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hhasia (61.68)

Geez You Folks Are Smart

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August 29, 2011 – Comments (7) | RELATED TICKERS: BAC , HBC

 

Thanks fooldom for such insightful comments on matters related to stocks and the US economy, Fed etc...

I'm sure I'm not alone when I take note of whats behind the wizards of the financial markets, and how toughly they fight to preserve that illiusion.  I recently heard a top CEO of an international bank comment that every thing is about confidence.

With that in mind, I submit that failing institutions are not just about bad decisions, but failing confidence.  You can make all the wrong moves and still survive if you convince the benefactors that your institution is"good" for the pledges.  Fail to convince them, or instill confidence in them and "poof".

From an overseas perspective, confidence in the US$ is falling.  With every step taken, the turf war that everything is undercontrol, all the while the FED ballance sheet explodes.

Several years ago I wrote a simple elegant solution that is constitutional, practical and has historic precidence.  What is it?  Create a domestic currency.  Lets call the domestic currency the "blue back".  Blue backs are on par with the mighty green back but are exclusive to US soil.  What does that do?  The Blueback is a viable means to pay down debts of the greenback.  Result, solvency, confidence domestically and overseas.  Make the Blueback the exclusive paper of the US Treasury.  The Bureau of Engraving and Printing arm of the Treasury currently prints the greenback on behalf of the FED.  Let them print a currency on behalf of the people, and for the people.  Americans would use the Blueback at home only, and greenback overseas.    This concept is not new. Lincoln did this at the end of the civil war. He produced the Greenback to pay of war debts, and whalla, the US went from Coins only to Coins and paper money.

Time to think out of the box, while a shread of confidence still remains.

As I am a blood relative of Alexander Hamilton, I think cousin Alex would approve. 

So, I throw this up for comments, cause geez you folks are smart.

HHASIA

 

 

7 Comments – Post Your Own

#1) On August 29, 2011 at 4:20 PM, chk999 (99.99) wrote:

Bi-currency systems self destruct because of Gresham's Law: bad currency drives out good currency.

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#2) On August 29, 2011 at 5:19 PM, hhasia (61.68) wrote:

Thanks for the comment.

I have serveral comments.

1. Greshams law is a theory. Evidence shows that it also works in reverse, when a countries currency is continually debased. Germany. Zimbabwe.  This theory also assumes open exchange. 

2.I am not talking about a dual currency for the US citizen. I am saying that the US Citizen gets a new currency, exclusive. Not valid tender outside the USA.

3. Trade and international markets continue to get the $.

4. Because the Domestic currency has par value, it would be acceptable to the Fed for repayment of debt. Remember the people"treasury" issues debt which the Fed purchases. The Treasury is NOT the source. The constitution was never written with this idea that the currency of a country would be in private hands. My proposal puts the currency in the hands of the people as was the original intent, without blowing up the world monetary system of the $ as reserve currency.

As a note, I'm in China. As you know the chinese currency is not fully convertable, it is controlled.  A controlled currency works. I'm simply adding that as a valid part of the US equation, with a twist that the Blueback is not convertable outside the USA.

Believe me when I say, there is a move underway to usurp the $. Remember for more than 100 years the Pound was the reserve currency. Take heed, empires fall.   This proposal changes the nature of the international trade run and operated by the private banking cartel. It gives purchasing and production back to the US government, and new life for the citizens. More millionaires are made in China every day in a closed currency system, I know this works.

HHASIA

 

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#3) On August 29, 2011 at 5:52 PM, CoastalTrader (94.82) wrote:

Without putting too fine a point on it, why should the U.S. give a damn about what some other country thinks?  If you don't like the greenback don't buy any. 

And just to ward off a complete waste of time, this is not flag waving "USA take it or leave it" posturing. It's as simple a pragmatic question as it appears to be on it's face.  No more, no less.

 Explain to me:  what are the consequences of ignoring these concerns?  Any?  Why even suffer the (nominal?) expense?

 

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#4) On August 30, 2011 at 5:24 AM, hhasia (61.68) wrote:

Coastaltrader

Your question is a valid one. Why care what the foreigners think?

