill, who said something to the effect:

"Taxing yourself to prosperity makes as much sense as trying to lift yourself up by standing in a bucket and pulling on the handle"

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Common sense isn't so common.

I've had this under the glass on my desk for several years. Semantics yes, but it does make you think a bit.


currency is made just like toilet paper, on rollers.
Gold is the money of kings
Silver is the money of gentlemen
Currency is the "money" of slaves

Money is minted
Currency is printed

I too am enjoying this thread. How money works is a fascinating subject for me.

It’s easy to be benevolent when your country is the size of a bucket.

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Sure you did

So who, exactly, has the money? Every country, w/ possible exception of a couple small ones, has a huge national debt... who carries that loan? It's all a shell game: think if the entire wealth of the world was $10 & there were 10 people & it was equally distributed. Person 1 could only spend $1 unless he borrowed $1 from #2 to buy a $2 item. Then #2 borrows from #3 & 3 from 4, etc. Go around the circle a few times & everyone is in debt for hundreds or thousands... but only $10 actually exists... now add however many 0's onto the figures & you have world debt & an excuse for gov'ts to keep raising taxes.

The people missing in your little list are “free men who actually work”

But this brings up an important historical point.

Paper money as we know it, detached from wealth in form of physical treasure like gold and silver and most importantly land, was invented in Europe in the late Middle Ages and the Renaissance primarily not as a value storage device, but as a medium of exchange.

Without it, the commercial revolution that among other things led to the Age of Discovery and America would have been impossible. You could not have a growing continent-wide economy by shoving bags of coins back and forth.

The people who pine for some gold or silver standard nowadays tend to be wealthy folks who are fixated on value storage. You’ve got yours and you want to keep its value up. Fair enough.

But the function of money as the lubricant of the whole economy which ideally keeps everybody engaged and in the loop of free/market exchange is infinitely more important. And that is working. Never perfectly, lots of ups and downs and even the occasional crisis.

But not disaster. As the German government convincingly demonstrated in 1923, you can intentionally drive your currency into hyperinflation and basically collapse its value to nothing to make a point to the world ... and walk away from it as a country, getting back to stability within a few years.

Some say a few Satoshis would fix the whole mess. (No, I am not advocating that.)

But to counter your point, it seems to me the West was Won on the back of Gold and Silver Certificates, not Federal Reserve Notes.

I'm not advocating a wholesale transition to gold coins, however paper money backed up by and pegged to physical assets is better than the current charade.

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I think we're down to a question of faith.

The Fed's monetary policy, and thus the dollar, is based on the aggregate value of the US economy, which (despite current problems) is quite real.

The intrinsic value of gold and other precious metals is not. That's why we see the wild gyrations in prices over time; their practical uselessness makes their value entirely dependent on the hope of a continued widespread belief in their preciousness.

I think I prefer economics over psychology

No economy exists in the absence of humans, they make emotion based decisions almost all of the time. Hence mass marketing campaigns.

Your point about the value of the dollar being based on the total value of the economy reinforces my original post.

Flood the economy with dollars (and there is no end to QE in sight); and the purchasing power of the dollar diminishes. It is a hidden tax against those who have put faith in dollars as a store of value.

The market doesn't so much determine how much is pumped, people do. And you better believe they make policy decisions based on emotions. It's not some dispassionate machine algorithm that decides things based on "economics".

It does come down to faith, you're right. I don't have faith in the benevolence or competence of the Fed not to get it right.

If pumping Ad-Infinitum is not bad, why not pump and distribute until we are all millionaires? Granted, maybe a car will cost a million bucks, but that will be paid for by those who came before and actually saved a million dollars.

When a party can make more of something from nothing, that party reduces the value of the the commodity that already exists. It's why we outlaw counterfeiting.

I don't trust the angels at the Fed to make economic decisions inside an emotionless vacuum.

A lot of people don't.

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