Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

Who Killed the U.S. Dollar?
(Mar 17, 2008)

Washington, DC – Whoa, listen up, girl friends.  It was a dark and stormy night… and, oh-oh, we got a monetary conundrum.

   Federal Reserve Chief “Helicopter” Ben Bernanke and U.S. Secretary of the Treasury Henry Paulson have recently pumped hundreds of billions of Dollars into the U.S. economy to “stimulate” – make that “bail out” -- the banking industry.  President Bush wants to pass out $160 billion -- $600 to every man, woman, and child in the U.S. -- to spend real fast and thus “stimulate” the economy.  The faster, the better, they claim.

   This is all based on the Keynesian economic theory espoused by Lord John Maynard Keynes from Britain who said, “Hey, stupid American Colonists and Limies here at home.  All you gotta do to enrich an economy is hide paper money (British Pound Notes or U.S. Dollars) in a cave, send the citizens on a big Easter Egg Hunt into the cave to dig up the paper money, and they will spend it faster than a bat out of hell, which, by my clever calculations, will greatly enrich the economy.”  Lord John’s theory was unpretentiously called:  “targeted inflation.”

   Ain’t that brilliant?  Sorta like salting your own gold mine with fool’s gold and expecting to get rich.

   Ya-yesss, girl friends.  That’s how it all started.  And if you think Lord John Maynard Keynes was immediately run out of town on a wooden rail and hung by a stiff rope till deader than a doornail at the next Economic Village Idiot Convention, you guessed wrong.  Lord Keynes was, in fact, awarded a Nobel Prize in Economics for this stupidity and his ridiculous inflationary daydreams were immediately implemented as standard economic policy in every major country in the world, including the U.S. by our central bank called The Federal Reserve.  Lucky us.

   There’s only one thing wrong with Lord John Maynard Keynes’ theory of “targeted inflation.”  It sucks.  In street talk, it’s called:  “You stupid shit.  What were you thinking?”

   Let’s say you have the Pink Slip for one ’57 Chevy parked in your garage.  Running down to Kinko’s and printing up a trillion counterfeit copies of the Pink Slip to your ’57 Chevy and hiding them in a cave for 350 million people to find and quickly exchange with each other in the economy will not enrich anybody, you dolt.  And if you change the wording on all the trillions of copies of Pink Slips from, “This is to Certify that there Exists on Deposit in My Garage, or at the U.S. Treasury, One ’57 Chevy, Redeemable to the Bearer on Demand,” to “Hi, this Piece of Paper IS the actual ’57 Chevy,” thus making your ’57 Chevy not redeemable, who do you think you’re kidding?  The fake Pink Slips have NO COLLATERAL.  They are just pieces of paper with no traceable commodity value.  Everybody holding the trillions and trillions of fake ’57 Chevy Pink Slips are holding nothing but paper.

   And that’s exactly what the U.S. Dollar and all paper currencies are today:  nothing but trillions and trillions of little pieces of Government Paper backed by nothing -- zip, zilch, zero, nada.

   In the same way that it would be absolutely stupid – and illegal -- to print up a trillion copies of the Pink Slip to your ’57 Chevy and distribute them throughout the economy on the premise that it would somehow enrich everybody, it is just as stupid for President Bush to print up a so-called “Stimulus Package” of $160 billion pieces of non-collateralized U.S. Dollars and pass it out to every man, woman, and child in America.  For the same reason, it is also just as stupid for Federal Reserve Chief Ben Bernanke and U.S. Treasury Secretary Henry Paulson to pretend that their “injections” of hundreds of billions of U.S. Dollars into the market will “stimulate” anything except more hyper inflation, the result of which will be a whopping rise in the prices of all commodities and services – except the collapsing housing market which is already waaaaay over-priced since home mortgages was the financial substrate, the Funny Money vehicle, used by the Fed to hyper inflate the market in the first place.

   So, why are President Bush, the Federal Reserve, and the U.S. Treasury perpetrating this ridiculous charade of “targeted inflation” dreamed up by Lord John Maynard Keynes?

   Because not one person in a million – especially those with PhD.s in Economics from America’s leading universities – understand the true nature of money, credit, and qualitative human action as the prime force driving economics.  Those who are printing up the Funny Money – The Federal Reserve -- and their investment banking buddies on Wall Street who get the new money first, are getting rich by perpetuating this Fantastic Fake Monetary Scheme:  the non-backed U.S. Dollar.

   Except for one thing:  hyper inflation of the U.S. money supply has now gotten out of control and the Federal Reserve is scared shitless that we are now teetering on the edge of the biggest Stagflation/Recession since the 1930s.

