Welcome to Capital Account. The Eurozone Purchasing Managers Index (PMI) points to a European recession, according to Markit Economics. Meanwhile a successful bond auction in Spain brought lower than expected yields. Is Europe on a “choose your own disaster” track? Fresh off his appearance predicting $7,000 gold on the latest Keiser Report, we talk to our guest co-host, Jim Rickards, Senior Managing Director at Tangent Capital Partners, and John Mauldin, President of Millennium Wave Advisors, about Europe’s fiscal future.
And while we deride the Fed for launching QE3, Japan has launched QE 8. This is the eighth round of easing as Japan’s twenty year slump drags on. We talk to Jim Rickards and John Mauldin about QE and the risk of inflation, interest rate dislocation and the big bang!
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A fundamental point that none of these Rickards/Maulden types of folks will ever get close to mentioning is the fact that all currency is a single, monolithic structure. This reality is meticulously occluded in myriad images of diversionary talk about contrived conflict (‘Currency Wars’, etc.). Names applied to the currency by different countries or the endless retinue of politicos and bank officers are all an illusory obfuscation of the core problem their feigned contentions seek to mask.
The reason behind all this deflection from the structure of the universal currency scheme is, pursuit of THAT examination invariably leads to crystal clear recognition of exactly how abysmal the scheme truly is in comparison to its alternative of metallic specie currency.
There are false ‘factions’ promulgating seemingly divergent ‘views’, pushing emotionally rhetorical ‘hot buttons’ to keep peoples’ thoughts from wandering onto this focus. Many of us spend decades mired in these ‘camps’ despite eager efforts to make logical examinations of the situation, so we fancy ourselves ‘in agreement’ with one or the other sets of charlatans.
Eliminating their entreaties, we see that banknote ‘money’ is a solitary system of infinitely inflating currency coincident with the net long term rate of interest on its issuance and circulation. The equation is a reciprocal ‘feed-back loop’, theoretically extending forever, or until they encounter requirements of impossible economic growth (to offset depreciation), or limited commodity supply constraints.
Or, in other words, there is no logical defense of a fiat currency system?
Jim is enlightening as usual. Loved his book btw!
Capital Account should one day invite Ron Paul to be the guest of the show. It will be nice to hear from him!
Ed_B, there actually is a very logical defense of the fiat currency system (‘logic’ dictated by the ends sought). Because the banknote scheme is inherently inflationary by necessary design, it offers the theoretical capacity to raise prices of goods at a metered rate (through current interest settings) by suppressing the ‘value’ (correlated ratio) of trade media. It’s my contention that this effect was chosen by governments and banks because metallic money naturally gains value over time (due to the ‘Population Demand Factor’), frustrating their insistance on ‘fixing’ a numerical ‘standard’. That propensity of commodity money (metals simply being the ideal form) compeled all the necessary (from governments’ perspective), ‘coin clippings’ and ‘debasements’ we’ve seen through history.
Two powerful elements drove the ‘elites’ to adopt depreciating currency to offset the phenomenon of naturally appreciating money. Linear accounting and taxation by percentage; both of which are indispensible to centralized control of large economies by (stupid) bureaucracies, whether for well intentioned ‘governance’ (which I surmise, was the original impetus) or not.
Like collectivist societal order, though, it just doesn’t mathematically (let alone psychologically) attain the goal set out to be accomplished (not even for benign purposes). And, like its corollary capitalist social order; to realize its maximal benefits, centralized bureaucracy and its supporting frameworks have to be completely transformed or abandoned.