Posted by: graemebird | October 26, 2008

Thinking In Silver And Gold/Cash-building In Liquified-Coal.

Right at the moment you can ring up the Perth Mint and order a kilo of silver. Last time I looked you could get a kilo of silver for about $540 AUD and it will take about four or five weeks to get to your place. The cost of the metal will be about 20 AUD above spot. The postage will be about $17.50. The insurance about $1.80 for the trip. Thats a pretty good price. The silver price will go up. But still its not worthwhile for someone like myself to buy these things on my credit card. Particularly as the interest is not tax-deductible and they will probably hit me for a tax if I offload it at a higher price.

But for those of you who are not in debt I suggest that accumulating some of this gear every few months is probably a good thing. As our country might be arm-twisted into following similar inflationary policies as the Americans are about to. The good news is that our man Stephens,  though by no means perfect, is something of an inflation hawke.

But this thread is about how we would likely behave if we were going to do the right thing, phase out fractional reserve ponzi-schemes in all their forms, and phase out from fiat-cash to 100%-backed commodity-money.

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My proposal is simply to have a tax exemption for any revenues gained in the provision of 100% backed commodity-money. That means that if you have a product, that can be monetized, you can avoid the company tax, the excise tax, and interest on loan contracts when it comes to mining, refining, shaping, selling, lending, distributing or storing this commodity.

At the same time, when this is in place, we want the fiat money costs to be recovered by the users of fiat-cash. We of course want to be phasing our fractional reserve, and adding cash to prevent monetary contraction, but then we want to be phasing that same cash out. And the banknotes are provided in such a way as the costs are not user-pays. They are expensive to maintain. But I believe they are maintained out of the Reserve Banks ill-gotten inflationary gains.

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Nobody is taking up liquified-coal as a money if there is even the remote possibility of providers pyramiding on their holdings. All such ponzi-schemes have to be made illegal or utterly impossible. Because it would be a great shame if we cannot take up other alternatives apart from gold and silver since to take up gold and silver alone will be to inflate the price of gold and silver above their economic price.

This is not what we want from the monetization process. What we want is people slowly trading in their fiat for commodity-money, but only at a rate that stops the price of that commodity from falling into its lower-range. We don’t want people monetizing at a rate that drives any commodity into record highs.

Let me clarify that. Obviously if we could change to gold and silver 100% backed money tomorrow I would accept that and be happy for it. Even if it drove silver to $100 per ounce and gold to $5000 per ounce. I’m not saying I don’t support a very fast changeover. What I’m trying to show people is the perfect cost-free changeover that will save us resources rather than cost us resources.

And for that we need people accumulating a wider range of commodities and for this to be manifested in a lot more storage of these commodities.

Now I’m saying the best outcome would be if the majority of the slack over the next thirty years or so was taken up as stored diesel or liquified-coal. Its not that we would want this outcome mandated. I just hope that business finds the way around the costs involved with storage and that this is the outcome. You put the tax-exemptions in place and outlaw and phase out any pyramiding and you accept whatever outcome there would be. But I would want to go over what a magnificent outcome it would be if the majority of peoples cash holdings were taken up in diesel/liquified-coal.

Now as I’ve explained, we neither want people going into debt to accumulate commodity-money. Nor do we want them blowing out the price of any one commodity money into new highs. Rather we simply want the accumulation to go ahead whenever the commodity goes below what is believed to be some sort of mid-range.

Now that silver is around $9USD and gold is below $800USD and there are shortages and time delays, clearly gold and silver are below their long-term mid-range and it would be a good thing, if we were transitioning to commodity-money, for people who were not in debt to buy into these dips at times like this.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

It is precisely for the already mentioned reasons that we would want other commodities to take up the slack. But if we can get this accumulation happening with liquified-coal it can help us through the hard times of energy-deprivation and corrupted markets that we face over the next twenty or thirty years.

Under these proposed rules the monetization of a particular commodity would allow the making and distribution of that commodity to be tax-free. Right there we have a way of boosting our production of liquified-coal and developing an independence from the totalitarian regimes that we are currently dependent on.

Previously I have explained how monetization amounts to the ideal in resource management. Taxing a resource impoverishes the supplier, and reduces supply, even as it reduces the amount consumed. Whereas monetization increases the amount produced but also increases the investment in substitutes. It reduces the amount consumed during what would otherwise be times of very low prices. Yet it will lead us to avoiding these large run-ups in price which comes with sudden shocks to supply.

Liquified-coal is produced by getting material that is chock full of carbon and using heat and hydrogen to break those powerful carbon-to-carbon bonds, adding carbon-hydrogen bonds, until such time as the solid hydro-carbon becomes a liquid-hydro-carbon.

