The bubble games with Tulips, Chameleons, Shares, Houses, or anything

The bubble games with Tulips, Chameleons, Shares, Houses, or anything

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.3xx).

#tulips, #chameleons, #Bitcoins, #cryptocurrency, #gold, #investment, #investment mania,

You have stored your earning surplus for rainy days and now are tempted to use that capital to make more wealth following EASY TRENDS. You may become an easy prey for the bubble games promoters who want to rip you off.

1. Dutch Tulips Mania of 1637

Figure: Tulips (currently at $2 a bulb).

Tulips are beautiful flowers which require skillful cultivation and are perishable.There was an (informal) club of Tulips owners in Holland. Anyone owning a beautiful tulip is automatically its member (You don’t need to grow the flowers yourself, you can buy them from anyone and they are good until they perish!). This informal club flourished then quickly dissolved itself in Holland. The phenomenon is named the Tulips Investment Mania of 1637. The Tulips Mania were mutually promoted by its own participants.

Obviously people have to grow tulip flowers to harvest them and the total number of tulips is limited as their total mass cannot exceed the mass of our plannet Earth!How much are you prepared to pay for a beautiful Dutch tulip now?

There were numerous analogue repeats of the tulips mania in the World and also in Vietnam. They did not use tulips but used instead chameleons, quails, specific types of fish in fish tanks. Those manias all ended up in the same way.

Figure: Any other flowers can also be used to start a mania.

2. A chameleon scam in Vietnam.

This story came from actual printed news reviews in Vietnam published prior to 1960. I have red it myself and quite enjoyed it.

A group of traveling Chinese merchants came downstream on a boat from Cambodia along the Mekong river toward Saigon area asking for available chameleons (Chinese traders have traveled along rivers on boats since ancient time). They bought all available chameleons at 5 cent per animal. The merchants also sold medicinal wine made of chameleons and herbs pickled in wine. This appeared like a genuine traditional oriental herbal medicinal wine. The merchants then returned to Cambodia saying that they would come back the following lunar month (River navigation relies on water level which depends on the phase of the Moon).

After one lunar month, the group of traveling Chinese merchants on boat came back, again asking for available chameleons.This time the group bought all available chameleons at even higher price of 10 cent per animal as there were then fewer animals. The merchants still sold the same medicinal wine of chameleons pickled in wine but at higher price. The merchants then returned to Cambodia again saying that they would return the following lunar month.

So it seemed that chameleons pickled in wine formed some sort of medicinal wine. People in Saigon then thought that chameleons would be bought for 10 cents per animal in Cambodia for making chameleons pickled in wine.

Two weeks later, some two boats carrying merchants came from the Eastern Sea towards Saigon along the Mekong river. The boats asked for the direction to go to Cambodia. The boats were full of chameleons. The local people of Saigon asked what the merchants buy and sell. They said they wanted to go to Cambodia to sell chameleons at 2 cents per animal. The smart local Vietmamese of Saigon confered among themselves then told the merchants they did not have to go far, they could instead sell all their chameleons at Saigon for the same price. The merchants were happy with the deal, sold all chameleons and return to Eastern Sea saying that they would come back the following year.

The smart local Vietnamese then waited for the arrival of the buyers from Cambodia to sell them the chameleons making a profit of 8 cents (=10 cents – 2 cents) per animal.

The boats from Cambodia never came back. The smart Vietnamese were not so smart after all.

Chameleons had little value and the smart Vietnamese had fallen for an elaborate scam. It was sad for them that all Chinese merchants from both directions were from the same group. This was a scam as there were organizers plotting the elaborate script.

3. Other manias and scams or “bubbles games”.

Beside chameleons, tulips, anything else can also be traded multiple times creating a bubble game that is either a trading mania or an outright scam. Examples are: Tulips bubble (1630), shares in the (British) South Sea Company (1720), Japanese Real Estate (1980), shares in dot.com companies (1999), American Real Estate (2006). Curently there is a “cryptocurrency” mania.

The main points of any bubble game are:

a/- The items must not be freely available like free air or tree leaves.

b/- There must seem to be a demand (essential or non-essential) for them.

c/- The trading relies on unsustainable activities, sometimes the trading must grow like in a Ponzi’s scheme.

d/- There seems to be no immediate plan by the authority to take their share of the quick profits via special taxes, special duties, registration fees,…

The players in scams and mania are herded by their own an inherent greed of making easy, quick profits at the expense of others. They think that they are quicker and smarter than others and can time the bursting of the bubble.

The steps for bubble games promoters (scammers) are:

a/- Obtain bubble trading objects at dirt cheap prices.

b/- Resell them all when most people have been involved or at some (coordinated?) price to change the possession of dirt cheap objects into assets of real value.

c/- Never sell real essential assets to acquire bubble trading objects.

d/- Have a plan of how to use the real asset when the bubble is about to burst (To avoid the temptation of making the last turn-around before the bubble bursts).

Currently, there are bubbles of shares, real estates. and cryptocurrencies. They are said to be in bubble state when their price far exceed any incomes they can produce. In practice almost anything can be sent into bubble state.

4. Gold can also be overpriced

Figures: 1 ounce gold slab.

Gold is a compact commodity. It can be swapped for any other commodity when there is a need.

There is always a demand for gold everywhere and the supply cost is almost constant in human history. So gold can be bought as a form of compact property and sold when required.

Gold can also be over priced as a bubble if its price far exceed the physical effort to mine it from nature. In 1975 gold price soared to USD 200/oz (after American were allowed to keep raw gold) and declined afterwards. For the last 50 years gold price has been reasonable.

5. Conclusion

Any type of assets can be sent into a bubble state. A buyer has to determine the income generated by an asset to determine its reasonable price and whether he is buying into a bubble which may burst right after his purchase.

References

[1]. https://en.m.wikipedia.org/wiki/Tulip_mania

[2]. https://survivaltricks.wordpress.com/2017/04/28/gold-for-storing-wealth/

[3]. https://www.brrcc.org/gold-price-1929/

[4]. https://en.m.wikipedia.org/wiki/Dot-com_bubble

[5]. https://en.m.wikipedia.org/wiki/Bitcoin

[6]. https://irishinfosecnews.wordpress.com/2018/02/05/the-new-gold-rush-a-look-inside-cryptocurrency-fraud/

[7]. http://riggedgame.blog/2018/02/06/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-us-economy/

[8]. https://wolfstreet.com/2018/02/05/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-economy/

[9]. https://venitism.wordpress.com/2018/02/08/cryptocurrency-2018/

[10]. https://wolfstreet.com/2018/02/18/blockchain-stocks-completely-disintegrate/

[11]. https://www.cnbc.com/2018/02/23/secretive-chinese-bitcoin-mining-company-may-have-made-as-much-money-as-nvidia-last-year.html

[12]. https://centinel2012.com/2018/04/17/the-bubble-of-1825-was-also-a-contagion/

[13]. https://business.financialpost.com/investing/investing-pro/nothing-can-save-venezuela-from-its-economic-fate-not-even-a-cryptocurrency

[14]. http://lawrieongold.com/2018/11/30/how-the-bitcoin-bubble-burst-could-lead-to-a-new-golden-era/

[15]. https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2783212/The-20-biggest-trading-disasters.html

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CPI can be manipulated to leave out individual Inflation components

CPI can be manipulated to leave out individual Inflation components

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.3xx).

