If you spend your time working for someone else, maybe in a fast food or things such like that, you will always be a slave of the financial system. Let me say, you can get more and more studying the moon. Studying the movements of the moon you will be able to understand the correlation between the moon and the Dow Jones.
Yeah.
Am I a fool? Maybe yes, but I know by person two men that have become rich studying the relationship between the moon and the financial market.
I’ve never met the man who developed this method. I just read about him. I just read his original works.
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The moon is the Earth’s only satellite. Since early times, it has been of great importance in almost all cultures all over the world. The Moon has been the subject of worships, myths and legends: in Ancient Egypt, Ancient Greek and Ancient Rome, in Assyria and in Babylon. But it isn’t all: stories and myths about the moon characterized also the Ancient Chinese, Japanese and Indian cultures. Finally, moon symbols have been found among African and Native American groups, too.
The moon was of great importance from the point of view of Astronomy and Theology. Thinking of Astronomy, the lunar calendar, was used by Germanic populations prior to the introduction of a the solar calendar. Passing to religions, there are proofs of lunar deities in all the Ancient World cultures: Artemis, Selene, Hecate in Greek, Diana, Luna, Trivia in Rome, Arianrhod in Wale, Ilargi in Spain, Chang’e in China, Anumati in India, Tsukuyomi in Japan, Avati, Fati, Hina in Polynesia, Sin in Mesopotamia, Allah, Ta’leb and Wadd in Arabian countries, Awilix, Metziti in Central America, Coniraya, Mama Quilla, Ka-Ata-Quilla in North America, Iah, Thoth and Khonsu in Egypt and this is only a small sample of deities. Current religions like the Jewish, the Christian, the Hindu, the Tibetan, the Persian, the Chinese and the Islamic ones use a totally or partially based lunar calendar. In the Islamic countries the Moon plays a real important role: the ascendant moon and the stars are a wider symbol in the Muslim communities. The flags of Turkey, Algeria and of Pakistan represent the ascendant moon and a star. Moon is really important in the Chinese culture, too. In fact, in China ,the Moon Festival is one of the most important traditional event.-
In our days, the Moon continues to charm us. Legends and myths about the Moon are survived: werewolves, red moons, the man in the moon, the moon rabbit, insanity and irrationalities superstitions, the influence of the moon on the nature and on childbirths.
Me too, during my childhood, I heard from my grandparents a lot of tales about the moon. I have already told you that my grandparents were farmers. I remember seed time and harvest time according to the different lunar phases. The relationship between the lunar phases and the bottling of wine was typical of the country culture, too. This is not all: according to my grandmother, there were specific periods for purifying, for cutting the hair and the nails.-
All these believes were really poetic . In any case for science lovers, I have to admit that up to our days there is no scientific evidence about such traditions and tales. Maybe the truth lies somewhere in the middle. Up to now, two things have been scientifically demonstrated. The first one is that the Moon shines because of the reflection light of the sun. According to the different positions between the Earth, the Moon and the Sun there 8 lunar phases: the new moon, the waxing crescent, the first quarter, the waxing gibbous, the full moon, the waning gibbous, the third quarter and the waning crescent.
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The second one is the ocean tides that is the rise and the fall of the sea levels. Let’s try to illustrate it in a simple way . The
phenomena is explained by two laws: the centrifugal law and by the Newton’s gravitation law. The centrifugal law is the result of the Earth spins on its axis. The gravitational law states that : “any two bodies in the universe attract each other with a force that is
directly proportional to the product of their masses and inversely proportional to the square of the distance between them”. The gravitational law involved the Earth, the Moon and the Sun. The Moon’s gravity pulls ocean water toward the Moon, but at the same time, the centrifugal force of the combined Earth-Moon revolution causes water on the opposite side of Earth to bulge away from the Moon. The 2 effects are perfectly balanced at the centre of the Earth. On the face of the Earth closer to the Moon the gravitational force is stronger than the centrifugal force (high tide). On the opposite on the face of the Earth farther from to the Moon the gravitational force is weaker than the centrifugal force (low tide). The Sun gravity works in the same way. When Earth-Moon and Sun are alienated, that is during the New Moon or during the Full Moon, the tidal effect increases. On the contrary when Moon and Sun are 90° apart with respect to the Earth, that is during the First Quarter or during the Third Quarter Moon, the tidal effect decreases.
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You don’t have to stop to appearances. It’s what the moon teach to you. The moon is always there even if during the day you can’t see it. Even if during the night you can’t see it.
Sometimes the truth is in front.
Sometimes you want to see to believe.
Instead you have to believe to see.-
Be aware, have plans,
Matt
Debts
Debts.
The New Zealand Dollar
The official currency of the New Zealand is the New Zealand Dollar.
I’ve never been in New Zealand but I know that prior to the New Zealand Dollar the official currency of the New Zealand was the New Zealand Pound.
Someone suggests me about the possibility in 1967 the new currency was named “Kiwi”. I’ve never seen a Kiwi to the life but looking at the picture there are a lot of resemblances with my bride. In any case, it isn’t a case that traders call this currency Kiwi.
The tale about the New Zealand Dollar is pretty short. In fact it’s only in 1967 that the New Zealand Dollar became the official currency of the New Zealand. The New Zealand dollar (NZ$1) was initially pegged at US$1. Today things are changed. The new ratio is US$0.68 to NZ$1. Maybe something went wrong. The New Zealand Dollar lost in 50 years more or less 50% against the US dollar.
But what about the New Zealand central bank?
The Australian Dollar
I like to think about Australia as to be a wild territory: nature, seas, oceans and animals. There are cities, too. More than just cities: Australia is considered a country that is part of the First World Countries. In any case, no doubts, Australia minds me 2 things: kangaroos and of course.. the Australian dollar.
