Without the Federal Reserve, We Wouldn’t Have Inflation

"Money responds to the law of supply and demand just as everything else does. When the supply of dollars goes up, the value of each individual dollar falls, and prices rise to compensate. That's inflation. Inflation isn't rising prices. Inflating the money supply causes rising prices. As prices rise, people become poorer and they demand relief. The politicians stop injecting money, people have less to spend, and business slows down, often causing a recession. The shakeout can be very painful, depending on how long the inflation has lasted and how many new dollars have been injected into the economy. What is generally overlooked is the fact that the Federal Reserve has been inflating the money supply almost without pause ever since the Fed was created 94 years ago. So, underpinning the most recent seven years of injections and malinvestment, we have the residual from the previous 87 years. In America's schools and colleges, the whole population has been taught that the government has the duty to create prosperity. If the government, led by Obama, doesn't inflate us out of this, he will be in very deep trouble. I think a whole new crop of multi-millionaires is about to be grown. The reason is, the dollar is the world's reserve currency, meaning the preferred medium for trade and savings. Trillions of dollars are held in foreign hands, and these foreigners absolutely do not want any further decline in the value of their dollars. If Washington inflates heavily to stop the recession, the foreigners will dump their dollars, possibly triggering a global monetary crisis in which the dollar would be completely rejected, becoming worthless. To prevent this, Washington must give the dollar some kind of backing that will make it trusted and desirable. I think it's safe to say it will be something that cannot be created on a printing press. Most likely it will be a basket of globally traded raw materials, perhaps copper, gold, silver, lumber, wheat, tin, iron, oil, and a lot of other things. Or, perhaps just one thing, gold. Until the 1970s, when this insane experiment with the paper US dollar as the reserve currency began, gold had been valuable for six thousand years. It worked so well it was the only reserve currency the world had ever known. There is nothing else so trusted. I don't know exactly what Washington will use, but I think gold will be in the mix." - An Interview with Richard Maybury, Author of 'Whatever Happened to Penny Candy'

Without the Federal Reserve, We Wouldn’t Have Inflation

June 25, 2012

Pete Ostapchuk, The Elkhart Truth - Many people believe that inflation, like sales tax, is a fact of life that has always been around. Inflation did not exist until after the Constitution was written. Otherwise, dollar amounts could not have been stated in the Constitution (see Article One, Section Nine).

The gold standard was why we had no inflation (see Article One, Sections Eight and 10). Around the beginning of World War I, the tag team of the Federal Reserve and the IRS came into being. A friend who survived the D-Day landing told me that you cannot have inflation until you can print money out of thin air. The perpetrators of the Federal Reserve system have left us with paper money. I can’t tell you who has our gold and silver. The Fed has the blessing of Congress to print paper money to increase the amount of money in circulation, which in turn causes inflation.

When you were young, you bought the lot next door for $5,000. When you needed money for retirement, you sold it for $50,000. Because of inflation, $50,000 now has no more buying power than $5,000 did back then, so you broke even. So far so good, until the IRS comes along and says you made $45,000 on the deal. The IRS wants you to pay income tax on the profit even though you just broke even.

Where is that government of the people, by the people and for the people? It only appeared that you made money because the Fed printed bogus money.

Jim Lichkay (“the word ‘capitalism’ does not appear in the Constitution”) wrote May 8 that the word “capitalism” does not appear in the Constitution, which it should not as it is the Constitution of our government, not our industry. But why does “Federal Reserve” not appear there?

Banks Quietly Prepare for the Return of Greece's Currency

Banks Prepare for the Return of the Drachma

May 11, 2012

Reuters - Banks are quietly readying themselves to start trading a new Greek currency. Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins.

From the end of the Soviet Union - which spawned currencies such as the Estonian Kroon and the Kazakh Tenge - to the introduction of the euro, they have had plenty of practice in preparing their systems to cope with change.

Planning behind the scenes has been underway since Europe's debt crisis erupted in Greece in 2009, said U.S.-based Hartmut Grossman of ICS Risk Advisors who works with Wall Street banks.

"A lot of the firms, particularly in Europe and also here, have been looking at that for a long time," said Grossman, who added that the latest Greek political crisis had brought matters "to a little bit of a head".

"But there really has been contingency planning at all of the financial institutions for that to happen ... Greece leaving the euro zone is not a new idea," he said.

The EU says it wants Greece to stay in the common currency, and opinion polls show Greeks want to keep it. But they also voted last Sunday for parties opposed to a bailout with the EU and IMF, throwing Greece's future in the bloc back into doubt.

The elections threw into doubt the EU/IMF aid package that came at the price of harsh austerity measures, and was reached only after much haggling between banks and politicians over a 100 billion euro debt reduction.

While the deal averted financial market catastrophe by allowing Greece to continue repaying its reduced debts, any future problems could be yet more troublesome, even if Athens managed the process in a more or less orderly fashion.

A Greek departure from the euro would create legal and practical problems for the banks which would dwarf the relatively straightforward technical job of dealing in a new currency.

SCENARIOS

Greece would almost certainly impose foreign exchange controls if it were to drop out of the euro, bankers said, but dealing in any new currency would still be possible.

"Forex desks can get ready relatively quickly. It depends on exactly how the exit from the euro happens," said Lewis O'Donald, the London-based Chief Risk Officer at Japanese investment bank Nomura.

Currencies that are not freely tradable, such as the Chinese yuan, are widely mirrored in off-shore foreign exchange markets through the use of derivative instruments, such as non-deliverable forwards, or NDFs.

The problem may be bigger for euro zone banks which need cash for individuals or companies doing business in Greece. They face the problem of what exchange rate to use, depending on the laws Athens might draw up for trade it its currency.

If Greece forced an exchange rate of, say, one euro to one new drachma, this could impose huge losses on foreign banks because such a rate would not hold on the markets.

Controls on the movement of capital could be a nightmare for banks with loans in Greece, potentially making it illegal for companies to repay debt in euros.

Even if it were not illegal, companies might no longer be able to repay foreign creditors because their cash had been converted overnight into drachmas - a currency that would rapidly lose its value due to the dire state of the Greek economy. That would, in turn, make it tough for any lender to get its money back, whatever contract it might have.

"Our assumption is that an exit route somehow has capital controls in place, or an inability for a creditor to enforce (legal rulings) under English law into Greece," O'Donald said.

SHOUTING 'FIRE!'

Banks have studied several options to protect themselves as best they can, including switching to U.S. law for new derivative transactions or loans. So far few have taken such steps due to doubts about how effective they would be, and also because they are afraid to add to market concerns.

"Banks are very, very reluctant to start shouting 'fire!'. They know what happens and what panic looks like," said one London-based lawyer advising financial firms.

Instead, most are simply checking the governing law of their contracts, hedging against defaults and running through every legal argument a Greek euro exit could throw up.

"There are still areas which will be grey in some respect and which will lead to conflicts of law that may have to be resolved in court," Nomura's O'Donald said.

Many banks have been simulating a rupture of the euro in "war games". But little is known about how an exit would work, and legal departments are poring over financial contracts, raising questions about the very nature of a currency.

"If transactions are denominated in the euro, what is the status of those transactions in the event that there is a change of the make-up of that currency?" said Miles Kennedy, a partner at accountancy firm PricewaterhouseCoopers.

With such questions unanswered, stuffing cash machines with enough drachma banknotes is almost an afterthought.

For Greece itself, it certainly won't pose a problem. The country's national bank has its own banknote printing press and mint and has continued to print euro banknotes ever since joining the single currency in 2001.

Corporate Puppets, Looting the People and the Public Treasury, Planned the Economic and Social Meltdown

'Armageddon Outa Here!' (Excerpt)

December 11, 2011

British National Party - We are now at the end of several decades in which the financial corporations have gone all out to use their puppets in the political, media and academic elites to break down every last barrier to short-term gambling and fiscal irresponsibility on an unimaginable scale.

Only the complexity of their multitude of interlocking schemes and institutionalised thefts has so far concealed the simple truth: The whole lot adds up to corruption and financial insanity on a scale that dwarfs the combined follies of Tulip Mania, the South Sea Bubble and every Ponzi scheme in history. The looting on the streets that so shocked England last month pales into total insignificance compared to the looting organised in the boardrooms of the world's great financial corporations.

The icing on the resulting already sickly cake is provided by the Utopian mania of elite conspirators such as those who created the Euro. They knew from the very beginning that their attempt to force most of Europe into the Procrustean bed of a single currency could only result in the short southern countries being stretched past breaking point and the tall, more productive northern ones having their heads and feet hacked off in a doomed attempt to bail out their broken neighbours.

