Tentative last safe date to get your Bernankes traded for something of intrinsic value is the end of the first quarter, 2010.
Well...you you could just take my word for it and save both of us some valuable time, but you probably want enough details to know how I made this dizzying leap a couple of weeks ago. My landing spot has been confirmed to my satisfaction by what Chris Dodd is up to.
It is the usual combination of what the dogs did not do in the night, how I would solve the problem if it were mine and I were a Statist, and wisdom accumulated from my gracious hosts at Agora Financial and a lot of time reading obscure articles and foreign newspapers. (English papers can be far more informative than ours.)
I am supposing that you are aware of the money-laundering scheme which funds the current regime? Congress raises the debt ceiling, Treasury Timmy burns out bearings on the printing presses and funnels the money over to Benny Big Bucks; the money swooshes through the system several times to US and foreign banks and corporations, including that which is smuggled over so that other governments can buy treasuries with the newly-created money substitute, sticking to assorted fingers in copious amounts. Fiat currency is rather like depreciation on your house, as interpreted by your insurance company which does not recognize that the value of a thing is what it costs to replace it. Every time fiat money changes hands it is worth less for the reason insurers give: it's older.
In the meantime, the Fed has been very busy buying up sliced and diced materials to have sausage to hang in the window. (Okay, call them toxic mortgages, but while I'm telling you the roof is really going to fall in this time we may as well indulge in a little flippancy.) Ostensibly, the Fed is rescuing Fannie Mae, Freddie Mac, and assorted banks who have no idea who holds title to many properties any more, and being the savior of what Hillary refers to contemptuously as the little people and their underwater mortgages. Right.
If you insist drearily on having that in dignified macroeconomic terms, the Fed is buying up GSE's by the trainload. The Fed has also announced that it will purchase another 1.2 trillion (yes, TRillion) in treasuries in the next quarter (and a mere two or three hundred billion more before the end of the year) and that it will buy no more after that-which was why I gave you the 31 March deadline. It is busy taking on all the debt it can...but has warned it will not continue to do so.
In the meantime we have learned from a censorious Congress that the Fed cannot account for umpty trillions and that it declines to say which banks it bailed out because that would jeopardize those banks' standing and gravitas, as well as making us all as mad as fire.
Congress, outraged on our behalf, gathered 285 sponsors for a bill to Audit The Fed. Gasp, what an idea, particularly since it hasn't been done honestly in nearly a century. So...how is it that that sort of power and support cannot pass the Bill and send a team of auditors trotting over? Once again, what the dogs did in the night was nothing. In speech they support the idea, but not with deeds.
Still got your eye on the wrong shell, huh? I doubt the pea has been under any of them for over a decade-to be generous. We can't audit the Fed because it isn't time. There are those who are connected who haven't finished closing out their positions in greenbacks, long a derogatory term. Why can't we audit? Oh, you modern generation. Because as soon as the Bill passes a lot of foofurraw will be kicked up, and the dead cat will drop half as far again, judging from the laws of physics, at least. When the team announces even a preliminary conclusion in Congress assembled, we're going to see a mass version of Captain Renault in Casablanca: We are shocked to learn that gambling has been going on in this establishment!
Hang on, Sweeties, because it gets much better from the perspective of the big boys. What happens to corporations that have no assets and shocking debts? Okay, so some of them are anointed solemnly as too big to fail, but in general they declare bankruptcy. Most of the proletariat is unaware that the Fed is and has always been a private corporation, but we Shooters are better informed. WE know that the Feds (note the S) can wash their hands of the Fed at any time! By definition the Fed cannot be too big to fail. Look! the government will cry. It already has!
Now, if the Fed is undergoing bankruptcy proceedings while Bernanke heads for some area that never heard of Federal Reserve Notes for his health, how will the government continue to fund junkets, pay off voting blocks, and send out pay checks? Obviously, there has to be some sort of money, and Congress and the Auditors will have established that the Fed's version is suitable only for the board game, Monopoly, and putting in the Chic Sales. Whatever shall we do?! You there, in the back of the class?
Very good. The king is dead, long live the king. The Fed will be dead, but fortunately Chris Dodd, in his foresighted way, arranged recently for the three functions of the Fed to be transferred to new departments of the FedS. Besides, it says right there in the devalued Constitution that it is the responsibility of Congress to decree what money is. Son of Fed is born...and what happens?
Well, anyone who didn't know about the scam in time to flee with his stored value is going to take a brutal kick to the codpiece. The stock market crash and housing bubble will be regarded fondly as the good old days.
China is obviously in on the plans (see Hillary's latest negotiations), and probably everyone who counts knows. They may not have told the upper levels of Bangladeshi, Icelanders, or the Yemeni...BRIC, OPEC, and the EU will all pretend to be furious, but most countries have been very busy attempting to devalue their currencies without anyone else recognizing that they're doing it. Trade balances, and that sort of stuff. It may be amusing to watch the scramble to refloat first.
Don't break out the champagne too early celebrating, because there is just one other little point to this exercise.