The history of a currency is strictly linked to the historical events and, as the most of you know, it’s strictly linked to banks. So what about Australia? The discovery of the Australian continent is almost modern history. I mean, in 1606 a Dutch Vessel landed in Australia: it was the first official landing. What after it? Dutch explorations continued through the 17th. During the 17th and the 18th centuries, other European countries explored the Australia continent. In 1770, the Lieutenant James Cook chartered, for the first time, a portion of the Australian cost: the East Coast. When Cook came back to Britain, he reported a positive judgment with regard to a possible colonization. In 1778, British ships landed in Australia with the idea to colonize it. In detail, Britain established a penal colony. During the 19th century new colonies were established. Up to 1851 all the Australian territories were colonized. 6 were the colonies: Queensland, New South Wales (which included the currently Northern Territory), Victoria, Tasmania, South Australia and Western Australia. And so we arrive to the 20th century. In 1901 through a referendum, the 6 colonies formed one nation. In detail when the Constitution of Australia became effective, on 1st January 1901, the colonies became states of the Commonwealth of Australia.
The birth of the Japanese Yen
What do you know about the currency currently used in Japan? Almost all know that it is the Japanese Yen. What more? Which is the link between the Japanese Central Bank and the Yen? How to explain the Yen swinging? It’s a quite common matter the currencies devaluation. It’s a less common matter the currencies appreciation. It’s an extraordinary matter the Yen appreciation in the last 60 years. So, what is happened? Can it be that the US have a hand in this matter?
Dude, if you want answers, you are exactly in the right place.
A general introduction: Japan has a millenary culture. Japanese culture covers all possible fields: literature, music, visual art, theatre, architecture and so on. Japan is well known for emperors, wars, samurai. But maybe you are more familiar with geishas or sushi. Well. This is not the point.
Let’s turn to the Japanese currency, the Yen. The Yen is a relative young currency. In fact, it has been introduced in Japan only during the 19th century. The first formal Japanese currency dates back to the 8th century. It was the “Wadōkaichin”. Soon this currency become debased. Therefore in the 10th, it was abandoned and was replaced by rice. During the 12th – 17th a Chinese coinage was adopted. That’s because of the increasing commerce with China. Finally during the 17th – 19th century the Tokugawa currency was adopted. Tokugawa was a unitary and independent metallic monetary system which denominators were metals: bronze, silver and gold, of course. In the past money had an intrinsic value. It was linked to commodities, in the specific to metals.
And here we arrive to the Japanese Yen. The adoption of the Yen is a quite strange story. It is strictly related to the Chinese currency history. As often happen, trades played a fundamental role. In detail the American-Asian trades. Let’s continue. In the 19th century, the silver Spanish dollar coins widespread throughout China and Japan. Starting from 1840 some American and Asian regions started to replace the Spanish dollar with regional currencies, the Mexican Peso in Mexico and the Hong Kong Silver Dollar in China . But Chinese people were not happy. They preferred the old Spanish dollar. You know, what is known is sometimes better of what it is not known. As consequence the Hong Kong government sold the mint machinery for minting the new Chinese currency to Japan. This is the birth of Yen. Formally the currency was adopted by the Meiji government in 1871 through the New Currency Act (1871). In practice the Act introduced the gold-silver standard currency system.
And here as always the same tale. A new currency, a national bank and the shift of the monetary power from governments to banks. Before 1872 in Japan there were 153 banks. In 1872 through the National Bank Act the National Japanese Banks were reduced to 4. All 4 banks printed Yen. In 1877, in order to finance the Seinan Civil War, the 4 National Banks printed notes and notes. The result was a severe depreciation of the currency. In other words: in that years, in Japan a severe inflation incurred. Here an oddity. For financing the Seinan Civil War, not only the government of Japan printed money. Of sure, the government’s rebels needed money too. So what happened? The leader of the rebellion started to print a new paper money! The ways for financing wars are always the same.
In 1882 a central bank, the National Bank of Japan was established. The aim was to centralize the issuance of convertible notes. I remember you, that before there were 4 National Banks. So what better explanation for the establishment of a new Institution? The Central Bank. Just a tip: national does not mean owned by citizens. It means that the bank issues national money. As a proof, the National Bank of Japan was from the beginning partly privately owned.
And so we arrive to 1897. In 1897 Japan switched from the gold-silver standard to the gold standard. That’s due to the strong devaluation of the silver coins.
And here we arrive to the First Word War. The history is always the same. During the First Word War the convertibility of the Yen currency into gold was suspended. Then was re-established. At the end, in 1931 it was suspended again. In 1942 the Bank of Japan law suspended the obligation to convert the Yen notes into gold. An era of flat currency started.
On 25 April 1949, according to Bretton Woods agreement, the Japanese Yen was fixed at 360Y per 1 US$. In December 1971 according to a new agreement, the so called Smithsonian Agreement, the Japanese Yen was fixed at 308Y per 1 US$. In 1973, like quite all the major currencies, the Japanese Yen become a floating currency. During the following years the value of the Japanese Yen floated up and down, down and up. The currency was gone crazy.
During the 80s due to higher interest rates, foreign investments (in particular in the Us) were more convenient than Japanese investments. The Yen devaluated, the dollar appreciated. What does it mean? The Japanese debt decreased. Moreover exports became cheaper and imports became more expensive. The opposite was true for the US. That was not good for the US.