#CPI, #inflation, #fiat money, #taxation by stealth, #indexation, #cost of living

Figure 1: Fiat money are paid to government employees. All citizens have to pay their taxes with that fiat money.

Inflation is vicious to the citizens who have to accept fiat currency from their ruling government. It is half terrible as having to use money with some use-by dates. Only governments like inflation. Inflation is often associated with the rise in CPI but the association may not be true.

1. Inflation.

It is convenient to begin the discussion with my previous posting entitled Your Fiat Money, part 2 (reference [1]).

Inflation is the steady loss of exchange value of a fiat money with time. Inflation of fiat money is caused by loss of its (government dictated) demands. When the government stop demanding payments of taxes, government fees, government charges with its fiat money the fiat money loses its value in the population. Real money like gold has no inflation.

For example, a load of bread is sold for 1 unit of fiat money. Ten years later it may be sold for 2 units of that fiat money, and twenty years later it may be sold for 4 units of that fiat money.

We say that there is an inflation. The fiat money steadily loses a percentage of its value every year. In this example it loses 7% every year. This 7% is found out from

(1+x)^(10)=2, x=0.07177= 7.1%

Inflation can only be estimated when looking backward. Even then it cannot be accurately determined as the past goods and the present goods can never be truly compared. Nevertherless people try to assign a figure on inflation based on the purchase prices using fiat money as if that fiat money has been compared against a hypothetical real money (made of gold, silver, food grains…).

2. Measurements of past inflation

Past price rises for each type of goods are easy to obtain and tabulate but overall price rises due to the loss of purchasing power of a fiat money is not easy to estimate as relative prices of different types of goods drift over time and their various price rises spread over a wide range. Fast rises and slow rises can be attributed to a variety of causes. It is hard to pinpoint how much of each rise is due to inflation alone and how much is due to other causes.

Past inflation may be estimated by looking at the required amounts of fiat money to obtain “the same” purchasing power of “the same” basket of goods, services, living conditions after a time duration.

If the yearly figures of inflation are x1, x2, .., x10, … then the compound inflation for 10 consecutive years would be

(1+x1)× (1+x2)× (1+x3)× (1+x4)× (1+x5)× (1+x6)× (1+x7)× (1+x8)× (1+x9)× (1+x10).

Compound Inflation ís not equal to the sum of yearly inflation.

Tax payers can use compound inflation over a long period to check the accuracy and honesty of the figures of inflation published by their governments. They can compare the purchasing values of their fiat money over that long period of time.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available (https://www.bls.gov/cpi/).

Sometimes prople just look at the rise of Consumer Price Index as an indication of inflation. However the switching from one type of items to another type of replacement items (even when only due to their availability) do introduce inaccuracy. That happens when some goods evolve over a long period, so that we have to compare the price of vastly different qualities of the same goods. For example, a house built fifty years ago cannot be accurately compared against a current house in terms of safety, comforts, satisfaction of ownership; or a car built fifty years ago cannot be accurately compared against a current car in terms of safety, comforts and performance. Similarly a loaf of bread sold fifty years ago also cannot be compared against a current loaf of bread in terms of taste, packaging, sanitation standards.

3. Inflation and CPI may NOT track each other.

There is another type of inaccuracy caused by the switching of the selection of replacement goods in the components of CPI.

Example:
The prices of log houses were tracked for some years then the prices of timber houses were tracked and phased in to replace the former type of log houses, then the prices of brick houses were tracked and phased in to replace the type of timber houses.

Suppose that the prices of each of those types of house all stay stationary then the CPI figures involving each period are gradually phased in, joined together to produce the figure for the whole period. The CPI stay the same for the whole period.

As the price of log houses has been phased out, its increase may become undiscoverable even if it had gone ballistic. Then log houses can come back AS A NEW TYPE OF PRODUCTS REPLACING THE OLD ONES at a steady price of say ten times the last price they were tracked for CPI. Now suppose that people start using log houses again, the new price (at ten times the old price) of log houses get phased back in and the CPI still can stay constant.

4. What kinds of spending should be included in the Consumer Price Index

(See https://en.m.wikipedia.org/wiki/Consumer_price_index.)

The inclusion should allows the index to mirror the spending of an “average” person.

However, new questions arise: What does that average person own?
What does that average person earn a year? What job does that average person do? Where does that average person live? What does that average person eat? What does that average person wear?

So the Consuner Price Index may be biased in one way or the other.

It is noted that the rise in Consuner Price Index may not follow inflation if the population increases its standard of living over time.

5. Why a government always want to have a low, false inflation figure (that is low rise in CPI).

A fiat money that is rapidly losing value through inflation will not be kept, hoarded by any user for longer than the duration of necessary transaction. That money will be forced spent at any earliest opportunity.

This makes the fiat money unacceptable for foreign trading outside the country.

Inside a country its high inflation or hyperinflation may make its economy SEIZE or self adapt to be ALMOST FREE from the fiat money (using bartering or using “real money” or privately issued credit notes). The government is then forced to control economic productions by decrees with tyranical policing (decreeing the prices of essential goods and publicly executing “economic criminals”).

So for its good public relations, a government always try to keep the inflation figure of its fiat money at some low figure acceptable to its citizens.

CPI can be obtained from governments’ websites. For examples:

Consumer Price Index, USA,
https://www.bls.gov/cpi/tables/home.htm

Consumer Price Index, Australia, https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia

Some web site such as
https://inflationdata.com/Inflation/Consumer_Price_Index/CurrentCPI.asp
gives easy comparison of CPI over long periods of time.

6. Method to keep CPI constant while prices go up.

The method is to withdraw a line of products, use another line of substitution products, then reintroduce the products as A NEW LINE OF PRODUCTS SUBSTITUTING the previous substitutions.

For example to remove the effect of price increase in milk, a government may ask milk producers to withdraw full cream milk for a while, transfering the component of milk price to skim milk which are left at constant price. After a while, full cream milk is then reintroduced as a new line of products at ten times its previous price. The component of milk is then gradually transfered back to full cream milk. Now skim milk is then withdrawn from the market and later on reintroduced into the market.

In this way CPI can stay constant even when full cream milk and skim milk takes turn to increase their prices by ten times each.

So the claims that Inflation is reflected in CPI’s supplied by governments should be read with skepticism. Unfortunately, the statement has been told often enough and for long enough so that a number of tax payers have started to believe in it without questioning. (A lie told once remains a lie but a lie told a thousand times becomes the truth, by J. Goebbels [9].)

Significant components for Australia are listed below and it is easy for Australian government to intentionally overlook or over-emphasize some particular components to bias the inflation figures:

Fresh Foods (exempted from GST),
Ready Foods (with applicable GST),
Clothing (including GST),
Consumable (including GST),
Residential rents (exempted from GST),
Housing loan interests,
Medical expenses and Health Insurances,
Schooling fees,
Cars and Transportation costs (including GST).
Communication, phones, computers, network costs (including GST).
Short term loan interests,
Fees on Financial Service (banking fees, superannuation custodian fees, superannuation compliance fees, superannuation consultant fees)
Brokers, Investment consultant fees,
Capital Gain Taxes on selling investments or major items.
Other government taxes, fees and fines.

