Fudging Numbers

It all seems so systematic, arranged, and orderly.  Sixty seconds make a minute, 60 minutes make an hour, 24 hours make a day, and one day equals one complete rotation of the planet earth. Roughly every 30 days the moon orbits the earth – which is one month.  Then every 12 months the earth orbits the sun – which is one year. So far so good…right?

 

The Gregorian calendarOldish German calendar.

Image via sciencesource.com

 

But here’s where the nice and neat order of it all breaks down.  For if you try to measure one of earth’s orbits of the sun in days it’s not so divinely tidy.  For it takes 365 days plus an inconvenient 6 hours to fully complete the cycle. Nonetheless, we don’t let these inconvenient 6 hours hamper our perfection.

We’re humans, after all.  We innovate, invent, and make the world in our image.  So when the numbers don’t jive, we do what must be done.  We fudge them. We create an off balance account, we concoct a new theory, we contrive negative interest rate policy…and we invent a leap year.

This coming Monday is the day the books must be reckoned.  Peering into our off balance account we find 24 accrued hours that must be tallied up and rectified. Consequently, we must have a day of correction for the disorder of the last four years.  We must resynchronize the calendar year with the astronomical year.  Moreover, we must reground our measuring system with its baseline – its reference point.

 

BrandoJuliusCaesarDid you really think we’d let you get away with that calendar-fudging, oh Julius? February 29? Seriously?

Photo credit: MGM/Turner Ent.

 

Without this resynchronization, what’s a year really measuring?  Perhaps, the calendar wouldn’t get too off kilter for a decade or two.  But in just 28-years the calendar would be off by an entire week.  Not long after that, the calendar would be debased to nothing more than etched lines inside a cave dwellers grotto.

 

Helicopter Drops

So goes the dollar – or any paper money – when it’s not backed by gold or some other commodity that can’t be created at will.  For without a stable base to hold its supply in check, what’s a dollar anyway?

It’s abstract, indefinite, and arbitrary.  It can be created out of thin air at the whims of the Federal Reserve.  A pocket full of dollars one day and you can buy the things you want and need.  On the next day these same dollars can revert to their intrinsic value…fire tinder or toilet paper.

Gold to paper currency conversion once limited the Federal Reserve’s money creation games.  But that was before the U.S. severed the dollar’s relationship to gold and commenced the dollar reserve standard.  Prior to 1971, a foreign bank could exchange $35 with the U.S. Treasury for an ounce of gold.  After that, when foreign banks handed the U.S. Treasury $35, they received $35 in exchange.

 

Nixon announces that he will “temporarily” default on the convertibility of the dollar into gold. One cannot show this video often enough, because it is such an excellent example of a government official lying as soon as he opens his mouth, with every single sentence he utters. It also betrays a frightening degree of economic ignorance.

 

1-DebtbergThe gold default and the debtberg… Nixon has really shown those speculators what’s what! – click to enlarge.

 

Unlike gold, which has no debt obligation or counterparty risk, dollars can expire worthless when their promissory obligation is defaulted on.  Alternatively, they can be inflated to nothing when a desperate Federal Reserve moves to dropping suitcases of money from helicopters over major urban centers.

If this helicopter drop concept is new to you let me assure you that it is no joke.  In fact, this is what former Federal Reserve Chairman, Ben S, Bernanke, said the Fed would do in a time of financial crisis.  He laid it out very clearly in his November 21, 2002 speech, Deflation: Making Sure “It” Doesn’t Happen Here. Then as Federal Reserve Governor (now former Chairman), Bernanke had the following to say…

 

“The U.S. Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.  By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. Government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the price in dollars of those goods and services.”

 

Later in this same speech, Bernanke made reference to a “helicopter drop,” alluding to a central banker hovering in a helicopter – dropping suitcases full of money to individuals.

 

bernanke_cartoon
Prosperity through the printing press – a proven concept since John Law!

Cartoon by Gary Varvel

 

Day of Reckoning Imminent

Unfortunately, that day is approaching.  For without the anchor of a gold standard, financial imbalances and debt creation will continue to grow to commanding heights.  Inflation, resulting in an implied default, will likely be more politically expedient than an outright default.

In the meantime, even if the dollar isn’t worthless – yet – its incessant variability is an incessant problem.  How does one save, invest, and accumulate wealth when the dollar’s monetary base is continuously inflated?

When a carpenter measures the length of a cabinet as being 3 feet, he’s certain that the length measured as 3 feet will always be 3 feet.  No more.  No less.  To the contrary, when a shopkeeper prices a 24-ounce loaf of bread at $3.93, he’s not certain that the value of one loaf of bread will always be equal to $3.93.  In fact, in 1971 – the year the dollar’s last tie with gold was severed – he would’ve valued three 20-ounce loaves of bread equal to $0.89.

Has the usefulness of a loaf of bread, on a per ounce basis, really changed 1006 percent?  Has its quality somehow become 1006 percent better? Of course not.  Rather, the baseline used to measure the value of a loaf of bread has been twisted and contorted like a politician’s spine.  The quantity of dollars in existence has increased.  Accordingly, the unit value of the dollar has decreased.