You know, US are really clever in finding solutions. In 1985 a new agreement, the so called Plaza Accord, established the overvaluation of the US Dollar. As consequence the Yen started to rise. At first it was ¥239 per US$1. Then ¥128 per US$1, then ¥123 to US$1, finally in 1995 it was ¥80 per US$1.
Currently (2013) the Japanese Yen is exchanged at ¥100 per 1US$. Therefore in the last 60 years there has been a 70% appreciation (from¥ 360 per Dollar to ¥100 per Dollar).
Note that meanwhile the Japanese Yen appreciated with respect to the US Dollar, the Japanese Yen incurred in both strong devaluation and strong appreciation against Gold. The numbers will proof the sentence. In the early 1980s an ounce of Gold was exchanged against 150.000 Yen. Then in 1998 the exchange became 40.000Yen an ounce. Today the exchange is 130.000Y an ounce. Yen behaves differently to Gold with respect to the US Dollar.
Be aware, have plans.
Matt
The Birth of the Canadian Dollar
Canada, you know, is wonderful. People here are very polite and friendly. The country reminds me the years of College. In fact, my Business teacher was Canadian. I really have a good memory of him.
Sure you know the Canadian dollar is a commodity based currency. Be careful, there is a trick. Commodity based currency doesn’t mean that the currency is linked to a commodity. It means there is a tight correlation between the currency and the commodity. In general this is the name given to currencies of countries that depend widely on exportation of row materials. Canada, you know, is rich of oil. That’s the trick. The trick explains how has been possible that a commodity based currency has devaluated by 300% in just 30 years. What’s more about the Canadian dollar?
Let’s proceed in order. The birth of the Canadian dollar is related to the colonial history of the country. You know, at the beginning Canada was in part an English colony, in part a French colony. But it isn’t all: in Canada there were also Portuguese, Spanish and Russian settlements. Well, I’m not interested to write about history. If you are interested, you can simply read a book of Canadian history. For me, it’s enough you know that due to the 7 years’ war between Great Britain and France and due to the Great Britain’s victory, in 1763 France ceded Canada to Great Britain. As years went by Portuguese, Spanish and Russian settlements disappeared or became British/US territories. In the 1800s Canada was almost entirely a British colony.
So what about the Canadian currency? In the first decades of the 1800s in the British Canadian colonies there were two main currencies: the first, was the Canadian pound, while the second was the US dollar. The first one was based on a pre decimal accounting system currency (halifax rating) while the second one was based on a decimal accounting system.
The 1850s were characterized by disputes on which currency to adopt. Local people desired to adopt the US dollar currency due to the increasing commercial exchanges with the US. Great Britain, of sure, wanted for its colonies the pound. In order to pacify people, in 1853 the Legislative Council and Assembly of the Province of Canada issued an Act. With this Act it was introduced a gold standard system based on both the British gold coins and the American gold eagle coins. However only in 1857 in the Province of Canada an official coinage was introduced: it was a decimal system coinage, perfectly aligned with the US currency. The British gold coin still remained. In 1859 also notes were printed according the decimal system.
the canadian dollar note
What about the other colonies? New Brunswick, Nova Scotia, Newfoundland and Prince Edward Island. In 1861 New Brunswick and Nova Scotia adopted a decimal system coinage, perfectly aligned with the US currency. In 1865 Newfoundland adopted a decimal system coinage based on the Spanish dollar. In 1871 Prince Edward Island adopted the US decimal system dollar.
But this is not the end. In 1871 the Canadian parliament passed the Uniform Currency Act. The aim was to adopt in all Canadian colonies a shared Canadian dollar.
This until the war.
As you know, due to the first world war the need of paper money increased. On April 10, 1933 the gold standard was abolished. And voilà. On July 3, 1934, the Bank of Canada act established the Bank of Canada as to be a privately owned corporation.
Before the Bank of Canada the Canadian Treasury was responsible for printing Canada’s bank notes. During the great depression people needed a guilty. The guilty was pinpointed to be the Canadian Treasury. So, in 1933, the prime minister of Canada, R.B. Bennet, as he took care of people, established the Royal Commission on Banking and Currency. Hugh Pattison Macmillan, a Scottish judge, conducted the Royal Commission. In a report Macmillan suggested the establishment of a central bank. Well. The next year, on 3 July 1934, the bank of Canada act received the royal assent. And in 1935 the bank of Canada were sold to the public through shares emissions.
If I’m not wrong it’s always the same tale. The Canadian dollar is as most of currencies a flat currency owned by private individuals.
Have a nice day.
Matt
The birth of the Swiss Franc
I love Switzerland. It’s a lovely country. I love Swiss Franc, too.
Of sure, Switzerland is a different country. It’s one of a kind. As everybody knows, Switzerland is a peacefully and rich country where people work hard. Switzerland is then famous for cheese, chocolate and clocks. In one word: Switzerland is amazing. And the history of the Swiss Franc confirms it. So, when does the Swiss Franc do its appearance? Why?
Before the Helvetic Republic (1798-1803), in Switzerland there were self-governed cantons. Each canton plus some other organizations such as cities and abbeys forged coins. The result was 860 outstanding different currencies.
With the Helvetic Republic, in 1798, a currency based on the Berne Thaler was introduced (do you remember the link between the thaler & the dollar?). This currency, forged up to 1803 was the ancestor of the Swiss Franc. The Berne Thaler value was equal to 6 ¾ grams of pure silver or 1 ½ French franc. It was the ancestor because, for the first time the same currency was, not shared but used a model in several Swiss cantons. In any case the Berne Thaler disappeared in 1803.