Suspicion should be raised if large, significant components are omitted for any particular consumer spending pattern. Indeed in around 1986, Australian CPI included the non-inflationary computer prices (of 286, XT models of PC). This kept the CPI low for that year but the age-pensions paid to old people was pegged to that CPI and pensioners suffered.

7. Calculating your own inflation index

As government supplied CPI’s are unreliable and designed to be biased, tax payers need to check government supplied CPI’s against their own indices. This is done by following the price of the same items of major spending over years such as housing costs, food prices and gold price (stored values for later use).

Inflation indices will roughly follow the price increase of housing, food and gold.

Vietnamese standardized gold slabs for trading

Figure: Vietnamese standardized gold slabs for trading.

References:

[1]. Your fiat money (Part 2), posted January 12, 2017.

[2]. Your fiat money, posted January 9, 2017.

[3]. Why does the Federal Reserve aim for 2 percent inflation over time?, Board of Governors of the Federal Reserve System,https://www.federalreserve.gov/faqs/economy_14400.htm, updated January 26, 2015, accessed 03 Mar 2017.
[4]. Neha Sharma and Shalu Yadav, The Indian village that has returned to bartering, BBC News Services,http://www.bbc.com/news/world-asia-india-38180075, 5 December 2016.

[5]. Patrick Bodenham, Will Spain’s coal belt survive through online barter?, BBC News Services,http://www.bbc.com/news/world-europe-38731808, 2 February 2017.

[6]. James Melik, Haggling and bartering gain appeal, BBC News Services,http://news.bbc.co.uk/2/hi/business/7883050.stm, 12 February 2009.

[7]. Mark Lowen, Greece bartering system popular in Volos, BBC News Services,http://www.bbc.com/news/world-europe-17680904, 12 April 2012.

[8]. Dallas police fire pension board ends run, bank stops 154m withdrawals. http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/dallas-police-fire-pension-board-ends-run-bank-stops-154m-withdrawals
[9]. Joseph Goebbels quotes, azquotes.com, http://www.azquotes.com/author/5626-Joseph_Goebbels.
[10]. https://www.moneymetals.com/news/2017/05/04/higher-inflation-consumer-prices-001061, (added on 10 May 2017).
[11]. http://www.zerohedge.com/news/2017-05-13/arizona-passes-bill-end-income-taxation-gold-and-silver
References added after 2017 November:
[12]. http://www.gold-eagle.com/article/deepening-crisis-hyper-inflationary-venezuela-and-zimbabwe
[13]. https://us-issues.com/2017/11/21/social-security-inflation-lag-calendar-partial-indexing/

[14]. http://www.silver-phoenix500.com/article/fed%E2%80%99s-%E2%80%9Cfrankenstein%E2%80%9D-policies-are-about-turn-their-master

[15]. https://mises.org/wire/dollar-dilemma-where-here

[16]. https://straightlinelogic.com/2018/08/04/how-inflation-destroys-civilization-by-nick-giambruno/

Added after 2018 Aug 15th:

[17]. https://www.silver-phoenix500.com/article/anatomy-hyperinflation

[18]. https://us-issues.com/2018/08/19/anatomy-of-hyperinflation/

[19]. https://akahinews.com/2018/07/29/venezuelas-bolivar-currency-worthless-as-inflation-hits-1-million-percent/

[20]. https://dailyarchives.org/index.php/history/1046-ben-bernanke-says-hitler-was-the-guy-who-got-economics-right-in-the-1930s

[21]. https://yapaholic.com/2018/08/19/us-national-debt-heres-what-you-need-to-know/

[22]. https://www.caseyresearch.com/how-inflation-destroys-civilization/

[23]. How Venezuela’s crisis developed and drove out millions of people, https://www.bbc.com/news/world-latin-america-36319877

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Reading a sovereign budget

Reading a sovereign budget

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.20x).

#fiat money, #deficit, #sovereign debt, #inflation, #gold, #immigration, #carrying capacity, #environment, #war reparation,

1. Meaning of Fiat Money.

Fiat money is just “Coupons for paying taxes and receive government’s goods and service”. Calling it money is just an attempt by issuers to confuse it with real moneys (like gold or food). Fiat money should not be viewed as any kind of exchangeable natural valuables but as only coupons (with various half-lives) issued by each nation to its citizens to pay to that nation its taxes, services, and state supplied goods.

Once a nation (the taxing authority) ceases to exist, so do its coupons and its fiat money!

Former USSR, Eastern European Communist Countries were with systems of fiat money not unlike current USA is.

With enough reckless printing, “easy to print coupons” may become not appreciated by its citizens and that is when we say hyper-inflation occurs to that fiat money.

There is NO MAGIC in wealth creation with printing fiat money.

2. National Yearly Budget.

Every year a sovereign government collects its taxes and pays its contractors and employees with its own “fiat money” (coupons). This is specified in its budgets. The yearly budget specifies:

Total expense (total coupons handed out during the year) which is the sum of

e1/- yearly expenses on contractors and employees,

e2/- dispense of coupons on “treasury bonds” maturing in the year.

Total income (total coupons collected in the year) which is the sum of

i1/- yearly income from tax collection (total coupons collected during the year from taxes),

i2/- collection of coupons from the issuance (sale) of “treasury bonds” which are redeemable after various specific dates in the future, and

d/- yearly addition of coupons (newly printed coupons issued during the year).

The total payment often exceeds the total income by a wide proportion and is called the deficit for the year. The deficit is equal to the amount of total expense minus the amount of total income.

Total Expense = Total Income + Yearly Deficit.

The deficit may cause uneasiness among citizens. However the deficit is of no real concern as long as the nation can continue to operate.

3. Dealing with deficits.

The sovereign may deal with yearly fluctuation of the deficit by issuing “treasury bonds” (i2) having redeeming dates on years with anticipated surplus (e2).

On the other hand, pertinent deficit is dealt with by one or a combination of the following methods:

d1/- Print new coupons to quitely devalue the existing coupons at some target rate such as 2% per year. In principle, printing an additional 2% of existing amount of coupons per year plus issuing an additional 2% of existing amount of “treasury notes” per year should cause only a loss of 2% per year of values of existing coupons. A nation with high amount of coupons in circulation and large amount of issued “treasury notes” can print large amount of coupons as well as issue large amount of additional “treasury notes”.

For USA, as of June 10, 2020, there was $1.91 trillion worth of Federal Reserve notes in circulation ( https://www.federalreserve.gov/faqs/currency_12773.htm ) and 25.986 trillion in Public Debt (https://treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm), this 2% inflation target allows the printing of 38 billion worth of additional Federal Reserve notes for that year and the issuance of 520 billion worth of additional Government Debt.

The costs are to be born by holders of Federal Reserve notes and of US Government Debts (including Treasury Bonds, Treasury Notes and Treasury Bills). These holders include other sovereign governments holding US dollars just for international trading and investments. This is called the “exorbitant priviledge” of the issuer of US dollars (https://en.m.wikipedia.org/wiki/Exorbitant_privilege). Foreign sovereign governments would be better off using gold for international trading, and there is now some movement for that.

d2/- Use gold from national treasury to buy (import) most common goods to sell to citizens to stabilize their prices in order to give the feeling that the coupons still hold their own validity. This solution to a pertinent deficit will finally exhaust the gold holding of the nation. This is also known as using gold to support currency.

d3/- Use part of national output to buy (import) most common goods to sell to citizens to stabilize their prices in order to give the feeling that the coupons still hold their own validity.This solution to a pertinent deficit requires the nation to have an ever growing output. Greenies may object against this method of having ever growing outputs.

d4/- Allow massive immigration in the hope that new migrants will contribute to future income from taxation (https://www.cbo.gov/publication/55967).

