Those of us who understand the principles of Capitalism know that sound ‘money’ is a core principle of this System. We also know that Capitalism is built upon the concepts of Wealth creation and then the distribution of this ‘wealth’ via the concept of VALUE. Since we own property under Capitalism we need to exchange and trade our units of production in the greater marketplace. All this is done with the understanding that a reasonable VALUE will be received for one’s labor and effort. Money is the concept which serves as our ‘proxy’ for VALUE in the Capitalistic System. Sound ‘money’ creates confidence in the exchange process and it also serves as a ‘store of value’ over long time periods.

Today, however, our money units have evolved into DIGITAL units that have ‘no value’ and no ‘substance’. Digital money creates continuing volatility in ‘prices’ and it also destroys the incentives for investing over long time periods. The other negatives about ‘DIGITAL money’ are centralized control over the money creation process and constant ‘money manipulation’ by the Central banks to influence ‘prices’ and ‘trends’. These actions create an environment of uncertainty, instability, and a desire for short-term decisions. Who, in their right mind, would want to invest their hard-earned funds long-term (say a 30 year mortgage) when the ‘money units’ are so volatile, unstable, and lacking in substance.

The history of Capitalism has demonstrated that ‘money units’ need to be some THING viewed as having VALUE. We can go back in history some 5,000 years to the Sumerians and then move forward to as recent as 1971 to ascertain that ‘money units’ have always been some THING of substance. The Sumerians adopted a silver coin as their money. The Hebrews, as early as 1700 B.C., also desired mostly silver as their ‘money units’ which they named the Shekel (which originally was a measure of barley). The Greeks adopted ‘money units’ of iron, bronze, and eventually they adopted silver for their unit called the ‘Drachma’ (all these units were viewed as having VALUE based upon the weight of the metal in each coin that was minted). VALUE is the core concept underlying the real economics of Capitalism!

As we continue our voyage through history we can discern that all Cultures and Civilizations adopted various ‘money units’ that were based on some item from NATURE (iron, copper, bronze, silver, and gold emerged as the chosen items). These ‘money units’ were mostly minted into coins which included a given unit of weight of the metal as their unit of VALUE. Value is the core concept which underlies all ‘money units’. When Political leaders, Kings, or Finance Authorities tried to diminish the metal content within the ‘money unit’, this always led to a rejection of the ‘money unit’ in time. The most recent example is the Zimbabwe dollar of 2009-10.

Never in the history of ‘money’ have political and finance authorities attempted to impose ‘valuless’ or ‘imaginary’ money units upon the marketplace (as today). Even the ‘paper’ money units (of the past) were always backed to some degree with an item that the people viewed as having VALUE. When the people in the marketplaces became AWARE that their ‘money units’ were totally debased, they immediately started to reject these ‘money units’. This is what is now happening in our current marketplace. Traders, investors, lenders, and many informed patriots are now rejecting our DIGITAL ‘money units’…which a few elite MONEY CHANGERS (our Central Bankers) are now imposing upon the markets. Many are going back to a real THING (gold, silver, or equivalent).

As AWARENESS grows among the public and the global trading markets, I am convinced that all the Bernanke, King, Draghi, and similar Central Bank DIGITAL ‘money units’ will also be rejected. Money is the ‘lifeblood’ of our Capitalistic Economic System and the debasement of our MONEY units will eventually DESTROY real Capitalism totally. Digital money units now represent some 96% of all money transactions in the global marketplace. Some 4 trillion of digital dollar equivalency are now traded daily via the global currency markets. Practically all government securities have now been converted to digital instruments. Direct electronic trading now makes up most of all the Exchange Markets globally.

Capitalism is doomed as an economic System given what is now occurring in the global markets. The ONLY political person who seems to understand the evolution of money (and its impact on Capitalism) is Ron Paul, Congressman from Texas, USA. All the other candidates and most financial pundits seem totally UNAWARE of what has taken place in recent years (mostly since 1990′s). The vast majority of financial pundits and media ‘experts’ also seem confused and unaware of our monetary history and the importance of sound MONEY as the real ‘proxy’ for all asset VALUES.

Given the nature of our monetary problems globally, it is now unlikely that any meaningful CHANGE can occur to salvage our current PONZI financial system. DIGITAL money units have now been imposed upon the markets and the new HFT computers are now endemic within our current non-system. The END of CAPITALISM is now present to those who are AWARE and informed. IMAGINARY money is what we now must live with until the current non-system collapses.  The coming COLLAPSE is assured (based upon history and human nature). Get prepared for the coming COLLAPSE in the next few months. The collapse process may take a few years to  fully play out…but 2012 is likely to be the beginning of this process. The internet is a perfect medium to learn about what is emerging!

A few websites that confirm this viewpoint are: http://dollarcollapse.com, http://economiccrisis.us, www.goldsilver.com, www.financialsense.com, http://economyincrisis.org, http://financialcrisis.org, www.321gold.com.

If you want to learn about ONE alternative to Capitalism you can research this website: http://kingdomecon.wordpress.com. Enjoy and get prepared for real CHANGE in the coming years…after the collapse!

The real purpose of economics is the creation of real WEALTH for our Nation and the global society. What our Central Bankers are doing today is not helping to create any meaningful REAL ‘wealth’. Punching numbers in the computer (called QE or digit creation) does NOT create any real ‘wealth’. Nor do all the derivative contracts (now some $1.5 quadrillion) create any real ‘wealth’ for our society. Recently, Ben Bernanke and his monetary committee created multi-trillions of digital dollars (some say over 16 trillion) via his monetary policy and loan facilities. Mervyn King of England has created billions of digital pounds via his monetary policy. The Bank of Japan has created trillions of digital yen…and who knows what China and the others have done. 

None of these actions produce one unit of real ‘wealth’ for our society. Yes, it may be meant for this result, but what are these policies actually doing within the marketplace? Does trading trillions of units of currencies (daily) via all our HFT computers create any meaningful real ‘wealth’? Are all the newly created units under the QE policies creating any meaningful new ‘wealth’ for the marketplace? Are all the speculations and bets between traders in the options markets creating meaningful new ‘wealth’ and growth for our economy? So what is REAL ‘wealth’ in economics? What is the goal of economics?

1. WEALTH:   We live on a planet with many natural resources (oil, gas, iron, uranium, lumber, etc.) plus all the other basic agricultural seeds, fruit seeds, beef cattle, fibers, and all kinds of similar raw natural resources. To improve our standard of living and eventually to create prosperity we need to constantly develop these natural resources into all kinds of finished goods and creative products for people to enjoy and consume. We now have the technology to be much more productive than in earlier periods of our history. In fact, much of our ‘wealth’ creation today is done via robots and computer aided devices. The potential for creating worldwide prosperity for everyone is available if we understand economics and its processes. Wealth creation from raw natural resources is our starting point. This is the purpose of economics and everyone needs to understand this purpose and goal as the fundamental reality of economics. What additional concepts are necessary to understand to further our goal of ‘wealth’ creation?

2. VALUE:   Under our system of philosophical Capitalism, we own property and the means for the production of real ‘wealth’. Private ownership means that real ‘wealth’ needs to be produced and then traded, exchanged, and distributed to all the people for their consumption. Under Capitalism, units of real ‘wealth’ can be broken down into units of ‘value’. For example: If a field of grain is real ‘wealth’, then bushels of grain (wheat, corn, oats, etc.) could be classified as units of ‘wealth’. Each bushel has ‘value’ in exchange as well as ‘value’ in use. ‘Value’ is a key concept of economics which is derived from the prior concept of ‘wealth’. As we exchange and trade our production to others we do this with the understanding that ‘value’ is being exchanged or traded. How is ‘value’ quantified or denominated in today’s world of Capitalism? What do we need to invent to measure the ‘value’ of our real wealth?

3. MONEY:   The history of economics starts with a barter society. Real ‘wealth’ is created from our natural resources and then this wealth is exchanged, traded, and distributed to the people. To facilitate the trading and exchanging process between people and nations we need to develop a concept which can measure this wealth in units. For example: What is a bushel of wheat worth? What is a pound of butter worth? What is a barrel of oil worth? Etc. We can subjectively exchange items for items but this eventually becomes slow and cumbersome. Wouldn’t it be wise to invent a unit which could be used by everyone to quantify worth or ‘value’? What could we invent?