From 1803-1850, the chaos. In Switzerland (more or less 15,940 sq mi) there were 8,000 different coins and notes. 1 different currency every 1.99 sq mi. It’s amazing, isn’t it? Well, between 8,000 different currencies more or less 1,200 were forged in the Switzerland. The other 6,800 coins (85%) were forged abroad. You know, coins were the evolution of barters: they were a measure of value used in exchange of goods and services. So coins should make exchanges easier. But with such a huge amount of currencies, it wasn’t so. It was really complicated.
In 1847 a relevant factor happened: the Sounderbund War: 27 days of civil war that ended with a period of restoration. As results, in 1848, the new Swiss Federal Constitution came into force. And here we are. The Swiss Federal Constitution provided the Federal Government, the exclusive power to forge money in Switzerland. Successively in 1850 with the Federal Coniage Act the Swiss Franc was introduced. This was the birth of the Swiss Franc.
What’s happen after? Shortly..
In 1891 a modification of article n.39 of the federal constitution took place. As consequence the right to forge and print the Swiss Franc switched from the Federal Government to a National bank. So some years later, it was 1905, the Swiss National Bank (SNB) was founded.
In 1914 the First World War began and the Swiss Franc value stopped to be directly linked to precious metals.
You know. As Bretton Woods. As always tales repeat.
Be aware, have plans.
Matt
The birth of Pound Sterling
The Pound Sterling is the world’s oldest currency still in use. It’s an hard currency. Origins go back to the Anglo-Saxon England.
Its value was equal to 240 silver pennies or better to one pound silver.
The King Offa of Mercia (757-796) introduced the silver penny copying the currency system of Charlemagne’s Frankish Empire. In fact also in the Carolingian empire, 240 pennies weighed 1 pound (the Charlemagne’s libra).
The penny swiftly spread throughout Anglo-Saxon kingdoms and became the standard coin of what was to become England.
Until 1158 pennies were in fine silver. Then King Henry II introduced a new coniage with a little less silver.
During the reigns of Henry VIII and of Edward VI the silver coinage was drastically debased. In 1526 a troy pound was redefined as 5,760 grains (373 g).
Few decades later, during which a new gold coniage and an unofficial gold standard system appeared, in 1694, the bank of England was founded, followed one year later by the bank of Scotland.
This is the point. The fine line between banks and money. You know: banks are not mushrooms. They don’t grow up by themselves.
Why a fucking bank now? Well.
The bank of England was established to raise funds for the King William III’s war (a member State of the European-wide coalition) against France. And these are the classified papers on the Pound Sterling. Click here.
The war was better known as the Nine Years War (1688-1697). As already stated the main actors were France and the European-wide coalition (of which the Anglo-Dutch King William III belong). At the end due to the victory of France, the French King Louis XIV became the most powerful monarch in Europe. He was so powerful that he was a menace to everyone.
But let take a step backward to the foundation of the Bank of England. Before the Nine Years War.
James II, the just ascended king to the throne of England was not the legitimate heir to the England throne. Moreover he was Catholic. You know, after more or less two centuries the idea of going back to the Roman Catholicism was not welcome. Therefore the immortal seven asked to William III of Holland, one of the king of England’s relatives, to replace the king of England. And so William III of Holland replaced James II.
And here, a new character appeared: William Paterson. This gentleman was trying to collect funds for financing his project: the “Darien scheme“. A sort of double project: to found a bank for financing the “Darien scheme”. And so we arrive to the creation of the Bank of England.
Here we go. With the Bank of England the issuing of paper money started.
The Pound Sterling was the official currency not only in England but also in several English colonies and dominions.
I could go on infinitely on Paterson, catholics, jews, the Mercer’s chapel and the Queen.
But this is not my purpose. If you are interested in the GB history you can ask to some historiographer. Maybe you can watch CSI: Miami to collect hints and reconstructing events.
The foundation of the Bank of England was the beginning of the fiat currency in England: the Pound Sterling. The beginning of a practice still in use.
So even in England, the pretext of the war, was the way used for establishing a flat currency.
Let me conclude with few considerations about the Pound Sterling.
If you have already read the post about the Forex Scam you should know the Bretton Woods agreements.
In that circumstances the USA pegged the Pound Sterling to the U.S. Dollar at a rate of 1£ = 4.03$. It was in 1940.
Actually the Pound Sterling is exchanged at 1£:1.68$. It seems the Pound Sterling has lost power against the dollar during the last seventy years.
And not only against the Dollar.
As I love gold and silver let me do some other comparisons. In 1940 the Dollar exchanged 35$ for one Gold Ounce and for 8.68 Pound Sterling. Today a Gold Ounce is exchange with 1252 Dollars and for 745.611 Pound Sterling.
I’m not a genius in math, but if mathematics is an exact science the Pound Sterling devaluated of about 8490%.The Dollar devaluation has been of 3477%.
Is it a plan to level out the currencies power?
Be aware, have plans.
Matt
The birth of Euro currency
Euro: the united currency of the Eurozone.
The Euro currency was introduced in1999. From January, 1 1999 to January, 2 2002 for the involved countries a trial period began. Both the national and the Euro currencies were in circulation.
Then since 2002 the Euro
has been the only outstanding currency of the Eurozone.
The countries involved in the Eurozone project were 12. Subsequently other countries adopted the Euro. Today the Eurozone countries are 18. The dream was: free people and good circulation, a unique currency. As a big family. Like Uncle Sam. Like China.
A great union, a great currency!
Now, fifteen years later things are changed. In some Euro countries it’ s a life of hell.
The scenario is different: the happy and integrated family has disappeared. Each country seems to be separate from the others. Each country has different problems from the others. And different interests.
The official plan was to unify countries. The result has been the contrary.
It is not my opinion. Facts only facts.
