“You’re the one that’s collapsing. Been sitting at that contraption for twenty-two years. It’s time you tried a girl.” – The Addams Family
It is related to the post. I promise. That makes it literature, so you have to like it. It’s sophisticated and swanky.
This series of posts was inspired by a great e-mail from Ricky. This is Part Two. Part One can be found here (Big Swedish Coins, Italian Women Pole Vaulters, and the Future of Money, Part I).
Let’s – again – state the basic thesis in Ricky’s words:
“I’m right there with you that collapse is coming to our house of cards because of the way they were dealt. But after all of the individual survival dramas play out, survival ultimately depends on a community rising from the ashes. And the glue of a community is ultimately the deals made between its individuals. And money is the encapsulation of those deals.
“So when the dust settles and the smoke clears and the phoenix rises from the ashes of the eagle’s nest, there’s gonna need to be a reset on money. On what it is, and how it works.”
Last time we looked at the financial history of the United States up until the Civil War. The first Civil War, not the next one (Civil War II Weather Report: Spicy Time Coming), I mean.
Just a few generations after the Revolutionary War, in the 1860’s, both halves of the United States defaulted on currency during the Civil War. The North defaulted on gold redemption in 1863, and the South printed Confederate currency like they were trying to make the Founding Fathers look like that one sailor that stayed in his bunk reading the Bible when the Seventh Fleet hit Sydney. My father-in-law swears that’s what he did, and no one with an Australian accent has shown up claiming to be The Mrs.’ long-lost sister.
Okay, after the Civil War, the United States is at least done with defaulting, right? I mean, we started up the Federal Reserve Bank™ in 1913 to stop these sorts of shenanigans, so that must have worked?
No. If the Federal Reserve ever pretended to have the mission of maintaining the stability of the dollar, it failed like one of Oprah’s diets.
Ricky sent this one. It’s perfect, with the exception that it doesn’t contain girls wearing bikinis. I think . . . we can do better. I think . . . we can Make Economics Sexy Again!
See, fixed that for you, Ricky. Graph is now 1000% better, unlike our currency. You can see her toes are pointed down into the sand, which shows that the value of the dollar is lower. Also, if I can point your attention to the years between 1950 and 1965 you can see what an amazing, um, time span that was.
In 1933, the United States had $4 billion in gold. Sadly, it owed $22 billion in gold that it would have to pay off in just a four years.
Solution?
Make owning gold by your own citizens illegal, and make them hand it in on penalty of going to jail if they don’t. After you’ve got those dollars, redefine the dollar so that it’s worth a lot less. Presto! You’ve stolen all the gold and then made the resulting “dollars” that your citizens have worth a lot less. Then you can give your cheaper dollars to other governments in payment. It’s like being Enron®, but with 100% less jail time, so it’s exactly like being a Kennedy.
So, yeah, I’d call that a default, too.
Finally in the 1970’s, the French decided that they could wake up from their wine and cigarette haze long enough to see that the United States was way short on the amount of gold necessary to pay all the debts that Johnson and Nixon created to get elected.
Defaulting on your currency is like a divorce: once is a mistake, twice is a trend, and by the third time….maybe, just maybe, it’s you. The French decided to be sneaky, and took all of their dollars, showed up at the bank, probably with a baguette under each arm, and requested gold. The United States essentially said, “Umm, we didn’t think that you thought we were serious about that. OMG, LOL!” and stopped giving anyone gold in exchange for their dollar. My scoring: yet another default.
Since August 15, 1971, the United States dollar is backed by our sterling record of fiscal responsibility, along with thousands of nuclear warheads. As Pop Wilder always used to say, “You get farther with a kind word and a sophisticated professional military and thousands of nuclear warheads than you do with just a kind word.”
I would my own discovery, the John Wilder Rule of Sexy Economics™: “You get more attention with bikini girl economics graphs than with just economics graphs.”
As careful study of this graph will show, the glorious years of 1970 led to the bare times to follow and a sensitive employment time in the early 1980’s. Unemployment never looked so good.
So, that’s a little bit about money along with some recent history. Looking at all of history, though, I’d say what happens with money depends upon the kind of collapse we expect to see. For the sake of simplicity, I’ll break collapses into three sizes. Why these three sizes? As of the time of writing I’m a bit thirsty, and the local convenience store only has three drink sizes. Here they are:
- Medium: The definition of a Medium failure includes monetary easing. It could also include a default that may cause economic hardship, but doesn’t impact the government of the country or the ability of a country to issue its own currency. This describes all of the defaults of the United States.
