Friday, July 1, 2016

MacLeod Channels Another

Again Alasdair comes to the conclusion of a currency hyperinflation. He never uses the word, but instead - as do so many others - prefers the term "currency collapse". It is a quick and easy read. But of course, nothing involving money can ever truly be quick and easy.

He arrives at the conclusion through a fairly logical analysis, but one point about money seems to be missing: the idea of wages in an economy.

If in fact we are gradually migrating to an entitlement driven vs. a wage earnings driven economy, as some, like Greenspan, have alluded to - then we must calculate this factor into the equation of money's value/function.

Now, some will argue that this is a slow migration, and very gradual, and not yet large enough a shift from actual wage earners to entitlement recipients. So let us dig a bit deeper to uncover the trend. Even in the shrinking world of wage earners, how have their jobs changed from a real world economic standpoint?

Consider the huge shift in wage growth attributable to financialization. Do high paying Wall Street jobs that create systemic risk and require public bailouts have a positive or negative impact on respective economies? How do these wages reflect the economic function of money?

Take the growth in governmental administrative jobs or professional services jobs which shuffle about in a system of redundant checks and balances. Does the growth of litigation, socialized medicine and various forms of re-insurance create true economic value, or does it recycle value from within a static economic system? How useful is the work being performed in advanced economies?

I mention this merely to contrast the type of economic development taking place in the Eurasian Economic Union, most notably the OBOR (One Belt One Road) project, and the energy production agreements and implementations in place to support it.

Clearly, the contrast between "real" economic development: building high speed railways, opening up new trade corridors, employing electricians, engineers, scientists, laborers ... versus "virtual" economic recycling: denying and delaying insurance claims, litigating, pumping and dumping securities, pretending to represent an industry's best interests as an association, political gain from corporate largess ... has some real impact on the way that wages reflect the value of the currencies they are paid in.

Or at least they should ... and in fact they do.

Though it may seem sentimental to invoke the virtue of "an honest days pay for an honest days work", one can certainly look dispassionately at the so called advanced economies and the moral economic value of their wage earning activities. Where the factor loses credibility is in the often noted realm of where "dishonest" economic activity takes place in the emerging market economies.

One does not need to place a geographic boundary upon "advanced" economic activity, if that is merely a euphemism for predatory or non-productive (indeed often "dishonest") economic activity. Greed does not have any national allegiance, it is found where it can thrive, and it thrives where conditions allow.

So Alasdair should take this aspect of money into consideration, as it is far more important than other cited considerations, and does also allude to the intrinsic value of gold as a form of "honest money" paid for "honest economic activity".

As debt increasingly fails, watch closely as the dishonest economic activity is paid in dishonest money, while honest economic activity - of true economic value, is paid in honest money. There has been a gradual shift, for a longer while and in greater proportion than our own propaganda has seen fit to admit.

Someone once said that "- derivative claims will be paid in derivatives." Someone else once said, "Gold is money. Everything else is credit." I will say again that all currencies are credits - a derivative of gold when treated as an asset.

Today, those who deal in derivatives - all of us - are being paid in them ... our societal attachment to them has kept them from fully failing. The currencies still work. They still buy the things we need and want. They may fail ever so slowly for an agonizingly long period of extend and pretend ... then ... all at once.

Who can say? Time proves all.


  1. Hi Wil,

    Only one generation gets to see the sociopaths get beheaded...those lucky guys...the unlucky just wait and wait :)

    I came to read your thoughts on Brexit...any thoughts about a run on Sterling? What about the position of the USA?



  2. Brexit was a welcome surprise. It shows us that true wealth supports the Eurasian Economic Union.

    The position of the US is akin to the fall of Rome. Many similarities as you know. I do not know exactly what Roman era our fall mirrors at this time. The history only rhymes, but desperation seems evident.

    The US could bring up a rational leader, and adopt a more cooperative stance. But dollar benefactors seem bent on all or nothing. There will be financial turmoils as the lions fight, much volatility ahead ...