"I have come to the conclusion that politics  is too serious a matter to be left to politicians."   ~Charles de Gaulle

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News and opinion from all over the political universe.  Much of it to be taken with several grains of salt.

Curmudgeon's     Archive.   

One Foot in the Grave
Magical Money  

Posterity's Debt To Me
The Battle for Honest Money
From Riches to Rags
Fiddler's Broken Wrist
Jack-lantern Wealth
Chance of Gold Confiscation

 1932
Poobahs of Positivism

IOU-nothing
Blood In the Streets
America Descending
Just Plain Stealing  ?
A thing to fear
Heavenly Sex
What Fools, We Mortals
Unvarnished Truth
Hucksterism Gone Wild
Religious Violence

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 July 23, 201

A Puzzlement   

   Wait!  Don't rush away 'til you consider a small point we're trying to make. 

   The above graph simply traces the plunge of purchasing power of the dollar from 1971 to 2009. In this relatively short period the U.S. dollar dropped to less than 20 in buying power. (Left scale)

   In the same time span the amount of currency in circulation shot up from $50 billion to nearly $900 billion. (Right scale) It's now over a trillion dollars and the bulk of it circulates overseas.

   In 1965 Congress declared that silver coin was no longer necessary, and in 1971 President Nixon removed the last connection of gold to the U.S. dollar.  With precious metals out of the picture paper IOUs (Fed'l Reserve notes) rolled off the presses in vast numbers.

   Thanks to the widespread use of digital financial transfers via computers the need of paper currency was seen as costly to circulate and less necessary in transactions.  The push toward a "Cashless Society" was launched.

   Has Donald Trump tweeted his opinion on cashlessness? 

   History broadly hints that fiat currency always leads to economic disaster. The invention of digitized "money" does little more than make it easier for Big Brother to keep tabs on our private expenditures, and it, too, promises a disastrous outcome. Not to mention another loss of individual freedom.

    We'd love to see mainstream media reserve a few minutes now and then to examine this issue. It's doubtful they will.  They're too busy trying to dump Trump. 


JOSEPH RAGO - R.I.P.
       Joseph Rago failed to show up for work in the editorial offices of the Wall Street Journal and his boss notified security staff.  Police officers went to his apartment and found him dead.  No evidence of foul play was alleged but the coronor's autopsy report is not yet available.

        At only 34 Rago had won a Pulitzer prize for his series of editorials on the Affordable Care Act.  His peers and employers are said to have strongly admired his editorial skills, not to mention his extrordinary depth of knowledge in matters involving the organization and delivering of medical services and the complex structure of federal and private insurance schemes advertised as methods of taking the bite out of sharply rising medical expenses. 

         For a talented writer whose career was on the ascendency it's doubtful his death was suicide, although details of his private life aren't known.  It has been suggested that his criticism of ObamaCare may have stirred up some powerful actors involved in the failing program.  Could they have slipped something into his morning coffee?  We must await the autopsy report to find out.

          We hope "natural causes" is the result of the examination of his corpse.  Nevertheless, we mourn the loss of this talented young editorialist.  It's an exclamation mark for the adage "The good die young!"

 

      It cost nearly $1.17 to buy one euro Friday.  That's 5 more than only a few days ago.   It means the dollar is weaker against the European currency,which will be a slap in the wallet if you're planning a trip there this summer.  It also accounts for the sharp rise in the spot price of gold - which acts like a kind of barometer, falling when the dollar parity is strong and rising when it's weak.

        Is now a good time to invest in gold?

        Not necessarily.  In fact, if INVESTMENT is one's objective...that is, buy something that might rise in price and yield a nice profit...we'd recommend gambling in stocks, bonds, real estate, etc.  In our view, owning some bits of gold is chiefly to preserve purchasing power, not "make money."  

         Consider this:  If you had cheated Franklin Roosevelt and held onto a $20 gold piece when he called America's gold into the Treasury in 1933 you would find it contains the same number of grains of gold today that it did then.  More important, the gold would still buy about the same quantity of stuff in 2017 that it did in 1933. 