- Large: This involves the complete destruction of a currency. Common examples are Weimar Germany or modern-day Wakanda© In both cases, the currency imploded as the major engineering problem of the day was how to print more money, faster (hint: the Germans only printed on one side to double press production). In Germany, the change led complete dissolution of society and a rebuilding under . . . well, Literally That One Guy Nobody Can Mention. In Zimbabwe, it led to complete destruction of the currency and eventual loss of power for the guy who had been President for as long as Zimbabwe had been Zimbabwe.
- Big Gulp®: This is the complete destruction of the economic as well as political system. Rome, long laboring under a fiat currency, finally imploded and left behind a smoking crater that took hundreds of years to fill. Thankfully, refills are only $0.29 with purchase of the official mug!
So what happens to an individual in one of these failures?
In a Medium Failure, you can keep your currency, if you like it, but what cost $100 a few years ago probably costs $1000 now. Everybody adapts and you can generally go about your business, but you’re poorer and not at all happy, and it looks a lot like the Housing Bubble of the 2000’s. Another analogy: it’s like you were forced to spend way too much time with my ex-wife.
The Housing Bubble can be seen pretty clearly here. Somewhere. Keep looking. You have my permission.
In a Large Failure, ultimately the currency is toast. Your money is gone. But the country will restart the economy using either a new currency, or just by adopting an outside currency that’s moderated by someone marginally more adult than you. Zimbabwe’s unofficial currency is the United States dollar, but there aren’t enough of them to go around, so many people use mobile currency that’s (more or less) run by cell phone companies. When your cell phone company has a much better record of fiscal restraint than your government? Yikes.
A Big Gulp© Failure is social collapse. The biggest one in recent Western history is Rome. The Roman Big Gulp® was so big that it spawned collapse after collapse in nation after nation as Rome shrank away from areas it could no longer afford to protect or govern. Great Britain is an example of the collapse. After the last Roman Legion left people buried their money . . . and never dug it up. Why?
The silver content of Roman coins in the late Empire consisted of waving a bit of silver over the top of the molten metal before a coin was made. Rome had gone full fiat. Roman coins, in the absence of Roman troops, were worthless. Money itself was abandoned, and barter was the key, when local bandits and warlords didn’t just take what they wanted.
You want a worthless currency? This is how you get a worthless currency..
How do we get to these collapses, and how likely are they?
Medium Failure: I think that there may be as high as a 70%-90% chance of a Medium Failure hitting the United States in the lifetime of the average reader. The challenges we will face with medical care (More Budget Doom, The Rolling Stones, an End Date, and an Unlikely Version of Thunderstruck) and the possibility that the politicians won’t resist the lure of free money promised by Modern Monetary Theory (The Worst Economic Idea Since Socialism, Explained Using Bikini Girl Graphs). Read the articles at the link. They were written by a cool guy I know, but before he really focused on getting better.
As a reminder of how close this might be to happening, a penny costs about $0.02 to make, so to get your two cents worth only costs a penny now, and that’s after they took out all the copper. The copper alone in an old (pre-1979) penny is nearly $0.02. It would cost about $0.04 to make a copper penny today. A nickel costs $0.06 to $0.08 to make. A dollar in pre-1964 silver coins is worth $10.60 at the time of this writing, which tells you that we’ve really already failed at keeping the value of our money up.
Ricky points out some interesting alternatives to currency in some of the supporting links he sent. Just like Zimbabwe leaned on cell phone providers to be less insane and more trustworthy than the government, Facebook® is betting that its new currency, named the libra (LINK) will be less insane than the dollar, and has the added bonus of having the word “bra” as part of its name. Honestly, I would have thought that Facebook™ would have denominated its currency in selfies and named it the lookatme.
Student loan debt makes you feel like you can’t afford much clothing, and you’re between a rock and a hard place. And very fit and tan and covered with oil.
Large Failure: Large failures are big. I mean, it’s in the name “Large.” It generally comes after really horrible financial malfeasance for years. Our current medical payment system (which is really bad) will, if not fixed, lead to a large failure. Other notable large failures? The start and end of the Soviet Union. North Korea. Nationalist China. The country is still a country, and, with outside help and a new government, can, after a generation emerge from chaos.
I think there’s as high as a 40-50% chance this will happen within the lives of the average reader.
Big Gulp© Failure: What would lead to a modern Big Gulp™-Level, end of Rome type event? Nuclear war. Running out of hydrocarbons. Meteor impact on George Clooney’s ego. Catastrophic disease. Reuniting the Spice Girls®. Regardless of the cause, I could easily see a failure of this magnitude ending 90% of the human lives on the planet.