How can it be possible? So noble purposes, so different effects? The answer is quite obvious. Politicians provide the answers. All their arguing are prepared. Politicians’ words are just to win people over.
Change the word “unify” with “divide” in the following sentence: “we want a unique currency, the Euro, to unify”. Now you will have the answer. Now you know the plan.
The majority of the EU citizens wouldn’t have accepted Euro as currency for dividing Europe. They wouldn’t have cast their vote for it. “ Unify” has been the solution.
I know for sure, that now a lot of people would like to go back to the national currency. They don’t want Euro any more. Due to Euro, now a lot of the Eurozone citizens up to one’s neck in troubles: economic troubles. Now it’s too later.
The truth is out. The Euro has divided countries. Now the question is: how have the Euro divided countries? Well, it was the year 1992. All was publically published. There was the Maastricht Treaty also known as Maastricht Tricky.
What is the Maastricht Treaty? The Maastricht Treaty provides to the EU countries the criteria for the adoption of Euro. Four are the criteria to be part of the European and Monetary Union:
1. Inflation rate: it should be no more than 1.5 percentage points higher than the average of the three best performing (lowest inflation) member states of the EU;
2. Government finance:
– the ratio of the annual government deficit to the gross domestic product (GDP) must not exceed 3%;
– the ratio of gross government debt to GDP must not exceed 60%
3. Exchange rate: applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.
4. Long-term interest rates: the nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.
Simple, isn’t it? It’s like at Coney island: min height to ride 44″. Ergo: someone rides someone not.
Many people think these criteria have advantaged Germany and France.
Many others think that southern European countries are old and lazy. Politicians are depraved and they are not able to do what it is required.
Without thinking which countries have been advantages and which ones have been fucked, my considerations are quite simple.
Due to the Maastricht Tricky the Eurozone countries monetary sovereignty has passed to the European Central Bank. In descending order, the major shareholders are: the Central Banks of Germany, France and England. Check by yourself.
Italy has 12.3108% stake and England has 13.6743% stake.
England. Have you ever been in London? I’ve never seen one Euro there.
Be aware, have plans.
Matt
The birth of the dollar
As you know the U.S. Dollar is the official currency of the United States of America. It is a wonderful piece of paper: green, with a lot of images. Honestly there are a lot of people that would like to use the US Dollar as a toilet paper instead of using it for paying bills.
In any case the Dollar is currently the official currency of the United States of America.
“Dollar” comes from an ancient Czech word: “thaler” (1500 a.C.). As in Germany the phonetic for “t” was/is “d” then “thaler” became “daler”. As “dalers” widespread through Spain, due to phonetic and linguistic reasons, “dalers” became “Dollar”.
Which is the link between the Spanish Dollar and the US? Going back to the US colonial period there is the answer. In the US colonial period there were three kinds of money: the commodity money (barters), the coins and the paper money.
Commodities money were, for example, tobacco and wampum. The most outstanding coins were Portuguese and Spanish coins so the famous Dollars (that gave the name to the current US Dollar). Finally there were paper money. Each colony/government had its own paper money: its continental currency.
In 1690, the first authorized paper money was issued by the Province of Massachusetts Bay. Soon also the other colonies started to print paper money.
Why did Colonies need paper money? Weren’t commodities and coins enough? The answer is simple: because of wars. Gold and silver weren’t enough for financing wars. Bills could be printed with no limits.
Printing green pieces. What amazing escamotage. Really. How to finance wars if the resources are not enough? Limiteless papers are the answer. Moreover the value of these notes was established by governments. Governments decided the amount of gold and silver at which notes could be exchanged.
What about the consequences of printing money without limits? Inflation of sure. Inflation = depreciation or better a loss of the paper value. The same paper value could be exchanged with less gold/silver.
In order to curb the inflationary effects of printing money, the British Parliament passed several Currency Acts:
– the Currency Act of 1751. The Act established that printed money had legal tender for public debts but not for private debts;
– the Currency Act of 1764. Paper currency had no more legal tender both for public and private debts. The Act created a lot of tensions between the British Parliament and the US Colonies. Therefore in 1773 another Act was promulgated.
– the Currency Act of 1773. Colonies could issue paper money as legal tender only for public debts.
And so we arrive to the American Revolutionary War (1775) and to a series of currency defaults. Four continental defaults occurred:
– the continental currency default of 1779;
– the default of continental domestic loans of 1782;
– the greenback default of 1862;
– the liberty bond default of 1934;
The liberty bond default increases the US depression and trade reduction during the 1930s contributing to fermenting World War II. So we arrive to the Bretton Woods international monetary agreements in 1944.
It passed more or less 50 years before to arrive to current Dollar Bill. A lot of time during which some people had had time for thinking on what to write and print on bills.
50 years. And well. Which is the result? The Dollar. The wonderful US Dollar.
Usually I don’t care about the images printed on notes but let me say that there is a lot of stuff on the Dollar bill.
I’m not an expert of symbols. But on the US Dollars symbols are self evident.
Well. This is the tale.
Symbols or not the financial system is a scam.
Someone pays and someone else receives.
Yeah.
In this case for example we pay interests to banks and banks receive money.
A lot of money.
Be aware, have plans.
Matt
The debt clock
Tick tock, tick tock, tick tock… it isn’t the Peter Pan tick tock crocodile. That’s the debt clock ticking.
The debt clock is simply a way to track the world public debt. Just now, what does the debt clock show? The right answer is: the debt clock shows $ 58,248, 95x,xxx, xxx ($ fifty eight trillion). This is the amount of public debt. Or better…
… the right answer is: it isn’t possible to fix the world public debt. The debt clock is merciless. Second after second, the debt clock hands move. And the world public debt moves, too.