I'll make the answer simple.  Foreigners + the Fed finance 50% of the american workforce. 

The public sector is America's largest employer. Local, State and Federal employees.  On a daily basis, at the state level, in fact 47 states are running budget deficits.  What does that mean?  Well last year the states borrowed from the Federal government to keep things working.  Who financed that? a combination of foreigners, the fed and taxes. Take away confidence in the $ from the foreign portion and the public sector jobs, ( fireman, police, prisons, garbage collectors, etc) would be soley financed by the Fed + taxes. Who is to say how many of those jobs would survive the fallout. ( Just ask the folks in California, which has seen record numbers of public jobs dissapear)

On top of that 43 million Americans are on food stamps. Such a huge number of people already dependent on the government just to eat. That number would explode. Then there are all the other programs.  The ability to print money is a blessing and a curse. A blessing cause you never run out, a curse because  the more you print the lower the value, debasing that portion held by foreigners.  Eventually, and this is already in the works, the foreigners stop purchasing debt, stop financing.  Ultimately calling the note. What do you pay with?  History shows for the big chunks owed.... land is the means of payment.

I believe alstry has lots of posts along these lines so I will not reinvent the wheel.  I wanted to post an alternative. A possible solution. 

HHASIA

 

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#5) On August 30, 2011 at 3:29 PM, Rehydrogenated (35.05) wrote:

I would have to say that the $ isn't valid tender outside the USA either - so there would be no difference between the blueback and the greenback.

People trade $ outside the US because they believe it is a better currency than say, the peso. While a small country like Cuba may be able to have a system like this, it is because when their currency leaves the country it really does become worthless. I just can't see that happening on bills with USA stamped on them.

Can you explain why it would be better to create bluebacks than to just print a bunch of greenbacks and give them to people?

 

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#6) On August 31, 2011 at 12:18 PM, hhasia (61.68) wrote:

 Rehydrogenated

 You state:

I would have to say that the $ isn't valid tender outside the USA either - so there would be no difference between the blueback and the greenback.

Actually this statement is incorrect.  As the reserve currency, the $ is the currency of trade.   Take oil for example. Oil is traded in dollars, regardless of country. The ballance of payments is calculated based on dollars.

Now if $ are used as an alternative currency in a country, while they keep their own currency. $/Peso example, thats a disaster waiting  to happen. I would not advocate a 2 currency system.

I'm advocating a distinct separate currency, a closed currency.  In parts of the country that are hard hit there is already a coupon/barter system for goods and services.  Why the rise in barter? The shrinking credit, loss of jobs.

You state:

Can you explain why it would be better to create bluebacks than to just print a bunch of greenbacks and give them to people?

This is an invitation to hyperinflation.  

At present, Treasuries are sold to foreign nations to finance the USA . In otherwords the government sells IOU's.  When the Federal Reserve writes a check to the Treasury, they are creating money from nothing. The more that is created the lower the $, and the cheaper the debt in real terms to pay back. The problem is the value of the debt held in other nations deteriorates, and to purchase more of the US debt those foreign nations must print more of their own currency causing inflation in the home country. It is like adding fuel to an ready burring fire. There is a race to keep up, like a barreling freight train a crash in the making.

If the US had a distinct national currency outside of the $ and exclusive to US citizens then the system would be more in ballance, people would have jobs.  Remember, the system is built on debt. ie, the supply of credit.  Credit is shrinking, companies are paying down debt, deleveraging. This is deflationary. The core of the system is in deflation mode. Price deflation follows a core meltdown, think "great depression".  With a seperate currency for the people, issued NOT on behalf of the FED, the US could avoid a certain meltdown.  

 HHASIA

 

 

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#7) On August 31, 2011 at 3:29 PM, chk999 (99.99) wrote:

This is deflationary. The core of the system is in deflation mode. Price deflation follows a core meltdown, think "great depression".  With a seperate currency for the people, issued NOT on behalf of the FED, the US could avoid a certain meltdown.  

 

I don't believe in deflation for a heartbeat. The last time we had any significant deflation, we had a PM backed currency and bad fiscal policy. We now have a fiat currency and a Fed dedicated to reflating the housing market. 

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