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 ( ) and 25.986 trillion in Public Debt (, 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 ( 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 (

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

This method may backfire badly if the new migrants don’t want to pay taxes (

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

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 (


[1]. Your fiat money (Part 2),








Added after 2020 July 11th.


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.


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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






Added after 2018 Feb 05:





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, , , Cashless bartering for survival, Federal Reserve Bank charges undeserved fees to Americans., A satirical guide to signs of an impending crash for small investors, Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors,Bankers earn more than interest margin on secured loans, Can most pension funds last?, … all

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Gold for storing wealth.

Gold for storing wealth

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.63).

#gold. #gold price, #gold investment, #gold sale B.O.E., #tribal memory,

Gold for storing wealth.

Human productivity varies wildly and each person needs some method to store the surplus from his periods of high productivity for use during periods of low productivity. Gold can be used for storing that surplus or wealth over long periods.

Gold is also a highly sought after commodity with stable price, and its owner can be sure that his surplus/wealth will not disappear overnight.

However gold is not a good investment as any interest earned by lending gold bars is really small (no more than 1%). Only jewellers borrow gold bars. They want to avoid resupplying their stock at New Years and wedding seasons.

1. Gold is in constant demand.

1a. Jewellery industry and hand-craft jewellers needs it. This is due to its lustre, malleability and corrosion resistance properties.

1b. Micro electronic industry needs it to make electrically high conductance terminals and connections.

1c. Micro engineering industry needs it to prevent rust and corrosion of their mechanical components.

1d. Electronic, optical, aviation and building industries need it to make transparent metallic films.

1e. Dentistry also needs it for dental works.

1f. Surgical medicine needs it for non-allergic implants.

2. Gold is a suitable bartering medium.

2a. Gold is in constant demand.

2b. If unsold, its owner can gradually turn it into home made jewelleries and sell to his neighbours.

2c. The cost of extracting gold from the ground is remarkably unchanged over thousands of years. Advances in technology is exactly offset by scarcity. Now people have to go 3km deep below the ground to mine gold in South Africa and in Canada ([4]). Soon they may go 4km deep below ground surface to mine gold.

2d. It is corrosion resistant and does not degrade with time.

2e. Any small, light amount of gold still has a high value.

2f. Any common amount of gold can be easily subdivided.

2g. The gold content of any unprocessed gold can be economically assayed and extracted using only HNO3, HCl and Cu. The extraction process is based on a simple metal displacement reaction of Au ions in aqua regia and is a common excercise for gold jewelers.
So gold satisfies all the requirements for being a bartering medium.

3. Gold price is not over-inflated.

The long term average of gold price reflects its utility value.
The price is not over-inflated due to massive amount in storage by various Government Central Banks in the World. They would grab any opportunity to sell their overpriced stocks. The Bank of England (wrongly?) set its selling price at US$268/troy oz in its massive unloading of 200tons of gold in the period of 1999-2002.

If gold price was held up by the vicious cycle of greed-herd mentality, the cycle would have been broken up by the prolonged heavy attack by the sale from Bank of England.

Despite such tremendous attack on its price by Bank of England, gold price did not collapse like the price of tulips or real estates when their bubbles bursted.

Right after the end of its massive sale, gold price rose up to US$600/troy oz, then to the current price of US$1000+/troy oz. The sustainable price is explained by the difficulty in extracting gold from the ground [4](see also [7]; I had invested in gold miners during the low price period of 1990-2000 and had experienced at first hand the details claimed by its author).

So, contrary to claims (propaganda?) by some authors, the average price of gold is neither pushed up by any remnant of prehistoric tribal memory nor pushed up by greed, fear and herd mentality (A lie told once remains a lie but a lie told a thousand times becomes the truth [6].).