The Fischer-Tropsch process is well-known. But the paths by which almost any organic material can be turned into liquid-fuel are likely a great more flexible than that. We could have a nuclear electricity production facility providing electricity for the grid, and on the off-peak times this electricity could be used to produce hydrogen for the liquification process. As well as the nuclear reactors for the nuclear plant, the liquification process itself might use heat provided for it by a nuclear reaction.

We see here that the monetization of liquified coal will increase the demand for coal and help fund the following:

1. The growth of nuclear-electricity.

2. The mining of uranium.

3. The building of nuclear reactors.

4. The building of coal liquification plants.

5. The substitution from coal to other materials for the purpose of producing “liquified-coal”

It will also help us by:

1. The breaking of any attempt to embargo us or to force a high price for imported fuels upon us.

2. It will help stop the price falling to ridiculously low levels (like now) via outrageous market manipulation.

If pyramiding is outlawed and there are no price controls its pretty easy to see what monies will win out.

It will be silver or digitized gold that you and me will think in. Most likely silver. The rich guys and international traders will most likely think in gold.

What I’m saying is that we can think in silver but that if we have the opportunity to we may well choose to accumulate cash balances in other commodities. If we feel that the current gold and silver prices are ahead of their long-term price and the current liquified-coal price is lower than its long-term price we may well choose to accumulate our cash balances in liquified-coal.

Now even as we do so. Supposing we go to the shop. Since under a situation of no-pyramiding and a lot of gear in storage, we would expect prices to be quite stable….. Well we could have several thousand litres of liquified-coal in our debit card. We go to get some groceries. We are thinking in silver. The grocery prices are listed in silver. But we take the money out of our liquified-coal account.

Transactions between 100% backed commodities are very cheap as the e-gold company has proven. We can draw funds out of our liquified-coal account, it is converted to silver, than the silver changes ownership to the grocery-store. All this can happen instantaneously and for much less transaction fees than the banks currently charge.

Now there is no reason to suggest we cannot get to this brilliant state of affairs that would have all sorts of spin-off benefits. But good money doesn’t just happen and never has. It only happens through INTENTION.

 

More Later.

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Responses

  1. Now get this straight you ignorant blockhead.

    I’M ONLY CLAIMING WHAT I’M CLAIMING. I’M NOT CLAIMING ANY STUPID LIE THAT YOU MIGHT WISH TO PUT IN MY MOUTH.

  2. Greshams law is NOT merely anecdotal. Its one of the most reliable and sound laws that we know. As soon as lesser money trades at par with superior money the superior money is driven out. This can happen with pyramiding or with price controls between monies.

  3. “Graeme – if the US dollar was so piss poor, why does the US gain a seigniorage benefit from people who didn’t need to use it?”

    Well why do you think? Its because most of the other currencies are even worse. But this position that the US currency holds…. its not a forever thing now that Paulson has landed in Washington.

  4. If we wanted to outclass the Americans and give ourselves all the seignorage we’d have to have a crawling revaluation against the Americans yet still allow for the wide dispersal of our currency. This would have to be acheived with INTENTION. It wouldn’t happen automatically.

    We could make a gain from that if we got rid of all of government debts (state,local and federal) and used the currency creation as a sort of low interest loan for ourselves. We might wind up with our price level falling about 1 or 2 % every year.

    But monetary policy isn’t about trying to grab seignorage.

  5. Greshams law of bad money driving out the good occurs when two monies are trading at par and one is better than the other.

    This is not really the case with US dollarisation is it? At no point do USD and pesos wind up trading at par. They cannot be confused in this way. Hence USD can exist alongside pesos and won’t wind up getting buried in the fields or exported.

  6. Yes its true enough that you won’t have our currency falling in value badly enough against other monies without the spontaneous remonitization of gold and silver. But there are all sorts of rules going against this. So things would have to get pretty bad. And the reserve bank and the banks will rip us off horribly. But they won’t let things get quite this bad.

  7. Greshams law is no “quip”. Its a law of economics. Pyramided money will drive out the 100% money since they will trade at par.

    If one money gets to be too outrageously useless another money may take over its true. This doesn’t contradict Greshams law. Since Greshams law is about one bad money and one good money trading at par. Or if there is a price control between the two monies. Which amounts to the same thing.

  8. Here is something interesting from JC just to show he isn’t entirely useless:

    “If the Japanese don’t stop the appreciation of the Japanese yen against the major currencies we could be days away from a crash of 20+% across the globe.

    I never realized this side swipe as things are moving very quickly and it’s only come to me this weekend after witnessing what has happened in japan/asia over the past few days.