Big Gulp® failures might last 1,000 years, since the last one lasted 500 years. That means, since the time of Christ, Western Civilization was in a Big Gulp™ failure for 25% of the time. Still – it only happened once. I’d give a likelihood of 5-10% of this occurring within the lifespan of the average reader. Pray some of the Spice Girls© have bad tickers.
Okay, these aren’t the Spice Girls™, but their ascending height from left to right is the perfect way to show that whatever lines are on this graph are going up from left to right. I assume the thing going up is bad.
Checklist – Signs of a Currency Collapse:
- Gasoline is priced in goats.
- Bankers take cold pizza as mortgage payments.
- You can pay off your medical school student loans with the change from buying a candy bar.
- Bill Gates is bumming cash by cleaning windows of passing cars.
- $100 bills are too cheap to use as notepaper.
- Americans are caught sneaking into Honduras.
- George Soros begins laying off politicians and selling some on E-Bay®.
- The IRS starts giving a 25% discount for cash.
- Your financial adviser will have helped you get to a small fortune, but only if you started with a large fortune.
- You try to make a withdrawal at the bank and they tell you they have insufficient funds.
So, Ricky, there it is, Part I and Part II. See you in Stockholm to pick up our Nobel Prize™!
Don’t forget to bikini wax.
Well, congrats, you have discovered how to post economic graphs without panicking anyone. What numbers? Am I right? The gov would have done it, but HR complaints of sexual harassment from all the fat and unloved chicks.
Best line in Part I: “If you’re shaking your head wondering how we convinced the world that this was a good deal, well, I am too.”
Basically the answer was Murphy’s Golden Rule – and guess who had all the gold, both figuratively and literally? Bretton Woods was a deal that could only be set up when every country in the world except the US was shattered by WW2, and Bretton Woods led directly to what is known as the Triffin Paradox (also called the Triffin Dilemma) that was identified in the early 1960s and is now biting us in the ass. There’s no way out. Here’s a great overview:
https://realinvestmentadvice.com/triffin-warned-us/
Interestingly, all of those charts in that article are all basically exhibiting exponential runaway, everything except for the gold price. There is huge ongoing manipulation stomping the gold price down, and that’s the only thing keeping Triffin’s Paradox from becoming Triffin’s Utter Catastrophe. Once the lid goes off of gold prices and THEY start an exponential runaway, everybody will abandon the dollar as a fiat reserve currency in a heartbeat. It ain’t gonna be pretty.
https://www.moneymetals.com/news/2019/05/13/jp-morgan-precious-metals-manipulation-001770
Very good link. Gold if a large failure. Ammo if Big Gulp!
No, they don’t want anyone paying attention to the economy . . . ignore the man behind the curtain . . . .
You mentioned those English folks who buried their money and never came back to dig it up. Let’s not be like them. I’m thinking that either they found a way to get by with barter (and didn’t need the gold), became ill from a plague (and having gold didn’t help), or they got jumped by a (short-sighted) thief the first time they tried to exchange the gold for something useful. (Things have to be really chaotic when a gold-trader can’t even send his brother-in-law to follow you home to steal the un-traded gold.)
If you like the idea of storing wealth underground, try potatoes, carrots, beets, turnips, etc. Itinerant rascals are unlikely to dig them up to steal, and even if they did, they’re relatively heavy to haul around. Yep; that’s why I’ve been digging holes in the back yard…
Yup. Looks too much like work. And everybody knows food comes from a supermarket, right?
Great…in one stupid paragraph you’ve completely screwed the country over…
“Big Gulp© Failure: What would lead to a modern Big Gulp™-Level, end of Rome type event? […] Reuniting the Spice Girls®.”
Well here’s your Big Gulp© Failure ya big poo poo head!!!
https://www.dailymail.co.uk/tvshowbiz/article-7143857/Spice-Girls-bring-house-second-sold-Wembley-Arena-show.html?ns_mchannel=rss&ito=1490&ns_campaign=1490
…and this just in from the weather desk: the humidity is rising, the barometer is getting low… perhaps Pinoche’ Jr is going to attempt an ACTUAL modern day raining event?
You can never tell when that cold front is gonna come through . . .
Nooooooooooooooooooooooo!
I still say we need to reset the currency based on eggs. Ten new-buck cents pays a farmer for a dozen grade-A, large eggs. It’s more useful than gold, you can ramp up production to meet demand, and it’s impermanent. You always need to make more.