I already pointed it out: we have to have something we call money. Obviously no one has anything as rash as gold in mind, and I can't help wonder how many of the golden ingots in Fort Knox-if, indeed, there are still any there, that being another place that doesn't get audited-may turn out to be genuine gold-plated tungsten. How convenient to have another metal with the same specific gravity as gold.
And this means? Yes, you there? Absolutely. It means that we must have a new currency to differentiate between new and improved genuine United States funny money and the disgraced notes of the Federal Reserve, which was neither holy, Roman, nor empire.
It doesn't matter whether they call it the Amero, the Globo, or the Obama in honor of a man who deserves precisely that sort of adulation and appreciation for his accomplishments. Snicker; think of it as America's version of the Nobel Peace Prize. Would that it were that harmless. Anyone who expects to get a 1:1 swap for his greenbacks leave quietly now, please.
My most sanguine guess-and it is only a guess-is that we'll turn them over for 30% of face value. And that was sanguine meaning hopeful. It would not surprise me at all if you are offered ten per cent., or even one per cent., at which point I suggest they would make great wallpaper. Those still holding traditional dollars will be exsanguinated. My bet is on the Amero, since I don't think the coins I have seen were stamped D to indicate that they were turned out by the Franklin Mint as collectors' items. There were plausible reports that China received a shipment of eight billion of them already...and perhaps more, who can say? Oh, I know, I am such a conspiracy theorist. Other fringe benefits include claiming that the new currency will fight the drug war and smacking those whose assets are stored overseas as dollars still. Can't bring 'em home without exchanging them and explaining where you got them.
One of the pigeons devalued currency will kick into the fire is a large increase in the price of items with the lowest cost. Do you really suppose anyone is going to round down on a can of soup that costs $1.12 in debunked FRN? No, indeed, my friends; the rounding will be up and-just as tires soared immediately on news that future tariffs will be levied on the Chinese-those items will probably see hasty increases before the fact. That's where the big money is going to be on the exchange! Lower case e. And, uh...who are the most famous purveyors of low-priced goods? Do I have to do all the thinking around here? Aren't these things pounding you thud, thud, thud? Wal-Mart and thousands of dollar stores full of geegaws from China, of course. The one I use has excellent merchandise and an honest policy. It changed from Everything A Dollar to Everything $1.09″ a few months back. Given their choice of reducing quality or accepting that their costs had increased 9% (that being a fine example of There is zero inflation.) they chose to raise prices. Sensible folks. Excellent value for the money. Their version of Vick's Salve is every bit as good as Kroger's $4.39 generic and Mr. Vick's original product which was up over seven the last time I looked. They sell a great many everyday objects which are sturdy and well-designed.
Okay, Sugars, you got all that? The debt is all being loaded onto the Fed, those in the know are scurrying to invest in kukui nuts, baht chains, ink cartridges, whatever they can find that is tangible, and in the fullness of time Mary Renault will be shown right again because The King Must Die.
You heard it here first, and if you don't get your money out of the mutuals, your CD collection, the Market, banks, and treasuries on your bottom line be it. I stopped to muse gently on the fate of T-bills, but concluded they will merely be revalued. Which doesn't mean there is not a way to repudiate them, only that I have not thought of it yet. Wahoo, would the FedS enjoy that even more than confiscating your 401(K) and replacing it with a genuine Government Retirement Account backed by the full faith and credit of the United States government, a project still in the works.
Killing the Fed like Caesar on the floor of the Senate is the perfect solution for everyone except those of us who are in line to become destitute. The government is off the hook for gazillions with a face-saving explanation for why they replaced the currency. Devalued it? Never!
Bernanke won't even murmur, Et tu, Obama? If my analysis is correct, he knows what is coming and helped arrange the biggest coup since FDR confiscated private gold.
Linda Brady Traynham
Mrs. Traynham, what if you are wrong? You had the fun of reading my prose and getting out of FRN's is the most sensible course for many reasons.
Are you never serious? What's more serious than telling you the bottom is about to fall out of the basket you put all your eggs in? It doesn't matter how you have diversified your assets if they are all denominated in dollars. If they are revalued in a new currency you have no choice of rejecting you'll discover that broken eggs on pavement aren't good for much, although they may go well with splattered stock brokers of lesser rank.
Did you come up with this all by yourself? No, for once I did not. A very bright friend brought me the first few pieces and asked what I thought. I admire his grasp of things political and economic, the floor shifted under my feet, and I went looking for more straws in the wind and found a couple. He prefers to remain anonymous. Thanks again, fellow.
How do I tell if the gold I have is real? Pour aqua regia on it and wait until the acid has dissolved a hole a quarter of an inch deep? For centuries people bit gold coins. Don't do it; dentists are very expensive. Besides, what are you going to do if you whack a bar briskly with a heavy carving knife and discover that beauty is only skin deep? My guess is that the longer you have had it the more likely a bar is to be genuine, and you will lessen the numismatic value (if any) if you cut into coins. Best answer? Assume yours is real because you can't do anything about it. Don't buy any new gold from less than impeccable sources and think carefully about further new coin purchases. I'm sure coins can be minted in tungsten and gold-plated. Kick yourselves for not buying sterling silver table ware; that isn't likely to turn out to be tungsten. Oh...go ask Byron King!