    Japan must stabilize the Yen and change its direction in the next few days and move to zero interest policy asap.

    Japanese investors have been killed over the past few weeks as a result of the yen’s appreciation.”

    You see these lunatics lurch from one disaster to another because they don’t understand the situation and aren’t interested in doing the right things. Here is Paulson futilely trying to shore up the banks at the expense of the taxpayer. And he tries one thing on and another disaster rears its head.

    Supposing if they resolve this yen disaster.

    Well Bernanke and Paulson have put a poison pill in the water a few months earlier. They have crashed the commodity markets in this short-term-clever long-term-idiotic move to recapitalize their banks.

    This happened when they guaranteed Freddie and Fannie. All the short-money around the world started flooding in the bail out of the short-positions on these losers. These guys all had to sell out of their commodity positions to do this and so now commodities are too cheap which is a boomerang waiting to come back and whack these oh so clever lunatics in Washington.

    Then the next thing they did is try to continue this recapitalization with a high-pressure bialout. Now they have put the dollar in trouble and they have convinced all these Europeans to flood their own systems with money to bail out their own banks….

    … So then a new disaster arises. The Japanese yen starts appreciating. Now JC reckons that the central bank must of Japan must act like this incredible welfare agency and give away cheap loans to people who are insolvent. And it has to debase its own currency or there will be a disaster. Since for many years now we have had the yen carry trade.

    So supposing that Paulson and the JC’s of the world convince the Japanese to do these counter-productive things?

    What do you imagine will happen to the commodities boomerang. It will come back to destroy all these lunatics.

    If its not one thing its another. There is no way some sort of uber-trader can manipulate his way out of this deal.

  9. now JC reckons that the central bank must of Japan must act like this incredible welfare agency and give away cheap loans to people who are insolvent. And it has to debase its own currency or there will be a disaster. Since for many years now we have had the yen carry trade.

    No bird . the BOJ wouldn’t be lending out any money. It would simply buy yen from the sellers of Yen against the US dollar.

  10. Nonsense. You claimed that you wanted the Japanese central bank to reduce its interest rates to zero. This implies massive increases in its lending.

  11. “Japan must stabilize the Yen and change its direction in the next few days and move to zero interest policy asap.”

    Don’t try and mislead third parties on my site JC. You will come off second best.

  12. “No bird you fucking idiot. the BOJ wouldn’t be lending out any money. It would simply buy yen from the sellers of Yen against the US dollar.”

    Well you screwed this one up didn’t you dopey?

    If the bank of Japan bought yen it would further APPRECIATE the yen. If it bought dollars and sold yen how is this NOT welfare. And what would it do with the dollars other then lend them out?

    Clearly you are ignorant. A little bit of traders knowledge gleaned here and there can be dangerous.

  13. Yes and they need to lower interest rates to zero as the impact of the appreciation of the yen is hugely deflationary for them. Even zero could be too tight.

  14. So you reckon these guys need to become this huge welfare machine, where they funnel out nearly unlimited amounts of loan money to people who are fundamentally insolvent!

    Great call JC. Thats one of the key drivers that got everyone in trouble in the first place. Thats what brought Iceland down. The famous Japanese carry trade that everyone talks about. And you are saying “more of the same” is the answer. Whereas in reality this is just kicking the can down the road.

    Uber-traders don’t make good central bankers as we have seen. Field workers are not field marshals. No matter how well paid they are. The Japanese have to line up for 10c on the dollar like everyone else when their rotten lending goes amiss.

  15. On another note here is some gentleman talking about the racket that went on at the Goldman Sachs house of ponzi-schemes:

    “They’re making not only the trading commissions, but they’re making the negative rebate. They’re charging that hedge fund some interest rate for this stock that they borrowed, that in this case they’d be charging it to four different guys, four different hedge funds.

    In fact, there’s really some evidence that this is the last great business on Wall Street. You know, the transactional business…what is Goldman charging its clients? A half-cent a share in trading? I mean, that business is gone.

    The last I went through the numbers for Goldman – and they’re public and everything – and basically two-thirds of their profit is from its proprietary trading. It is a hedge fund – it’s a hedge fund with the name of bank on the door.

    Then one-third of the profits come from being an investment banking house. And of the third that comes from being an investment banking house, of course there’s some from M&A activity and IPOs and such, but it looks like primarily the prime brokerage business. Well, prime brokerage is just a fancy name for the stock loan business.