Immigration increases total economic output, though not necessarily
output per capita. It also affects the federal budget through the taxes
that foreign-born people pay and the government programs in which they
participate. https://www.cbo.gov/publication/55967

This method may backfire badly if the new migrants don’t want to pay taxes (https://www.theglobeandmail.com/opinion/swedens-ugly-immigration-problem/article26338254/).

Questioning the consensus is regarded as xenophobic and hateful. Now all of Europe is being urged to be as generous as Sweden.

So how are things working out in the most immigration-friendly country on the planet?

Not so well, says Tino Sanandaji. Mr. Sanandaji is himself an immigrant, a
Kurdish-Swedish economist who was born in Iran and moved to Sweden when
he was 10. He has a doctorate in economics from the University of Chicago and specializes in immigration issues. This week I spoke with him by Skype.

“There has been a lack
of integration among non-European refugees,” he told me. Forty-eight per cent of immigrants of working age don’t work, he said. Even after 15 years in Sweden, their employment rates reach only about 60 per cent.
Sweden has the biggest employment gap in Europe between natives and
non-natives.

https://www.theglobeandmail.com/opinion/swedens-ugly-immigration-problem/article26338254/

Even if the new immigrants are willing to work and to pay taxes, this solution to a pertinent deficit may brings to the nation a population replacement or may make the nation exceed its own carrying capacity and ruin its own environment.

d5/- Provoke wars against weaker countries to win over them and force outrageous war reparation on them (https://en.m.wikipedia.org/wiki/War_reparations).

References:

[1]. Your fiat money (Part 2), https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/.

[2]. https://www.federalreserve.gov/faqs/currency_12773.htm

[3]. https://treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm

[4]. https://en.m.wikipedia.org/wiki/Exorbitant_privilege

[4b]. https://outofthecave.io/articles/you-want-to-talk-privilege-ok-lets-talk-privilege/

[5]. https://www.cbo.gov/publication/55967

[6]. https://www.theglobeandmail.com/opinion/swedens-ugly-immigration-problem/article26338254/

[7]. https://en.m.wikipedia.org/wiki/War_reparations

Added after 2020 July 11th.

[8]. https://larspsyll.wordpress.com/2020/07/12/the-deficit-myth-a-review/

New? Cranks? Reading one of the founders of neoclassical economics, Knut Wicksell, and what he writes in 1898 on ‘pure credit systems’ in Interest and Prices (Geldzins und Güterpreise) soon makes the delusion go away:

… It is possible to go even further. There is no real need for any money at all if a payment between two customers can be accomplished by simply transferring the appropriate sum of money in the books of the bank …
A pure credit system has not yet … been completely developed in this form. But here and there it is to be found in the somewhat different guise of the banknote system …
We intend therefore, as a basis for the following discussion, to imagine a state of affairs in which money does not actually circulate at all, neither in the form of coin … nor in the form of notes, but where all domestic payments are effected by means of the Giro system and bookkeeping transfers.

[9]. https://survivaltricks.wordpress.com/2019/07/13/how-hitler-defied-the-bankers/

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The “Mean Realizable Present Value” of a future income

The “Mean Realizable Present Value” of a future income

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 3xx).

#inflation, #present value, #inflation discount, #probability,

Many investors have run into losses due to their blind application of inappropriate valuations. They just blindly buy a bond if it is sold at less than its “present value” and thought that they have bought such a thing at a discount only to find out later on that they have paid too much.

Here I propose that they should use a more appropriate “mean realizable present value”
instead of “present value” for stream of incomes such as bonds.

1. The “present value” commonly used by investors.

The “present value” of some future income is an amount of money needed at present to buy and store a wealth to match that income when it arrives.

The present value of an uncertain future income is therefore also uncertain like that income.

Common application of “present value” to a stream of future incomes has simply equated it to the “inflation discounted value” of that stream of income.

For example, when a bond issuer commits to pay the bond holder 3 yearly installments of 1000 dollars each, the “present value” of that bond is often valued by only compensating for inflation to be

1000×(1-Inf) + 1000×(1-Inf)×(1-Inf) + 1000×(1-Inf)×(1-Inf)×(1-Inf)

At a rate of inflation of 3% per year, it will be

1000×(0.97) + 1000×(0.97)×(0.97) + 1000×(0.97)×(0.97)×(0.97) = 2911 dollars.

Many investors have run into losses due to their blind adoption of such inappropriate “present value” for their bond. They just blindly buy the bond if it is sold at less than 2911 dollars and thought that they have bought a “debt at a discount”.

If and when the bond issuer goes bankrupt, they lose all uncollected payments and the reality is they receive much less than the 2911 dollars of inflation discounted value in their formula.

Therefore such definition of “(inflation-discounted) present value” is inappropriate for investors. It is proposed here that investors should use instead the “mean realizable present value” defined as in the following.

2. The “mean realizable present value” of a future income.

It is more appropriate for investors to use a “mean realizable present value” of a future income defined to be the “mean of all possible present values” from that income.

Figure 1: The question is “Would you exchange 1 bird in your hand for 3 birds in the bush?”.

For example, when a bond issuer commits to pay the bond holder 3 yearly installments of 1000 dollars each, the “mean realizable present value” of that bond should be valued according to the following.

1000×(1-Inf)×(Pr. of 1st payment) + 1000×(1-Inf)×(1-Inf)×(Pr. of 2nd payment) + 1000×(1-Inf)×(1-Inf)×(1-Inf)×(Pr. of 3rd payment).

At a rate of inflation of 3%, the present value of that bond will be

1000×(0.97)×(Pr. of 1st payment) + 1000×(0.97)×(0.97)×(Pr. of 2nd payment) + 1000×(0.97)×(0.97)×(0.97)×(Pr. of 3rd payment)

It is equal to 2911 dollars only if the Probability of each payment is 1, that is when there is no possibility of any default.

Generally the present value of that bond will be

1000×(0.97)×(Pr. of 1st payment) + 1000×(0.97)×(0.97)×(Pr. of 2nd payment) + 1000×(0.97)×(0.97)×(0.97)×(Pr. of 3rd payment) << 2911 dollars.

Using the past records for the survival of new small companies we can guess the probabilities of survival for any new small company in Australia as:

Prob. of surviving longer than 12 month = 66%,

Prob. of surviving longer than 24 month = 66%×90% = 59%,

Prob. of surviving longer than36 month = 66%×90%×90% = 53%.

Therefore the “mean realizable present value” of a bond issued by a new small Australian company will be

1000×(0.97)×66% + 1000×(0.97)×(0.97)×59% + 1000×(0.97)×(0.97)×(0.97)×53% = 640 + 555 + 484 = 1679 << 2911 dollars.

So the “mean realizable present value” is only 1679 dollars, a much lower value than 2911 dollars of “(inflation-discounted) present value” often advocated in uncritical financial analyses.

3. Dependence on the survivability of the payer.

crystalballc70.jpg

Figure 2: A crystal ball is needed to determine accurately the probability of any given company surviving in the future.