The Europhiles were well aware that this would happen, but regarded it as a 'benevolent crisis' because it would provide them with the excuse to do what they wanted to do at the start - impose not just a common currency but total financial and economic union under central Brussels control.

It is, furthermore, entirely possible that a similar ideologically motivated financial suicide pill may also be envisaged for the US dollar. The bid to effectively merge the USA with Canada (enormous reserves of filthy, inefficient but hugely valuable shale oil) and Mexico (enormous reserves of cheap, non-unionised labour), is not a conspiracy theorists' myth but a genuine political project.

Planned meltdown?

It is, however, so unwanted, undemocratic and obviously 'unsaleable' that, like the creation of a federal Europe, it would need a financial and subsequent economic and social crash of historic proportions in order for the elite to bulldoze a new pan-American currency - the Amero - through the barriers of public opinion, national sovereignty and plain commonsense.

The jury is still out as to whether the gathering crisis was planned all along by the elite, or whether they will simply try to exploit events over which they themselves no longer have any control. In a way, it doesn't make much difference to us little people. Either way we're going to be screwed - unless we organise to fight back and provide both credible explanations and attractive solutions.

The financial crisis of the old order can be summed up as the result of a corrupt banking system, fueled by short-term greed and driven by sociopathic Utopian fantasists, hitting the brick wall of the physical reality of energy scarcity. Crash, bang, wallop, what a picture! No wonder even those who are too close to the banking trees to see it feel that dark fear that "it's going to get very nasty."

Of course, old hands radicals of all persuasions including ours will have heard repeated predictions, going back many decades, of an impending 'crisis of capitalism'. Some of those were indeed followed by serious economic shocks, others simply failed to materialise, but so far the System has survived them all.

Plunge Protection operations (in which vast sums of US government cash have been spent propping up share prices), and in the last couple of years Quantitative Easing (i.e. printing fortunes in paper money and giving it to favoured elite friends to use to buy real assets) have put off the day when the financial train slams into the buffers at the end of the track.

Secretive elite

It is, of course, always possible that the ingenious folks at the Federal Reserve, Bank of England, Council for Foreign Relations, Bilderberg Group and the other interlocked and secretive elite organisations may come up with further ways to postpone the Day of Reckoning by even more reckless use of taxpayers' money and shackling the chains of debt on future generations.

Printing more money - vast amounts of it - might help for a bit, but at the cost of hyper-inflation. Germans in particular have particularly bad memories of where wheelbarrows full of currency can lead, however, and it's not exactly a constructive answer. Is there any other way, within the confines of the present rotten system?

The markets clearly doubt it, and the consensus of economic commentators seems to be that, in their efforts to contain the crisis, the central banks are effectively out of ammunition, out of ideas and out of time.

That is certainly the opinion of a business lawyer with whom I was speaking the other day.

"No one in any serious business goes into insolvency without preparing for it. Once they decide it can't be avoided they move to secure their assets. Whether it's a jobbing printer putting their printing equipment in someone else's name or a banking elite putting their money somewhere safe, it's all the same.

"The big boys in the financial world know what's coming and have already taken precautions to protect themselves and their friends," he told me with worldly-wise cynicism.

"QE wasn't really about keeping things afloat. If it had actually worked in the long-run it would have been a bonus, but the main aim was always simply to buy enough time, and provide the money, for a gigantic elite shopping spree.

"Farmland, gold, energy shares, grain supplies, water companies - on both a corporate and personal level they've been buying up everything which will have real value on the other side of the Crash and all the chaos that will come with it."

Banksters v the 'little people'

One way or another, the banksters who've created the mess have been working very hard to make sure that they're not the ones who get hurt by it. In fact, they'll be hoping to use it to loot the 'little people' even more.

At the same time, their politician friends are planning to use the Crash as an excuse to impose different bits of their One World dreams. Financial unions, control of everything from the Internet to guns, more powerful police forces to keep the peasants under control - they're all on the way. Schools, hospitals, local government, military supply chains, picturesque islands and national parks - if it doesn't move they'll privatise it. We're going to see the biggest fire-sale in human history.

These things now cannot be avoided; it is now only a minor question of timing. The big question, however, remains bigger than ever: Will they get away with it?

In trying to get the right answer to this, it is vital to remember one thing: Despite the enormous powers of the elite, and for all their scheming to dodge and benefit from the fall-out from their disaster, most of what is now happening is beyond anyone's control. An entire system is coming off the rails, because it's just run out of fossil energy track.

Forget shale oil, gas fracking, biofuels and windfarms. They will all play some kind of role in the cruel, degraded, neo-feudal world that will be the outcome of all this if the elite keep control. But none of them has the energy density or low production costs to replace 'conventional' fossil fuels. They will widen even further the gap between those who have such assets and the exploited serfs who don't, but they are incapable of providing the energy basis to recreate our pre-crash world.

[...]

Well made future

We can and must move forward to a time where locally produced food, grown and reared in ways that return fertility to the soil, is enjoyed in its proper season. We can and must move forward to a time when value is not primarily measured by how cheap something is but by how well it is made and how long it will last. We can and must move forward to a time when things are not built to be sold and thrown away, but to be bought, cherished and repaired.

We can and must move forward to a time when the needlessly created wants promoted by cynical and manipulative advertisers ("the bureaucrats of capitalism") are replaced by the satisfaction of buying good and truly useful things produced as close to home and sustainably as possible.

The transition to a successor to the current Age of Waste is inevitable, but we still have a choice as to what will come after it. If things stay on their present destructive trajectory, the 'long emergency' of Peak Oil, and the intertwined shortages that are coming with it, are likely to lead to a sort of new feudalism.

The 'big boys' of banking, energy, corporate cannibalism and military clout will use their existing wealth and power to grab everything and everyone that survives the helter-skelter slide down the grim side of the Hubbert's Peak.

[Note for newcomers: Hubbert was the American geologist who first identified the bell curve graph of oil production that geological reality imposes on individual wells, oil fields, producer nations and total global production alike. Having just passed its halfway high point, we still have plenty of oil left, the problem is that we have used up the oil that was most easily found and extracted, the best quality oil that was most easy refined, the supplies in the most stable and safe parts of the world. In simple terms, we have used all the good stuff that gave us the maximum amount of energy out for the minimum amount put in. Drilling in mile deep water in the hurricane-ridden Gulf of Mexico or open cast mining Canada for shale oil isn't yet scraping the bottom of the barrel, but as the boss of Shell has now admitted "the age of easy oil is over."]

If the banks, corporations and their political and media puppets succeed in convincing most people that we can have globalist business as usual, as long as we leave things to them, then the failure to change long term direction will lead to multiple and mutually reinforcing disasters, including famine and resource wars.

Traditional futurism

If, on the other hand, we succeed in slaying the globalist dragon and bringing the banks to heel, then we can build a traditional futurist world of families, local communities and historically-rooted nations. A Britain where buildings, cities and governments alike are built and run to essentially human scales. A Britain where the short-termist exhaustion of our soil through agribusiness monocultures is replaced by family farms and mixed agriculture which build fertility and sustainable productivity as the foundations of a healthy nation and the birthright of future generations

We can set about building a system where the creative drive of individual human beings is free to work its magic through private enterprise without being crushed by either socialist EU bureacracy or capitalist monopoly.

We can refuse to exist as ignorant cattle herded from crisis to crisis, as nervous sheep submitting to endless fleecing in exchange for 'protection' against real or imaginary wolves, as beaten dogs begging for scraps of dried out bones. We can wake up, stand up, and live as freeborn Britons - lions whose deeds and whose roar have built and shaken the world in the past, and will do so again.

But before we can do any of those good things, we have to win. For the last year or two, the first step was simply to survive the waves of external and 'internal' attacks that we have faced as part of a Europe-wide war against all genuine nationalist organisations.

At times it was touch and go, but – against all the odds – we in the British National Party have survived. Friends of ours in organizations overseas who are facing exactly the same kinds of lies and subversion as we have faced are in several cases still reeling under the blows. I pray that they will weather the storm and go on to prosper and grow, and I tell them that they can do so, because we have done. The attempted murder of the British National Party has failed. Next year, we bounce back.

The desperate attempts to break the nationalist opposition everywhere is happening because the globalists know that their time is running out fast. They know better than we do just how unstable their entire system has become; they know just how rapidly their threadbare legitimacy and addled authority will be shattered as the public lose patience with them and all their works.

They know their slow motion crash will grind on. Their only realistic aim is - before it's too late - to take out the real opposition. All over the world, that means us nationalists.

The more their System crumbles, the more they and their media, police and undercover puppets will lash out in more desperate attempts to shake our faith and weaken our ability to make political capital from the great unravelling now underway.