And if more are produced than demand will purchase, the farmers just plow them into the fields and start selling roasting hens.
The ten cent piece should have an egg-shaped hole in the middle.
I really like the idea. Now, if we could make them radioactive eggs . . . that would really be money burning a hole in your pocket.
History is one thing. End game projections are something else. Buckle up for one wild ride.
https://www.goldmoney.com/research/goldmoney-insights/for-those-who-don-t-understand-inflation
Yup. Great link.
I once heard on NPR that if Kim Jong-un were to die, the South Koreans would be worse off because they wouldn’t have a government. I think you’ve drunk the same kool-aid. The difference between a protection racket like the Mafia and a government is, government has an state religion to hide the fact it’s a protection racket, which is promoted by the established church. In the US, the established church is the public schools.
Accordingly, after the official parasites currency inflate themselves into an inability to collect taxes, the medical doctors, farmers, and oil refinery workers are going to settle trades between them in gold coins.
Same Kool-Aid? Umm, where did I give that impression?
Wilder, you’re a disgusting degenerate objectifying terrible person with all those hot-girls-in-bikinis graphics. I mean, you’re just awful! And, of course … I’m right on board with you. I’m so bad, I can’t even describe me.
You and I undoubtedly disagree on a few things here and there. How could it be otherwise? And yet, the Brotherhood of Hot Girl Appreciation, well, it transcends all the trivial stuff. Keep on keepin’ on!
Will do! Yup, without disagreement, it’s not interesting, is it?
I beg to differ.
(still laughing!)
I am a big fan of the idea of a looming barter economy, I have been working up a post about it for some time. If things really go haywire in the country, do you really want to rely on cryptocurrency? Or even gold? But if I have extra .22 LR ammo and you have some canned beans, that is a swap we can make. I can’t feed my kids gold coins.
And then we have this conundrum. Do you wish to approach me, sitting on 22 ammo and much more, hoping to trade me beans for some of that shiny ammo? Do I, sitting on my pile of ammo and also beans and other items of nutritive value, wish to trade you out of some of what I already possess, in order for you to have some ammo to later snipe at me with?
Far more will go into a future barter economy than simple trading of this for that. Ammo is a strategic resource. That indicates a suitability for trade only between trusted partners. Beans, on the other hand, indicate to a potential trading partner that you have more than enough food, if you are willing to trade it for anything. Is he a person to be trusted with such knowledge? Or will he simply say no thanks, and use that ammo later to come get your food, being pretty certain that there is indeed food, in concert with a lack of ammunition? Barter in hard times is more complex than most grasp.
In a bad collapse tis far better to have a sizable network of like minded individuals that cover all the bases than to engage in any sort of trade.
Worse if the collapse is disease related or there are too many refugees or raiders, strangers will be shot in sight and justly, thus no one is going to be trading with anyone.Policy wise in such circumstances it is actually sounder to kill strangers, take useful items and burn or display the body than to take the risks.
Therein however lies the problem, without a margin of trust enough for trade, recovery is not possible
Back after Rome, oh after a few centuries it was Feudalism and Christendom
This time? Who knows?
It is so hard to predict past the bottleneck – what would have happened if the South had won the Civil War? Who could have predicted the outcome, which may very well have been set by the plans for Gettysburg being wrapped around some cigars.
So YOU’RE the guy who was hoarding 22LR ammo for the previous decade! Leave some for someone else, man. 🙂
Yup. More .22LR is always a good thing.
You didn’t mention another interesting fact about Rome…Toward the end, Rome wouldn’t accept its own currency for payment of taxes, but demanded gold instead..If the dollar weren’t good for tax payments, even nukes couldn’t make it anything but worthless.
My opinion on probability of medium collapse…100% certain, and likely in the next 20 years.
Great point! And, I’d go higher than I listed, but I’d have bet we’d have imploded by now in 2000 . . . .
But after all of the individual survival dramas play out, survival ultimately depends on a community rising from the ashes.
So if people understand that simple fact then why not have a Community rise now when the risk are lower and people can hammer out the details without starvation knocking on the door…Why not have a system in place that will allow you to have way better odds of surviving a collapse…Why oh why aren’t we smart enough to figure that out??????