The difficulty in working out the probability of survival of the payer is one essential problem in investment.

The disadvantage of using “mean realizable present value” is that the probabilities in use may NOT be agreed upon between transactional parties whereas the “inflation-discounted present value” has always been mutually accepted as the analysis based on the best case.

However, using this new “mean realizable present value” gives a more appropriate valuation for investors. It presents a combination of the current “present value” and the commercial “rating” of that income. This “realizable present value” reduces to zero when the payer goes bankrupt and the “inflation-discounted present value” is only the upper limit of this “mean realizable present value”. The upper limit is reached when the payer survives past the final payment.

4. Conclusion

This “mean realizable present value” of an income stream can be applied to the income streams of bonds or of commercial loans. If it is used instead of the “present value” in the balance sheet of any economic entity the balance sheet of that entity would give a better estimate of its net worth.

This “mean realizable present value” explains to investors why some certain company issued bond may become worthless when the chance for the company to survive to repay to its bond holders vanishes. The value does increase and decrease with market conditions and can better quantify the market values of “loans” hold by any lender (or bank). It would be easy for investors to then understand the sudden vanishment of “wealth” hold by banks or investment funds.

Using these “mean realizable present values” the balance sheets of central banks may also look vastly different after they bought all bonds on the markets to support all companies on the Stock Exchanges.

References:

[1]. Inflation is vicious to fiat money users posted Mar 29th, 2017.

[2]. Investors-beware-dividend-growth is misleading, posted on September 01, 2017

[4]. Why does the Federal Reserve aim for 2 percent inflation over time?, Board of Governors of the Federal Reserve System,https://www.federalreserve.gov/faqs/economy_14400.htm, updated January 26, 2015, accessed 03 Mar 2017.

[5]. Your fiat money, posted January 9, 2017.

[6]. Your fiat money (Part 2), posted January 12, 2017.

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How Hitler Defied The Bankers

Hjalmar Schacht,… temporarily head of the German central bank, summed it up thus: An American banker had commented, “Dr. Schacht, you should come to America. We’ve lots of money and that’s real banking.” Schacht replied, “You should come to Berlin. We don’t have money. That’s real banking.” (https://nationalvanguard.org/2015/08/how-hitler-defied-the-bankers/)

via How Hitler Defied The Bankers

Comment by tonytran2015:

Fiat money is just “Coupons for paying taxes and receive goverment’s goods and service”.([1]. Your fiat money (Part 2), https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/, [2]. https://survivaltricks.wordpress.com/2019/05/29/fiat-money-is-just-institutionalized-scams-part-2-reinterpreting-official-narratives/).

Fiat Money is just institutionalized scams, Part 2: Reinterpreting official narratives.

Fiat Money is just institutionalized scams, Part 2: Reinterpreting official narratives.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.20x).

#fiat money, #free health care, #money for everyone, #quantitative easing, #monetary tightening,

Fiat money is just “Coupons for paying taxes and receive goverment’s goods and service”.

1. Fiat money of any nation is just only its coupons:

Former USSR, Eastern European Communist Countries were with a system of fiat money not unlike current USA is. Everyone has his coupons but goverment stores may not be able to supply the needed goods.

With enough reckless printing, “easy to print coupons” may become not appreciated by its citizens and that is when we say hyper-inflation occurs to that fiat money.

There is NO MAGIC in wealth creation with printing fiat money.

2. Printing more coupons as an election promise:

Gullible voters still believe that government has the Wealth Creation MAGIC and can distribute that wealth using its printed coupons.

Logics and the inevitable wake up from the cruel policies in former communist states have shown that no such magic had existed yet voter fools still believe in such magic upon which election candidtes made their promises,

Election candidates should not be allowed to say that “my elected government will provide free health care, will give citizen payments for doing nothing”. The promises are not feasible (It is impossible to provide all citizens with service totalling to more than the works supplied to the nation plus its imported services).

Rather election candidates should be required to say only what they can actually do such as “my elected government will freely distribute coupons for use at health care centers. Even for people doing nothing they will still get coupons“. Whether the coupons can bring in the promises is quite another matter.

3. Federal Reserve Bank policies reinterpreted:

2a/- As coupons can be printed at will, holders of coupons better spend them before the market get flooded with new coupons from any “Quantitative Easing“.

2b/-With the current economic setting giving 100% tax deduction on all interest payments on business loans, everyone has to borrow to be competitive.

The FRB can jack up interest rates (Monetary tightening) to give bigger shares of profit to lenders of coupons (fiat money), or to next tier of lenders (non-central banks) who issue notes promissing to give coupons to the first 10% of these notes presented (brought back) to them (the next 90% will get NOTHING from the issuers but may get something in consolation from the government who issued licenses to the non-central banks).

References:

[1]. Your fiat money (Part 2), https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/.

[2]. https://survivaltricks.wordpress.com/2019/04/28/fiat-money-is-just-institutionalized-scams/

[3]. https://survivaltricks.wordpress.com/2017/03/01/qe-may-be-another-scam-to-steal-national-wealth/

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Blog image of Contents page of Money

Looking after your money.

These are the contents of MONEY sub-page re-organized in book order for coherent reading.

Blog image of this page

DETECTING COUNTERFEIT CURRENCY

Detecting Counterfeit Currency, US dollars, posted on July 15, 2016

Hologram

Detecting counterfeit currency, Australian dollars., posted on November 15, 2016

fineprint50dollar

Detecting counterfeit currency, Australian notes with transparent stripes., posted on August 10 2017,

polymer 5 dollars transparent stripe

Fiat Money is just institutionalized scams.

KarlMagn

Fiat Money is just institutionalized scams, Part 2: Reinterpreting official narratives.

KarlMagn

fiatmoneyc60.jpg

,posted on 01 Mar, 2017

fiatmoneyc60.jpg

fiatmoneyc60.jpg

gov finance

Hologram

Miseries-unleashed-by-push-for-cashless-trading, posted August 22, 2017

Negative interest rate is not new, posted December 4 2016,

polymeraust100dollars

Cashless and negative interest go hand in hand, posted December 10, 2016

crystalballc70.jpg

Why do people buy Treasury Bonds with Negative Interests ? posted 2019 Aug 16,

crystalballc70.jpg

fiatmoneyc60.jpg

Real life lessons on national economics.posted on September 12, 2018

The next fall of US dollars after their rejection by Shanghai Cooperation Organization. posted on 2019/11/07

It is not GDP, it is the service to the population that counts.