We will not find it easy, but they will not get their way. We will survive, and we will go on to win

Banks, Governments Move to Restrict Personal Gold Bullion Purchases

Banks, Governments Move to Restrict Personal Gold Bullion Purchases

September 9, 2011

SHTFplan.com - This week we returned from a trip to the Eurozone where we met with a host of different people across many countries and several industries. All of the indicators we’re seeing – construction starts, bank lending, personal borrowing habits, economic growth, and even the (lack of) items in grocery store carts – suggest that Europe is on the brink, though as is generally the case, the average European has no clue what’s coming their way.

The most alarming situation we identified is one relating to the purchase of gold coins and bullion – specifically in the country of Austria – but one that will likely make its way across the EU if it hasn’t already.

Unlike the United States, where gold and silver can be purchased through traditional methods like visiting a local dealer directly, or even placing an order on the internet, it is much more difficult to find a gold/silver dealer outside of Germany or Switzerland. As a result, those individuals interested in acquiring gold are left with purchasing directly from local bank branches.

Had you visited an Austrian bank three months ago, you would have had absolutely no problem purchasing a large quantity of gold/silver from the bank. You’d simply call the bank about 24 – 48 hours in advance, let them know you’re coming and how much you needed, and you’d personally pick up your order within a couple days.

A new trend in Austrian (and perhaps the rest of Europe’s) banking policies suggests that certain interested parties are attempting to control the sale and personal acquisition of gold/silver as safe haven assets. What we experienced first hand should be a wake up call for not just Europeans, but Americans as well.

The policy change was quiet, has not been reported by any media outlets that we’re aware of, and no mention of the new policies is made on the web sites of Austria’s largest banking institutions (though it is clear they vehemently comply with U.S. anti-money laundering measures and the Patriot Act)

According to the bank representatives and manager we spoke with, Austrian banks have now been ordered to restrict the sale of gold and silver bullion purchases and are limiting personal acquisitions of precious metals to 15,000€ (approximately $20,700 USD) at a time, or 11 ounces of gold at today’s prices.

Upon further discussion we learned that these policies were implemented over the course of the last 30 days, and they are now standard operating procedure. The reason given was the banks had come under pressure from EU, Austrian and U.S. officials, with this particular manager specifically citing U.S. money laundering initiatives and the EU’s Third EU Money Laundering Directive which was implemented across the zone in December of 2007.

The idea that these restrictions have been put in place as anti-money laundering measures is laughable. As we all know, if a drug cartel or other criminal organization wanted to launder money, they wouldn’t do it in person purchasing bullion coins at a local banking branch. They’d simply pick up the phone and contact a too-big-too-fail bank (video), as we’ve seen with the billions of dollars recently laundered through U.S. banks. You may remember there was very little reporting on this issue from mainstream media and it has been ignored by U.S. prosecutors.

As Austria is one of the more developed nations in the Euro Zone, there is a strong likelihood that they are not the sole country implementing these new policies – and that this has been, or soon will be, implemented across the entirety of EU nations.

To the average European and American this may not mean much. But If you’ve been paying attention to the events unfolding over the last several years, it’s becoming clear that the economies of the EU and US are under threat of a significant and potentially permanent financial collapse. This morning, IMF managing director Christine Lagarde was quoted as saying that the situation is so dire,

“Policymakers should stand ready, as needed, to take more action to support the recovery, including through unconventional measures.”

The new gold and silver purchasing limits would certainly qualify as unconventional, along with other recent proposed measures by EU officials and business leaders. One such proposal from Italian business leaders calls for all cash transactions over 300 Euro (About $400 USD) to be banned, and to be permitted only in electronic format.

The global trend across industrialized nations for the last twenty years has been to move towards a cashless society, but one that still utilizes centrally planned currencies. While central banks, large institutional funds and wealthy private investors across the world continue to buy up gold, governments seem to be moving quickly to restrict the ability of average people to do the same – and they are rapidly implementing policies to either restrict or track these types of transactions.

Many cities around the country, such as Houston, TX, have passed identification requirements that force sellers of precious metals to present a valid form of ID at the time of sale. Like Europe, the U.S. is expeditiously implementing direct methods of tracking these transactions, as well as indirect methods that target those who may be engaging in suspicious activities, namely using cash, as per FBI and Homeland Security bulletins issued last month.

The noose is tightening. Governments, large financial institutions and political chess players know exactly where real value exists. And it’s certainly not in the currencies that are being printed with reckless abandon.

Currency Meltdown and Hyperinflation

What Accelerated Hyperinflation Looks Like

July 1, 2011

SHTFPlan.com - Never having lived through a hyperinflationary currency meltdown makes it difficult to visualize how such an event may unfold. We know from historical examples like the Weimar Republic and Zimbabwe that the end result is wheel barrows full of paper currency being used to buy basic staples like bread and rice.

The following chart from the late Howard Katz provides us an example of what the beginnings of a currency meltdown look like, in this case Zimbabwe’s hyperinflation, and how quickly it can devolve into completely financial chaos:

year		rate of increase in prices
1999		56.9%
2000		55.22%
2001		112.1%
2002		198.93%
2003		598.75%
2004		132.75%
2005		585.84%
2006		1,281%
2007		66,212.3%
2008		231,150,888.87% (July)

The Zimbabwe dollar took roughly five years to completely lose the confidence of its people. But because the US dollar is the world’s reserve currency all bets are off in terms of time lines. Given our dependence on debt issuance and foreign investment to cover our expenses, there’s a distinct possibility that shouldn’t be ignored. As James Rawles discussed in his book Patriots and Troy Grice in his book Indivisible, if our foreign creditors pull the plug on lending, the entire monetary system of the United States could collapse in one fell swoop. This is certainly a possibility.

Whatever the triggering mechanism, and however long it takes for the American public and our foreign creditors to lose confidence, the end result will be the same. We often talk about store shelves emptying if and when the dollar becomes worthless, but another likelihood in such an event would be that store shelves remain fairly well stocked simply because the people have nothing of value to acquire those goods (and eventually, that leads to riots and political collapse).

The following video from Silver Investor demonstrates the pricing discrepancies that will result if the US dollar goes into meltdown.

However it comes about, whether quickly in a period of days or weeks, or progressively over months and years, the wealth of anyone who denominates their assets in US dollars (including now, ironically, many Zimbabweans) will be virtually destroyed.

Belarus Shoppers Panic as Ruble Collapses

The Chaos of a Currency Collapse

My idea of an economic nightmare isn't a stock market crash, but a currency crisis which destroys the value of an entire country's wealth. If this story line sounds like the stuff of Hollywood film or a black & white newsreel from the 1920s -- think again. This horrific scenario is unfolding this week in Belarus, where the government was forced to devalue the currency by 36% on Monday as confidence in the nation's economy evaporated. - Could a Currency Collapse Happen Here?, SmartMoney, May 26, 2011

The horrific scenario playing out this week in Belarus should serve as a warning to the U.S.

June 16, 2011

GoldCoin.org - Last month Belarus witnessed the effects of a collapsed currency when the Government cut the rouble’s value against the US dollar by almost half. Previously 3155 roubles would buy a dollar but in the blink of an eye they decided 4930 would be needed.

This was not even the reality because perception of the collapsing currency meant the situation was even worse as people scrambled for foreign exchange on the black market where you needed at least 6000 roubles to buy a dollar.

So what sparked this crisis?

President Lukashenko had promised to raise public sector wages by a third during his election campaign, which he duly carried out. This was sustainable only because of the support Belarus received from Moscow in terms of loans. However, as fears grew about the country’s finances, support from Russia waned and even near neighbours from the EU didn’t fancy the risk thus sparking a sharp drop in confidence in the currency.

To exacerbate the problem there was a shortage of foreign exchange currencies, dollars or euros, in the country.

The consequences of a collapse

Flicker: chudentsov

Shelves quickly emptied of food and any "tangible asset" that would hold value better than their currency; Empty Store Shelves in Minsk, Belarus May 18, 2011

Wide spread panic broke out as the economy effectively became paralyzed and people suddenly realised their currency was of diminishing worth. Shops were quickly emptied of everything that could be bought. Everyday food was snapped up at “luxury” style prices as people thought of survival but also they also bought electric goods like toasters, microwaves, canned goods and virtually anything that was for sale as they rushed to convert their currency into “any tangible assets” that were not losing value as quickly as their roubles.

The empty shelves throughout the towns seemed eerily reminiscent of the Soviet controlled days.

Shoppers knew that anything they could purchase could be more useful as a form of barter than the diminishing currency in their purses and wallets.

The human cost was quickly evident from the stories of employees sent on unpaid leave as companies also struggled to cope and comprehend the impact. Andrei, a computer company employee explained how he queued for a week in Minsk trying to buy dollars but didn’t even get one.

