Sunday, May 11, 2014

The Inherent Flaw of Fiat

No matter how much is written about it, we never seem to truly understand "money". Those who have written in the simplest of terms seem to impart the greatest understanding. I am not fit to keep their company, but I will try to make a simple point as best I can.

Whenever we give the issuer of fiat (digital or paper) unlimited power to create it, they inherently control its flow to the powerful and wealthy - those closest to the source of the new money - because they and the issuers are bound together by mutual interests.

The complex path of shell games and transformations which fiat takes may have many twists and turns, but in it's simplest terms, the process is much like a bank printing money for itself and handing it out to its closest friends ... and the rest of society accepts that this is the same as earned income. This is the great flaw of fiat as we define it today. It "takes sides".

We see in this effect the so called "wealth inequality" gap, which is the true measure of the power of fiat. As fiat grows more widespread, accepted and embedded in our valuation system, wealth inequality grows. See it grow to new extremes in the USA, from where the most powerful fiat of all time is issued. The gap will grow larger still, until the imbalance is completely unsustainable.

Gold once held a place in the hearts and minds of men (a place where fiat now dwells for many) as a "true" money of universal and unambiguous quality. Many still view gold this way today, more so in the producer nations than in the so called advanced economies.

But take note, no government or monarch ever issued a decree to "declare" gold as legal tender. Rather, society makes this choice naturally, due to gold's unique and enduring qualities, which people all over the world, throughout time, have found to serve their best interests as a durable, save-able, divisible and trade-able form of universally accepted wealth.

We could go into the many unique qualities of gold which make it the perfect and ideal wealth reserve asset as described above. But those have been written about at length elsewhere. What is important to point out here is that society at large - the people of planet earth throughout the ages of civilized man - have traditionally come to value gold in this way. No one coerced them.

Just as naturally as people eat fruit, but not the dirt it grows in, people naturally decide what is wealth. They can be fooled over time by the money changers as they separate the money from its gold foundation, but this state of affairs never endures.

With fiat, a select few issue a decree of paper wealth as legal tender, and THEY - not society at large, but THEY - determine to a great degree where it will "be distributed" (not earned) and in what amounts. And of course this furthers the wealth inequality gap, since so much wealth flows to these same select few.

When society decided what money was, the working classes prospered. Even though the old gold standards were imperfect, they still functioned to keep wealth in the hands of producers. Today, wealth is mostly a byproduct of debt, and what is produced is merely a secondary item from which to draw profit through a debt derivative.

This is the way of our modern times. All fiat wealth today is a derivative claim on future production, whereas physical gold is the "here and now" representation of wealth with no implied future performance required to make it whole. Our fiat money today is a claim on production so far out into the future, none of us will ever live so long as to see it "made whole".

But I digress. The point is this: The wealth inequality gap always strains a fiat system near the end of its timeline, and we are at the point of a systemic *snap* as the gap continues to widen. So watch this element of our global economies. The unsustainable growth of this gap is what changes the minds of society at large to repudiate fiat (i.e. debt). Add this domino to "gold flow constriction" and "massive derivative failure" (as well as others) to see which one first topples to create the inevitable cascade of defaults which lies ahead.

As people gradually awaken and begin to understand that this fiat system serves the powerful and wealthy at the expense of the working class, they will turn back to gold, as they have time and time again. Gold is the wealth of all people, rich and poor alike. It has no allegiance or bias toward any class. It is only a "political metal" in the sense that the corporatist class struggles to manipulate its worth and hide it's true nature from the little people, so as to make the fiat scraps that fall from the table of the .01% more appealing.

Fiat today is truly the money of the banking class. Increasingly, it serves the Too Big To Fail banks and their direct beneficiaries - by far the primary benefactors and recipients of the lion's share of newly issued fiat. And the FED can feign surprise at this wealth inequality effect, but they are the very authors of it, which is to be expected, since they are for the most part owned by the very same .01% they serve. Again, a simple understanding that money and power exists to serve its own best interests, as through the primary dealers which own the FED.

People are awakening to this fact. The Eurasian Union and the BRICs are growing weary of the wealth inequality that the derivative based global monetary system continues to spread. They understand the great advantage of the issuer of the global reserve fiat, and reject it. Meanwhile, the issuer is so conditioned to this advantage that it even places sanctions upon its use as a form of punishment for those who oppose the system. A risky proposition which only those insulated by a cocoon of fiat wealth (confidence) would mistake.

Watch this gap closely in the coming months, for people will begin to question "political" money used to achieve political ends both domestically and abroad. Yes, even those who depend upon this political money to survive are beginning to understand that they traded job opportunity for subsidies, as corporations outsourced their jobs to take advantage of the wage arbitrage of a tilted money system.

It is this inherent flaw which could trigger a massive systemic change. When this change comes, the very nature of fiat itself could be redefined, if gold is truly set free to function in its historical context. And in its new defintion, fiat will no longer bear this intrinsic flaw.

We call this FREEGOLD, because our money system has become so structurally imbalanced that we actually need to label the natural free markets of open and uncompromised societies of the past.

Freegold, as such, is clearly distinct from our conflicted and corrupted markets today, controlled by the few who game the advantages of wealth creation by decree. It is the gold standard that always should have been, but never was, because of Fiats inherent flaw.

1 comment:

  1. Thank you for this. While many thoughts come to mind I wanted you at least to know someone is appreciative of the effort.