 

2-TMS-2Broad true US money supply TMS-2 – the era of Bernanke and Yellen has seen the amount of money in the economy rise be nearly 125%. Let’s call it “the courage to print” – click to enlarge.

 

Indeed, prices of individual goods and services will fluctuate to account for natural changes in supply and demand.  But when money is anchored to a stable reference point, like during the classical gold standard of the 19th century, overall prices will by and large be stable.

With respect to recording the passage of time, leap year’s necessary, vital, and appropriate, for preserving the calendar year’s conformity with its baseline.  So, too, today’s money needs a stable base to derive its meaning and value from.

Without such a reference point, we’ll just continue to spin out of orbit.  Money will continue to accrue more zeros at the end of everything it measures.  Yet what good’s a $100 dollar bill if it only buys you what a $1 dollar bill did before?

So enjoy Monday’s imminent day of reckoning.  The time was there all along…it just needed to be reconciled.  Alas, we have a startling suspicion that reckoning the distortions of the dollar reserve standard will not be so amiable.  Though it’s necessary, all the same.

 

Helicopter-ben-bernanke-1Helicopter Ben: He sure earned his nickname. The bill for all the fun is yet to be presented in full, but presented it will be.

Illustration via forbes.com

 

Charts by: St. Louis Federal Reserve Research

 

Chart and image captions by PT

 

M N. Gordon is the editor and publisher of the Economic Prism.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

3 Responses to “Day of Reckoning Imminent”

  • Treepower:

    Hate to be a know-all but in the 1953 version depicted, Brando was playing Mark Antony. By the scene in question J.C. (played by Louis Calhern) was already being ferried across the Styx.

    Back at my school in the early eighties, being shown the film three times was regarded as the least burdensome means of teaching the book for ‘O’ level. Brando was good though, and Mason.

  • No6:

    The coming denouement will not be only unpleasant as most writers smelling future problems allude to.
    People are going to suffer and many will die.
    Bernanke is not a cartoon character he is a criminal of the highest order who continues to rake in huge profits rather than face the gallows.

    • therooster:

      It has fallen on today’s society that things are governed from the apex of power. What a shame. We are more than a contained society in the eyes of freedom. This includes contributing to economic efficiency, even in the area of making contributions to liquidity for the benefit of all. This also includes the addition of debt-free asset backed liquidity like bullion. The advantage now is that we can step up gold’s liquidity by using bullion to back a currency who’s denomination is in weight instead of a national currency such as dollars or any other fiat currency.

      Imagine that ? A currency of weight, backed by real weight. I guess if the weight had flexible value (and therefore flexible liquidity), it would combine debt-free characteristics with liquidity which is not limited to the amount of metal that a society brings out of the ground.

      Bernanke is not some godly icon that should be worshiped, nor is his position of some holy significance other than being able to provide a convenient measurement tool that allows for the debt-free trading of two economic widgets that have the same measure of value in the price model …. a price model of relativity that allows for the comparison to support a debt-free trade such as barter .

      Just because a debt-free widget is likely priced in conjunction with a dollar, does not mean that the dollar has to be used to settle the trade. There are forms of liquidity that are available as long as they subscribe to the same price model for the sake of comparison ….. even bullion.

      It’s not the job of Mr.Bernanke or anyone else stuck in the apex of power to bring this FACT to your attention.
      It might be damaging to the new hybrid structure for liquidity that is emerging. Just because we are starting to enter debt-free gold into circulation does not mean we wish to do away with the measurement tools of fiat currency. I think we’ve learned some recent things of amazing importance about “necessary evils”.

      Fiat currency is like a yin waiting for its fateful yang to show up in the name of completion and symbiosis.
      It is up to the market to add debt-free currency in the development of the yang. Fitting since I seem to recall some Words about darkness coming out of light in the process of creation. There’s nothing new here when we “follow the script”. :-)

      The second half of this production belongs to us, the people within the market. We hold our own solution now that people within the classical apex, like Mr Bernanke, have given us a real-time price measure model …. but only if we stop fixating on a fiat currency’s role as a currency, only (debt based medium of exchange). The dollar is also a model for relative price comparisons at “the other end”.

      If thine eye offend thee, simply pluck it out.

      http://l.facebook.com/l.php?u=http%3A%2F%2Fthumb7.shutterstock.com%2Fdisplay_pic_with_logo%2F55404%2F150687905%2Fstock-vector-tree-and-it-s-roots-silhouette-in-modified-yin-yang-symbol-150687905.jpg&h=XAQGWr4XG

