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: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

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:

  • A Golden Renaissance – Precious Metals Supply & Demand
      Battles for Civilization A major theme of my work — and raison d’etre of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts.   Battling the barbarians at the gate... [PT]   There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travelers to...
  • The Federal Punch Bowl Removal Agency
      US Money Supply and Credit Growth Continue to Slow Down Not to belabor the obvious too much, but in light of the recent sharp rebound, the stock market “panic window” is almost certainly closed for this year.* It was interesting that an admission by Mr. Powell that the central planners have not the foggiest idea about the future which their policy is aiming to influence was taken as an “excuse” to drive up stock prices. Powell's speech was regarded as dovish. If it actually was,...
  • The Non-Expiring Hedge - Precious Metals Supply and Demand
      The “Risk Asset” Dip Not Worth Buying is on its Way The prices of the metals rose, gold by +$11 and silver by +$0.25. The question on everyone’s mind (including ours) is: what will cause a change in the gold price trend, or what will make gold go up in a large and durable way? And that leads to another way of looking at this question.   Here is a very good technical reason to adopt a constructive attitude toward gold despite the fact that its nominal price in USD terms...
  • A Global Dearth of Liquidity
      Worldwide Liquidity Drought - Money Supply Growth Slows Everywhere This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).   Nobody likes a drought. This collage illustrates why.   The liquidity drought is not confined to the US – it is fair to...
  • The Zealous Pursuit of State Sponsored Wealth Destruction
      How to Blow $9 Billion The life cycle of capital follows a wide-ranging succession. It is imagined, produced, consumed, and destroyed. How exactly this all takes place involves varying and infinite undulations.   The Stroh Brewery in Detroit. The company provided an example of how wealth that has been accumulated over generations can be completely destroyed due to just a handful of really bad decisions. [PT]   One generation may produce wealth, while the...
  • Debt, Death, and the US Empire
      Yosemite Sam Gets Worried About Federal Debt In a talk which garnered little attention, one of the Deep State’s prime operatives, National Security Advisor John Bolton, cautioned of the enormous and escalating US debt.   Deep State operative John Bolton, a.k.a. Yosemite Sam [PT] Photo credit: Mark Wilson / Getty Images   Speaking before the Alexander Hamilton Society, Bolton warned that current US debt levels and public obligations posed an “economic...
  • The Bien Pensants Agree: The World Doesn’t Need Gold – Precious Metals Supply and Demand
      The Last Thing to be Left Standing – Alas, Not Yet  The price of gold was about unchanged this week, whereas that of silver fell another nine cents. All Serious Right Thinking people agree that the world does not need gold. Indeed our monetary system produces Great Moderations that are totally unlike the incredible volatility of the gold standard era. They wish they could kill all memory of gold as money.   Ben Bernanke, the inventor of the “Great Moderation” fairy tale,...
  • How To Give Thanks Like Socrates
      Political Correctness Indoctrination [ed note: we are posting this belatedly as it was originally supposed to be published on Thanksgiving Day. Unfortunately your editor was out of commission... but MN Gordon's article is still worth reading. - PT]  Ordinary ideals of Americana range as far and wide as the North American continent.  The valued conviction of one American vastly differs from that of another.  For example, someone from the Mid-Atlantic may have little connection...
  • Trump or Seasonality: Which One is Going to Prevail in the Dollar's Late Year Surge?
      A Plethora of Headaches We hope the recent market turmoil is not giving our readers too much of a headache. As you are no doubt aware, the events of the last few weeks have made maneuvering around global markets rather difficult.   A less than happy NYSE floor trader [PT] Photo crdit: Brendan McDermit   The US faces uncertain economic times, as Trump and Xi Jinping remain locked in a bitter trade dispute that is likely to go on for some time, creating uncertainty...
  • Paper Lanterns
      Mud Volcanoes There are numerous explanations for just what in the heck is going on with the economy.  Some are good.  Many are bad.  Today we’ll do our part to bring clarity to disorder...   Two data series it is worth paying attention to at the moment: the unemployment rate (U3) and initial claims. As the chart at the top shows, when the former makes a low it is time to worry about the economy. Low points in the U3 UE rate slightly lead the beginning of recessions....

Support Acting Man

Item Guides

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

350x200

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

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]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!