This is the second part of Keith’s lecture on irredeemable currency. Enjoy!
Keith Weiner on Irredeemable Currency, Part 217 comments to Keith Weiner on Irredeemable Currency, Part 2 |
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Hi Dailycapitalist,
Thanks, on a related note, Many people are showing interest of investing their money in currency trading. However, the fact remains that the foreign currency exchange market is no place for beginners.
All the Best
I would say that many of our readers are not beginners, but rather traders and other financial professionals.
Just a reminder… This video is the second half of the first lecture. Video of the second lecture is coming soon.
Let us all give grace to those who fell in battle, so that our cherished liberties and independence be the air we breath.
God’s glory upon them; God’s wisdom and light shine upon America for all to behold.
As a freeman standing on my feet, I give thanks to America: and on my knees, I give prayer to my Lord for his wise council and strength.
May this land always be the beacon of light, for truth, justice and liberties.
God Bless America!
many of our readers are not beginners, but rather traders and other financial professionals
This may well be true, but I’d rate myself as a beginner. Nevertheless, Keith, you did a masterful job of teaching, laying out concepts in a clear logical manner.
Well done!, from a fellow professor (physiology, not finance)
As a thought experiment, I find myself wondering what would happen if all 100M producers watched this pair of videos?
Bill: thanks for your kind words!
While I have no hope that they will watch this video, I do have hope that they can be reached! :)
I think that Mr. Weiner makes many great points but I’m disappointed by his discussion of inflation. Instead of trying to redefine the term inflation, he should draw a distinction between monetary inflation and price inflation. They are entirely different, although there is a link between the two.
While Mr. Weiner accurately describes monetary inflation, he does not address the specific means by which this creates price inflation. The critical missing point is that the flows of the funds created by monetary inflation determine the levels of price inflation. Since so much of recent monetary inflation is channeled into education, health care, energy, and government programs, this is where we find price inflation. Since so little is channeled into consumer goods, we see very little reflected in the CPI.
Doug: I am working on a paper (or it may turn out to be a series of papers) looking at prices and interest rates. The short answer is that I do not believe it to be a linear relationship between counterfeit credit expansion (call it by whatever word you will) and prices. Or interest rates.
While I am receptive to the argument that the choice of word matters less than a clear expression of the idea behind it, I do not think that clarity is served by having the same word refer to rising prices and expansions of counterfeit credit.
Very interesting. Will there be a print copy available? One with the slides included?
Heather: good point. The slides are not Powerpoint, but made with a tool called Prezi. Here are the slides:
http://prezi.com/q_lstciwu2e6/paper-money-vs-gold-the-problem/
This was an excellent lecture! Some of the financial stuff was over my head, and could’ve done with clearer examples, but I got the gist of most of it.
A few questions that came to mind while watching this:
1. Is the process of permanent gold backwardation that you are positing really a process of the market “relearning” that gold is money? After all, most people do not consider gold to be money, and will not have a desire to dump their cash into it.
2. If the market is relearning the value of gold as money, then could it be possible that the market will first make several mistakes on the way, and initially try to value other things as real money – such as the dollar, wheat, oil, or some other commodity? And if so, then wouldn’t we see an equivalent backwardation in those items first, before a backwardation in gold?
3. If a bank wants to buy short to sell long, in order to cash in on the higher profits, and *if* they clearly stated such in their contract with depositors, then why would duration mismatch be immoral/illegal? What is the moral/legal difference between FRB and duration mismatch, that allows you to say one is alright while the other is not? I would think they would both be perfectly fine so long as it is in the contract. How is it different from a casino that does not anticipate many people hitting the jackpot all at once?
4. Why is it that, in this situation, silver has gone into long-term backwardation before gold, and not the other way around? I am not familiar with silver futures markets, but for how many years into the future might silver go into backwardation before gold starts to do the same thing, permanently?
Brian: Thanks for your thoughtful comments and questions. I am sure that I cannot do them justice here (though I may write at length on some of the topics you introduce), but here is a quick stab:
1. While many people (especially in the West) do not consider gold to be money today, the markets have not lost the idea. I refer to gold’s 80 years of stocks to flows, and its narrow bid-ask spread. It still behaves like money, though most Americans don’t realize it.
2. I think one could look at the build up of bubble after bubble after bubble–the prices of stocks, real estate, crude oil, etc. rise spectacularly and then fall–as an attempt by people to use them instead of paper money as a store of value. For reasons that go outside the scope of an answer on a comment thread, I don’t think one could look at an ordinary commodity as money. Though I see no reason why they couldn’t go into permanent backwardation (they go in and out of backwardation in normal times).
3. The fraud with duration mismatch is when the depositor says “I will lend this to you for a week” and the bank says “great, we will lend it out for a year!” When the depositor comes to withdraw his money after one week, the bank is forced to behave like a ponzi scheme taking money from elsewhere to make good on the first depositor to withdraw. If a second depositor comes to withdraw, the bank is squeezed tighter, and so on, until it goes bankrupt. Fractional reserve is nothing more than the bank lending out some or most of its deposits. As the market maker in lending, this is what it is supposed to do, and the reason why the bank pays interest to its depositors.
4. I am not sure I would say that silver is in permanent backwardation. Long-dated silver futures are backwardated. As are short-dated. There is a group in the middle which are not. There are arguments both ways regarding whether gold or silver goes into backwardation first. The argument for silver is that it is more sensitive and will change sooner. The argument for gold is that gold is the senior monetary metal and the one that everyone will turn to first.
Hi Keith,
Great work here I like your innovative thinking. I’m retired now but I had an undergrad in economics (4.0 in 30 some semester hours). After graduation I ended up in the army and then work dictated a masters in business but I never gave up my love for the subject. I have continued to study the subject and written about economics a lot — I have also developed some ideas that mesh with your work if you are interested let me know. In any case I believe that you are 100% correct.
Hi David,
Thanks and yes I am interested! You can reach me at my last name dot my first name at gmail dot com. :)
Hi Keith — I sent you a couple of samples of my writings last night.
Thanks for the links to the slides. That really helps. Now I’m going to watch the lecture again with the slides up in another window. This is important information…thanks for sharing.
Keith,
This video by Marc Nuttle fits very well with your theory. If you and Nuttle are both right then Armageddon will happen in October. By my calculations (based the Treasury MTS reports) we will exceed the $16.394 trillion debt limit in October 2012 — before the November election and that will force the issue.
http://www.morningstartv.com/featured-video-week/special-webinar-current-economic-upheaval