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#3147119 - 01/31/13 04:28 PM The Death of Money
OHVATN
4 Point


Registered: 10/09/12
Posts: 337
Loc: Middle TN

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Once one understands that in a fiat currency monetary system that we have lived in since 1971 that money is debt (i.e., "credit money"), the continual creation of government debt is necessary for the system to survive. However, eventually the "Minsky moment" arrives and money dies. As Voltaire said, and I'm paraphrasing, eventually all fiat currency returns to its intrinsic value, zero. Initially, an economic system borrows in low amounts and grows, then it levers more and moves into the speculative phase which requires more credit money or debt to pay back previous borrowings. Finally, the system meets its "Ponzi finance" stage where when additional credit must be issued just to cover interest payments. Japan is just about at this stage now and we have been emulating them since 2008 (after all, Bernanke advised the BOJ in the late 1990s to pursue the course they've been on). For a much better explanation, see http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx#.UQp3KOIdHWo.twitter. Bill Gross is not on the lunatic fringe. He's the managing director of PIMCO, the largest fixed income manager in the world.

If you track US national debt creation since 1968 for each presidential administration, you will probably be struck by (1) the parabolic rise in debt creation, and (2) beginning in 2008 national debt creation started to far outpace GDP growth (with the exception of the Bush I presidency when debt grew $1.463 trillion from 1988 to 1992, but GDP grew $1.247 trillion during the same time period). Obama's first term is a shockingly horrible and scary $6.041 trillion of additional debt created while only growing an additional $1.381 trillion of GDP. We are now at Debt to GDP ratio of 103.5%, only slightly better than Greece (but it's only the last day of January). (Professors Reinhart and Rogoff studied all modern currency crises and found that in all cases they were preceded by a debt to GDP ratio of 100% or more. These currency crises usually end up in a hyper-inflation, the loss of complete faith in a currency, or the death of money.)

As Bill Gross's article above points out, we now need to issue $20 of debt to produce $1 of GDP. That is simply unsustainable and the phase transition started in 2008. You may be a Keynesian and believe that the US government can print and borrow ad infinitum and all will be well (or even worse, a Modern Monetary Theorist and believe that debt doesn't matter, there's that trillion dollar platinum coin). That may be true, until it is not.

So, what happens when it is no longer true and the $ dies? See http://www.zerohedge.com/news/2013-01-30/elliotts-paul-singer-how-money-created-and-how-it-dies. As ZH says, "Paul is not some fringe blogger, some academic with a chip on his shoulder and an inferiority complex, nor some lunatic gold bug. Paul runs Elliott Management, one of the five biggest hedge funds in the US, which at last check had some $21.1 billion under management." According to Mr. Singer - "History is replete with examples of societies whose downfalls were related to or caused by the destruction of money. The end of this phase of global financial history will likely erupt suddenly. It will take almost everyone by surprise, and then it may grind a great deal of capital and societal cohesion into dust and pain."
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"Democracy is the theory that the common people know what they want and deserve to get it good and hard." H. L. Mencken

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#3147135 - 01/31/13 04:39 PM Re: The Death of Money [Re: OHVATN]
FLTENNHUNTER1
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Registered: 11/21/07
Posts: 15536
Loc: Tampa FL

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#3147270 - 01/31/13 06:44 PM Re: The Death of Money [Re: FLTENNHUNTER1]
Stalkhunter
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Registered: 07/17/11
Posts: 3846
Loc: Knoxville TN

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Great rread, death is at our door step, chaos, panic, looting and then war. History repeats but now it will be on our soil.
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#3147309 - 01/31/13 07:05 PM Re: The Death of Money [Re: Stalkhunter]
de novo
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Registered: 07/21/08
Posts: 3994
Loc: Middle TN

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Where's a good place to buy silver directly? Can't afford any gold!
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#3147326 - 01/31/13 07:13 PM Re: The Death of Money [Re: de novo]
FLTENNHUNTER1
16 Point


Registered: 11/21/07
Posts: 15536
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Coin dealers in your area.
_________________________
The Second Amendment - George Washington didn't use free speech to defeat the British, he shot them.
"If there must be trouble, let it be in my day, that my child may have peace." - Thomas Paine





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#3147346 - 01/31/13 07:36 PM Re: The Death of Money [Re: FLTENNHUNTER1]
Stalkhunter
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Registered: 07/17/11
Posts: 3846
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was told to save nickles as many as possible

Edited by Stalkhunter (01/31/13 07:36 PM)
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#3147556 - 01/31/13 10:08 PM Re: The Death of Money [Re: de novo]
OHVATN
4 Point


Registered: 10/09/12
Posts: 337
Loc: Middle TN

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 Originally Posted By: de novo
Where's a good place to buy silver directly? Can't afford any gold!


As FLTENNHUNTER1 said, find a good coin dealer. I like silver, plus central banks don't own it so less or no chance of confiscation (unlike gold, as FDR did in 1933, but I think that's unlikely because the $ isn't backed by gold). Don't forget about fractional gold - 1/4 and 1/10 oz and 1, 5, 10 gram bars/rounds. I also like APMeX online. Very reliable but there's shipping cost. APMeX premiums can be less than a local dealer's premiums and I like to take a look to get an idea on price before visiting the local dealer. Gold and silver more so is very volatile. Highly manipulated by central banks and the bullion banks like JP Morgan and CFTC really doesn't enforce regulations against those guys Read Jim Sinclair, Trader Dan Norcini, 321 Gold, Zero Hedge, Stewart Thompson to help keep you sane and learn and stack. Jessie's Cafe Americain is a good site if you can ignore his liberal political slant (although he is as disgusted with Obama as most of us but for different reasons). Good luck.
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"Democracy is the theory that the common people know what they want and deserve to get it good and hard." H. L. Mencken

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#3147570 - 01/31/13 10:18 PM Re: The Death of Money [Re: Stalkhunter]
OHVATN
4 Point


Registered: 10/09/12
Posts: 337
Loc: Middle TN

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 Originally Posted By: Stalkhunter
was told to save nickles as many as possible


Kyle Bass, manager of Hayman Capital hedge fund and one of about 15 traders to short the subprime market and make several billion betting that the housing market would implode, is famous for going to his bank and buying a million $ worth of nickels. All those years of using nickels and pennies to round up so I got a dollar bill as change are over. I hoard nickels and pre1982 pennies (95% copper). Nickels are still made of copper and zinc.

Kyle Bass is now shorting Japanese gov bonds and advises the University of Texas endowment. Got UT to invest a good chunk of the endowment in physical gold.
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"Democracy is the theory that the common people know what they want and deserve to get it good and hard." H. L. Mencken

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