Hologram

, posted on 17 April 2017 ,

, posted on 07 May 2017 ,

, posted on 10 Jun 2017 ,

The Parasites of Western Economy, Part 4: Scammers who entrap acquaintances into being guarantors for their loans. posted on 22 July 2017 ,

moneyd20.jpg

The Parasites of Western Economy, Part 5: Company Asset Strippers and Conspirators posted on 13 August 2017 ,

moneyd20.jpg

The Parasites of Western Economy, Part 6: Robbers of pension money in Australia posted on 02 May 2018 ,

moneyd20.jpg

The Parasites of Western Economy, Part 6B: Robbers of pension money in Australia. posted on 16 July 2018 ,

moneyd20.jpg

The Parasites of Western Economy, Part 7: Providers of invented inefficient service from tax money posted on 18 May 2018 ,

moneyd20.jpg

The parasites-of-western-economy-part-8-body-corporate-robbing-owners-of-low-cost-dwellings posted on 05 June 2018 ,

moneyd20.jpg

The Parasites of Western Economy, Part 9: Over-chargers-for-unfamiliar-types-of-service posted on 04 July 2018 ,

moneyd20.jpg

The-parasites-of-western-economy-part-10: Greedy-politicians-overpaid-with-our-tax-money posted on 21 August 2018 ,

moneyd20.jpg

EARNING OF BANKS

, posted on December 15, 2016

polymeraust100dollars

, posted on November 30, 2016

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Collapse of online banking is not a remote risk., posted on November 20, 2016

polymeraust100dollars

Gold for storing wealth. posted on 28 April 2017

Gold Slab of 37.5g in Vietnam

Bitcoins-tulips-sparkling-diamonds-fiat-moneys-and-gold/ posted on 24 Jan 2018

Hologram

crystal ball

posted on November 20, 2018

Stay calm when they go bankrupt. posted on July 20, 2019

KarlMagn

Stay calm when the Stock Markets crash. posted on 2019 July 26

crystalcrash2c70.jpg

Signs pointing to an impending crash for small investors, posted on December 16, 2016

crystalball2c70.jpg

Avoid-buying-zombie-floats-on-the-stock-exchanges posted on October 20, 2017

The Futures and Derivatives Markets (Part 1).

crystalball2c70.jpg

The Futures and Derivatives Markets, Part 2: Rigging the indices to win

crystalball2c70.jpg

Government may be behind bubble markets posted on February 12, 2018

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SURVIVAL WITHOUT CASH

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Bitcoins, Tulips, Sparkling Diamonds, Fiat Moneys and Gold

Bitcoins, Tulips, Sparkling Diamonds, Fiat Moneys and Gold

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.106).

#Bitcoins, #tulips, #diamond, fiat money, #gold, #investment, #investment mania,

Bitcoins, Tulips, Sparkling Diamonds, Fiat Moneys and Gold.

You may want to store your earning surplus for rainy days. Here are a number of easy options, including those of the current and past investment manias! They are gold, fiat money, sparkling diamonds, tulips and bitcoins.

1. Bitcoins.

Imagine a club with limited number of equal ranking memberships (less than 10 million memberships). The memberships are transferable (can be resold), you can buy more than one membership, and memberships are well protected from counterfeiting

(using Blockchain technology).
Currently the price for each membership is higher than $1000US and keeps on rising. Memberships from competing

similar clubs are also booming.
How much would you pay for one membership to belong to the club? US$16000 or US$10000 or US$1000 or US$100 ?
The club is now known as the Bitcoin Owners Club. Competing clubs are for owners of other crypto-currencies.

2. Tulips

Figure: Tulips (currently at $2 a bulb).

Tulips are beautiful flowers which require skillful cultivation and are perishable.There was an (informal) club of Tulips owners in Holland. Anyone owning a beautiful tulip is automatically its member (You don’t need to grow the flowers yourself, you can buy them from anyone and they are good until they perish!). This informal club flourished then quickly dissolved itself in Holland. The phenomenon is named the Tulips Investment Mania.
Obviously people have to grow tulip flowers to harvest them and the total number of tulips is limited as their total mass cannot exceed the mass of our plannet Earth!How much are you prepared to pay for a beautiful Dutch tulip now?

There were numerous analogue repeats of the tulips mania in Vietnam. They did not use tulips but used instead chameleons, quails, specific types of fish in fish tanks. Those manias all ended up in the same way.

Figure: Any other flowers can also be used to start a mania.

3. Sparkling Diamonds.

Figure: Glass model of a “brilliant cut” diamond.

The sparkling diamonds are mined and marketed by De Beer Group. Its successful marketing slogan is “Diamonds are forever”. You pay high price for any diamond but you would be lucky to get half of that money when reselling the diamond immediately after buying.

Nevertheless, girls are still asking their husbands for diamonds!

4. Fiat money

Figure: Fiat money can always be used to pay taxes. .

You are forced to receive your salary in the fiat money of the country you are living in!

Fiat money may partially “perish” due to inflation or may (very rarely) appreciate due to its scarcity.

Fiat money can always be used to settle your taxes, service fees and fines with your government whereas tulips and bitcoins cannot.

Figure: Modified photograph of a note of US$100, the best known fiat currency in the World.

5. Gold.

Figures: 1 ounce gold slab.

Gold is a compact commodity. It can be swapped for any other commodity when there is a need.

There is always a demand for gold everywhere and the supply cost is almost constant in human history. So gold can be bought as a form of compact property and sold when required.

6. Conclusion

You have now been informed to make some choice with your earning surplus. Be warned, it may PERISH with your wrong choice.

The next level of questioning is how can someone fool so many people in those Investment Manias

References

[1]. https://en.m.wikipedia.org/wiki/Bitcoin

[2]. https://en.m.wikipedia.org/wiki/Tulip_mania

[3]. https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/

[4]. https://survivaltricks.wordpress.com/2017/04/28/gold-for-storing-wealth/

Added after 2018 Feb 05:

[5]. https://irishinfosecnews.wordpress.com/2018/02/05/the-new-gold-rush-a-look-inside-cryptocurrency-fraud/

[6]. http://riggedgame.blog/2018/02/06/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-us-economy/

[7]. https://wolfstreet.com/2018/02/05/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-economy/

[8]. https://venitism.wordpress.com/2018/02/08/cryptocurrency-2018/

Added after 2018Feb20:

[9]. https://wolfstreet.com/2018/02/18/blockchain-stocks-completely-disintegrate/

[10]. https://www.cnbc.com/2018/02/23/secretive-chinese-bitcoin-mining-company-may-have-made-as-much-money-as-nvidia-last-year.html

[11]. https://centinel2012.com/2018/04/17/the-bubble-of-1825-was-also-a-contagion/

[12]. https://business.financialpost.com/investing/investing-pro/nothing-can-save-venezuela-from-its-economic-fate-not-even-a-cryptocurrency

[13]. http://lawrieongold.com/2018/11/30/how-the-bitcoin-bubble-burst-could-lead-to-a-new-golden-era/

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Inflation is vicious to fiat money users.

Inflation is vicious to fiat money users

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.57).

#inflation, #fiat money, #taxation by stealth, #indexation, #cost of living

Figure 1: Fiat money are paid to government employees. All citizens have to pay their taxes with that fiat money.

Inflation is vicious to the citizens who have to accept fiat currency from their ruling government. It is half terrible as having to use money with some use-by dates. Only governments like inflation.

1. Inflation.

It is convenient to begin the discussion with my previous posting entitled Your Fiat Money, part 2 (reference [1]). It is easily seen that the government can choose to pay its employees X units of its fiat currency C1 and require the whole population to pay it all taxes amounting to X units of that currency. The fiat money C1 will find its own value in the population depending on how government employees interact with the whole population of the country.

Alternatively, the government can choose to pay its employees Y units of another fiat currency C2 and require the whole population to pay it all taxes amounting to Y units of currency C2. Again the fiat money will find its own value in the population.

As other things are equal, we must have

X*C1 = Y*C2

and the value of a fiat currency is inversely proportional to the amount issued by the government to its employees.