   If the above explanations still haven’t convinced you, allow me to quickly demolish a few monetary fallacies, The Big Monetary Lies, that the Federal Reserve, the U.S. Treasury, and President Bush’s Plunge Protection Team (Economic Working Group) do NOT want you to know about.

Big Lie # 1:  The value of the U.S. Dollar is backed by our Gross Domestic Product (GDP).

   Buzz, wrong!

   The Federal Reserve does not, and cannot, issue Dollars using our GDP as collateral because the Federal Reserve does not own America’s GDP.  Individuals in America, not the Federal Reserve, own America’s GDP.  The Federal Reserve cannot issue paper receipts, invoices, or U.S. Dollars for collateral that it doesn’t own.  Nor can citizens turn their U.S. Dollars into the U.S. Treasury for their neighbor’s house, car, or TV.  It is ludicrous to say that the U.S. Dollar is printed up and somehow “backed by” America’s GDP.  The U.S. Dollar is not backed by anything except thin air.

   This non-collateralization of the U.S. Dollar (i.e., not backed by gold or silver) IS the core of our current financial crisis.  Essentially, NONE of America’s commercial paper is backed by any real collateral:  no gold, no silver, or anything else.  Structured Investment Vehicles (SIVs), subprime mortgages, Treasury-Bills, and Federal Reserve Notes are fake monetary contracts with no redeemable or traceable collateral.  That’s precisely why we’re in the economic mess that we’re in today:  the U.S. Dollar has no value, no collateral, no standard of weights and measure.

Big Lie # 2:  The U.S. Dollar represents “capital” or “capital goods” and, therefore, claims the Federal Reserve, injecting billions of U.S. Dollars into the market is the same as injecting “capital” or “capital goods” into the market.

   Buzz, wrong!

   The U.S. Dollar and all the above-mentioned non-backed paper monetary instruments are not real “capital” or “capital goods.”  “Capital goods” are finished goods or intermediary products of production.  “Capital” is the monetary measurement (in gold or silver money or 100% redeemable gold or silver certificates) of real “capital goods.”  Since the U.S. Dollar is not backed by anything, it is not “capital” or “capital goods.”  Injecting billions of U.S. Dollars into the market is simply more hyper inflation or devaluation of our unit Dollar and will accomplish nothing but inflate prices and cause unemployment.

Big Lie # 3:  The U.S. Dollar is a “liquid” asset, claims the Federal Reserve, and since we have a “shortage” of “liquidity,” claims the Fed again, the Federal Reserve needs to “stimulate” the economy by injecting hundreds of billions of Dollars into the market.

   Buzz, wrong!

   First, the U.S. Dollar is not an asset; it is a hyper-inflated liability, a debt, whose value is crashing precisely because it is hyper inflated and not collateralized by a tangible commodity such as gold.  Nor is the Dollar, “liquid.”  Commodities such as gold and silver or 100% Gold or Silver Certificates are “liquid” assets because they can be exchanged rapidly.  Once again, the current U.S. Dollar is nothing but printed paper with no collateralized backing -- no gold, no silver, no anything.  We do not have a shortage of U.S. Dollars in the financial or any other markets.  In fact, since the Federal Reserve has injected trillions and trillions of hyper-inflated Funny Money into the market over the last several decades, we have a huge oversupply of Dollars in the economy, relative to other goods and services.  Therefore, injecting more U.S. Dollars into the market is not injecting more “liquidity” or “capital” or “capital goods.”  It is simply injecting more hyper inflated paper, which was -- and still is -- the problem in the first place.  The solution to quenching a raging wild fire that is already out of control is NOT to pour more gasoline on it.  The solution is to stop the hyper inflation of the fake U.S. Dollar, let the markets clear, and quickly phase back onto a 100% gold standard.

   Note that -- as a medium of economic exchange -- gold and precious metals are the only types of money that are NOT simultaneously somebody else’s debt – unlike the current U.S. paper Dollar, which, by the way, is cleverly structured by the Federal Reserve out of thin air as YOUR National Debt to be repaid to the Feds through taxation PLUS interest.  Therefore, gold is currently a perfect medium of economic exchange.

Big Lie # 4:  President Bush’s $160 billion “Stimulus Package” -- $600 for every person in the U.S. – will stimulate the economy and pull us out of the current Recession.

   Buzz, wrong!

   As pointed out above, it is absolutely absurd for President Bush, the Federal Reserve, and the U.S. Treasury to claim that injecting $160 billion of our National Wallpaper into the market will stimulate the economy.  No matter what the people do with the new Dollars, the $160 billion injection is simply more hyper inflation.  Nor does it matter how “fast” consumers spend the new Dollars, or whether they spend it on domestic goods or foreign goods, or save it in a self-directed IRA for gold stocks, or pay down a housing debt, or buy an all-day sucker, or stuff it under their mattress.