History shows that people have invented all kinds of ‘things’ for the measurement of ‘value’. Tulip bulbs were used in the Netherlands, nails were used in Scotland, deer skins were used in Tennessee, wampum was used by the Native Americans, silver was used by the Spanish, the British, and the Swedes…and the Colonial Americans used all of the above prior to our formation. Eventually, as math and numbers became the obvious means for calculations of ‘value’, units of numbers were given specific ‘names’. Our ‘dollar’ was a ‘name’ chosen by our founding Fathers of money back in 1785. A ‘name’, however, has no substance or meaning without some definition. What does the ‘name’ DOLLAR mean without a definition? What is a ‘name’ without a definition? Where does a ‘name’ derive from?

Thomas Jefferson, the key founding Father of our monetary units recognized that the ‘name’ DOLLAR needed a specific definition if ‘value’ was to be calculated or measured in the marketplace. So how did Thomas derive a definition for the ‘name’ DOLLAR? What Thomas did was observe what the people were trading and exchanging in the real marketplace. He then concluded that most people viewed the Spanish silver coin as the most desirable ‘thing’ for calculating ‘value’. This gave Thomas the idea to define our unit, the DOLLAR, in terms of the silver content in the Spanish silver dollar. This led to our American dollar being defined as 371.25 grains of silver (the same content of pure silver as was used in the Spanish silver dollar). Why was this definition meaningful to the people in the marketplace?

What now could happen was a minting of new silver coins with the ‘name’ DOLLAR’ and then everyone could use these coins for exchange in the marketplace. Prices could emerge from the trading process for all goods and services via this new MONEY (the American silver dollar). As prices became known and established…VALUES became established for all products, goods, land, machinery, and services. All natural resources could now be ‘valued’ via this new money scheme which Thomas Jefferson and eventually our Congress adopted. As new silver coins were minted and entered the marketplace, prices could adjust and growth could occur. The key psychological ingredient for all this to occur was marketplace CONFIDENCE.

As money and confidence grew over time, more goods and services emerged from the marketplace. As new creativity emerged more products, things, and services emerged. All this gradually led to growth and prosperity for the overall society. As more natural resources were discovered and developed, new items could be created and offered to the marketplace. A growing economy emerged with sound ‘values’ and sound ‘money’. The key ingredients to a growing and prosperous economy were ‘wealth’, ‘value’, and ‘money’. These are the basics of Economics 101.

What we have for economics today is a distortion within all these three categories. Most economists today seem to lack an understanding of WEALTH, an understanding of the concept of VALUE, and an understanding of the concept of MONEY. Today we have units of money called ‘dollars’, ‘pounds’, ‘yen’, ‘euros’, etc. but with no substance or meaning to these NAMES. What is a ‘dollar’ today? What does the ‘name’ DOLLAR denote? Why are units, called ‘dollars’, created OUT OF NOTHING today? Why are all VALUES mostly distorted and purely subjective (many call this ‘price’ discovery)? Why is most WEALTH today viewed as accumulating more digital currency units (virtual units of imagination) rather than real material products? What is now needed is a BACK to BASICS mindset. This missive is just a beginning! Enjoy! http://kingdomecon.wordpress.com.

These past couple of weeks we have witnessed ‘asset purchases’ by the Bank of England and the Bank of Japan. Mervyn King at the Bank of England has chosen to purchase some 50 billion pounds worth of new ‘assets’ (supposedly to pump up the financial assets of his banking buddies and indirectly the economy of England). Yesterday, the Bank of Japan, revealed that they are purchasing some 10 trillion yen worth of new ‘assets’. Does this sound logical and representative of sound monetary policy?  First of all we need to recognize that Central Banker’s use words differently from the average person.

In reality, what Central Banker’s call ‘asset purchases’…many of us would call QE (quantitative easing) or new money creation. The difference in the use of ‘words’ creates different interpretations of what is happening! Then we notice that the words ‘asset purchases’ can mean different things. To some bankers this might mean Treasury Securities…to others it might mean Corporate Securities…and to others it might mean Equity Securities. The jargon that is used is meant to confuse the market and to create uncertainty in the mind of the public and all traders.

What is happening is that Central Bankers operate in a world of secrecy, privacy, and vagueness. When they announce a ‘asset purchase’ they actually mean that they desire to create more units of money for the overall market (distributed via their banking cartel buddies). They desire to create more ‘inflation’ to raise asset prices. Most Central bankers do not like the word QE…nor do they like people to announce that they are creating new money units ‘out of thin air’. Central Banker’s want everyone to THINK that they are just buying a few ‘assets’ for their portfolio and that this is good policy for everyone. In reality, however, they are secretly manipulating the markets, the value of all asset classes, and the emotions of all market participants. In addition to destroying currency values to maintain their hegemony.

I was recently shocked when I heard that our Fed Chairman, Ben Shalom Bernanke, created some 16.1 trillion of new money units to bail-out his banking buddies between 12/07 and 07/09. This fact was revealed by a limited audit of the Fed by our General Accounting Office (GAO)…which was initiated by a law suit from Bloomberg News. According to the audit these TBTF financial institutions received all these trillions in basically free money units and then used these units to purchase ‘assets’ with a higher interest rate so they could create the impression of solvency and legitimacy.

Citigroup, received 2.5 trillion; Morgan Stanley, 2.04 trillion; Merrill Lynch, 1.95 trillion; Bank of America, 1.3 trillion, and some dozen or more additional banking entities some 9 trillion. Imagine what was done to bail-out all these banks by primarily just two key policymakers (Ben Bernanke and his assistant Bill Dudley). What I have learned is that there are basically only TWO key policymakers who have real OPERATIONAL knowledge of what is happening within realtime Federal Reserve open market operations (namely, Ben and Bill). Bill Dudley is the President of the NY Fed (and prior manager of the Trading Desk at this institution) and also the vice chairman of the Federal Open Market Committee (FOMC). Bill reports to Ben Bernanke on a daily basis to keep him informed.

Bill was hired at the NY Fed after spending some 21 years with Goldman Sachs as their chief economist and market specialist. Then after Timothy Geithner resigned as President of the NY Fed in 2009 to become our Treasury Secretary, Tim hired his buddy Bill Dudley to take his place and role at the NY Fed. Notice how Goldman Sachs and other large Wall Street firms control the entire policymaking process when it comes to our money. Notice the small cadre of elite bankers and financial manipulators who work to promote their cabal of ‘Money Changing’ and market control. How did this happen? Check out:  history of the Federal Reserve Act via Google search.

Bill Dudley has now been appointed (according to: www.bis.org) as Chairman of a key committee at the Bank of International Settlements (BIS) in Basel, Switzerland (in addition to his role as President of the NY Fed). Check out the history of Bill Dudley at: www.newyorkfed.org.  Apparently, Bill will work on the issues of International coordination of banking issues and money flows to the Big Banks so that all the banks can work together during these difficult economic times. Notice that our entire monetary SYSTEM is controlled and managed by a select few highly opaque individuals who have no direct relationship to our elected politicians (those we elect to run our country for us) and who do not report in realtime to the American people (only after they have made their secret decisions and then in vague and deceptive language).

Notice also the lack of transparency when it comes to how our money units are distributed within our overall economy. Those who are part of the banking CARTEL are protected from all their shenanigans when they FAIL, whereas, you and I are expendable when we ‘fail’. The lifeblood of Capitalism is our money. And the fair distribution of these money units to those who enhance and create our REAL WEALTH (material goods for consumer products) is what Capitalism is all about. What did our founding Father, Thomas Jefferson, say about Central Banking and these manipulators…which reveals their motives and intentions? Thomas said the following in 1809:

“I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” — Thomas Jefferson — The Debate Over The Recharter Of The Bank Bill, (1809)

What Thomas Jefferson is saying is that MONEY should not be centralized and then controlled by unelected and private interests. Thomas Jefferson understood human nature. Thomas Jefferson understood that MONEY should not be created ‘ex nihilo’…out of nothing (as today). What Thomas Jefferson desired is that MONEY be some THING of value that people controlled. He chose silver and gold as the foundation for MONEY…and he allowed paper notes only if they were convertible into silver or gold. This provision provided that the PEOPLE would be ultimately in CONTROL of our economy.

What has emerged over these past 40 plus years is an International money CARTEL…composed of mostly opaque elite policymakers who have no real interest in the vast population of working producers (the blue-collar workers who create most of our real wealth). This non-System which we now have must be changed. The first duty of every American is to get themself educated on all these issues. Learn about the history of money and value via the internet. There are countless sites and educators that understand this history. You can start with this site:  http://www.gedwardgriffin.com/. Enjoy and keep this website on your list also: http://kingdomecon.wordpress.com.