          Do the math.  The mint price of gold in 1933 was $20.67 per troy ounce.  The spot price of gold today is $1,255.00 per troy ounce.  You would not have actually "made money" by holding gold all that time, but your gold would have maintained purchasing power far better than irredeemable paper currency.


  

   This graphic from  DSHORT.com reinforces our contention the dollar is only a shadow of what it was when the Federal Reserve System went into operation in 1914.  (Congress created it just before Christmas, 1913.)  In its original form the Fed was supposed to be a buffer to smooth out the booms and busts that periodically occurred in the economy by pumping money into the economy in slow times and withdrawing it during booms. 

     Congress later amended the Fed's function to require it to also pump in funds to insure as low an unemployment rate as possible.  As the chart above shows this has sliced the purchasing power of the U.S. dollar to a nickel.

      While popular news media are agog about the GOP failure to fix the medical insurance mess and spending enormous amounts of time and print space on "Russiagate"  it might be wise to spend a moment or two worrying about the fate of the dollar.  It's a long way from 5 cents to zero but thousands of monetary units have vanished from the earth over the centuries.  It would be a terrible inconvenience if that were to happen to the dollar.  (Born 1792.  Died ?)



      Through the years we've been told that it's childish to call attention to historical remarks that question the staying power of democracy, despite the fact that writers of the U.S. Constitution distrusted it and purposely framed a republic.  By 1870 it was clear  the Supreme Court could and would abandon the tenets of the Constitution. 

       With the election of 1932 the old ideas of central government had been swept away with the promise of economic and social planning that would lift the nation out of the mire created by the Roaring Twenties in the aftermath of a costly war. (WW1)  Not many noticed, or cared, that the New Deal borrowed heavily from socialist precepts.

       Why experiments in democracy invariably grind to a catastrophic end was laid out in the conclusions of Professor Alexander Tytler, whose CYCLE OF DEMOCRACY was drawn by him or other scholars from his 18th century book on the failure of Athens.

        The yen for socialism in the United States now bears the label "Progressivism" and nearly half the voting population favors it.  Unfortunately, there is not one example through written history that shows the socialist framework working successfully for great lengths of time. 

          Among socialism's many flaws is its tendency to believe a central authority can create equality by making fiat currency (paper promises) a "legal tender."  When this stage is reached it's only a matter of time before disaster strikes.

           A good way to avert catastrophe would be to re-apply the methods of the constitutional republic - including a return to a sound money basis.



         THE MYSTERY OF INFLATION
    When we emerged from high school more than seventy years ago we had not been exposed to any instruction on what caused inflation.  Most folks had a general sense that price increases had somehow been triggered by the recent war (WW2) but as long as general wage increases made even a feeble attempt to keep up with it there was little choice.  "That's just the way it is." 

    Inflation is still quite a mystery.  Ask a passerby about it and you will probably get complaints about corporate greed.

     We eventually discovered that inflation was not rising prices after all.  Rising prices were the CONSEQUENCE, usually, of inflating of the money supply.  It's like playing the board game, Monopoly. If someone were to double the money supply prices on the boardwalk would quickly rise. 

      Dr. Henry Hazlitt's "Economics in One Lesson" explains it very clearly.  First published about the time we emerged from high school, his book is still in print.
  

   Fed chief Janet Yellen is not alarmed that price inflation is still below the Fed's goal of 2 percent per annum. Low inflation or (spooky music here) dreaded DEFLATION would be ruinous according to modern economists because it would mean falling prices. That would include wages, which is the price employers pay to get people to work for them. It would also make servicing debt more difficult, and would ruin the millions who have speculated on price rises for their homes and other property.


   David Stockman's Contra Corner has posted an interesting graphic showing the steady effect of price inflation between January of 2000 abd March of 2014.  Oil and gasoline prices are lower today than in 2014 but health care costs and other prices reflect the steady effect of inflating..."low" as it is.