Consequently, if all other things are unchanged but the government increases both the payment to its employees and the tax to be collected by 3% every year then its currency is worth only 100/(100+3) its former value one year ago. This is called an inflation at a rate of 3% per year.

2. Inflation is a rent on fiat money.

After selling his stock, a trader has cash (which is fiat money), he will have to use his cash to buy new stock. If he holds on with the cash for one year, he can buy only (100-3)% of what he could have bought immediately. This works as if he was renting the cash from the government at a cost of 3% a year.

The long standing wisdom is not renting anything you don’t really need and people should not keep cash longer than it is absolute necessery.

Any government will love inflation. It is its best next thing to issueing money with expiry dates and un-redeemable government bonds, vouchers (Old scams but still can be practiced against illiterate, trusting populations)

3. High inflation may feed on itself.

Remember that the fiat money will find its own value in the population depending on how government employees interact with the whole population of the country.

When high inflation occurs people may try to increases prices in anticipation, causing even more severe inflation.

People may then even try to avoid using any fiat money at all and they may choose their own alternative bartering medium such as food (rice grains or flour) or commodities (gold or silver) instead of the readily available but steadily depreciating fiat money.(see [4,5,6,7] for bartering techniques). Such avoidance of fiat money brings even more loss of its value and deepens the inflation.

When inflation is too high, the ruling government may lose its grips on the economy and chaos may follow (as in Germany prior to 1933).

4. High inflation reduces actual interests on government debentures/treasury bonds.

Inflation is to be subtracted from the interest rate given by any government debenture/treasury bond.

The inflation rate is hard to obtain but it must be taken into account when buying government debentures.

Unless the after tax return from a government debenture/treasury bond is higher than inflation, the bond holders may actually LOSE money on their bonds.

The interest rate given on Government Debenture/Treasury Bond is determined at the time of sale while actual inflation is made after that time. A government can easily wipe out its debts to bond holders by producing very high inflation. (see [10]).

5. Inflation rips off members of pension plans.

The loss caused by inflation on cash based holdings (rents on cash) also applies to long term storage of values such as saving for retirements.

Unless inflation has been taken into account, most perceived benefits of pension plans can be only just mirages given to uninformed plan members. To have any real benefit after tax and INFLATION, plan members usually need cash contributions/injections by the government and if they don’t obtain them there will arise the problem of unfunded liabilities.

In most cases, the contributed funds of any pension plan cannot earn any net income AFTER tax and INFLATION. If there is no cash contribution/injection by government, plan members would be MUCH better off using their contributions to buy gold and save the gold for their own retirements.

Vietnamese standardized gold slabs for trading

Figure: Vietnamese standardized gold slabs for trading.

The imminent run (insolvency) of pension plans are only the tip of the iceberg.(see reference [8]).

6. Inflation produces a stealthy wealth tax.

Inflation actually produces stealthy, disguised taxes on your properties.

When you change your house, as you have to move to a new location for new jobs, the value of that succession of similar houses keep on increasing due to inflation. Governments can classify the increases as “incomes” and impose taxes on them. Some governments have already done that. This type of FALSE incomes may also be extended to include your other possessions such as cars, jewelleries, housegold goods and gold holding.

These taxes on FALSE incomes are actually taxes on your possessions such as your houses and the tax rate depends on inflation. Your legislative representatives will not bother to make yearly oversight of it and the governments easily get away with it.

The federal authority may have encroached on the rights of member states if it makes property taxes! So the federal authority has to do it under the guise of income tax on false incomes produced by inflation.

Note added on 15 May 2017:

Only recently, the US State of Arizona admitted that gain/loss made from gold holding is not subjected to Income Tax of that State.[11]

7. Inflation causes non-synchronized price increases.

Inflation causes uneven, non-synchronized price increases due to different flow on times for different types of goods. This allows the government to put unfair short term weighting factors on individual types of consumer goods. The weighting factors let the government artificially select them to manipulate the yearly statistics on the Cost of living to lessen its obligation to pay pensioners their entitled upkeep.

8. Inflation forces people to borrow.

Inflation forces people to borrow with any purchase plan stretching over many years. A buyer would lose to inflation on his cash accumulation/saving if he wants to remain debt free and save up the whole amount for the purchase. House purchases are typical examples where buyers are forced to borrow.

9. Inflation gives government unfair advantages in charging taxes on citizens.

When you made a huge loss and claimed a carried forward loss to offset against possible future gain in calculating income tax, the loss is NOT indexed by inflation! So a loss of $1000 by a future trader in 2010 can only offset against a gain of $1000 in 2017! (Although $1000 in 2017 is worth much less than in 2010)

10. All governments love inflation.

A government loves inflation for the following reasons:

1. Inflation is a rent on its fiat money.

2. It can define False incomes and tax its citizens on the false incomes.

3. It can muddle statistics on Cost of living and the government can fool the world with its manipulated figures on the growths in GDP, GNI.

4. It allows government to gain unfair advantages over its tax payers when calculating their taxable incomes.

So the claims that Inflation is preferred to deflation by governments should be read with skepticism. Unfortunately, the statement has been told often enough and for long enough so that a number of tax payers have started to believe in it without questioning. (A lie told once remains a lie but a lie told a thousand times becomes the truth, by J. Goebbels [9].)

References:

[1]. Your fiat money (Part 2), posted January 12, 2017.

[2]. Your fiat money, posted January 9, 2017.

[3]. Why does the Federal Reserve aim for 2 percent inflation over time?, Board of Governors of the Federal Reserve System,https://www.federalreserve.gov/faqs/economy_14400.htm, updated January 26, 2015, accessed 03 Mar 2017.
[4]. Neha Sharma and Shalu Yadav, The Indian village that has returned to bartering, BBC News Services,http://www.bbc.com/news/world-asia-india-38180075, 5 December 2016.

[5]. Patrick Bodenham, Will Spain’s coal belt survive through online barter?, BBC News Services,http://www.bbc.com/news/world-europe-38731808, 2 February 2017.

[6]. James Melik, Haggling and bartering gain appeal, BBC News Services,http://news.bbc.co.uk/2/hi/business/7883050.stm, 12 February 2009.

[7]. Mark Lowen, Greece bartering system popular in Volos, BBC News Services,http://www.bbc.com/news/world-europe-17680904, 12 April 2012.

[8]. Dallas police fire pension board ends run, bank stops 154m withdrawals. http://www.dallasnews.com/news/dallas-city-hall/2016/12/08/dallas-police-fire-pension-board-ends-run-bank-stops-154m-withdrawals
[9]. Joseph Goebbels quotes, azquotes.com, http://www.azquotes.com/author/5626-Joseph_Goebbels.
[10]. https://www.moneymetals.com/news/2017/05/04/higher-inflation-consumer-prices-001061, (added on 10 May 2017).
[11]. http://www.zerohedge.com/news/2017-05-13/arizona-passes-bill-end-income-taxation-gold-and-silver
References added after 2017 November:
[12]. http://www.gold-eagle.com/article/deepening-crisis-hyper-inflationary-venezuela-and-zimbabwe
[13]. https://us-issues.com/2017/11/21/social-security-inflation-lag-calendar-partial-indexing/

[14]. http://www.silver-phoenix500.com/article/fed%E2%80%99s-%E2%80%9Cfrankenstein%E2%80%9D-policies-are-about-turn-their-master

[15]. https://mises.org/wire/dollar-dilemma-where-here

[16]. https://straightlinelogic.com/2018/08/04/how-inflation-destroys-civilization-by-nick-giambruno/

Added after 2018 Aug 15th:

[17]. https://www.silver-phoenix500.com/article/anatomy-hyperinflation

[18]. https://us-issues.com/2018/08/19/anatomy-of-hyperinflation/

[19]. https://akahinews.com/2018/07/29/venezuelas-bolivar-currency-worthless-as-inflation-hits-1-million-percent/

[20]. https://dailyarchives.org/index.php/history/1046-ben-bernanke-says-hitler-was-the-guy-who-got-economics-right-in-the-1930s

[21]. https://yapaholic.com/2018/08/19/us-national-debt-heres-what-you-need-to-know/

[22]. https://www.caseyresearch.com/how-inflation-destroys-civilization/

[23]. How Venezuela’s crisis developed and drove out millions of people, https://www.bbc.com/news/world-latin-america-36319877

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Federal Reserve Bank charges unnecessary fees to Americans.