After attending a great conference at the Hyatt Resort in Indian Wells, Ca., I will provide you a report on what I learned from the experts at this conference. The following viewpoints give an overview of the thinking presented:

Roger Wiegand, www.tradertracks.com:  Our political and monetary leaders are mostly psychopaths. These leaders could care less about who gets killed or hurt. They all seek power and control. Personally, I have given up on ‘saving the world’. Gold is likely to reach $2050/ounce in May, 2012. Oil should be at $120/barrel by June, 2012. Check out my newsletter for tips and investment advice.

Jeff Berwick, www.dollarvigilante.com:  The End of the World as we know it is here. The transition to a new system will be difficult but this transition period is necessary and positive for the longer run. Now is the time to prepare for the crash (financial collapse) of a lifetime. Those who want to protect their assets should diversify globally. Get a passport from more than just your home country. Invest in gold and gold stocks…also store up a supply of food items and plant a garden if you can. Have homes or places to travel to in many countries…if possible. Stay away from highly urban locations (say Los Angeles or similar). The State is corrupt and also all the Central Banks. Think for yourself and do not trust those in power. The collapse will happen within the next 5 years or less. See my website for my newsletter and other information. Comment:  the above is my paraphrase from my notes.

John Embry, http://www.sprott.com/markets-at-a-glance:  Debt has now reached levels which prevent any repayment options. The debt can not be repaid and our politicians and Central Banks will likely create a monetization of all future debt…this will lead to hyper-inflation down the road. The no-pain process (meaning an avoidance of the deflation scenario) will be chosen by the authorities. Kicking the can down the road will continue as there are no solutions to our debt problems. Eventually, a collapse is certain. Gold and silver investments will benefit from this process. Comment: my paraphrase from my notes.

Andrew Schiff, www.europac.net: The history of money shows that many items have been used as money…including wampum, shells, beads, and other items. Gold and silver emerged as the best items for money. Eventually, we will return to some type of gold standard. Today, the problem is debt and the monetization of new debt. All this will likely get resolved via hyperinflation down the road. The best store of value will be gold as fiat currencies get devalued. Comment:  my paraphrase from my notes.

Greg Weldon, www.weldononline.com: The big issue is ‘who will buy all our debt’ going forward? Some 2.7 trillion of USA debt will mature in 2012…and in addition to this we will run another 1 trillion of deficit. China and Japan are now liquidating debt by selling Treasuries. Are trends portending another recession? We now have deflation in real incomes, deflation in new home prices, demand for new homes are lowest ever, commercial real estate is declining, and the Greek situation is coming to a head soon. Central Banks will attempt to avoid deflation at all cost. This means that they will reflate. Gold will benefit in 2012 and beyond in this environment. Comment:  my paraphrase from my notes.

The above provides you with an overview of the thinking from this conference in Indian Wells, Ca. The weather has been beautiful and ‘on the surface’ it looks like we have NO PROBLEMS. I have noticed that a lot of Canadians are visiting this area now. It might be the weather? After listening to the above presenters and many others, I would conclude with the following comments:

Don Swenson, http://kingdomecon.wordpress.com: Every speaker (some 20 or more) seemed to think that our debt situation will lead to a reflation and then hyper-inflation down the road. The logic for this conclusion seems to be the unlimited ability of our Central Banks to create (every speaker used the word ‘print’) money to monetize future debt. I am still surprised that none of the speakers or presenters understand the operational procedures of our Central Banks today. Every speaker is thinking (in their mind) that Central Banks are ‘printing’ units of money. This mindset creates the idea that all these paper units will enter the marketplace and bid for goods and services. Is this the reality today?

In reality, all the major Central Banks today actually do not ‘print’ money. What they do operationally is create new units of money ‘out of nothing’ (via their thinking). We call this creating money ex nihilo or creating money ‘out of thin air’. There is no paper being ‘printed’ by the major Central Banks today. What actually happens is that Ben Bernanke and other Central Bankers just ‘punch’ in numbers in their Desk Computer (all Central Banks now use HFT computers) to create new money units (really digits). These new digits are called by their currency names (dollars in the USA, euros in Europe, yen in Japan, etc.).

For example: assume that I am Ben Bernanke…what would I do to create new money today? If a commercial bank (say JP Morgan Chase or Goldman Sachs) needs emergency cash for some asset in their portfolio (say, to avoid insolvency)…I just create new units for my System Open Market Account (say, the SOMA account) and then I use these new units to purchase new assets (let’s say Treasury bonds) from JP Morgan Chase or Goldman Sachs. In other words, I just create money units ex nihilo…out of nothing. New digits (now called dollars) appear in my computer screen within my SOMA (system open market account). I can use these digits (dollars) to purchase any asset I desire.

The ECB (European Central Bank or Mario Draghi) also does this same procedure…as does Mervyn King at the Bank of England (he just created another 50 billion pounds for his clients). Computers have replaced the ‘printing’ of money units and a decision from key authorities for the Central Banks initiates the process of money creation…ex nihilo.

You can verify United States money ‘printing’ by going to this website: www.moneyfactory.gov.  The B.E.P. (Bureau of Engraving and Printing) actually ‘prints’ all our paper notes which now requires less paper each year. The average face value of currency notes (produced) per day in 2011 was $453 million (this is down some $175 million from 2008). This means that approximately $117 billion of face value is produced per year (currently decreasing every year). Furthermore, some 2/3 of all new notes end up outside the boundaries of the United States. This means that only about $39 billion of face value paper notes circulate in the United States as new units in 2011. Paper notes and coins are vanishing from circulation as more people use their computers (virtual reality) for accounting and banking purposes. The cashless society has arrived in most of the Western World.

The total dollar amount of paper notes and coins that circulated in 2011 was about $829 billion (a decline from about $853 billion in 2008). Furthermore, only about 1/3 of this amount circulates in the boundaries of the United States…the remainder circulates outside the United States. So what is now happening is that ‘paper’ money and the ‘printing’ of notes is declining. The new digital units (credit cards and direct electronic units) which we call ‘virtual reality units’ have emerged as our money units today. Even the 46 million Americans now on Food Stamps receive a debit card loaded with digital money for their purchases. And most Social Security recipients now receive their monthly payment via a direct digital deposit to their banking account. What does all this mean for our future?

Ben Bernanke, our Fed Chairman, has created some 1.25 trillion of ‘face value’ equivalent units via QE1 and then some 600 billion via QE2. This suggests that most money today are digits within the computer screen and not ‘paper’ notes as implied by all the speakers at the California Investment Conference. Basically, our Fed is no longer ‘printing’ money and this has major implications for what is likely to happen in the future! Hyper-inflations (in the past) have all happened with the excess circulation of ‘printed’ notes. This was the situation in Zimbabwe in 2009-10 and Germany in 1921-24. Countries which ‘print’ all their money today could experience hyper-inflation. The United States and most Western countries, however, have now converted to mostly digital money units…and high speed computers for the distribution and accounting of these units.

Since our digital money units can be created in unlimited amounts this suggests to many that these units will enter into circulation and chase existing goods and services (eventually causing hyper-inflation). In reality, however, this is not happening. Most of the new units created are sitting in accounts and not being used to chase existing goods and services excessively. If this trend continues (as I think it will) there will be no hyper-inflation as the speakers above implied. What we now witness in the real estate sector is emerging deflation. All the excess liquidity (some say 2 trillion sitting in the major bank’s accounts) is not chasing home values or most consumer goods. In fact, both residential and commercial real estate values are now declining (suggesting a lack of bidding from the public). This trend is likely to continue going forward. What does this mean for our economy?

A more realistic scenario for our future is a DEFLATIONARY depression. We see all the symptoms now in the real estate sector and the consumer sector. Wages are not increasing and affordability for new stuff (homes, cars, and durable goods) is not improving. This suggests that deflation is much more likely than hyper-inflation. The deception that causes this change in perception centers on the word ‘printing’. Printing of new notes is not happening at a rate that would cause consumers to bid up values. Some prices are increasing (say oil and other inelastic commodities) but the overall CPI demonstrates that there is no real reflation of our economy. Prepare for DEFLATION down the road…not hyper-inflation as implied by the above experts!

The lesson in this missive is that we need to understand the ‘words’ spoken by experts. The simple word ‘printing’ has deceived many experts. Those who have not fallen for this deception will likely view hyper-inflation as a false doctrine going forward. The Devil is always in the ‘details’. Words make a difference in one’s interpretation of events. Watch the use of ‘words’ as you listen to all experts. When you hear the word ‘printing’ by an expert presenter…ask yourself WHO is ‘printing’ paper units today? Are new paper units entering the market? Where are they? Enjoy this missive and take the time to derive your own conclusions on these issues! http://kingdomecon.wordpress.com.