“In just one month, I have been made bankrupt, the entire country is bankrupt,” he said, adding that “even during the Soviet collapse we never suffered such a nightmare”.

There are many more stories of hardship, families without food or the means to buy any, shops without stock for them to buy even if they had the means.

Dmitry who is a 48 year old factory worker explained how he closed his bank account to get out 5 Million roubles in cash so he “could buy something before my money turns to dust”.

Tensions are growing as many people blame the President for mismanaging the economy. Staple food supplies are now hoarded but people feel anxious that unrest is starting that could spill over into conflict at any time.

Revolution is always more likely when the population are starving.

Which country is next?

This may all seem so far away from wherever you are reading this but the causes of currency collapse may be closer to your doorstep than you think.

How many countries are in deep debt and reliant on support loans and bailouts right now?

Greece, Ireland, Portugal, Spain, Italy, Japan, USA, Belarus and virtually all of Eastern Europe and the Euro zone (only they never put it in the headlines!)

What happens when the support cannot be maintained? Currency Collapse.

It could be the US Dollar, the Euro, the Yen who knows?

But even if it isn’t your currency that collapses, what will be the knock on effects in every developed country if one of these currencies collapses? The same as in Belarus.

Globalisation has been the buzz word for expanding Capitalism but it also means that economies are now inextricably linked and inter-twined to such an extent that when one sneezes they all catch a cold!

Remember the level of Sovereign Debt is spiralling out of control in the US, Greece, Ireland, Portugal and others are close behind such as Spain and the UK. Austerity measures in all countries are hurting normal folk badly – they are losing their jobs, suffering pay freezes, inflation and pension erosion. Social unrest and industrial action looms large across Europe, and this will itself impact the recovery and debt repayment. This has already started in Greece, Portugal, Ireland and large scale protests in the UK are gathering momentum with the Autumn likely to be the boiling point of anger.

The discontent and despair of regular folk is understandable as they are bearing the brunt of all the hardship and it just isn’t fair.

Politicians spout their practiced rhetoric about how to fix things but the reality is they just don’t care that much as they are not the ones affected. They have means to isolate them from the hardships, and many of them are actually responsible for producing the mess. How can they care about regular people or preach what we need to give up when they don’t – ever met a poor politician? Enough said!

There is now even talk of a “sub-prime” type problem in China because of over-indulgence in property speculation, leaving huge swathes of developments empty or under-occupied and therefore leaking money and ready to default.

We need more than lip service!

Mainstream news outlets are all controlled by self-interest groups (private and Governments) and they never provide the whole story about global economic frailty as there would be worldwide panic if they told the truth. The situation right now is on a knife edge and the next Belarus is not far away.

Politicians won’t admit it, but then again they won’t suffer like the rest of us as they’re all rich enough and well connected to see out any storm. They care too much for their own popularity to be honest. Posh boys and rich kids rule the world and their assets are well protected in advance.

Remember what happened when panic struck in Belarus, people bought any tangible asset they could because it would maintain value better than their currency. This phenomenon is happening daily – your bank account is the best place to keep currency if you want it to devalue!

Currency is not a means of preserving wealth because it has no inherent value especially when confidence is lost – then it is just a piece of paper.

The only real money available is a tangible asset that maintains its value whatever happens to printed bits of paper currency – and that is gold!

A lesson on Money and currency

We need to understand the difference between money and currency as one is real and the other a promise. Money can be defined as a medium of exchange and a store of value and until fairly recent times was in fact coins made out of precious metal with an intrinsic value or for ease of use, notes backed by precious metal.

Money, when considered as the fruit of many years’ industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency. Thomas Paine (1737 – 1809)

Currency is still a medium of exchange but is not a store of value as it only derives its value by government degree or “fiat”. It’s value is based on the issuing the authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies.

A days wages in Germany 1923

The problem is that fiat currency runs the risk of central bankers printing too much and causing large inflation or worse. The more that is printed the more the currency is debased just as the Fed is doing now with the dollar. This has been going on for decades with central banks indiscriminately creating money to cover expenditure and ever increasing debt. There are examples throughout history and in the 20th Century most of us are aware that in Germany in 1923 it would take a barrow load of Deutschmarks to buy a loaf of bread but an ounce of gold could buy a reasonable house and one dollar was worth 4 trillion marks.

This irresponsible printing of money has eaten away at the value of the world’s reserve currency the USD dollar and dollar based assets, to such an extent that they have lost 82% of value since 1971, the year the US cut links with the gold standard. The GBP has fared even worse that the USD losing around 85% of value since 1971. There are many illustrations of then and now and how owning gold with intrinsic value would have more purchasing pro rata than currency. E.g the latest model Cadillac Eldorado would have taken 180 ounces of gold at $42.02 to pay the showroom price of $7,546. This same 180 ounces is now worth over $200k and would buy two Cadillac convertibles with enough left over to fuel to first service. In the UK an average family car cost £1000 around 60 oz of gold and now the same would cost £17000 around 23 oz of gold. The 60 ounces would have bought the same family car for you a sports car for your wife and a hatchback for your son or daughter. Gold retains its purchasing power year after year...

Belarus Appeals to IMF for $8 Billion Rescue Loan

June 1, 2011

AP - Belarus has asked the International Monetary Fund for a loan of up to $8 billion to stabilize its plummeting economy, the government said Wednesday as it struggles to manage the country's most severe financial crisis since the Soviet collapse.

Prime Minister Mikhail Myasnikovich said the country is counting on striking a low-interest loan deal of anywhere between $3.5 billion and $8 billion. Analysts say at least $9 billion is needed to get the economy back on track.

"This is an SOS signal from the Belarusian government, which is losing control of the situation," said Stanislav Bogdankevich, former head of the National Bank.

Panic spread across the country last week, when the National Bank cut the value of the Belarusian ruble against the dollar almost in half. Belarusians have been rushing to buy up goods and lining up for days at currency exchange offices to get dollars and euros in a desperate attempt to protect their savings.

On Wednesday, the government issued a decree freezing prices on staples such as fish, cheese, tea and coffee and some fruit and vegetables.

The IMF, which issued Belarus loans amounting to $3.5 billion in 2009-2010 to help it weather the impact of the global financial crisis, is studying the country's finances and is expected to produce a report in mid-June.

An IMF spokesperson, Olga Stankova, said the Fund's mission visiting Belarus will "discuss policies that would restore economic stability and put the economy on the path of strong and sustainable growth."

"The mission will use the opportunity to exchange views with the authorities on possible next steps in response to their request for the Fund-supported program," she said in a statement.

Observers pin much of the blame for the country's financial woes on authoritarian President Alexander Lukashenko, who oversaw an increase in social spending before his re-election late last year. The IMF cited that as a key drag on the economy.

Belarus is hoping for a $3 billion loan from Russia but the Kremlin has been dragging its feet, insisting it will lend Minsk money only if the country sells up to $7.5 billion worth of its key state-owned enterprises over the next three years. A decision is expected to be announced later this week.

Russia is reportedly seeking to capitalize on Belarus' vulnerability by acquiring major stakes in energy assets such as Beltransgas, the state-owned gas pipeline network that supplies domestic homes and forwards the gas to Europe. Russia's state energy giant Gazprom already owns 50 percent in Beltransgas, and is demanding the remaining 50 percent as part of the deal.

Russia's Finance Minister Alexei Kudrin warned Belarus last month that it is in no position to turn the deal down because it is ill-equipped to meet the tough terms for any IMF loan.

For most of his 17 years in power, Lukashenko has relied on Russia — Belarus' main sponsor and ally — to maintain a quasi-Soviet economy complete with a social safety net that helped maintain his popularity.

But the Russian subsidies have dwindled recently as Moscow pushes for control over Belarus' most prized economic assets.

Investors Withdraw $3 Billion from Stock Funds in May

We suspect that when the Dow hits 4,000, the average pension fund will have assets to cover 30% to 40% of benefits. That said, they will probably cut payouts by some 50% or more. This should occur in a year or two. In two to three years, public pensions and Social Security will be cut an equal amount. As we have said previously, pull cash values out of life policies and terminate annuities. Many insurance companies will go under. We have listed several already near the edge. State insurance funds will be unable to cope with the losses as the financial edifice falls apart. [Bob Chapman, Crime, Corruption and Collapse on Wall Street, The International Forecaster, March 11, 2009]

Investors Withdraw $3 Billion from Stock Funds in May

June 13, 2011

AP – Investors last month withdrew $2.7 billion more than they deposited into stock mutual funds in May, snapping a four-month string of net deposits that began in January, Strategic Insight said on Monday.