   The bottom line:  Since its founding in 1913 the Federal Reserve has overseen the demolishing of the U.S. dollar. The purchasing power has dropped to under a nickel in the more than a century the Fed has existed.  Now it clearly favors destroying it altogether at the rate of 2 percent a year. 

   The demise of fiat currency is a subject worth more notice.


   VISA steps up push against cash.
     Starting in August VISA will award grants of $10,000.00 to small merchants who will adopt a "no cash" policy and upgrade their checkout machinery to accept all forms of electronic funds transfer.   How many merchants will accept their offer is an unknown because many are willing to accept cash although fewer consumers than ever are using it in their daily transactions. 

      The motive is simple.  VISA rakes in about 2 percent from digital transactions but collects nothing from cash transactions.

       Recent data show that cash transactions still lead at some 32 percent, but by a shrinking margin.  Debit cards are in seconed place, followed by credit cards.  Electronic payments account for about 11 percent among consumers, while payment by checks is down to only 3 percent. 

        Is it time to abandon cash?  Millions of consumers don't think so, but having to visit an ATM to fill one's wallet is time consuming and less attractive as the battle against cash heats up. 

         The world has been on a fiat currency standard since the summer of 1971.  Now there's a serious movement afoot to curtail the production of paper bills and base metal coins.  One merchant is quoted as saying he saves 23 hours a week by refusing cash and not having to count bills and coins, take them to the bank, etc. 

           But, we wonder what happens when computers are hacked or power is disrupted?  It seems reasonable to have some backup with which to trade for necessities.

 "The men and women who are doing everything they can to bring the United States back to constitutionalism are in the minority. Its our job to recognize the value in these people, and vote for them. Its also our job to see [bad] actors for what they really are, rebuke them, and remove them from office."

 
We should not post this quotation without citing its source, but we have misplaced it. Nevertheless, although momentarily in the "anonymous" category, it's thought provoking and is slowly beginning to gain some attention. 
Some pundits are already suggesting a big push toward the creation of a workable third party for the 2020 elections....one that offers a clear choice between the two mainstream big-government parties (Democrat and Republican) and one that restores some of the precepts of the U.S. Constitution. 

   The Libertarian Party always falls short of this goal chiefly because it never learned how to sell its ideas to the general voting public.  Moreover, it long ago got a negative reputation for opposing the federal government's failed War on Drugs.

    Although the RADICAL INDEPENDENT PARTY was an ad lib brainstorm on a 1994 radio talk show, its political platform  offers some clear choices. 
    It's time for another recession.

     No one wants a deflationary recession (depression) and anyone suggesting it could happen is labeled a worry-wart of the most despicable kind.  After all, the stock market is  doing well, consumer borrowing is booming, and the Federal Reserve is nervously examining the inflation numbers and hinting that its plan to reduce its swollen assets portfolio and raise the basic interest rate is still on "go."

    But the worry-warts are nervous about the apparent calm.  Former congressman Ron Paul sees a 25 percent drop in the stock market on the horizon, and other doomsayers are trying to wedge their frightening predictions into the noisy battle between President Trump and the leftist news media.  General media are far more interested in the swap of insults between Trump and CNN than the peculiar waffling of the currency.

    One big question is whether or not the Federal Reserve can raise interest rates to what is considered "normal" ranges without sending the economy into a tailspin.  The Fed wants to see price inflation running at an annualized 2 percent, and that's not happening yet.  There appears to be the tug of DEFLATION ruining the plan. 

    Deflation?  Surely deflation of the sort we experienced in the 1930s has been banished from the face of the earth.  We don't even call dips in the economy by that hated name any more.  They are "recessions" or "soft spots in the economy." 

     The main thing for the bewildered citizen to remember is:  THE PURCHASING POWER OF A DOLLAR INCREASES IN DEPRESSIONS.  THE PURCHASING POWER OF THE DOLLAR DECLINES IN PERIODS OF INFLATION. 

       Watch the prices of gold and silver.  If they decline  deflation is in the wind. If gold and silver prices spike sharply
higher it's a historic sign inflation has grabbed the economic