My personal background involves teaching the history of money and also practicing in the profession of Value and the time aspects of money. I started my financial career as a lender, mortgage underwriter, appraiser, consultant, and observer of marketplace transactions. This career led to my interest in economics, money, valuation, and teaching. What I have learned from my experiences (these past 40 years) is that we live in an ‘illusionary’ world that has mostly emerged since the closing of the ‘gold window’ in 1971. What do I mean?

Prior to 1971, the psychology of the marketplace was mostly based on material aspects of reality. Our mindset was mostly focused upon the material objects which economics produced and the consumption of these objects (goods). Gradually, however, these material aspects of reality have evolved into today’s spiritual aspects. For example: money used to be viewed as a material object (paper, metals, or similar). This view of money created the mindset that ‘value’ was certain and measurable. We could denominate the value of an object (say a house) with money units that existed in space and time. This mindset led to the idea that ‘value’ was real and certain. As new money units entered the marketplace and bid for new material objects, we assumed that the ‘value’ of these objects (goods in the terminology of economics) would increase and remain at this higher level indefinitely. Prices (the proxy for ‘value’) could be viewed (under this paradyme of reality) as certain or specific…with the results calculable or measurable. What changed this mindset?

With the closing of the ‘gold window’, our money unit gradually changed in its nature. Since paper notes could no longer be converted into gold (or silver)…this made the paper notes the real money units…in the mindset of the marketplace. Then as these paper notes were replaced with digits in the computer screen…another reality emerged which we now call ‘virtual’ reality. Virtual reality has gradually replaced material reality as we now create our ‘money’ via the computer. The circulation of money units today consists of some 96% virtual units (digits in the computer screen) and 4% paper/coin units (material objects). What has this situation created for economic thinking and the financial markets? Why did this change in the nature of our money units create the mathematical concepts of finance (derivatives, index currencies, etc.) which were necessary to hedge risk in the marketplace? What has this created for all our economic and monetary concepts today?

What most economists and pundits do not seem to understand is the implications which have emerged as a result of this change in the nature of our money. The key concept of all historical money units has been their objective reality in spacetime. Gold is an objective item which exists in spacetime. Silver is an objective object which exists in spacetime. Paper is an objective item which exists in spacetime. BUT…what is a ‘name’ and ‘number’? What is a ‘digit’ in the computer screen? Can any of these items be viewed as part of material (objective) reality? Today, our money unit is called by the name ‘dollar’. The symbol and number which we use to represent our ‘dollar’ is:  $1.00. How do these units (name, symbol, and number) change the nature of our money and the concept of ‘value’?

Today, we witness the collapse of ‘value’ in the real estate sector of our economy. We have all witnessed housing values decline by 20-70% or more. How can this be possible if our money unit, the ‘dollar’, is a material unit? We measure ‘value’ in our money unit (the ‘dollar’). From the origin of our ‘dollar’ in 1792 up until the closing of the ‘gold window’ in 1971, prices of objects and things were relatively stable. This created the mindset that ‘value’ was also stable and real (material). When I ‘valued’ a house at $100,000, I did so with the mindset that this number was real and specific. All valuation professionals would represent ‘market value’ as a point estimate that was specific and real. BUT…what changed all this…especially since the financial crash of 2008? Why is ‘value’ now immaterial along with our ‘dollar’?

What emerged after the crash of 2008 was an awareness that our money units (dollars in the USA) were not real or material. We witnessed our Fed Chairman as he created NEW money units (in the trillions)…OUT OF NOTHING. The question emerged: Where did all these units derive from? What were these units (in reality)? What does it mean to create NEW units (now digits in the computer screen)…Ex nihilo (out of nothing)? The awareness which emerged after the Bernanke policies of QE1 and QE2 changed the reality and the mindset of many as to the NATURE of our money. We now could discern that our MONEY (a name, a symbol, and a number) were not  material objects or some thing from nature. The behavior and actions of our Fed Chairman revealed a NEW reality about our money and the origin of our money.

Since the crash of 2008, we have witnessed our Fed Chairman continue to create and manipulate the markets via his NEW money units which he creates Ex nihilo…Out of Nothing. This brings up the issue of:  what is money today? If Bernanke can create $trillions of NEW units by just THINKING…then what does this mean? Wouldn’t this mean that Bernanke is creating MONEY from his CONSCIOUSNESS? Where does money derive from when there is no materiality or objective reality to the units being created? Does not this mean that Bernanke just THINKS up numbers and then has these NUMBERS ‘clicked’ into virtual reality via the computer? Are not the ‘digits’ that Bernanke creates via his decision (with the approval of the FOMC committee) a form of VIRTUAL REALITY that is based on IMAGINATION derived from his MIND? Is this the NEW reality that we now call Casino Capitalism?

This is my Challenge to all economists and financial pundits: What is money today? Where does money (say our dollar) derive from? Who is mostly responsible for the $trillions of NEW units which have been created…Ex nihilo…since the crash of 2008? What is meant by the concept…Ex nihilo? If our money unit today is an immaterial concept of the MIND, what does this mean for all of our economic concepts and ideas? If our money units are subjective then all assets in the marketplace have a subjective VALUE…with no stability!  Since the purpose of MONEY is to represent VALUE, then do these concepts have any objective meaning today?

Historical Capitalism is based upon material MONEY. Historical Capitalism is based on measurable VALUE. If any asset (say a house) is not capable of being VALUED objectively, then how can we call our current economic SYSTEM viable and objective? If our Fed Chairman can create MONEY…Ex nihilo…and do this secretly and privately…now in the trillions…how can anyone have any CONFIDENCE in any long-term values (say mortgages)? Capitalism is based mostly on two concepts:  MONEY and VALUE. If these concepts are subjective and meaningless to people in the marketplace, then what does this lead to as people negotiate new ‘values’ via their transactions?

What is now necessary for economists and for every financial pundit is to understand our NEW economic and monetary issues as we experience them today. Money has evolved from a material object (1792-1971)…to its current status as a spiritual concept of one’s consciousness (mind). Virtual reality (digits in the computer screen) reveal an image of a deeper immaterial reality…the consciousness of person’s who create these digits Ex nihilo. Ron Paul is basically correct when he says that the Fed creates ‘money out of thin air’. Another concept for ‘thin air’ is Ex nihilo. Both these concepts reveal a new nature for our money which every economist must now understand!

The consequences of this change in our MONEY has major implications for all asset VALUES going forward. Since our money is now immaterial we should expect great volatility in the value of all financial assets going forward. This will eventually lead to a loss of CONFIDENCE in all financial institutions. Money is the ‘life blood’ of Capitalism. Few seem to understand money and its history. Now may be the right time to learn this history. Enjoy and give this missive your serious attention:  http://kingdomecon.wordpress.com.

P.S. Ask yourself these questions: Why is gold and silver now in much greater demand by informed investors in the marketplace? Since 1971, a one ounce gold coin has gone from $35/ounce to near $1750/ounce. If the one ounce coin does not change in its material reality, why does the ‘price’ of this coin change? What is ‘price’ today when our measuring tool is immaterial? If ‘price’ is an Ex nihilo reality, then could all ‘prices’ go to ZERO at some future point? If ‘prices’ of all goods today are based on immaterial consciousness, then is not ‘value’ also immaterial? What is Capitalism when all major concepts (money and value) are spiritual in nature? If money is immaterial (say spiritual) then is all our debt ‘immaginary’? Is all of our accounting based on immaterial consciousness? I think we have entered a NEW reality whether we like it or not! Think it through!

The history of money is understood by few Americans and also few investors. Yet, money is the key to Capitalism and also the key to sound decision-making when making our investments. Many investors are now recognizing that our monetary SYSTEM has changed and that many of our current problems (debt and deficits) relate to our monetary issues.  The issues of ‘money’ can be presented in just a few categories…as below:

1. What item or items have historically been the foundation of ‘money’? If we go all the way back to the first Civilization on this planet (the Sumerians) we can show that their money item was an item from nature. The most popular money unit that emerged from the Sumerians was a silver coin called by the name ‘Shekel’. Monetary values were measured in ‘standard’ weights (mostly with silver as the money unit). Keep in mind that the purpose of ‘money’ is to serve as a ‘measure or standard of VALUE’. To accomplish this objective, ‘money’ needs to be defined in terms of some THING from nature. Money has included many THINGS or items from nature (copper, iron, silver, gold, tulip bulbs, nails, etc.) since the time of the Sumerians…however, the concept of ‘money’ has always included some THING outside my/your MIND…until today. What has happened to change all this?