Bond funds and funds buying foreign stocks attracted net deposits, as investors became less confident about the U.S. stock market, amid signs that the economic recovery is weakening, the New York-based fund industry consultant said.

Yet investors have put a net $39 billion into U.S. stock funds during the first five months of 2011. That marks a shift in sentiment after investors began withdrawing more than they deposited each month following the stock market meltdown in 2008, while bond funds attracted net deposits. That trend held up long after stock prices began to recover in March 2009.

But May was the first down month for the Standard & Poor's 500 since August 2010. The stock index fell 1.4 percent as investors reacted to disappointing news about the economy, as well as high gas prices, tornadoes and flooding in the South, and the debt crisis in Europe.

Further setbacks in the economic recovery may lead to volatile short-term moves in and out of stock funds "as investor confidence waxes and wanes," said Avi Nachmany, research director with Strategic Insight.

Other details of how investors moved their money in May:

• Foreign stock funds: Despite the war in Libya and heightened political unrest in the Middle East, investors added a net $6.6 billion to funds that buy foreign stocks.

• Bond funds: Investors added a net $19.9 billion to taxable bond funds, a category that includes corporate bonds. That was the biggest haul since October, when net deposits totaled $21 billion. Through the first five months of the year, taxable bond funds attracted $79 billion in net deposits.

About $200 million was withdrawn in May from municipal bond funds, which buy the debt of state and local governments. Investors have been pulling out of muni bonds since early November, fearing that states and cities are in critically poor financial shape. Through the first five months of this year, the net withdrawal total is $32 billion. May's comparatively modest total suggests fewer worries about muni bond defaults, Strategic Insight said.

• Money-market funds: A net $8 billion was withdrawn from these funds, designed to be safe harbors where investors can temporarily park cash and quickly access it when needed. Their appeal has dimmed because returns have been barely above zero since early 2009.

• Exchange-traded funds: A net $6.5 billion was withdrawn from ETFs, which bundle together investments in a particular market index. Unlike mutual funds, they can be traded during daily sessions just like stocks. May's withdrawal of money from ETFs snapped an eight-month string of net deposits.

Read More...

It is Time to Prepare for Hyper-Inflation

The Time to Prepare for Hyper-Inflation is BEFORE It EXPLODES

May 23, 2011

Graham Summers - This is a continuation of a series of essays I wrote concerning the global shift away from the US Dollar as reserve currency. If you missed those essays, a brief recap of the items listed were:

1. China and Russia dropping the US Dollar for trade
2. China ramping up trade with Brazil
3. Saudi Arabia moving to strengthen trade with China and Russia
4. China, Russia, Brazil, India, and now South Africa are moving to trade more in their own currencies (not the US Dollar)
5. Singapore (major financial center in Asia) starting to trade yuan

All of these items are real and documented. And the pace of the move away from the Dollar as reserve currency is not slowing.

Indeed, it was just revealed that ASEAN+3 countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, and South Korea) are researching the prospect of a “common currency” similar to the Euro.

The significance of this development cannot be overstated. The primary question those who do not believe the US Dollar could lose its reserve currency status ask is: what will be the replacement?

For certain there is no one currency that could fit the bill. The Chinese yuan could not do it as China is not ready and in fact ready to suffer a housing and banking collapse. Russia’s economy is a disaster aside from a few key areas (Moscow, St Petersburg, etc), the Euro in its current form won’t even exist in a few years, and Japan is both an ecological and financial disaster (they’ve just announced a 1 QUADRILLION stimulus plan.

Thus, the idea that any one of these currencies could replace the US Dollar as reserve currency of the world at this time is absurd.

However, a common currency comprised of most Asian countries (the primary creditor nations and manufacturing base of the world) is a completely different story.

Understand, I am aware that common currencies in general are flawed (especially when you’re uniting a bunch of bankrupt aging countries like Europe). However, a common currency comprised of Asian countries would overcome be a much more viable alternative to the US Dollar as reserve currency of the world.

The reason for this is that a common currency in Asia would get past the individual risks of any one Asian nation’s currency (Thailand and Japan in particular are a mess) at least in the beginning.

True, ultimately a common currency there would prove as futile as the Euro. However, it would serve as a “stepping stone” in the process of finding a replacement of the US Dollar as world reserve currency.

What I mean is that should a common currency be introduced in Asia, it would probably work for about 10-15 years. By then we’re well into the 2020s if not the 2030s at which point it is quite possible China will indeed be in a place to provide a world reserve currency on its own.

I wish to stress that even if Asia doesn’t implement a common currency and the US Dollar remains the world’s reserve currency (I put the odds of this at 20%), we are still facing a debt default in the US which will result in the US Dollar dropping dramatically in value and ushering in serious if not hyper-inflation.

Indeed, most commentators fail to understand the real reason Weimar Germany suffered hyperinflation. Niall Ferguson’s book, “The Ascent of Money” explains that it was in fact a political mistake that ushered in hyperinflation:

Yet it would be wrong to see the hyperinflation of 1923 as a simple consequence of the Versailles Treaty. That was how the Germans liked to see it, of course…All of this was to overlook the domestic political roots of the monetary crisis. The Weimar tax system was feeble, not least because the new regime lacked legitimacy among higher income groups who declined to pay the taxes imposed on them.

At the same time, public money was spent recklessly, particularly on generous wage settlements for public sector unions. The combination of insufficient taxation and excessive spending created enormous deficits in 1919 and 1920 (in excess of 10 per cent of net national product), before the victors had even presented their reparations bill… Moreover, those in charge of Weimar economic policy in the early 1920s felt they had little incentive to stabilize German fiscal and monetary policy, even when an opportunity presented itself in the middle of 1920.

A common calculation among Germany’s financial elites was that runaway currency depreciation would force the Allied powers into revising the reparations settlement, since the effect would be to cheapen German exports.

What the Germans overlooked was that the inflation induced boom of 1920-22, at a time when the US and UK economies were in the depths of a post-war recession, caused an even bigger surge in imports, thus negating the economic pressure they had hoped to exert. At the heart of the German hyperinflation was a miscalculation.

The similarities between the US today and Weimar pre-hyperinflation are striking. As in Weimar, US fiscal authorities are not taking any steps to rein in their loose money policies. Similarly, the US Fed, like Germany’s financial elites, believes that currency depreciation is a good thing.

Thus we have a rather frightening set-up for hyperinflation in the US: the largest emerging market players are moving away from using the US Dollar at the same time that US monetary authorities are engaging in disastrous policies similar to those employed by the men who brought hyperinflation to Weimar Germany.

I firmly believe the US will see serious (‘70s style inflation) if not hyperinflation within the next 2-3 years. It could come sooner depending on how the Fed’s policies play out.

On that note, if you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Holocaust explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.

All in all its 14 pages contain a literal treasure trove of information on how to take steps to prepare AND profit from what’s to come. And it’s all 100% FREE.

To pick up your copy today, go to http://www.gainspainscapital.com and click on FREE REPORTS.

Good Investing!

Graham Summers.

PS. We also offer a FREE Special Report specifying exactly how to prepare for the coming collapse in the US stock market (inflation will NOT be positive for stocks for much longer).

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com and click on FREE REPORTS.

A Rapid Increase of the U.S. Money Supply by $14 Trillion Could Cause a Run on the Dollar

Geithner Should Resign as Treasury Secretary

April 20, 2011

NIA - ...NIA constantly receives emails asking us if Paul Ryan's proposed budget were to be implemented instead of Obama's, would the U.S. be able to prevent hyperinflation. The truth is, both Obama's budget and Ryan's budget would leave us with just about the same national debt five years from now.

The constant battles between the Democrats supporting Obama's budget and the Republicans supporting Ryan's budget are simply being used to distract Americans from the real issue, the Federal Reserve's monetization of our debt and the record $1.4 trillion in excess reserves that are currently parked at the Fed.

The Federal Reserve's balance sheet has just reached a record $2.65 trillion. However, excess reserves parked at the Fed are now rising even faster than the Fed's balance sheet. NIA believes that come later this year, the Federal Reserve is likely going to stop paying interest on excess reserves banks have parked at the Fed, in an effort to push this money into the economy. This high-powered money will multiply by as much as ten times as it circulates throughout the U.S. economy, increasing our money supply by $14 trillion.

A rapid increase of our money supply by $14 trillion could potentially cause a run on the dollar, with the world rushing to dump their U.S. dollar reserves for just about any real asset they can get for them.

Inflation is beginning to spiral out of control even by the U.S. government's artificially low calculations. The Bureau of Labor Statistics just reported that the consumer price index (CPI) rose in March by 2.68% over a year ago, compared to the February increase of 2.11% and the November increase of 1.1%. Year-over-year CPI increases have risen 144% since November as a direct result of the Fed's destructive policies, yet the Fed continues to say that inflation is not a problem.

