Thursday, February 7, 2013

The Fiat World – How long will it last?

The macro-economic environment is now really heating up with all of the paper money printing by the world’s central banks. Fiat financial systems are based on superficial confidence rather than sound business principles – but right now that is working. Today saw new highs worldwide in many indexes and huge multinational stock prices.  HAPPY DAYS ARE HERE AGAIN!!
As long as the world perceives these paper currencies being perpetrated by banking cartels as holding of their value, the game will continue.  But how long can this last?  Many market commentators, myself included, discuss the pending doom of the current ”spend all you want we will just print more” central bank montra. History has shown that eventually all fiat currencies fail. But history only rhymes rather than perfectly repeating and the paper printing fiasco that we are entering the final chapter is far bigger than any fiat system ever conceived of. We are 70 years into this paper credit boom that has laden the world economy with about $200 trillion of debt. This is unsustainable – but it is naive to believe that anyone can time the demise of the bubble of all bubbles with any precision.
I want to share with you one of the mechanisms at the disposal of the banking cartels to keep the confidence of this paper wealth system we are currently in. This is a quote from a very reputable investment news company Stansberry and Associates and it is referencing one of our governmental  ”regulatory agencies” that the banks have in their back pocket,
- happy reading and don’t be shy to send this to your Congress people and anyone you know that thinks that market “regulation” by our government is the answer to anything…
The Securities and Exchange Commission (SEC) is once again doing something that should make you furious. It’s suing one of the few ratings firms in the country that actually publishes real, useful ratings on insurance companies, banks, and bonds. The firm is called Egan Jones and its founder, Sean Egan, is one of the most trustworthy, earnest, and honest folks I’ve met in finance.
Interestingly, his business model is like mine: The folks using his ratings pay for them, unlike Moody’s and Standard & Poor’s, where the bond-issuing banks (aka, the big banks) pay for the credit rating. SEC rules require every bond sold in the U.S. come with at least two ratings by its approved ratings agencies. These “approved” agencies are the same ones that rated every horrible subprime mortgage as triple-A during the credit bubble. Guess who didn’t? Sean Egan.
Like me and a few others, Egan warned loud and clear that the subprime mortgage market suffered from massive problems. He wouldn’t go along with the charade that was orchestrated by the big banks and their SEC lapdogs. You’ll never guess why the SEC is suing Sean Egan. It’s not because of his ratings – which have always been vastly more accurate than the SEC-sponsored firms. No, it’s because he applied to become SEC-approved. The agency is suing him for civil securities fraud because it alleges he filled out the form incorrectly. I’m not making that up.
Sean Egan is a pioneer in the credit-rating
agencies business. He fought the SEC for decades, simply to be allowed to
pursue a business model that wasn’t inherently corrupt. [Sean Egan's business
depends upon the buyers of bonds, who pay for his ratings, as opposed to the
major rating agencies who are paid by the sell side.] The lawsuit against Sean
Egan removes the last pillar of any credibility or honesty in our capital

Monday, November 5, 2012

Fiat World Everywhere! - Coinhuskers

(When will the world figure it out?)

“Fiat money is an intrinsically useless product, used as a means of payment.”
Source -

Every nation today is using fiat money backed by debt. Fiat = money by decree some entity has to enforce it via regulation or law. Fiat money can come in different forms. Debt based fiat money is the current form today enforced by central banks around the world. The fiat money model today originated with the Bank of England in 1694. Fiat money is borrowed into existence and then interest is owed back to central banks.

The fiat money model simplified... We find some trees - make some paper - find a printing press - put a nice design on some paper - add some ink - add some #'s - enforce some laws to make fiat money legal.

Fiat money = debt. Debt = borrowing. Borrowing = interest (funny money for banks). No debt/borrowing = no money!

Further explanation of fiat money in action today

Centrals banks are private monopoly perpetual debt machines that lend fiat money to whomever living souls will borrow their debt and pay interest back to them. Continuous debt is the tool to keep economy afloat. Banks must attract as many people as possible to go into debt to borrow fiat money so they can collect interest. This explains why you'll get a million credit cards offers in the mail. Central banks enhance their wealth by simulating commercial banks to make loans (risky) to collect as much interest as possible. All banks are essentially bankrupt from the first loan they make because they don't have the 100% reserves to cover the promises they loan out. Fiat money is loaned to banks. Banks only lend promises back by a signed document, without a signed document and loaned deposits to banks there is nothing to lend. 

Central banks lower interest rates to simulate as much borrowing to keep the economy afloat. Citizens assume their getting a great deal to buy goods/services when really it is encouraging citizens to borrow and pay interest to banks to keep the fiat money game going. A delay between new loans being created and repayment/interest being collected allows for systematic failure of the system to be postponed. Reason I say postponed is because eventually exponential growth catches up. 2008 was a brief preview when two of the top 5 banks went under: Lehman Brothers & Bear Sterns. Risky loans caught up to these two banks the repayment of interest on loans could not be made.

Propaganda babble informs us to save the system we must bailout the banks. Taxpayer fiat money foots the bill. Central banks must continue to issue/buy their own debt to keep fiat money alive. If the public opts for other forms of payment, fiat money would go to its intrinsic value of zero. 

Fiat money throughout history becomes worth-less and worth-less until it is worthless! All have ended up being an ancient artifact. Fiat money should serve as a learning lesson... a lesson not taught in the conventional wisdom arena's such as old school financiers, public schools & universities. Fiat money value derives solely on trust & confidence which has always eventually faded away. 

For examples of different forms of fiat money in the U.S read article below: Rock-Paper-Silver!