Big Lie # 5:  Since it is normal for prices in a free market to go higher and higher every year, claim the Federal Reserve, we need to “inject” more U.S. Dollars into the banking and housing markets through government-guaranteed entities such as Fannie Mae.

   Buzz, wrong!

   First, in true free market capitalism – as opposed to our current Welfare State, the accumulation of “capital” and “capital goods” and competition tends to drive prices down, not up.  Governmental intervention – such as Lord John Maynard Keynes’ “targeted inflation” implemented by the Federal Reserve for their special interest buddies on Wall Street – stifles competition, wrecks supply and demand, destroys free market price formation, and thus tends to force prices up, up, up and away -- exactly the opposite of capitalism.  “Targeted inflation” is simply a clever form of central bank Highway Robbery without the Highway, or as Nobel winning free market economist F. A. Hayek said, ‘targeted inflation’ is simply America’s Road to “Socialism on the installment plan.”

Big Lie # 6:  We are not in a Recession.

   Buzz, wrong!

   Look out the window.  You don’t need a weatherman to know which way the wind blows.  Not only is the U.S. and the entire globe in a huge Recession, the central banks of all nations are driving the world into a huge Depression as they implement more controls and hyper inflate all their non-backed paper currencies.

Big Lie # 7:  The Federal Reserve, U.S. Treasury, Congress, and the President can, and should, bail out all the subprime home owners, the banking institutions, and everybody else in America by printing up billions and billions of more U.S. Dollars to save us all from economic Armageddon.

   Buzz, wrong!

   If you haven’t figured out by now that the main function of all central banks, including the quasi-governmental U.S. Federal Reserve is – and always has been – to strip the individual citizen of his wealth by substituting the gold standard with a non-backed paper monetary system, then the current frenetically absurd actions by President Bush, the Federal Reserve, and the U.S. Treasury to ridiculously “inject” hundreds of billions of Dollars into the economy as fast as they can when the U.S. economy is already awash with over half a quadrillion Dollars (that’s $500 trillion Dollars) should leave no doubt in your mind about what the Fed’s true function IS AND ALWAYS HAS BEEN.

   The only true solution to our current Recession is (1) go back to a 100% gold standard and (2) dump the central bankers and their Keynesian economic theory of “targeted inflation,” which only serves as a clever vehicle for their incessant financing for special interest groups and themselves.  The Federal Reserve and all international central bankers have now bankrupted the global markets with their fiat paper currencies.

   The U.S. Dollar is now dead, murdered by the Federal Reserve.  R.I.P.

   It’s time to return to a sound monetary system, which means gold and silver.  Otherwise, the Fed-induced current Recession will turn into an even bigger problem of stagflation, a Depression, martial law, and the loss of more individual freedoms.

   Finally, those who think the U.S. Federal Reserve will voluntarily give up their power and money easily and not go the same route as the Great German Inflation of the 1920s would do well to review the following historical facts:

In 1914, Germany’s Fed Reserve, the Reichsbank, suspended conversion of its paper money into gold.  By November 1923, after continual “injections of liquidity,” Reich Marks in circulation soared past 92.8 quintillion Marks and skyrocketed past 496 quintillion Marks through July of 1924.  On Oct 25, 1923, the Reichsbank apologized that it had been able to only print 120 quadrillion Marks that day, but the demand was for one quintillion Marks.  Finally, after nobody would accept the Mark, the Reichsbank devalued to a new Rentenmark, convertible at 1 trillion to one.  By Nov 1923, circulation had increased 245 billion times and prices 1,380 billion times.  Inflation finally stopped in one day when 4.2 Rentenmarks (4.2 trillion old Marks) exchanged for 1 Dollar, which was convertible into gold.  Germany, via the Dollar, finally went back to the gold standard, after destroying its entire economy in 9 years through hyperinflation of its non-backed paper money. – Dr. H. Hazlitt, Economist

Today, in 2008, after FDR dumped the gold standard in 1933 and Nixon cut all dollar ties to gold in 1971, our derivative markets currently exceed a half a quadrillion dollars or $500,000,000,000,000 – five hundred trillion dollars – of non-collateralized paper fueled by America’s central bank, the Federal Reserve.  And what is it that everybody is screaming for more of?  The injection of billions and billions of more non-collateralized paper money as “liquidity” to “spur” the “growth” of the economy.

   Sound familiar? -- FM Duck

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