Even though inflation is now way above the Fed's informal inflation target of 1.5% to 2%, the Fed continues to ignore the CPI and only looks at core-CPI, which excludes food and energy and is mainly based off of rents. All gains in U.S. retail sales are now solely due to inflation and all U.S. economic growth is phony. Any temporary decline in the unemployment rate is only a result of the distortions caused by the Fed's printing of money.

Gold has just surpassed $1,500 per ounce and silver has now broken $45 per ounce. These latest movements in gold and silver prices indicate that there is a major risk of hyperinflation breaking out as soon as the second half of 2011.

Average U.S. gas prices are now $3.84 per gallon and are rapidly approaching the all time high of $4.12 per gallon from June of 2008. Unlike 2008, there are no leveraged up hedge funds buying oil futures contracts today. Oil prices are rising as a direct result of the Federal Reserve's zero percent interest rates and quantitative easing. Unless the Federal Reserve acts now to dramatically raise interest rates, $5 per gallon gas is possible by the end of 2011.

When gas prices reach $5 per gallon, there won't be a drop off in demand. It will only encourage the Federal Reserve to print more money so that Americans can afford $5 per gallon gas, which could push gas prices to $6 or $7 per gallon in 2012.

Saudi Arabia is reducing oil production because they have to: their oil reserves have been overstated by 40% and they are past peak oil production. As bad as rising gas prices are for all Americans, they will be hurt by rising food prices even more.

Inventories of gas are not as tight as food inventories, which are now at record lows for such agricultural commodities as corn. NIA has been warning about low agriculture inventories since its first documentary 'Hyperinflation Nation' and accurately predicted this past year's record rise in agricultural commodity prices in its October 30th, 2009, article "U.S. Inflation to Appear Next in Food and Agriculture".

NIA predicts the next major inflation crisis will be in college tuition prices. We are about to experience a record rise in student loan defaults as a result of rapidly rising food and gas prices.

College tuitions are the one area of the U.S. economy, besides healthcare, that did not experience any decline during the financial crisis of 2008. Despite rapidly rising college tuition prices, the value of a college degree is declining at an even faster rate. NIA believes that by the year 2020, we will conservatively see 20% of American colleges and universities close its doors with enrollments in remaining colleges and universities declining by between 15% and 30%.

NIA will expose the facts and truth about the upcoming American college education crisis in its upcoming documentary, 'College Conspiracy'. [See video here.]

A Systemic Transfer of Wealth from the Many to the Few Via Currency Debasement

Global Economy: “It’s the End of the Dollar as We Know It (Do We Feel Fine?)” Part 2 of 3

May 9, 2011

The Daily Reckoning - “So what might a ‘dollar crisis’ look like, how would the US government likely respond, and what impact should we expect this to have on financial markets? While we do not purport to have the specific answers to these questions, there are some general considerations we can discuss with some reasonable confidence.

First, let’s define ‘dollar crisis’. While dollar weakness certainly plays a role, what really matters is the impact that this has on US government financing costs. When these rise to levels that cannot be serviced without resort to direct debt monetization by the Fed, you have a crisis. Now imagine if you will that as the dollar slides, major global buyers of US Treasuries and other dollar securities gradually withdraw from the market in favor of alternative currencies or, perhaps, gold reserves. They needn’t sell their existing holdings, mind you, rather merely reduce or cease ongoing purchases. As US borrowing costs rise, all the current assumptions about US debt serviceability must necessarily be re-evaluated for a higher rate environment.

While there is no magic number, in the event that Treasury yields rise back above 5% or so, chances are that financial markets begin to price in a materially higher risk premium for holding US debt. In a self-reinforcing spiral, unless the US government takes swift and credible action to restore confidence in debt sustainability—that is, a convincing program to reduce the deficit—what might have been a gentle and orderly if concerning rise abruptly becomes sharp and disorderly. At this point, desperate measures will be on the table.

First of all, most likely the Fed implements some sort of ‘emergency’ program of Treasury bond buying, perhaps a cap on yields at 5% or so, in order to buy some time. The problem with capping yields, however, is that if the market clearing yield is higher than the cap, then the Fed becomes the ‘buyer of last resort’ and, in short order, finds itself holding the bulk of US Treasury market debt outstanding. While this would no doubt lead to (increasingly appropriate) comparisons with banana republics, the US Fed and government would nevertheless continue to try to exude an aura of being in control of the situation as investors dump Treasuries and the Fed’s balance sheet explodes.

Second, as foreign investors flee US Treasuries and most probably other US assets, domestic investors are highly likely to attempt to do the same. This is when the US government probably imposes some form of capital controls, making it essentially impossible and perhaps outright illegal for US investors to purchase foreign assets. Not only the US but also most countries facing such dire economic circumstances have resorted to comparably desperate measures in response to past economic crises, so extreme actions of this sort should not be ruled out but rather anticipated.

Third, the government may try to make life more difficult for so-called ‘speculators’, that is, people trying to protect themselves by reducing their exposure to devaluing dollars and risky Treasury securities. For example, they might restrict investors’ access to precious metals in various ways. In doing so, US government officials will most probably draw some sort of arbitrary line between those institutions still allowed to transact in precious metals—the big banks—and those not so allowed, such as private investors and households. While such double-standards are no doubt arbitrary, unconstitutional and simply unfair, such actions have ‘legal’ precedent and, as such, may well come into force at this stage.

While capital controls and curbs on ‘speculators’ might also buy some time for the US government to try and restore some degree of stability in financial markets, in fact they will just bring the day of reckoning closer. Indeed, the very idea of the world’s pre-eminent reserve currency being subject to capital controls is downright farcical. Unless rescinded in short order, capital controls will lead to the US not only losing reserve currency status but probably becoming something of a global economic pariah. As such, expect any discussion of capital controls to be couched in ‘temporary’, ‘emergency’ language, although we doubt that such rhetoric will prevent the Chinese, Russians, Indians, Brazilians, Europeans and probably also OPEC nations from forming new associations and alliances to offset the loss of investment and trade with a United States rushing headlong into masochistic, counterproductive economic nationalism.

As for the broader impact of curbs on ‘speculation’ in precious metals and possibly also other commodities, such policies will quickly drive global commodity trading offshore, most probably to locations historically keen to acquire such business from the US, including London, Switzerland, Singapore, Shanghai, Hong Kong, Moscow and Dubai. Yes, the US government will no doubt be able to mandate, by executive fiat, who, what, and at what price various commodities will be traded on US exchanges, but to the extent that the rest of the world thinks the price of something should be higher (or the dollar lower), the associated transactions will take place elsewhere until, inevitably, the bulk of exchange activity emigrates to friendlier jurisdictions abroad.

As one desperate time-buying measure after another approaches its effective expiry date, the next step could be for the US to open negotiations with foreign creditors to restructure its debt, something which might well prove politically impossible, even with the best of intentions. Alternatively, and more in keeping with US and global economic history, the US might simply impose a settlement forcing foreign and possibly also domestic creditors take a huge ‘haircut’ on their holdings of Treasury debt. Although obviously a default by any other name, no doubt the US will call it something else. (We suggest TOUGH, or ‘Treasury Obligations Under General Haircut’, given the historical proclivity of US authorities to employ euphemistic acronyms when implementing unprecedented and counterproductive economic policies.)

At any stage of the above process, and highly likely to occur in our opinion, the US may simply do away with such shenanigans and devalue the dollar unilaterally in some fashion and to a level which, in theory at least, would be sustainable and allow for the US to service, with reasonable confidence, its accumulated debts in sharply devalued dollars. Indeed, the US has done exactly this before. In 1934, FDR unilaterally devalued the dollar by some 60%. In the early 1970s, President Nixon removed the anchor to gold entirely, claiming that this would not be inflationary. More recently, any objective analysis would conclude that the US has had an unstated policy of dollar devaluation since at least 2004 if not earlier, as that was around the time that the US started to attack China’s exchange rate policy and, by implication, that of any other country which chose to maintain stable rather than appreciating exchange rates vis-a-vis the weakening dollar.

As far as investors are concerned, merely reducing exposure to dollars and dollar financial assets may not be enough. To what extent the dollar devalues versus other currencies is, ultimately, a speculative guessing game. Perhaps all currencies devalue in real terms as one country after another resists currency strength. Certainly the euro-area, Japan and the UK have debt problems of their own. And many emerging markets are currently experiencing booms, the magnitude of which have, historically, ended in busts.