2. What was the main cause for the psychological changes in our ‘money’?  After our GREAT DEPRESSION era of 1929-1944, our money units gradually became less and less real or less based on items of real VALUE. Historically, ‘value’ has been perceived as intrinsic in certain items from nature. The three most desired items from nature which were generally perceived as containing intrinsic VALUE were copper, silver, and gold. This made these three commodities ideal foundations for ‘money’. Since the purpose of ‘money’ is to measure VALUE, economists and philosophers generally thought that any money unit needed to be defined or directly related to an item of VALUE.

This was the logic and philosophy of the American monetary system. Basically, it was Thomas Jefferson and Alexander Hamilton who designed our monetary philosophy. After observing human behavior in the marketplace, they concluded that most people viewed items like copper, silver, and gold as desirable items for measuring VALUE. This made these commodities their choice for the foundation of our money system. Our ‘dollar’ was chosen as a NAME for our money unit and this NAME (dollar) was then defined in terms of silver (and indirectly in terms of gold).

Our money unit (the dollar) remained tied to some item viewed as containing intrinsic value until August 15, 1971. It was on this historical date when the foundation for our money unit (the dollar) was psychologically CHANGED. Our then President, Richard Milhous Nixon, upon advice from his Secretary of Treasury and other prominent economists decided to CHANGE the relationship of our money unit (the dollar) from all ties to an item with perceived intrinsic VALUE (gold). The NIXON SHOCK was the name for this historic change. Shortly after this change, monetary policy was made much more flexible and dynamic.

With no tie or definition of our money unit (the dollar) to an item from nature (a THING), it became possible to INFLATE the number of money units Ad infinitum (no limitation). Our monetary policy (after 1971) became a TOOL of Central Bankers who could manipulate the number of money units as they perceived as proper. At first, these Central Bankers could cause money units to increase via the ’printing’ of new paper units. Then in the 1980′s and 1990′s a new technology emerged called the digital computer. This new technology made monetary policy even more flexible and dynamic. New money units (still called dollars) could now be created and destroyed via the computer. Digits in the computer screen replaced the ‘printing’ of money units (the dollar) and DIGITS (images in the computer screen called ‘numbers’) became our new ‘items’ for monetary exchange, investment, monetary policy, and for ‘measuring VALUE’.

3. Why is ‘Consciousness’ a key concept that we NOW must understand if we desire to make good decisions with our investments?  Consciousness is what our key Central Bankers use to originate their money unit creations. Today, Central Bankers like Ben Shalom Bernanke (USA), Mario Draghi (Europe), Mervyn King (England), Zhou Xiaochuan (China), Masaak Shirakawa (Japan), etc. can CREATE money units (digits with currency names) from their CONSCIOUSNESS. Money units are now just ‘DIGITS’ (imaginary units) which are created as VIRTUAL money units…Out of Nothing…Out of Thin Air…Out of MIND stuff. This makes our money units creations from the CONSCIOUSNESS of key policymakers.

Ben Shalom Bernanke, for example, can now just call up his DESK manager at the NY Federal Reserve Building in New York and request that new money units (still called dollars) be created (Ex nihilo) to represent new CASH in his System Open Market Account (the SOMA account). Money, in other words, APPEARS from the CONSCIOUSNESS of Mr. Bernanke and his ‘group think’ FOMC committee. What should this process be called if we desire to represent REALITY today?  My name for this process would be ‘MONEY FROM HEAVEN’. Bernanke can now create money units (Ex nihilo) to distribute to any of his banking friends and associates. What a CHANGE from our historical money units and from the principles of CAPITALISM. Bernanke is now equal to historical Capitalism, Money, Monetary Policy, the Source of VALUE, the Measure of VALUE, and Giver of Solvency (to his favorite banking buddies).

4. Why does this One unelected person…who meets mostly in SECRET with his banking buddies (the FOMC committee and via phone with Tim Geithner, et al) get to CONTROL and manipulate the entire global marketplace?   Are you aware that this One unelected person created some $1.5 trillion of monetary digits (still called dollars) via his QE1 policy (2008-2010) to bail-out his banking buddies. Then he followed this up with what we call QE2 (2010-2011) which resulted in another $600 billion of new money digits (dollars in the computer screen) to manipulate economic activity and the greater marketplace. All this manipulation is being done with basically ONE unelected person who operates with minimal transparency or Congressional oversight. Is this Capitalism that we can believe in?

Money today is no longer a THING from nature (like copper, silver, or gold) and it also has NO objective VALUE. How can a unit (still called the ‘dollar’) created from the CONSCIOUSNESS (mind) of Bernanke, et al, be viewed as SOUND money? How can a unit derived from the private THINKING of this ONE unelected person (and his ‘group think’ committee) be viewed as a SOUND system for establishing PRICE stability and EMPLOYMENT growth…going forward? Can ONE unelected person at the Fed Building in Washington (in conjunction with his ‘group think’ committee) or the Fed Building in New York where the HFT (high frequency) computers are located determine the stability of PRICES, VALUES, and economic GROWTH for our entire economy? How can we discern the MIND of Bernanke and his plans, goals, and future money manipulations? Can anyone DISCERN the CONSCIOUSNESS (the inner thinking) of this ONE unelected person? Is QE3 coming? When? How Much? Who get’s the units (still called dollars)? Why do certain TBTF institutions get funds for ZERO interest rates and others get foreclosure notices?

5. Why is our current non-SYSTEM inherently immoral, unfair, corrupt, and bankrupt? It doesn’t take a genius in economics or monetary history to recognize that our current non-SYSTEM is destined for collapse. Since the emergence of a non-thing as our monetary unit (1971 and thereafter), we have created tremendous wealth along with tremendous DEBT and DEFICITS. The favorable aspects of a ONE person monetary system (Greenspan from 1987 to 2005) and (Bernanke from 2005 to today), is that ‘money’ could be created Ad infinitum and Ex nihilo. This process allowed unlimited borrowing and refinancing and this led to credit INFLATION and the BUBBLE economy. All this seemed good and proper until the CRASH of 2008. The benefits of fiat money units (credit cards, bank credit, and inflation) helped us create unbelievable new WEALTH (goods and services). The problem, however, is that this non-SYSTEM eventually leads to an IMPOSSIBLE debt issue which defies logic and repayment. We are NOW at that point in our economic history.

We now must understand this history and the issues which have emerged. The key concept going forward is understanding the issue and concept of CONSCIOUSNESS. Another word for this concept is the human MIND. Today, we experience a new money system which is not based on material reality. Our money is created Ex nihilo. The units we use for our measure of VALUE (digits in the computer screen) are virtual and imaginary. The process of money digit creation (monetary policy) is mostly a SECRET (non transparent) process. This process and non-System leads to value distortions, derivative instruments to manage uncertain risk, unsustainable debt for public and private enterprises, price volatility, flash crashes, algorithm manipulations of prices via HFT computers, moral hazards for governmental entities, corruption in our financial and political institutions of power, and a need to save the non-System via more hierarchical institutions (a ONE WORLD Monetary System).

Let’s conclude with these remarks:  history demonstrates that any type of money system must be based on some THING perceived as having intrinsic value (silver and/or gold are the best historical examples). Money that is created Ex nihilo by a few Central Bankers is not a SOUND or MORAL system going forward. We must now either eliminate all money from the face of this planet or restructure our system via NEW MONEY (based on gold and silver). These are our ONLY solutions going forward. The concept for 2012 and beyond is:  NEW MONEY OR NONE! Enjoy and pass this missive on to our leaders. http://kingdomecon.wordpress.com

P.S. If you desire to understand CONSCIOUSNESS see this website: http://closertotruth.com

After attending one of my favorite money conferences, I would like to summarize some of the views which seemed most relevant and which made an impact upon me as an attendee. The following speakers seemed most impressive and knowledgable on the issues that they presented:

1. Danielle Park, www.jugglingdynamite.com:  This lady seemed exceptionally knowledgeable and current on all the financial issues and current trends. Danielle’s viewpoint can be summarized as follows:  She see’s no inflationary pressures evident in the world economy and, therefore, she is bearish on commodities and most stocks. She stated that the next downturn could be significant. The velocity of money flows suggests that money is not going into growth but is sitting in holding patterns in banks and corporations. Practically all Hedge Funds lost money in 2011. The world markets are highly leveraged again and this is a dangerous signal. The secular bear market will continue for another 5-7 years. CASH is king and the worship of cash will continue for some time. Danielle is not interested in investing in either silver or gold. She likes CASH and preservation of one’s purchasing power in these markets. Comment:  this lady was one of the best at the conference. Her weakness, in my view, is that she seems unaware of our collapsing ‘fiat’ currencies…and the real role of gold and silver when ‘fiat’ currencies are collapsing all around us. Presumably, she thinks that our ‘dollar’ is a thing of value and can be salvaged from extinction. I would disagree on this viewpoint.