Brother, that would be because most are such “rugged individualists”, seeing feds in every person that says hello to them, and feeling secure atop their case of ammo and stack of canned beans. The chieftains of their own fiefdom, encapsulated completely in their own skull, with room left for copious delusions of grandeur. Because once the balloon finally goes up, they will be the spec ops warrior they spent hard earned cash to look like, and the world will be their oyster. Pity the unprepared dude next door didn’t know that when he snatched their soul with one well-placed round of whatever he had. But he enjoyed the beans, so it wasn’t a total loss…
That community thing is in process, here…😉
Dr. David Brin, privileged Canadian liberal though he may be got this spot on in his book The Postman. with his “survivalists” who refused and hindered every effort at reconstruction
The movie isn’t that great though if you are bored enough on a Saturday, it’s not too bad.
In a really hard fall I can easily see these paranoid types coming together as reavers along with hundred other groups of men looking for slaves and a nice gas station fort
Not fun
But as the Founding Fathers knew, Join or Die
Yup. It never hurts to think six ways around a problem, especially when the problem is so vast . . .
Yes! Agreed! It’s funny that modern life seems to split us apart, rather than bring us together. Almost like it’s designed that way. Almost.
My money is on booze. Make it, store it, trade it, use it to buy grain and sugar and clean water to make more. Civilisation began with beer.
I agree. Now where’s my beer?
Damnit, that was me not “Anymouse”. Sheesh. Make mo liquor.
Beer’s on me!
I did in fact read the other post re: beer while responding, but it’s been my thought since about 2012 that you make more friends with booze than bullets in the long run. Assuming, of course, that bullets miss you in the short run. Who will want to kill the guy that makes what everyone loves?
Exactly. Be the guy people need.
The elites seem to be destroying the US in every possible way.
Communism cannot compete with capitalism so the ruling class is pushing social divisions to weaken the USA.
Women aren’t fighting for their rights, the 1% are using feminism to weaken men and destroy families.
Blacks aren’t fighting for their rights, the 1% are using blacks to divide the country.
Illegal immigrants are used to divide the country.
Homosexuality and immorality are used to weaken the US.
Wars are used to kill off the population and increase refugees, the debt, terrorism, and tyranny.
Abortion is used to reduce population growth.
The elites are trying to kill off the 99% with chemicals in the food.
Drugs benefit the ruling class by allowing the 1% to fill their private prisons and weaken the population.
Climate change benefits the elites by giving them an excuse to raise taxes and increase regulations that punishes small businesses. The elites don’t fear regulations because they write the laws, control the government, and can afford lawyers.
Trade wars are used to weaken the population by driving up prices.
Americans are weakened by poor education and welfare.
The elites support the police state because a country without free speech, religion, and guns is easy to control.
One of the dangers of tyranny is that people become used to it and forget what freedom was. Twenty years ago a prison guard could go home after work guarding murderers and thieves. Now a jail guard can go home after work just to live in a minimum security prison.
The Nazis used to choose Jews to guard other Jews. Capos might have gotten a little more food, but they were still prisoners.
Americans are all criminals today because everything is illegal. How can anyone take the moral high ground when murder and feeding the homeless are both illegal? Do you feel proud if you don’t get arrested for withdrawing less than $10,000 from your own bank account? Do you feel like a saint when you pay taxes that fund illegal wars? Are you not responsible at all for paying for torture and remaining silent? You don’t have blood on your hands?
Freedom once lost, is lost forever. Rulers would never want to give freedom to the people and slaves do not want freedom because they fear it. If Americans were allowed to have the choice of having self-service gas pumps, Americans would refuse because they don’t know how they work and don’t want to get their hands dirty. If asset forfeiture, CIA torture, TSA groping, and NSA wiretapping were ended, Americans would fear terrorists.
The ruling powers want to kill off the strong white men and than send the weak liberals to the gulags to be starved and killed.
The 1% will then divide up the wealth and land of the US among themselves and rely on robots and technology to do the labor.
The elites don’t care if the US collapses because they are suicidal and they live in gated compounds with security guards on private islands, go to private schools, and have private jets to fly them to private airports.
The one thing that terrifies the elites is a population that loves freedom, morals, and self-sufficiency. The 1% ridicules moral people who love liberty. When was the last time you saw a movie about family values or the Bill of Rights? The ruling class could gun down monks, but that would make bad optics so the elites are doing whatever can they can to kill off moral people in other ways.
How else can you explain the destruction of the USA? Economics isn’t rocket science. If you want a strong economy, don’t punish hard work with taxes and regulations while rewarding laziness with welfare and allowing millions of 3rd world immigrants to flood the country.
http://www.americanthinker.com/articles/2014/12/psychopathy_and_politics.html
Think.