4. Using and buying gold.

Vietnamese Gold Slab

Figure: Vietnamese gold slabs for trading. This standardized slab has 37.5g of 99.99% pure gold and has been issued in individual, clear, sealed plastic bubble. Its SJC trade mark is vigorously defended by the Vietnamese government. The last 4 digits of the serial number DB 1XXXX on this slab have been blurred to protect the privacy of the owner of the slab.
4a. When gold possession is legal, people can use any suitable amount they like. They still have to stick to unprocessed gold from reputable producers.
The Vietnamese government owns the Vietnamese company SJC which issues and trade gold slabs with weghts of 0.05, 0.1, 0.2, 0.5, 1 Vietnamese ounces. The trade mark SJC is vigourously defended by Vietnamese government. The photos of one such Vietnamese 1 once (37.5g) slab are shown here in this section. SJC company sells people these gold slabs and also buy back from them.

4b. When possession of unprocessed gold is prohibited, people still can use gold rings made by reputable jewellers in weights of 0.1, 0.2, 0.3 troy ounces as their medium of exchange.

5. The costs of owning gold.

(This section has been added on 10 Aug 2017)

This varies a lot from country to country and even gold seller to gold seller. It can be anywhere between 0.6% and 2.5% for a complete cycle of buying and immediate reselling.

For example, on the date of 10 Aug 2017, the prices and sell-buy margins are:

0.55% in Vietnam, Saigon (SJC gold TP HCM 36,350,000 36,150,000)

2.5% in Australia, Melbourne, (1oz ABC Bullion Pool Allocated $1,638.30 $1,598.81)

In Vietnam, the cost for buying and then immediately reselling gold slabs (such as the one pictured in this blog) is about 0.55%. This compares well with the foreign exchange cost of 0.2% for buying USD then immediately reselling it.
On the other hand, the Vietnamese VND inflation rate has been designed to be 7% (= 4% against USD + 3% by USD),. Only after 1 monrhs the person who bought gold has already been ahead.

6. Storing wealth using gold.

Example: You want to buy a $80000 house and each year you can only save up $20000.

If you save your fiat money, then after 4 years you will have $80000. If yearly inflation is 6% the price of that house will be then

$8000×(1+6%)×(1+6%)×(1+6%)×(1+6%) = $100998 .

So you are $20998 short of your target!

If you bought gold for the first 3 and 1/2 years then after 4 years you will have in hand

$10000*(1.03)^7 + $10000*(1.03)^6 + $10000*(1.03)^5 + $10000*(1.03)^4 + $10000*(1.03)^3 + $10000*(1.03)^2 + $10000*(1.03) (gold to sell) + $10000(cash)

= $10000*((1.03)^8-1)/((1.03)-1) = $10000*8.89233 = $88,923.

In this case you are only $100998 – $88923 = $12075 short of your target!

So gold is much better than cash (fiat money) for storing wealth. You are still short of target since the actual value of your new cash saving reduces every year.

7. Conclusions.

Gold is much better than cash even in any medium term (abour 3 years duration) financial plan.

You can also see why many governments want to outlaw the possession of unprocessed gold: Their fiat currencies are inferior to gold.

Please note that this author is neither associated with gold industry nor having any interest/betting on gold price movement.

Disclosure of interests:

The author has no interest in any gold price betting, has neither relation with SJC of Vietnam, nor with any organization working on gold.


[1]. ,

[2]. Cashless bartering for survival, posted on February 20, 2017,

[3]. tonytran2015, ,, posted on December 5, 2016

[4]. top ten deepest mines world South Africa,

[5]. Sale of UK gold reserves, 1999–2002, wikipedia,,_1999%E2%80%932002

[6]. Joseph Goebbels quotes,,

[7]., accessed and added to the list on 13May2017.

Augmented after 2017 June 11:

















Tuesday’s announcement by the Department of Justice of a guilty plea by a former trader of JPMorgan for systemic “spoofing” and price manipulation of gold, silver, platinum and palladium traded on the COMEX and NYMEX futures exchanges (owned by the CME Group) sure seemed like a very big deal …. The infractions occurred from 2009 to 2015 and the trader admitted to engaging in a conspiracy to commit market manipulation on hundreds of occasions, with the knowledge and consent of his immediate supervisors. [24, 25]









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