2. Gordon Chang, www.gordonchang.com:  Gordon thinks that China is faltering badly. Factories are closing, electricity consumption is declining, workers are protesting, container ships indicate downturn, and $ reserves are now starting to decline. The past 35 years of uninterrupted growth is now over…and the wheels are coming off this engine of growth. Going forward, urbanization will slow down and this will affect growth to the negative. Currently, there are many ‘ghost’ cities that have sprung up with no occupancy. Real estate values are starting their decline. Total debt to GDP is now over 800%. China’s leaders will attempt to ‘kick the can down the road’ for the time being. Comment:  Mr. Chang was quite impressive with his knowledge and understanding of the issues. His counterpart was Frank Holmes, www.usfunds.com. Frank viewed the situation in China as positive with growth continuing. Personally, I did not find his presentation as convincing as that of Gordon Chang. Each of you will need to decide for yourself which view is most realistic.

3. James Turk, www.goldmoney.com:  Mr. Turk is the foremost expert on the history of money and the role of gold in our economy. James thinks that hyper-inflation is coming down the road. This leads him to forecast an eventual price for gold of $8000 or more. He sees mining companies as a good option now…as costs are down relative to revenues which can be realized (given the price of gold at $1600 and growing). A Bull Market on most mining stocks in 2012 will create great profit opportunities. Silver could likely outperform gold in 2012 as the historical silver/gold ratio is 16:1 and this ratio is currently out-of-line at its current ratio of 50:1. This ratio is likely to be closer to 30:1 by the end of 2012. Gold is money as it was chosen by the people some 5000 years ago as money. Comment:  James has a great understanding of money and precious metals history. His view that hyper-inflation is coming down the road is unlikely, however. What is now happening is deflation and value destruction on a massive scale worldwide. This deleveraging and value destruction can not be reversed given that investors and consumers are not borrowing as in prior periods. Massive credit expansion creates hyper-inflation and this is not occurring given our digital money markets today. You can bring a horse to water but you can not make the horse drink. Without new borrowing and credit expansion, deflation and value destruction will happen…its a ‘snowball from hell’ once it gets moving! What we are likely to see in the future are more bankruptcies, foreclosures, and insolvencies on a growing scale. This trend is unlikely to lead to hyper-inflation as Mr. Turk assumes!

4. Jay Taylor, www.jaytaylormedia.com:  Mr. Taylor is an Austrian economist and investment advisor. Jay is very knowledgeable on the history of banking, the Fed, and general economic issues. Jay thinks that the Fed was created to help the ruling elite control the money markets and future political trends. Jay now thinks that the Fed and the 2900 banks under the direction of the Fed have created DEBT that can not be repaid. He stated that Bernanke has recently created $2 trillion just to bail-out the European banks…and this process is likely to continue until the system collapses. Jay envisions a major credit contraction coming with DEFLATION as a consequence. He concludes that the Bretton Woods System created after WWII is now totally broken. He does not think that the European debt and deficit situation can be solved. All these events, he thinks, is positive for gold and gold shares. His top gold pick for 2012 is a company called Sandstorm Gold. Comment:  Jay Taylor was one of the most informed economists at the conference and his judgment does not differ much from mine. My view is that a Deflationary/Depression is coming and this will be evident before 2012 ends.

In conclusion, the Vancouver Resource Conference, www.CambridgeHouse.com, was excellent and very informative. Personally, I would suggest that our economic situation is dire going forward. The problem is our digital money unit, debt, deficits, foreclosures, bankruptcies, insolvencies, centralized monetary creation by our Fed and other Central Banks, and an economic model (Keynesianism) which is broken. Going forward, we need to be thinking about a new economic MODEL/SYSTEM which promotes individual freedom and choice over CENTRALIZED administration. This reality, however, is unlikely until our current non-System totally collapses. At that point, the people will desire meaningful CHANGE. As of today, the best that can be expected is MORE OF THE SAME.

Stay current by keeping this website as one of your favorites:  http://kingdomecon.wordpress.com. Enjoy

P.S. Ben Bernanke’s news conference today, 01/25/12, suggests that everyone should give gold and silver a new ‘look’ for the coming months. Ben appears ready to create more QE $ later this year as conditions worsen. This policy, however, will not create any hyper-inflation…but it will be good for those invested in gold and silver. Ben seems totally unaware of what is happening in the greater marketplace and if he is deceived about these markets, then most must also be deceived. Ask Ben this question:  Where does he get his QE $ from? What is ‘thin air’, Ben?

We all assume that conditions now in practice (within our marketplace) will continue forever…but is this a good assumption given today’s volatile markets? As of this writing, many countries are starting bilateral currency exchanges to avoid the American ‘dollar’. Also, many countries now are so loaded up with ‘dollar’ debt (China, Japan, Britain) that they are desiring to decrease their current holdings. Currently, our ‘dollar’ is the reserve currency for all world trade and is accepted by almost all nations as legal tender. Will this legal status continue for our ‘dollar’ going forward…indefinitely? Let’s think about what could happen in the near future as nations seek ways to avoid the ‘dollar’ and ‘dollar’ accumulations.

This situation is now happening with trade for the nation of Iran as of January, 2012: http://youtu.be/6u7KnXyrKmQ

Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow. The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said. Iran has replaced the dollar in its oil trade with India, China and Japan, Fars reported.

The BRIC nations have also expressed a desire to reduce the role of the ‘dollar’ via bilateral trades and eventually as a settlement mechanism: 

April 14, 2011  BRICS Desires To Replace the Dollar as World Currency

These news items demonstrate that our ‘dollar’ which has served as the global reserve unit since the Bretton Woods Agreement of 1944, could be on its LAST legs. Let’s assume that the global marketplace (most of the major emerging trading nations) desire to replace our ‘dollar’ with either a barter situation or a combination of barter and their local currencies (as Iran is now doing). How could this affect ‘prices’ of commodities like oil, copper, wheat, corn, silver, gold, etc.? What if our current ‘dollar’ is also rejected by the American people…and declared no longer ‘legal tender’? How would this affect ‘prices’ (say of oil or gold)?

Most pundits ASSUME that everything will remain the same…forever. But is this a wise and valid assumption going forward? There are many forces now wanting to CHANGE our monetary system. There is currently a bill circulating in our Congress called the NEED ACT. This act is being proposed by Congressman Kucinich of Ohio and his description of this act and its implications can be viewed here:  http://youtu.be/BYGuactD1-U. Basically, this ACT (if passed by our Congress) would eliminate the Fed and create a new fiat ‘dollar’ which would be created by Treasury personnel (say Geithner, et al). To accomplish this goal, it is likely that our current ‘dollar’ would need to be legally abolished and a new Kucinich dollar would emerge (as our official unit).

We also have Congressman, Ron Paul, who desires to abandon our current ‘dollar’ and return to some type of GOLD STANDARD. This goal would also require that our current ‘dollar’ be changed, abolished, or declared non-legal. What would these types of proposals do to ‘prices’ of goods and services in our economy? Keep in mind that all goods and services are ‘priced’ in a legal tender unit that is officially declared the ‘coin of the realm’. So if our current ‘dollar’ were no longer ‘legal tender’ (for all debts public and private), then we could have a major problem in our marketplace…instantaneously and immediately! Let’s think about this situation as a thought experiment!

What would be the ‘price’ of an ounce of GOLD without our current legal tender ‘dollar’ being officially valid? What would be the ‘price’ of a barrel of OIL without our current legal tender ‘dollar’? What would be the ‘price’ of your HOUSE, CAR, LAND, and FURNITURE…given this scenario? Do you sense that we could be back to a BARTER mentality with ONE official decision…a declaration that our current ‘dollar’ is no longer ‘legal tender’? Every item that you now observe around you could have NO ‘price’ (in current dollars). Gold would immediately go to ZERO (in current dollars). All other goods and services would also go to ZERO. Why is this so!

To understand money we must recognize that money starts out as IMAGINARY (a concept of one’s mind). The names, numbers, and symbols (say $1.00) that we use to denote ‘prices’ in the marketplace are really ‘imaginary’ units (derived from our individual consciousness). Why do you think that Ron Paul and many others accuse our Fed Chairman, Ben Shalom Bernanke, of creating MONEY…’out of thin air’? What is ‘thin air’…in reality? Another word for ‘thin air’ might be NOTHING (no thing)! In other words, our DOLLAR (which we use to ‘price’ all our goods and services) is really NOTHING (an imaginary unit, totally subjective, or a unit derived from one’s consciousness). What does this MEAN for ‘prices’? What does this mean for asset VALUES?