While we do have our opinions as to which currencies are rather more or less undervalued vis-a-vis each other, it is a far, far simpler conclusion to reach that, the further along the above process we move, the more likely it is that commodities rise relative to currencies in general as the former begin to function, in varying degrees, as alternative stores of value. Yes, gold and silver have the most prominent historical claims to this role. Yet other metals are not so far behind. And the farther one descends down the rungs of the global economic ladder, one can find historical precedents for all manner of commodities serving as money in some shape or form.

Seeds, nuts, grains, various livestock, peppercorns, cigarettes, liquor; such stores of value may seem uncivilized to some, but please tell us: What is civilized about a systemic transfer of wealth from the many to the few via currency debasement? If this is what qualifies today as ‘civilization’, well then we’ll take our chances with the Barbarians, as indeed the frontier Romans did from around the 4th century onward, when they finally lost patience with the rapacious regime in Rome and invited the Barbarians in, province by province, as the implied tax- and inflation-relief outweighed the uncertainty of governance under their new, northern masters.

In time, even those Romans living closer to home came to regard the Barbaric side of this Hobson’s choice as rather more preferable, resulting in the complete dissolution of the Western Roman Empire. Perhaps it should be no surprise that, for the next millennium or so, the bulk of Western European economic progress occurred not in Italy but rather in the more dynamic trading societies of the north, including the Normans, who would manage to conquer a large part of the more prosperous lands around the European periphery, north and south, including of course the bulk of what is known today as Great Britain.

Meanwhile, the Eastern Roman Empire at Byzantium would last another thousand years. Why? Historians have their various reasons, many of which seem reasonable. In our view, perhaps the most compelling is that, notwithstanding the travails of economic fortune through the ages, the Byzantines stuck with a tried and tested ‘hard money’ policy, rather than succumb, as did their western counterparts centuries earlier, to the temptation of currency debasement and inflation.

Historically, empires both large and small have a curious yet consistent inability to long outlive the purchasing power of their currencies. As the saying goes: What men learn from history is that men do not learn from history. And with that, Exeunt.”

Read More...

The Fast Track to a Cashless Society Using Smart Phones for Electronic Transactions

Confirmed: Google Developing NFC-enabled Mobile Payments for Retailers

"We're working with Google on the development of NFC applications for merchants," the chief executive of POS terminal maker Ingenico has told French reporters.

May 2, 2011

NearFieldCommunicationsWorld.com - France-based POS device manufacturer Ingenico has confirmed that it is working with Google on the development of NFC-based services for retailers.

Google wants to be able to deliver coupons to consumers "in the physical world, that's to say in stores," Philippe Lazare, CEO of Ingenico, told French reporters. According to news agency AFP:

"Google wants a system where, when you enter a shop or supermarket, you receive a special offer on your telephone. At the checkout, you can take advantage of this offer" by touching your phone to the Ingenico POS terminal, which will be capable of reading the coupon and will automatically apply the discount to the shopping bill, he explained.

Google isn't planning to make a move into the payments business for now, however, Lazare added.

"But it will do one day or another."

The news follows reports in March that the internet advertising giant, which added NFC functionality to its Android mobile operating system in December, is working with Citigroup and MasterCard to make mobile payments easier in a bid to boost its advertising business. Reports suggest that Google is also working with POS device maker Verifone on the project.

Visa Unveils Mobile Payment Best Practice Guidelines

May 2, 2011

NearFieldCommunicationsWorld.com - The card giant has set out best practices and minimum standards for encryption and made clear the solution provider's responsibilities to secure cardholder data when mobile devices are used to accept payment.

Visa has released a best practice guide for retailers, software developers and device manufacturers who are using smartphones and tablet computers to accept mobile card payments.

The payments giant has stepped in to spell out minimum standards and best practices as the use of mobile devices to accept payments continues to proliferate.

"Because mobile devices and acceptance attachments today are not designed to the same security requirements as traditional payment terminals, and merchants do not control the security of the network environments to which their acceptance devices connect wirelessly, there are important security considerations above and beyond those for traditional acceptance solutions," says the firm.

Eduardo Perez, head of global payment system risk at Visa, adds:

"Mobile devices that can facilitate acceptance of payments are an important advancement in payments that must balance the promise of an enhanced consumer and retailer shopping experience with enhanced security measures to protect sensitive cardholder information."

Among the best practice guidelines are demands for:

• Encrypting all account data at the card reader level and in transmission between the acceptance device and the processor — especially important given the use of wireless or public networks;
• Enabling truncation or tokenisation of card numbers, allowing the merchant to identify the cardholder without storing the full account data;
• Ensuring that payment data read from cards is protected against fraudulent use by malicious or unauthorised applications on the device.

The document, Visa Best Practices for Mobile Payment Acceptance Solutions Version 1.0 (PDF), can be found on Visa's website.

The news comes after it emerged Visa has invested in Square, the mobile payments start-up — set up by Twitter co-founder Jack Dorsey — that turns phones and iPads into credit card readers.

A member of the Visa executive will join Square's advisory board to help create a partnership that will allow Square to convert some 27m businesses in the US that don't accept credit cards into Visa customers.

Square has now announced it will begin distributing a new version of its card reader featuring data encryption this summer.

Gemalto Gets MasterCard Approval for NFC Mobile Payment Solution

March 30, 2011

NearFieldCommunicationsWorld.com - The digital security giant Gemalto has become the first company to have its NFC mobile application certified by Mastercard, paving the way for a global roll-out of mobile payments based on MasterCard's PayPass technology.

Gemalto's UICC-embedded software application is compliant with Mastercard's mobile PayPass M/Chip 4, the new payment specification designed for mobile NFC. The application and the UICC have both achieved Mastercard's compliance assessment and security testing certification.

"This new certification from Mastercard makes Gemalto the first on the market for this mobile product and will enable banks and wireless operators to offer a secure, innovative and convenient payment means to their entire customer base," says Jean-Claude Deturche, senior vice president of mobile financial solutions at Gemalto.

Gemalto's software application is embedded in the SIM and incorporates the trusted service management interface for Paypass, enabling over-the-air account provisioning and management.

It can be configured to offer debit, credit and prepaid functions, and in the latter case the application enables consumers to top-up their account directly from their mobile phone.

Mastercard's James Anderson says the collaboration will help to "add ease" to the fast-paced lifetsyles of consumers around the world.

"We are pleased to collaborate with Gemalto to broadly expand the use of mobile payment services," he says. "Leveraging the interoperability of Mastercard PayPass, Gemalto's effort will enable cross-border mobile NFC payment, adding ease to the fast-paced lifestyles of more and more consumers across the world."

The move comes after last December's announcement that DeviceFidelity's In2Pay microSD NFC solution had been certified by Visa for commercial usage.

The collaboration was described at the time as a "historic milestone for Visa and its clients".

Samsung and Visa to Bring Mobile Payments to the London 2012 Olympics

March 31, 2011

NearFieldCommunicationsWorld.com - Samsung and Visa have announced a strategic alliance designed to bring NFC payments to the London 2012 Olympics, enabling consumers to make mobile payments using a special Samsung Olympic and Paralympic Games mobile phone.

The phone manufacturer and payments network, both Worldwide Olympics Sponsors, are to enable athletes and visitors at the London 2012 Olympics to make payments using a special Samsung Olympic and Paralympic Games mobile handset.

"In London there are already more than 60,000 locations where contactless payments are accepted and contactless and electronic card payments will be available in the run-up to and during the 2012 Olympic and Paralympic Games," the partners say.

"Samsung and Visa will work together to provide the contactless enabled Olympics handset to Visa and Samsung sponsored athletes as part of this initiative," they add. "Samsung and Visa also plan to make the handset available for consumers to purchase through mobile network operators and other distributors."

Peter Ayliffe, CEO of Visa Europe, explained the thinking behind the project.

"Visa, like Samsung, shares the vision of leveraging our Olympic and Paralympic Games sponsorship to leave a lasting legacy in the market for banks, retailers, mobile operators and consumers. We are not only breaking new ground for Olympic partnerships, we are committed to enabling consumers to connect with mobile and contactless payments technology for 2012 and beyond. We look forward to working with financial institutions and mobile operators alongside Samsung to make this initiative a success."

Seokpil Kim, president and CEO of Samsung Electronics Europe, added that

"Samsung is striving for long term change in the way we use mobile payments. In London next year, we regard the greatest show on earth as the perfect opportunity to showcase how this technology can make a positive difference to people's lives — enabling them to feel closer to the Olympic and Paralympic Games. This mobile payment device will be available in the UK initially, and we plan to expand the service to other countries in Europe and around the world where contactless payment facilities are available in the near future."

One Million Chinese Consumers Adopt NFC Technology for Mobile Payments in Just Four Months

April 4, 2011

NearFieldCommunicationsWorld.com - Growth in the Chinese mobile payments market has helped Watchdata sell another million of its NFC Simpass devices in just four months.

