Everyone’s Talking About Currencies

Here Are the Facts [The Daily Reckoning] July 29, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Everyone’s Talking About Currencies - You need to understand currencies… - What about gold?… - The ideal sound money system… [Response Requested 1/1000th of an ounce of gold available for you]( As a reader of The Daily Reckoning, Jim Rickards is offering you 1/1000th of an ounce of gold when you upgrade your account. It will come in the form of a “Gold Back” - a new type of gold currency that’s starting to spread across America. If you have not responded to Jim’s offer yet, and want to know how to claim yours… Please click the link below for details. [Claim Your New Gold Back Currency Here]( The Hawaiian Islands Editor’s note: Currencies have been receiving greater attention recently, especially as a new gold-backed BRICS currency could be launched next month. But do you really understand currencies? Today, Charles Hugh Smith shows you 21 points about currencies that you should know. [Charles Hugh Smith] CHARLES HUGH SMITH Dear Reader, Everyone's talking about currencies, but often without much context. Here are 21 points about currencies that it's good to keep in mind during any discussion. 1. Currencies are the foundation of a nation's economy and financial system. History may offer examples of currency collapses benefiting the few, but there are no examples of currency collapses benefiting the many. 2. Ultimately, every currency reflects (i.e. is "backed" by) the economy and institutions of the issuing nation. Nations with diverse, adaptable, productive economies with deep, transparent markets have the means to pay interest on their bonds and offer productive investments for other nations holding surpluses of their currency. The meme on fiat currencies is that they're "backed by nothing." But currencies issued by nations/central banks that issue interest-bearing bonds are backed by the interest-bearing bonds. 3. Governments jealously maintain the sole privilege of issuing the currency so they can inflate (i.e. reduce the purchasing power) of the currency at will to make it easier for debtors to pay down debts. This benefits governments which are debtors and the banking/financial sectors which profit from lending and leverage. 4. The collapse of a currency destroys the central state's ability to issue debt to fund its functions. Governments will always try to maintain the currency while debasing it as a means of maintaining a status quo that benefits elites at the expense of the many. 5. Currencies reflect financial repression: central banks' suppressing interest rates/bond yields and excessive money creation weaken currencies by making the currency less attractive to global capital. 6. When currencies lose purchasing power via inflation, everyone forced to hold the currency loses out: their labor buys less and the value of their money declines. 7. There is a class dynamic to this process: the wealthy have the means to transfer their wealth to other currencies or assets that retain their purchasing power, the commoners have fewer means to do so. 8. Financial repression that reduces the purchasing power of the currency exacerbates wealth inequality, as the wealthy are able to use credit and leverage to buy assets that are inflating in central bank generated credit-bubbles. Roughly 90% of income-producing assets are owned by the top 10%. 9. As a currency crisis looms, the wealthy transfer their assets overseas to escape capital controls. After the currency is devalued and assets have crashed in value, the wealthy return to the domestic economy and scoop up assets at fire-sale prices. [Tiny AI Stock Targeted For Buyout Deal?]( A massive buyout alert has just been issued on a tiny AI company that could skyrocket in the coming months, weeks, even days. And according to James Altucher, a man who has made millions of dollars on these kinds of deals… This could be a once in a lifetime opportunity for you to make a fortune. He’s revealing all of the details in the video below (including a leaked memo from Google). [Click here for more...]( [Watch This Video Now]( What About Gold? 10. There is a lot of hype and hope around gold-backed currencies, but these are only truly sound money if the currency can be converted to gold. Without conversion, a "gold-backed currency" is still under the control of a government that will use the currency to benefit the few at the expense of the many. 11. In other words the problem isn't the currency being backed by a commodity, it's the government/central bank control of the currency that's the problem, as the central state manages the valuation and conversion to its own benefit. "Backing" a currency in name is meaningless without a means for those holding the currency to convert it directly into the commodity. 12. Compare using gold directly as money with a "gold-backed currency" that isn't convertible to gold. The gold coin has intrinsic value; the value of the "gold-backed currency" is controlled by the government / alliance issuing the currency. 13. The vast majority of money is created by issuing credit, both public and private. If a currency is "backed by gold" at a set valuation, what happens when the money supply expands due to credit issuance? 