To understand money and prices we need to understand what has happened to our historical MONEY. Back in our Colonial days (prior to 1776) and up until 1971, our ‘money units’ were a ‘name’ for a real physical THING (silver, gold, copper, some base metal, or paper). The ‘name’ dollar described some THING outside my/your mind. Today, our current ‘dollar’ is NOTHING (no thing within spacetime). Our ‘dollar’ is now derived mostly from the MIND and CONSCIOUSNESS of Ben Shalom Bernanke and his FOMC committee. These policymakers ‘create’ units of dollars (now just digits in the computer) as our MONEY. Where do these ‘units’ derive from (some 95% of money transactions are now digital)? What are these ‘units’…in reality?

Ben Bernanke (USA), Mervyn King (England), Mario Draghi (Eurozone) and other central bankers now just ‘create’ units (called currencies or money) via their HFT (high frequency trading) COMPUTERS. How is this done? Ben Bernanke, today, can just  THINK up a number (say the recent $600 billion QE number) and then order the manager at the trading DESK (at the NY Federal Reserve Bank) to credit the SOMA (system open market account) with $600,000,000,000 of units (digits in the computer…which we call ’dollars’). What a neat trick for creating ‘money’…out of what Ron Paul calls…’thin air’! Is this a SHELL GAME or not? Is this equivalent of ‘money from heaven’?

Bernanke can now create digits in his computer screen (his SOMA checking account) and then distribute these units (called cash or dollars) to whomever he needs to bail-out. Money appears from ‘heaven’ for Bernanke and his friends. What a great system for those with connections and special financial needs within the connected establishment. This same process is used by Mervyn King at the Bank of England and could be used by Mario Draghi and all the other Central Bankers on this planet. Does this system and process sound Constitutional or American? Would our founding Fathers of money, Thomas Jefferson and Alexander Hamilton, bless this system and process?

What we experience today in the monetary arena are fictitious and imaginary manipulations of our economy and all the ’prices’ within our global economy. This has all evolved over the years since the closing of the ‘gold window’ in 1971. This event on August 15, 1971 (called the Nixon Shock) allowed this entire current system and process to emerge. When President Nixon removed all ties of our ‘dollar to a physical commodity and also disallowed any convertibility of our dollar into gold, this decision set in motion the system and process which we now experience. Historically, money units have always been some THING which existed in spacetime. Spacetime is usually viewed as ‘outside’ one’s MIND or consciousness.

Today, however, we do not have a physical unit for our money. Most of our financial transactions today are via the digital units which we experience within our computer screens. Virtual reality has replaced spacetime reality when it comes to our money (less than 4% of money transactions are now done with paper or metal coins). The best method for visualizing this reality (spacetime reality) is to observe our planet and people from the perspective of ‘outer space’ (say an earth satellite view). This you can do by clicking on this link: http://3planeta.com/subject/maps.html. You can observe live images of: Central Park in New York, the Giza Pyramids, or even your personal house.  All these images should be viewed as ‘outside’ one’s MIND. Virtual reality, in contrast, can be experienced by looking at the computer screen directly in front of your nose at this moment. There is a distinct difference! Virtual reality is really an extension of the human MIND; whereas, spacetime reality is ‘outside’ one’s mind (as are gold, oil, silver, wheat, corn, lumber, gas, land, buildings, trees, etc.).

In conclusion, ‘prices’ today are mostly meaningless and imaginary. The reason for this fact is our money unit (our current dollar). This type of unit creates distortions in value, volatility in prices, manipulation of our economy by a select elite, and the coming financial flash crash that is likely sometime in 2012. Keep in mind that a commodity like gold can have a ZERO ‘price’ in fiat currencies and yet substantial ‘value’ as a trading or exchange unit. This is now starting to happen as the American ‘dollar’ is being rejected by many Nations as a settlement unit.

 Who will recognize the reality of this missive? The only presidential candidate that seems to have a comprehensive understanding of money and money manipulation is Ron Paul, Congressman from Texas. All the other candidates (Romney, Gingrich, Obama, and Santorum) seem unaware of what is now happening within our global monetary system. Will they become AWARE prior to election date 2012? Given the nature of the internet, I would think that they will. If you desire, you have my permission to pass this missive on to any one of them. Enjoy…and keep watching the digital markets for serious change in 2012 and beyond!    http://kingdomecon.wordpress.com.

P.S. Update on currency swap agreement by China: 

China signs currency swap deal with UAE

(China Economic Net)

08:54, January 19, 2012

Today we have a currency unit called the ‘dollar’ which is our legal tender for all debts (public and private). This unit has evolved over the years since its founding in 1785. After the collapse of the Continental, which was our Nation’s first experiment with public money, two key Americans were instrumental in choosing our ‘money unit’ (also called currency unit) for our Nation. Thomas Jefferson was the key person who chose the name ‘dollar’ for our money unit. He was also instrumental in choosing the subsidiary coinage (half-dollar, quarter, dime, nickel, and penny) which we adopted in the Coinage Act of 1792. The other founding Father which helped with these issues was our first Secretary of Treasury, Alexander Hamilton.

Both of the above founders, along with select members of our Congress, chose the ‘names’ for our currency units as well as the definitions for the various units. Jefferson understood that a sound money unit was essential for our Country and for sound growth within our Capitalistic economy. Jefferson and Hamilton were both in support of the Coinage Act of 1792 which established our money units. Since the founding of our ‘dollar’ in 1792, the following changes have occurred. Each of these changes has created a new meaning for our ‘dollar’ and for our economy. Following is a brief overview of this evolution in the meaning of our ‘dollar’:

1. Dollar #1:  the  ’name’ dollar was chosen and approved by our Continental Congress in 1785. This ‘name’ had no definition (it was totally a fiat unit with no reality).

2. Dollar #2:  the name ‘dollar’ was defined in 1792 as $1.00=371.25 grains of silver (this definition was derived from assaying the Spanish silver dollar in the Colonial marketplace). Indirectly, our ‘dollar’ was also viewed as 24.75 grains of gold. This was derived from the 15:1 ratio between silver and gold in the marketplace. Our ‘dollar’ now had a specific  meaning as a commodity currency with silver/gold as its backing.

3. Dollar #3:  a new meaning emerged in 1834 as the silver/gold ratio had changed to 16:1 in the marketplace. Congress then redefined our ‘dollar’ as 23.20 grains of gold (the definition in terms of silver was dropped).

4. Dollar #4:  another new meaning emerged in 1934 during the FDR administration. Our ‘dollar’ was further changed to 13.71 grains of gold. This new definition created a value for 1 ounce of gold as $35.00. This definition remained as the official definition of our ‘dollar’ until Nixon closed the gold window on August 15, 1971.

5. Dollar #5:  a new calculation was derived in 1973 for our ‘dollar’ at 12.63 grains of gold. This new definition was meaningless as no convertibility was allowed in the marketplace. This new calculation was made to reflect the higher price of $38/ounce for gold in the marketplace.

6. Dollar #6:  another new calculation emerged in 1974 as the price of gold reached a new level in the marketplace ($43/ounce). This new calculation for our ‘dollar’ was 11.37 grains of gold. This definition was also meaningless as no convertibility was allowed in the marketplace. Shortly after this event, gold in the marketplace reached $850/ounce (1980) as fear emerged that our ‘dollar’ was worthless. Once again, the meaning of our ‘dollar’ changed!

7. Dollar #7:  with the abandonment of any backing or convertibility for our ‘dollar’, our Congress approved a new fiat ‘dollar’ for our Nation and the World in 1975. This ‘dollar’ led to the creation of our ‘index dollar’ (a number calculated as a weighted average of some six unique world currencies). This ‘index dollar’ has been viewed as a paper unit as most units were printed until the emergence of the computer. This ‘dollar’ has also been viewed as a fiat currency with no backing or intrinsic value. Some called this new currency regime which emerged in 1975 the ‘Floating Currency System’. Once again, the meaning of our ‘dollar’ changed!

8. Dollar #8:  with the emergence of computer technology in the 1980′s and 1990′s, a new ‘dollar’ evolved. This new ‘dollar’ was the ‘digital dollar’ which became the talk of the marketplace after the CRASH of 2008. This ‘dollar’ allowed our Federal Reserve Bank to create new units (dollars) with the click of a computer mouse. Most of us have watched as our Fed Chairman has created $trillions (some say as much as $16 trillion) of new units (now digits in the computer screen) as our money. The QE policies of Ben Shalom Bernanke have become a major issue of conversation in the marketplace and among economic pundits. Ron Paul has popularized the policies of the Fed and their creation of units (called dollars)…’out of nothing’! Is this a viable process going forward? What meaning does this convey to the world?