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Sector: Positioning and Sentiment
      A Case of Botched Timing, But... When last we wrote about the gold sector in mid February, we discussed historical patterns in the HUI following breaches of its 200-day moving average from below. Given that we expected such a breach to occur relatively soon, the post turned out to be rather ill-timed. Luckily we always advise readers that we are not exactly Nostradamus (occasionally our timing is a bit better). Below is a chart of the HUI Index depicting the action since the January...
  • India: The next Pakistan?
      India’s Rapid Degradation This is Part XI of a series of articles (the most recent of which is linked here) in which I have provided regular updates on what started as the demonetization of 86% of India's currency. The story of demonetization and the ensuing developments were merely a vehicle for me to explore Indian institutions, culture and society.   The Modimobile is making the rounds amid a flower shower. [PT] Photo credit: PTI Photo   Tribal cultures face...
  • March to Default
      Style Over Substance “May you live in interesting times,” says the ancient Chinese curse.  No doubt about it, we live in interesting times.  Hardly a day goes by that we’re not aghast and astounded by a series of grotesque caricatures of the world as at devolves towards vulgarity. Just this week, for instance, U.S. Representative Maxine Waters tweeted, “Get ready for impeachment.”   Well, Maxine Waters is obviously right – impeaching the president is an urgent...
  • The Long Run Economics of Debt Based Stimulus
      Onward vs. Upward Something both unwanted and unexpected has tormented western economies in the 21st century.  Gross domestic product (GDP) has moderated onward while government debt has spiked upward.  Orthodox economists continue to be flummoxed by what has transpired.   What happened to the miracle? The Keynesian wet dream of an unfettered fiat debt money system has been realized, and debt has been duly expanded at every opportunity.  Although the fat lady has so far only...
  • Welcome to Totalitarian America, President Trump!
      Trump vs. the Deep State If there had been any doubt that the land of the free and home of the brave is now a totalitarian society, the revelations that its Chief Executive Officer has been spied upon while campaigning for that office and during his brief tenure as president should now be allayed.   Image adapted from the cover of “Deep State #5” - depicting an assassin from the future   President Trump joins the very crowded list of opponents of the American...
  • Searching for Truth
      Heresy or Truth? RANCHO SANTANA, NICARAGUA – In the fifth century, Christian scholars counted 88 different heresies. Arianism. Eutychianism. Nestorianism. If there was a way to “offend” God, they had a name for it. One group of “heretics” argued that there was no such thing as “original sin.” Another denied the trinity. And another claimed Jesus was not divine. Which one had the truth?   Depiction of the first Council of Ephesus in 431 AD, convened by Emperor...
  • Gold and the Fed's Looming Rate Hike in March
      Long Term Technical Backdrop Constructive After a challenging Q4 in 2016 in the context of rising bond yields and a stronger US dollar, gold seems to be getting its shine back in Q1. The technical picture is beginning to look a little more constructive and the “reflation trade”, spurred on further by expectations of higher infrastructure spending and tax cuts in the US, has thus far also benefited gold. From a technical perspective, there are indications that the low at $1045.40,...
  • The Unstable Empire – A Campfire Tale
      Campfire Tale   Caesar: The Ides of March are come. Soothsayer: Ay, Caesar, but not gone. — Julius Caesar, Shakespeare   GRANADA, NICARAGUA – Today, we stop the horses and circle the wagons. For 19 years, we have been rolling along, exploring, discovering. We began with the assumption that we didn’t “know” anything - so we kept our eyes open. Now we know even less.   Famous people who knew nothing and were not shy to admit it: Sergeant Schultz...
  • Why Silver Went Down – Precious Metals Supply and Demand
      Rumor-Mongering vs. Data The question on the lips of everyone who plans to exchange his metal for dollars—widely thought to be money—is why did silver go down? The price of silver in dollar terms dropped from about 18 bucks to about 17, or about 5 percent.   Reportedly silver was already assassinated in the late 19th century... so last week they must have assassinated its corpse. [PT] Illustration taken from 'Coin's Financial School'   The facile answer is...
  • Systematic Trading - Unwrapping the Onion
      Lumpy but Robust   [ed note: this article has originally appeared at the Evil Speculator and was written by trader and ES contributor Scott. We provide a link to Scott's past articles below this post for readers who want to get more familiar with his ideas and/or any unusual terminology used in this article]   One continual theme in my trading is that every time I think I have it figured out, I get punched in the face by an unexpected problem. The tendency is to go more...
  • LIBOR Pains
      Wrong Focus If one searches for news on LIBOR (=London Interbank Offered Rate, i.e., the rate at which banks lend dollars to each other in the euro-dollar market), they are currently dominated by Deutsche Bank getting slapped with a total fine of $775 million for the part it played in manipulating the benchmark rate in collusion with other banks (fine for one count of wire fraud: US$150 m.; additional shakedown by US Justice Department: US$625 m., the price tag for a deferred prosecution...
  • “People Need to Understand that their Biggest Asset is Individual Liberty” - an Interview with Claudio Grass
      Preserving Liberty in a Difficult Time   In his latest interview for the X22 Report, Claudio Grass shares his views on the future of the Euro, the Trump Presidency, the monetary system and the advantage of of owning gold in these times of global uncertainty.   Claudio Grass, managing director at Global Gold   As election season is upon us in Europe and political and economic tensions are heating up, Claudio Grass notes that “the euro is the most artificial...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com