It moves really, really fast. Second after second, the world public debt increases more of less about thousands of dollars.
Let’s take a step forward. What’s the public debt? Is public debt good or not? And if not, why? Public debt, is nothing else that the debt owned by central governments. High levels of government debt are of sure a problem. When governments are not more able to repay debts, they fail. And, you know, that bankruptcies cause economical instabilities. The case of the US failure would cause a global economic and financial instability. A global catastrophe.
So, given $ 58 trillion of world public debt, which is the governments public debt ? It’s:
1. United States ($ 17,510,xxx,xxx,xxx)
2. Japan ($ 10,018,xxx,xxx,xxx)
3. China ($ 5,055,xxx,xxx,xxx)
4. Germany ($ 2,950,xxx,xxx,xxx)
5. Italy ($ 2,911,xxx,xxx,xxx)
6. France ($ 2,643,xxx,xxx,xxx)
7. United Kingdom ($ 2,152,xxx,xxx,xxx)
8. Spain ($ 1,344,xxx,xxx,xxx))
9. Brazil ($ 1,110,xxx,xxx,xxx)
Xxx,xxx,xxx stand for values between 1, 000,000,000 and 0.
It comes from that the United States is the government most in debt. In itself this data seems not so relevant. In fact the right way to measure debt is the “debt- GDP ratio”.
In any case it’s wrong to undervalue public debt levels. That’s because:
– higher is the debt, higher is the debt growth rate;
– high debt means high interests.
But it isn’t all. High public debt is related to inflation. If public debt is paid printing new money, high levels of inflations are the result. I’ll tell you about Zimbabwe.
But it isn’t all. The United States are the government more in debt. So, what’s about debt ceiling?Is the global economy in threat?
Debt ceiling, inflation, debt-GDP ratio, interests on debt are other stories. I’ll tell you more in the future.
Matt
Inflation: how much do you know about it?
Yesterday I went with my bride to Johns’ house, one of my bride’s friends. After a tasty dinner and a good talk, we watched a really interesting DVD all together. The title of the movie was “In time”, the director was Andrew Niccol. I say a really interesting DVD because the movie inspired the post of today. To be true the movie gave me many points of inspiration.
In detail Dayton, the main character, toward the end of the movie, says more or less the following words: “It’s useless to provide more time (money) to people. They (the system)will increase time rates (prices). Therefore people will be poor as before”.
As you probably have understood, today I’ll write about inflation. Inflation is simply the increasing of the price of goods and services over a period of time. But what it is important is what inflation implies. To make it simply:
_ suppose wages and salaries increase as goods and services prices. Then people are neither richer nor poorer than before.
_ suppose wages and salaries are the same as before but that goods and services prices increase. Then people are poorer.
An example can better explain it. Suppose my wage is $ 1,200. Suppose now that 1 milk (regular) costs $1.00, 12 eggs cost $2.25, loaf of fresh white bread (500g) costs $2.39, apples (1kg) cost $3.71 and so on.
Now prices increase, that is 1 milk (regular) costs $2.00, 12 eggs cost $3.50, loaf of fresh white bread (500g) costs $2.90, apples (1kg) cost $3.78 and so on. My wage increases at the same as prices. It’s now $ 1,300. So, I’m neither richer nor poorer than before.
Now prices increase, that is 1 milk (regular) costs $2.00, 12 eggs cost $3.50, loaf of fresh white bread (500g) costs $2.90, apples (1kg) cost $3.78 and so on. My wage is still $ 1,200. So, I’m poorer.
Do you agree with me? It’s self evident.
Inflation is a really insidious illness. Law rates of inflation are themselves good for the economy. The problem is that people don’t perceive inflation. Or better people do not perceive to be poorer due to inflation. They perceive prices increase, they complain and then it’s all. Someone doesn’t even know what inflation is. Or better, if you have read the post it’s sure now you know. News always speak about the rates of inflation. But inflation doesn’t seem a people’s matter. It seems a matter of interests for economists and banksters. Nothing so wrong!!!
That’s because inflation makes you poorer and you don’t know it. If you are so lucky you have received a rise in salary, and you feel richer now, inflation fucks you. You are the same as before. The problem is that you don’t know it. That’s what economist know as “money illusion”. People thinks in nominal terms instead of real terms. So if you don’t know things, everything turns up to be no more than illusion. You feel richer but you aren’t. You feel the same but you aren’t.
But inflation is a long story. What happen when prices increase too much (hyperinflation) or at the opposite when prices decrease (deflation)?
Which is the relation between hyperinflation, monetary supply, monetization of the debt, governments’ debt, US debt ceiling and so on? I have told you it’s a very long, long story. In the next posts I’ll tell you more. I’ll tell you about my grandmother’s experience with inflation. The story took place in Germany, after the Second World War.
Matt
Tax liens to help people
What are tax liens? How does they work? Tax liens belong to a really interesting and quite unexplored world.
Let’s me now introduce tax liens to you.
First of all some boring stuff: definitions and things like that.
What does tax liens are? Tax liens are liens imposed by law on properties for securing taxes payments.
So, how does taxes work in the USA? Which taxes US citizens have to pay?
In the United Stated taxes are administrated:
• at federal level by three administrations: the IRS (Internal Revenue Service) that is the federal government agency responsible for collecting taxes, the TTB (Tax and Trade Bureau) known as the Alcohol and Tobacco Tax and Trade Bureau and the US Customs and Border Patrol that administrates taxes on imports;
• at a state level by an administration referred as the Department of Revenue or Department of taxation. It’s a state taxing authority that differs from state to state;
• at a local level by local administration.