14. Currencies can be viewed as competing means of exchange and stores of value. Those currencies that have been issued globally in quantity are the easiest to use for exchange because they're the most liquid. Those currencies whose valuation is established by the marketplace are more trustworthy than those arbitrarily pegged by governments. 15. As stores of value, currencies' valuation is based on the yield of the bonds issued by the state issuing the currency. Higher yields, a stable state and a diverse, adaptable economy offer capital a lower risk profile than unstable governments and weak, brittle economies dependent on commodities or exports. [[CHART] Could Inflation Hit 20%+ In 2023?]( [Click here for more...]( Take a close look at this scary chart pictured here… What you see is the money supply in America… And as you can see, the number of dollars in circulation has exploded in the last few years. In fact, more than 80% of all dollars to ever exist have been printed since just 2020 alone! Which is why some say inflation could soon explode even higher than it is now, to 20% or more. And if you’re at or near retirement age you must take action now to protect yourself… otherwise you risk losing everything. [Click Here Now]( Gold and Triffin’s Paradox 16. Triffin's Paradox is that a currency cannot serve both its domestic economy and the global economy equally well. To provide the global economy with sufficient liquidity to hold as reserves, the dominant reserve currencies must run sustained trade deficits to "export" their currency into the hands of those needing the currency for trade or as reserves. 17. The reason why the world abandoned the gold standard is that trade imbalances led to importers' reserves of gold being drained as exporters demanded payment in gold, i.e. they demanded the trade deficits be settled in gold: we demand the currency that we hold from trading with you be converted into gold. 18. Gold as currency only works if trade balances, i.e. surpluses and deficits, are extremely modest. This is a problem in a global economy with mercantilist nations who structure their economies to run massive trade surpluses and exporters of commodities (such as oil) that run massive trade surpluses. 19. Mercantilist nations need to keep their currency weak enough to encourage the exports that generate their growth. Nations seek to intervene in currency markets/manipulate their currency to support their domestic economic policies. 20. Nations want to control the value of their currency to support their domestic economies' mercantilist structure, but this means running trade surpluses and keeping their currency weak. Neither serve the interests of other nations seeking places to park their excess foreign currency. The Ideal Sound Money System? 21. Currencies are intrinsically bound to trade, domestic economic policies, market forces and the limitations of the issuing nations' fundamentals: is their economy open, with deep, transparent markets? Is it diverse, adaptable, stable, with plenty of opportunities for holders of its currency to invest and know they can get their money out without hindrance? Do their financial systems operate in a predictable fashion with ample liquidity, or are they prone to liquidity crises and unexpected capital controls or policy reversals? The ideal sound money system is one in which many currencies, both state-issued and privately issued, compete in a transparent global marketplace. In other words, a system in which participants decide what they value as sound money, liquid means of exchange, etc. in a wide-open marketplace outside the control of governments, alliances or any centralized power node. I have long favored adding a labor-backed cryptocurrency that is both a means of exchange and a store of value to the mix. I explain the benefits of such a non-state global currency in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All. Regards, Charles Hugh Smith for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: Jim Rickards doesn’t usually call-in favors… But he recently called in the aid of one of his most trusted, hedge fund intelligence contacts. Jim calls him [The Banker.]( Jim wanted The Banker to teach you his most closely guarded income secrets. Ones that he’s used to manage $20 million portfolios… And The Banker’s personally beaten several billionaire investors with these secrets — including Ray Dalio. He made [this video– showing you EXACTLY how he does it.]( If you want to protect yourself — and your family — from whatever disastrous policies the Biden administration throws at us next… [Then go here to learn about The Banker’s powerful income strategy.]( [click here for more...]( If you’re worried about Biden Bucks and what it might mean to you and your family… Do not ignore this urgent development. [Click here right away for the full story.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Charles Hugh Smith] [Charles Hugh Smith]( is an American writer and blogger, and serves as the chief writer for the blog "Of Two Minds". Started in 2005, this site has been listed No. 7 in CNBC's top alternative financial sites, and his commentary is featured on a number of sites including Zerohedge.com, The American Conservative, and Peak Prosperity. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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