While the rest of the world remains firmly in the pre-rollout stages of NFC technology, the adoption rate in China is running at an ever higher rate, according to Watchdata.

Four months ago, Watchdata produced its two millionth Simpass device, an NFC add-on that provides almost any standard mobile phone with the ability to make mobile contactless payments.

Now, the company says it has broken the three million unit mark for the rollout of its Simpass technology.

The majority of Watchdata's devices are being distributed via China Telecom which officially launched an NFC version of the Yang Cheng Tong Card, for public transport and other local payments, in Guangzhou and Foshan provinces in February.

China Telecom has issued almost two million Simpass devices to date in more than 20 provinces in China, says Watchdata, and a recent survey conducted by China Telecom has found that:

• 90% of Simpass users are actively using the service to make payments
• 32% of subscribers switched to China Telecom to access mobile payments

Simpass works with 80% of handsets on the market and can be used to make payments at more than 20,000 points of sale across China, including farmers' markets where consumers can pay for fresh vegetables and seafood with their mobile phones.

Speaking at the Cartes Asia conference, Dr Sean Gao, Watchdata's vice president of product and marketing, said the firm was looking for global expansion.

"We are looking to replicate the success of Simpass in China around the world," he said, "making it the unifying solution for different stakeholders that would hopefully become a mobile payment standard in the industry."

Google Joins the NFC Forum for Mobile Payments Worldwide

March 31, 2011

NearFieldCommunicationsWorld.com - Google has joined the NFC Forum as a Principal member and existing members CSR and Intel have raised their membership status to Principal level.

The internet giant is one of 32 new members of the NFC standards organisation. Other well known names to join the association include car maker Daimler and electronics giant Hitachi.

Principal membership is the second-highest level of membership in the NFC Forum. Each Principal member is entitled to appoint a voting representative to each of the technical, marketing, and compliance committees and working groups. Principal members can also designate individuals to run for positions leading committees or working groups.

Crucially, only principal and sponsor level members are able to use their own in-house facilities to conduct NFC Forum certification testing, rather than having to send devices out to a third-party testing facility.

This can make an important difference, Koichi Tagawa, chairman of the NFC Forum, told NFC World. While confidentiality is key part of the service offering of independent testing labs, the nature of devices submitted for NFC Forum certification testing may often be highly confidential, he explained.

But, if you are able to do the testing in-house, "you're not exposing your product to anyone outside your company."

A further 31 organisations have also joined the NFC Forum. New associate members include: A&D, AQ Corporation, China Telecommunication Technology Labs, Communications Global Certification, Daimler, FIME, Hitachi, ICT Korea, Kovio, KTC (Korea Testing Certification), National IT Industry Promotion Agency RFID/USN Center, Rohde & Schwarz; SK C&C USA, Soliatis, Sporton International, TA Technology (Shanghai), TTA and VI Service Network.

Recent additions to the Forum's membership at Implementer level include 3A Logics, DeviceFidelity, HOTech, i-Free, MagTek, MStar Semiconductor, MtekVision, Poken, Sysnet Group, Tuomi IT, Via Licensing and Waldemar Winckel. Logyca has also joined as a non-profit member.

"The NFC Forum thrives on the active participation of global industry leaders and innovators such as CSR, Google, and Intel," Tagawa added. "Their energy, ideas, and influence will greatly enhance the work of the Forum, as will the support of our new associate, implementer, and non-profit members from around the world."

NFC Business Models White Paper Sets Out the Key Issues Involved in Introducing Mobile Wallet Services

March 15, 2011

NearFieldCommunicationsWorld.com - A white paper based on the executive summary and key findings from our NFC Business Models research report is now available to download free of charge.

The new white paper introduces a number of concepts that are fundamental to understanding the NFC market opportunity and includes details of ten of the most important findings from our NFC Business Models research report.

"NFC is attracting interest from an ever growing number of banks, retailers, transport operators, advertisers and other businesses around the world," says Sarah Clark, editor of NFC World and author of NFC Business Models.

"Understanding of the business models that will succeed is still in its infancy, however, and there is much confusion over what is actually involved in successfully delivering NFC services, who needs to be involved in planning the infrastructure required and the kind of company that is best positioned to profit from NFC.

"Our NFC Business Models research report sets out the latest thinking from around the world on what successful NFC services will look like, the building blocks that will need to be put in place in order to drive adoption of NFC services, the roles and responsibilities of each of the numerous players in the market and the business strategies that are most likely to succeed," Sarah explains.

"With this white paper, our aim is to provide everyone with a basic grounding in the key issues involved and, we hope, to clear up some of this confusion."

The NFC Business Models white paper is based on the executive summary and key findings from the full research report. It introduces a number of concepts that are fundamental to understanding how the NFC market will evolve and includes details of ten of the most important findings from the full report.

The white paper can be downloaded free of charge from the SJB Research website.

Think&Go Introduces NFC Shopping Engine

April 24, 2011

NearFieldCommunicationsWorld.com - French start-up Think&Go NFC has introduced NFC Commerce, a new retail solution that includes a wide range of applications that retailers can use to enable shoppers to interact in their stores via NFC.

The new system combines NFC tags placed on product labels and shelf-edges with a 'preference engine' stored on a consumer's mobile phone so that, for instance, shoppers can be alerted if a food product contains an ingredient they are allergic to or does not meet their pre-set shopping preferences.

NFC Commerce includes a shopping preference engine, coupon collection, in-store navigation and relational advertising modules, Think&Go NFC's Tim Baker told NFC World at the Wima conference and exhibition in Monaco last week. Here, the system can be configured so that, for example, when the shopper chooses to buy spaghetti, an advert for a particular brand of bolognese sauce is delivered instantly to their mobile phone.

The shopping preference engine, meanwhile, allows information stored on NFC tags to be filtered so that consumers can be alerted when an item for sale does or does not meet their purchasing needs.

In an example on show at Wima, the preference engine can be used to set up a list of items to which the user is allergic, does not like or prefers not to eat. When a shopper reads the NFC tag for a particular product, its ingredients are transmitted to their mobile phone.

They are then run through Think&Go's shopping preference engine and the results are displayed on the handset. These can also be configured by the user in a number of different ways but, in this instance, can be set so that the phone displays a red 'not recommended' flag if the item contains an unsuitable ingredient.

Think&Go is working closely with the St Isidore, Nice branch of the Leclerc supermarket chain — where the system is on test — on the development of NFC Commerce.

"The advantage of NFC is a personalised communication to the customer," says Thierry Cornac, managing director of the store.

"We help the customer through the special offers, from the entrance to the cashier."

Cornac has participated in the production of a video showing the ways in which NFC is being used in the store, by both consumers equipped with an NFC phone and by those equIpped with a Leclerc branded NFC add-on affixed to their existing phones:

The goal, says Baker, is to continually evolve new modules for NFC Commerce, based on feedback from retailers, to ensure that the system meets the widest possible range of retailing needs.

Potential application include easy access to product information, special dietary needs and context-aware needs, in-store navigation, personalized marketing, cross-selling, up-selling, consumer behaviour tracking, loyalty cards, coupon capture, advertising channels and more.

"The simple gesture of reading a tag with a NFC enabled mobile phone means that interaction with products and in-store information systems becomes so easy that any consumer can use it with pleasure," Think&Go explains. "With opt-in consumer tracking, retail stores can understand detailed consumer activity and better serve their needs with targeted special offers and information."

Google Launches Las Vegas NFC Service as ‘Ultimate Tourist Guide’

March 10, 2011

NearFieldCommunicationsWorld.com - The internet giant is offering visitors 10,000 free monorail tickets as it expands its NFC-enabled Google Places and Hotpot marketing system to a third US city.

Google has announced it is rolling out its NFC-based marketing system to Las Vegas and is pitching the service as the ultimate tourist pocket guide.

Following on from the introduction of the service in Portland, Oregon, and Austin, Texas, Google has now begun distributing its 'Recommended on Google' NFC and 2D barcode-enabled window decals in the Nevada city, allowing visitors to find more information about the business by swiping their NFC-enabled mobile phone against the window sticker or scanning the 2D barcode with their phone's camera.

The campaign is part of the internet search giant's new local marketing project, which sees it teaming up with the Las Vegas Monorail to distribute 10,000 free single-ride tickets. The Google Places app, which allows users to rate and recommend businesses such as cafes, shops and restaurants, will be promoted to busy tourists who don't want the inconvenience of wasting precious time by trying to find out which are the best places to visit.

Las Vegas businesses are also able to order customised kits via the Google Places Catalog to receive basic cards and stickers as well as more high-tech gadgets with the aim of encouraging customers to rate the business on Hotpot.

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