US citizens usually have to pay the following taxes: income taxes, gift taxes, sales and exercise taxes, estate and property taxes. In case of employers and employees there are also payroll taxes.
Tax Lien Certificates are Certificates issued by the county government when property taxes are not paid. These Certificates claims that a lien has been placed upon the property. Tax Lien Certificates are then sold through an auction process to investors of many US counties and municipalities . Selling price is determined by different variables such as the amount of unpaid taxes and by the specific Tax Lien Certificates operating costs. At the term the Tax Lien Certificates owners (the investor), will receive an annual fixed interest rate from 8% to 36% plus the previous unpaid amount of taxes on property. The Certificates term changes from 1 to 3 years. In case the property owner fails to pay back unpaid taxes and interests over them then the investor becomes the new owner of the property. In fact tax liens have precedence over all other liens.
But, the point is: how can Tax Lien Certificates help people in trouble? Thanks to Tax Lien Certificates investors pay the rightful owner’s unpaid taxes. At same investors provide him extra time for finding money and repay the debt. So investors give the owner the possibility and the time for paying his debt. Time ranges from 1 to 3 years. You know, private companies (such banks and “friends” like that), don’t give people so much time for paying debts before taking away the house. That’s what I know. So that’s the way, for helping people.
But it isn’t all. Also Tax Lien Certificates are a way for providing benefits to the community. That’s because taxes are necessary to Counties for providing public services. Paying taxes, that otherwise will be not paid, would help Counties providing services to citizens.
Yesterday, I met George, a big house owner with financial problems. I bought the Tax Lien Certificate that allowed him to stay at his home and above all to still be the owner of his home. George explained to me his personal situation. He told me about her wife Margaret and their 2 children. He told me that Margaret is an housewife and that she takes care of the children during the day. He also told me about his financial problems. He explained me that two months ago his company has fired 100 people due to internal reorganization. So now George is at home. Yesterday morning, George received a good new. He will start the new job the next week. He had a lot of problems. But now the past is gone. The future seems full of hopes for George.
These are moments in which I feel really satisfied and proud to be an investor.
With Tax Lien Certificates we can support Counties and we can support owners with financial problems. Thanks to Tax Lien Certificates I can feed my family.
Tax Lien Certificates are more than investments. It means helping each others.
Have a nice week,
Matt
The US debt ceiling
Do you still think the United States of America cannot fail? In the past the US have declared default at least 6 times. Last default was in 1971 (For more infos click here). Being one of the largest world economy don’t guarantee against defaults. Due to globalization, the default of one of the top world economy would provoke a global crisis or better a global economic collapse. Of sure the US debt default would impact not only on China, the major US bond holder, but on the whole world economy.
Recent news suggest a new US default is possible.
Let’s start with some definitions. What’s the debt ceiling? It’s a mechanism adopted in the US in order to limit the national debt the Treasury can issue. In other words it’s a mechanism to limit government spending. When the debt limit is reached, some extraordinary measures should be adopted both for financing government expenditures and for paying previous obligations. Moreover the debt ceiling limit the payment of issued obligations but not the issue of new obligations. The impossibility to adopt extraordinary measures when the debt limit is hit cause a sovereign default. And of course you can imagine the impact of the US government default on the world economy.
Let’s turn to news. In 1995, 2011 and 2013 there were three debt ceiling crisis. In 1995 the Republican President Bill Clinton and the Democratic Congress had a first dispute on debt ceiling. At the end a balanced budget agreement was proposed and more federal spending were cut.
In 2011 another debate on debt ceiling took place. The federal spending were close to hit the debt limit. Therefore in 2011 a negotiation on how to solve the crisis took place. The crisis solved with the introduction of the Budget Control Act. The debt ceiling was raised from $14.3 trillion to $14.7 trillion with the opportunity of increasing it in the next months. Moreover the Budget Control Act required spending cuts by $900 billion over the next 10 years and a special committee in order to identify further cuts. Another consequence was on the US rating. For the first time, a rating agency such as Standard and Poor’s cut the US rating from AAA to AA+. So for the first time, one of the top world economy has been shaken.
Turning to 2013 and to the last debt ceiling crisis.
On December 31, 2012 the government technically reached the debt ceiling.
January 2013: it was the beginning of a very long and debated year on debt ceiling. New extraordinary measures had to be adopted.
On February 4, 2013 with the “No Budget, No Pay Act of 2013” the US debt ceiling was suspended up to May 18, 2013.
On May 19, 2013 the debt ceiling was reinstated. The limit was of $16.7 trillion. That’s in order to respect the borrowing made during the suspended period. No previsions were made about debt ceiling next commitments. In any case it was sure that “extraordinary measures” had to be adopted again. In Summer Treasury warned Congress about a possible US default. According expectations it was required to raise the debt ceiling.
On October 16, 2013 with the Continuing Appropriation Act 2014 the debt ceiling debt ended: the debt ceiling was suspended up to February 7, 2014 and at same government agencies could receive funds until January 15, 2014.
But that’s not all. On December 20, 2013 the US Treasury Secretary announced that when the debt ceiling suspension will expire on February 7, 2014 the US will hit the debt limit again. Therefore other “extraordinary measures” will occur. The Congress will probably raise the nation’s borrowing limit. This for avoiding the US default.
The US federal debt seems to be an endless problem. This is because up to now the government has provided short term solutions. Probably in the future the government will suspend the debt ceiling again. It’s like to postpone the problem without solving it. The worst scenario would be the US default. When the US debt will increase so much to become unmanageable the default is the only way. The US economy differs from the emerging economies such as the Chinese economy, the Indian economy and so on. That is because the US economy such as other developed world economy have slow economic growth. That’s the problem. Keeping constant taxation laws, Increasing government debt cannot be compensated by increasing tax revenues. That’s due to the slow GDP increases.