Federal Reserve Bank charges unnecessary fees to Americans

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.51).

#fiat money, #private #Federal Reserve Banks, #unnecessary fees, #questionable fees, #questionable dividends, #new money.

American people keep paying unnecessary fees to private bankers through Federal Reserve Bank.
Every year billion dollars of undeserved fees (or interests) have been paid to private bankers through the Federal Reserve Bank. This Federal Reserve Bank is actually a private bank, not a wholly owned branch of the US Government. There is no ground for using a private FRB and pay it billions of dollars every year.

1. USA need no one to back their newly printed dollars.

fiatmoneyc60.jpg

Figure: Fiat money relies only on the taxation power of its issuing government for its backing.

The said payment cannot be said for supporting (underwriting) the issuing of new US dollar notes. Indeed, the government of USA is a money sovereign. It can print as much fiat money as it likes (and bear the consequences). Its fiat money has value to American people because they have to use it to pay taxes to their federal and states governments.

(See references [1] and [2] for simple explanation.)

2. It is wrong for the Federal Reserve Banks to give interests on the fractional deposits of constituent banks.

There are 2 objections to paying such interests. They are:

2a. The deposits by the contributing constituent, private banks of the Federal Reserve Bank are part of their own effort to make themselves appear more liquid. They cannot demand any interest from the government on their deposits, just like airlines cannot demand government compensation on the costs of carrying their statutory reserve fuel on each flight.

2b. If everyone has to bear a near zero or negative interest, why are those constituent private banks exceptional ? They received 12 billion dollars in interest for the year 2016.

3. The private Federal Reserve Bank has no right to charge that much.

How much had the FRB constituent banks deposited to earn that 12 billions in interest for the year 2016? Is such interest of the same rate offered to most Americans when they buy into government bonds?

4. Past presidents have tried to undo the burden but two got assassinated while doing it.

Presidents Abraham Lincoln, Thomas Jefferson and John F.Kennedy had seen the unfairness of private bankers charging interests to the country and had tried to unshackle the burden on the country. Lincoln and Kennedy had been assassinated while Jefferson survived the assassination attempt. It is currently costing $40 per year per person for the US to keep using the private Federal Reserve Bank.

President Trump may do something about it if Americans protest loudly about it.

5. Americans should demand United States Notes.

A chilling history of private bankers gripping the US government system is given by reference [9]:

“Central bank usury control caused the US Constitution… to get their First Bank Of The United States in 1791. … When their 20-year charter was up in 1811, the Jeffersonian Democrats prevented its charter from being renewed. So the Rothschild bankers summoned their mercenaries (the British army and navy) to teach us a lesson, the War of 1812. … they got their Second Bank Of The U.S., again with a 20-year charter. When Andrew Jackson was elected in 1828, the bankers tried everything to stop him; they created the 1833 recession; had him censured in 1834; and a failed (both guns misfired) assassination attempt on Jan. 30, 1835… Jackson killed the bank in 1836, … During the Am. Civil War, Abraham Lincoln created Greenbacks instead of the 24% to 36% usury the Wall Street bankers wanted to charge, and he was assassinated on Good Friday 1865. … 1913 the Rothschild bank got their …. Federal Reserve Bank. The Federal Reserve Act of 1913 originally had a 20-year charter. But … 1927, the McFadden Pepper Act was signed into law. It made the F.R.’s power over our monetary policy perpetual. . … 1963, President John F. Kennedy created United States Treasury Notes, known as Silver Certificates, with Executive Order 11110, and he was assassinated on Nov. 22, 1963.”

Rather than accepting the FRB Notes lying down, Americans should demand United States Notes (each with a red seal) issued directly by the Treasury just like those issued under Kennedy’s administration. Those notes had nothing to do with the FRB and America can save on the so called “interest” charged by FRB on any new money issued by US government and backed by its own taxation system.

Using the dollar notes with red seals (such as Five dollar with Red Seal Notes in series 1953 A through C, see picture in reference [6]) will save Americans $40 per head each year.

References:

[1]. Your fiat money, https://survivaltricks.wordpress.com/2017/01/09/your-fiat-money/

[2]. Your fiat money (Part 2), https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/

[3]. The-thirty-families-made-plans-for-a-future-without-you, theMicky.org, http://mikeyy.org/2017/01/30/the-thirty-families-made-plans-for-a-future-without-you/, originally by horse237, https://vidrebel.wordpress.com/2017/01/30/the-thirty-families-made-plans-for-a-future-without-you/

[4]. Stack Jones, The Banking Swindle-The History of Banking Fraud, criminalbankingmonopoly.wordpress.com, https://criminalbankingmonopoly.wordpress.com/2014/02/20/history-of-banking/#comments, accessed Jan 2nd, 2017.

[5]. Federal Reserve System, wikipedia, https://en.wikipedia.org/wiki/Federal_Reserve_System, accessed Jan 2nd, 2017.

[6]. Five Dollar Bill Red Seal Series 1953 US Currency, Natural Web Solutions Inc.(US), https://www.collectons.com/shop/item/58107/Five-Dollar-Bill-Red-Seal-Series-1953-US-Currency#imgs58107

[7]. Us issues, Central banks alchemists of finance part iii-reblogging, http://us-issues.com/2017/04/05/central-banks-alchemists-of-finance-part-iii/, 03 April 2017

[8]. Dale B. Halling, History of Central Banks in the United States, thesavvystreet.com, http://www.thesavvystreet.com, accessed 03 April 2017.

[9]. http://rudolfhess.net/

Added after 2018 Apri 21st:

[10]. https://us-issues.com/2018/04/21/black-tuesday-october-29th-1929-revisited/

[11]. https://counterinformation.wordpress.com/2018/05/03/i-know-which-country-the-us-will-invade-next/

[12]. https://tabublog.com/2017/05/19/the-federal-reserve-neither-truly-federal-nor-a-full-reserve/

[13]. https://socioecohistory.wordpress.com/2018/07/31/the-dark-agenda-behind-globalism-and-open-borders/

[14]. https://counterinformation.wordpress.com/2018/07/31/the-subservient-role-of-governments-how-economics-changed-to-work-against-us/

[15]. https://christianpatriots.org/2018/10/15/trump-is-right-the-federal-reserve-is-crazy-and-here-are-101-reasons-why-it-should-be-shut-down/

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