    I mean, prime brokerage is trading shares at half-a-cent commission, or whatever they charge now, and stock loan repo. So it’s the last really good business on Wall Street as an investment bank. And it’s especially good if you can sell the same thing, or rent the same thing, three or four times over. [15:34]”

    JC claims that all this sort of stuff comes from “truther sites”. He’s bullshitting of course. He was in banking in the US until 2002. He knows better than that.

    Here is the link with the tape and the transcript. Listen to these guys and you tell me if they sound like “truthers,”

    http://www.financialsense.com/transcriptions/2007/0331.html

  16. “Here seems to be a way to shut GMB up- the last comments at the ‘Newsweek’ thread were not answered! I just pointed out you couldn’t stop individuals inventing FR Banking with their own resources, whether it was good or bad. No reply from anyone!

    Comment by nicholas gray | October 27, 2008”

    I’m moderated Nicholas you idiot. And of course you can stop fraud. You make it illegal and fine them or throw them in jail if they break the law.

    Currently there is big Tort law being planned to bankrupt the racketeers. The only problem is that the racketeers are often the same people being bailed out by the US government.

    Goldman Sachs for example.

  17. Its not possible to pyramid with your own resources Nicholas. It takes four parties and three moves to even begin the process. For you to claim that you cannot stop people pyramiding their own resources means you don’t have a clue what we are talking about.

    You tell me Nicholas how you can even POSSIBLY pyramid your own resources?

  18. Here is the calibre of argument we get from these monetary cranks. Here is an argument from nicholas gray. But I cannot find the argument within it. I suppose its really the “Hi I’m nicholas gray and I am an idiot” argument.

    “Graeme, why don’t you open something that you don’t call a bank, but which otherwise would be a bank (Whole Metal Depository Store?), and let people put their precious metals in it? I don’t know why they would, except for safe-keeping, but you might get some.
    Now how do you, as the Store-keeper, make a profit from this? Would you charge them a holding fee? If you get robbed, what do you repay them with?
    And how do you stop the customers from inventing FR by themselves? I might have 100kg Gold (don’t I wish!) at your store for safekeeping, and I issue a note to someone giving him or her control of some of that gold. If none of them actually collect it, but just accept the notes, I might end up giving 1000% of the gold to other people, all without your participation, or even knowledge! (The obvious solution, outlawing customers, might be impractical.) Here, the customers would be guilty, and the banks totally innocent!
    I think FR is here to stay, regardless of whether it is good or bad.

    Comment by nicholas gray | October 24, 2008”

    Its pretty obvious that if you weren’t a licensed trader that the government supported you would indeed be convicted of fraud and you would be put in jail and lose your gold.

    So thats the end of that problem. But what is the argument?

  19. Look Jason. Have you got any sound argument in favour of your fractional reserve system? Or against my system? Or in favour of naked short-selling (NO NOT SHORT-SELLING YOU LYING DOG CAMBRIA)

    Lets repeat that just for the lying dog Cambrias sake. Jason have you found an argument in favour of NAKED-SHORT-SELLING? That is to say pyramiding shares?

    See if you can understand what is going on by listening to this fellow:

    http://www.financialsense.com/Experts/2008/Burrell.html

  20. J the Christos fella. You sound like a fellow jumping up and down with his fingers in his ears. Don’t hide behind the retard Jason. Just make your case.

  21. To people deriding the idea of the “whole metal depository store”, maybe you should take a look at the Swiss Banking system.

  22. Alex. Can you try and keep the issue alive on Thoughts On Freedom?

    Basically the usual goon-show has used the “thread-of-doom” technique to close down the debate over there and Humphreys has put me on moderation.

    All our other efforts are useless if we cannot get this issue right.

  23. I don’t think there’s much point in trying to persuade the people on the other side of the fence. Perhaps it would be better to persuade the people sitting on the fence, ie the general population who as yet don’t have strong opinions about matters economics.

  24. Alex this is all par for the course. And there is no way around it. The questions and accusations come in thick and fast since any one question can be answered with the questioner looking like a moron. But since they aren’t interested in an answer I can barely wipe the posts quickly enough.

    This is what we might call the actions of HOUSE-NIGGER-TOWN. Bear in mind I would not apply the term to anyone of swarthy skin or who had even a passable tan. Its a technical term that can be understood by reference to the wonderful explanation given by Malcolm X.

    You see all the people who are using the Thread-Of-Doom technique have been doing so for two-three years. They aren’t interested in whats right or what is wrong. For yea they are house-niggers. Cambria might be Massa. But the others by and large are house-niggers. And they are quite happy with the immense damage that is being done to the rest of us by these various pyramiding schemes, because for the time being they-are-alright-jack. Its as if they are saying “You are just jealous because you don’t get to steal also.”

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