The above evolution of our ‘dollar’ shows the changes in meaning that has occurred since our dollar was founded in 1785. We now have a VIRTUAL dollar as 95% of all money transactions are done via our new computer dollar. We witness this new dollar as we watch our computer screens from day-to-day. All our stock and money markets are now digital markets. Electronic money has emerged and this has changed the meaning of our dollar and the concept of money. The volatility, price fluctuations, flash crashes, and world exchange problems are directly related to our new digital money and the administration of this money unit.

The consequences of these changes has led to a new global marketplace where prices change from moment to moment. Stability in prices is now impossible as our Central Banks manipulate the markets with their QE and monetary policies via their HFT computers. Our new ‘dollar’ is now mostly VIRTUAL (95% of transactions are now electronic) and this means that most financial assets are also now mostly VIRTUAL assets. Even our Treasury securities are now traded as virtual instruments via Treasury Direct:  www.treasurydirect.gov. Practically, all stocks and similar instruments for trading are now VIRTUAL concepts. We now live with a new virtual ‘dollar’ and mostly virtual financial instruments. Is this Capitalism?

Finally, is our current virtual ‘dollar’ actually Constitutional. Does a VIRTUAL dollar qualify as legal tender in a strict legal sense? Is our Congress aware of the above changes to our money units and the implications of this change? The implications of a money unit that is created by a centralized group of policymakers (our FOMC) and manipulated via HFT computers does change the fundamentals of Capitalism. Can a centralized body of policymakers really stabilize prices and create confidence with their QE and similar policies. The next few years should be instructive for all of us.

Anyway, we all need to understand what is now happening with our monetary system. Should a small group of elite bankers have the power and control over our entire ‘free market economic system’? Can the current debt and deficit situation be resolved with this type of system? My personal view is negative. The model that we now follow is not viable for the longer term. In fact, I don’t think this system can last for another decade. Our problem today is our ‘dollar’ and the administration of this unit. We now have a centralized group of elite bankers who essentially run our economy. Is this the type of Capitalism that Americans want for our future? The election of 2012 should bring all these factors to the attention of all Americans. What type of change to Americans really desire?

Our future is either the Obama type future based on the European model of government (collectivism) or a future model which puts the individual prior to the group (freedom). Freedom, in my view, must win this battle! Enjoy and give the above evolution of our ‘dollar’ some thought:  http://kingdomecon.wordpress.com.

The entire model for Central Banking has changed and few understand what has happened in recent years. The old system of paper currencies and metal coins is rapidly being replaced with digital units. Virtual reality is replacing empirical reality and few seem to understand the implications of this change. This video might help you understand what is happening:  http://www.ecb.europa.eu (click on educational, then videos).   Monetary policy is now controlled via digital injections (called liquidity injections). The platform used for most operations and transmissions are webs of high frequency computers…all controlled by just a few centralized policymakers. This operation over in Europe is very similar to the operation of our Federal Reserve here in the United States. It’s suppose to stabilize ‘prices’ in the marketplace but it does just the opposite.

The current digital model is a Top/Down system with a governing council (similar to our FOMC) at the controls. The lead policymaker in Europe is Mario Draghi, President of the ECB.  This policymaker acts and makes his decisions using a ‘group think’ board similar to what Bernanke uses in the U.S.A.  The system seems so logical and modern on the surface but for those of us who understand the history of money…we can discern the fallacies and shell games which are built into this system. The digits, now used for money, are really ‘virtual units’ created from the MIND’s of the key policymakers. The concept of ‘money’ today derives totally from one’s consciousness (a non-material and non-physical source). What happens as these imaginary units enter the marketplace?

These units are distributed via an electronic transmission system at near the speed of light…from computer to computer. The above video tends to lead the viewer into thinking that ‘money units’ are still mostly paper and coins…yet a discerning viewer will see through this shell game. Money units today are IMAGINARY units which display as numbers in our computer screens. Who can discern the difference between ‘virtual reality’ and ‘spacetime reality’? I would suggest that the majority of professionals today can not discern the difference.

The history of money and Capitalism, however, is based on physical units for a medium of exchange and standard of value. The above video does mention gold and the gold standard but it concludes (falsely) that money is merely a tool for ‘price’ and purchase transactions. In reality, money is supposed to be a tool for the ‘valuation’ of an asset or product. When we exchange a good or product (say our personal house) the issue (in our mind) is ‘what is the fair value’ for this good or product. If the money unit is ‘nothing’, ‘imaginary’, and a virtual ‘digit’…how can this unit be viewed as a ‘standard of value’ or a ‘store of value’? Do real Capitalist’s want to ‘store’ an imaginary digit as their ‘value’…especially when this unit is created and manipulated by a policymaker with a HFT computer to influence ‘prices’ in the marketplace (like a Central banker)?

Let’s think about the real role and purpose for money. Our founding Fathers and our Constitution spell out the role for money in Article I, Section 8. Congress is supposed to coin money and regulate the ‘value’ thereof. To regulate ‘value’ our DOLLAR needs some substance to it. Our DOLLAR needs a ‘definition’. What is a ‘name’ like DOLLAR with no ‘definition’? What is a ‘symbol’ and ‘number’ ($1) with no definition? I would suggest that a ‘name’ and a ‘number’ as our money creates a MONETARY dictatorship. Whoever, has the AUTHORITY to create this ‘name’ and ‘number’ becomes the SOURCE of ‘value’.

Today, the SOURCE of ‘value’ is Ben Shalom Bernanke in the United States of America and Mario Draghi in Europe. These two individuals do use their AUTHORITY to ‘create’, ‘manipulate’, ‘influence’, and impose their personal economic agenda on the entire marketplace. They can do this because our ‘money’ today is ‘NOTHING’ (no thing). They can create units from their MIND or CONSCIOUSNESS and click their thinking into action via a HFT computer. Is this Capitalism? Is this Constitutional? Does this create market Confidence? Does this manipulation create stable Prices? I don’t think so…nor do I think that this system will create stability, prosperity, or confidence.

Take the time to watch this video again:  www.bankofengland.co.uk/education/inflation/qe/video.htm. This video demonstrates how digital units (called pounds) are used by the key policymaker in England, Mervyn King, to manipulate and influence ‘prices’ in his marketplace. Is this real Capitalism or is this just monetary dictatorship over the market process? Where does Mervyn ‘get’ these digital units from? Do any of these ‘units’ contain any real ‘value’…which can be stored or saved as ‘surplus productivity’…the real purpose for saving? Do units derived from the MIND or CONSCIOUSNESS of Mervyn (say his recent 75 billion QE program) and entering the market secretly by stealth create CONFIDENCE…once a person understands this manipulation?

Money is supposed to be the ‘lifeblood’ of Capitalism. How can non-material/non-physical ‘money’ serve as the ‘lifeblood’ of a Capitalistic System? Did our American founding Fathers desire a DICTATORSHIP over the market process and the distribution system…as we now experience with DIGITAL money? What happens to this type of ‘money’ if a Bank Holiday is necessary? What happens if the computer system shuts down? What happens if these digital units are given just to the 1% who control all of Wall Street? Is any of this the type of Capitalism which the common man can support?

I think it is time for all the American and European people to WAKE UP and smell the ‘smoke’ and ‘corruption’ now occurring within the ‘halls of politics and economics. Read some history on the role of money in a Capitalistic economic system. Read some history about the power of money to influence leaders in high positions of POWER. Ask yourself if the Fed is really an institution that you want to support. And then question your 2012 presidential candidates on their understanding of what is now happening. Who really understands ‘money’ , our Constitution, and Capitalism? Does Mitt Romney understand money and economics? What about Rick Perry, Newt Gingrich, or Rick Santorum?

Personally, I would suggest that none of the above understands how our non-System works. None even seems to desire to understand. Why is this so? The only person with some common sense on these issues is the Congressman from Texas, Ron Paul. This person, however, is shunned by the establishment media, most Americans, and even those who understand our monetary history. Anyway, now may be a good time to learn why our current SYSTEM is corrupt and collapsing. Check out these website to learn more about these issues:  www.kingworldnews.com, http://thecomingdepression.blogspot.com, www.thecomingdepression.net. Enjoy and keep this website on your favorite list: http://kingdomecon.wordpress.com.