Changing taxation or cutting federal spending are a huge political matter.
Look at the following chart.
US Debt/GDP – debt ceiling forecasting – Source: FRED
It’s to you answering to the question: will the US default be the end of the never-ending story?
Credit default: the liberty bond default
The tale of the today post starts in 1917 with the US entry in the First World War (1914-1918). It’s the beginning of another tale about credit default.
Before to start let me introduce what credit default is.
Credit defaults happen when there is no the possibility to pay off a debt.
In general the term “credit default” is used to point out private inability to pay back a debt.
In any case “credit default” is also used to point out government insolvencies.
Let’s turn to the tale.
As always wars are very expensive and funds are required. In order to finance the war in 1917 the US Congress issued the so called “Liberty bonds”.
The amount of the required financing was really huge: the first world war troops cost to the United States more than $30 billion.
Liberty Bond and Credit default
On April 24, 1917 the first issue of bonds for a value of 5 billion dollars took place. Bonds were issued at 30 years, paid an interest of 3.5% and were redeemable after 15 years.
Conditions for a credit default were established.
The second issue – on October 1917 –was of $3.8 billion bonds. Bonds were offered at 25 years, at an interest rate of 4% with the possibility of redemption after 10 years.
The first two bond issuing campaigns were quite unpopular. As consequence an aggressive mass-media campaign started.
The idea was to promote the act of purchasing bonds as patriotic act. Famous artists, movie stars, boy/girl scouts and also the US Aviation Section were involved.
On April 1918, there was the third issue of 3 billion of Dollars at an interest of 4.55%. On September 1918 the forth Liberty Loan offers $6 billion in bonds at 4.25 percent.
On April 1919 the fifth and last liberty bond issue, also known as the Victory Loan, took place.
On August 1919 the US liberty bond debt plus other debt obligations were of around $25.596 billion. The credit default machine was at work.
The terms of the bonds allowed bonds to be switched into later bonds with superior terms and the possibility to required gold coins as payment of the principal and of the interests.
When in 1933 President Roosevelt entered in office the US debt was unsustainable.
The US treasury had 4.2 billion of dollars in gold, not enough for paying both principal and interests.
On April, 1934 the US Treasury defaulted by refusing to redeem bonds in gold and devaluating the dollar by approximately 41% against foreign exchanges.
The investors’ total loss due to the devaluation was more or less of $ 220 billion (at 2012 price per ounce).
And this is the end of the credit default tale of today.
Be aware, have plans.
Matt
Currency defaults
The first part of the tale will be about the first US Continental currency default. The CONTINENTAL CURRENCY DEFAULT of 1779. A tale of wars, debts and money.
It all began with the American Revolutionary War (1775) or better with the American War of Independence. The 13 American colonies were Great Britain Colonies and such as every Colonies they had to pay taxes to their conqueror. In 1775 the Colonies refused to pay taxes to Great Britain. The War between American Patriots and British militia began.
In order to finance the war, the US Continental Congress (a Congress that represented all the 13 Colonies) issued 2 million dollars of notes. The debt should be paid in 4 years. But everyone knows that wars are really expensive. 2 million dollars were not enough. One month later the Congress issued further notes. Notes for 1 million dollars. Not enough. A third and a forth emissions followed. 3 and 13 million respectively. Not enough. So at the end the US Continental Congress got into debt for 241 million of dollars (British debts excluded).
1779 Currency Default
The notes were flat money. The conversion rate between notes and gold/silver was variable: it was decided by the governments. In general these notes were not converted into commodities (gold/silver) but they were retired by governments as payment for governments taxes.
In detail, during the American Independence War, the US Continental Congress (representing all 13 Colonies) issued notes but it had no power of taxation. Therefore the single Colonic Administration was made responsible for redeeming the notes as payment for taxes. Notes should be accepted by law (and for avoid terrible penalties as mutilations).
In any case the debt was too high. There were too much notes outstanding. As in current days, there is too much money outstanding, inflation or better a loss of the purchasing power. So what happen? People realized that neither Congress nor Colonies wouldn’t be able to redeem such notes. In 1779 the bills of credit were depreciated from 38,5 to 1.
A percentage can better clarify the depreciation: a 97,40% depreciation. In the same year (1779) people began to refuse notes as payment. This was the first Continental Currency default. The loss was more or less of $7 billion. Who lost money? Citizens of sure.
But the Continental Currency default wasn’t the only result of the American Revolutionary War.
The well known result of the American Revolutionary War (1775-1783) was the US Colonies independence. The hidden results were the two US government defaults: the continental currency default of 1779 and the CONTINENTAL DOMESTIC LOANS DEFAULT of 1782.
I repeat myself: wars are really, really expensive. They cost human lives and huge amounts of resources. What if owned resources aren’t enough? As always smarter people exist. And I don’t know why these people are everywhere. Everywhere, at any time someone becomes richer and someone else becomes poorer. So, what if resources aren’t enough? Solution 1: to print paper money (continental currency default of 1779)
Solution 2: loans. Loans were another way for financing the American Revolutionary War. The US Continental Congress borrowed capitals both domestically and abroad. At the end of the war the total debt was of 11 millions Spanish Dollars. The Congress paid the interests on debt borrowing other capitals from Holland and France. But the debt was too huge. So what happened? When Holland and France stopped to finance the US Congress, the Congress defaulted. It was the year 1782.
Successively the unpaid debt was partially paid through the issuance of notes. Notes effective for paying taxes. Then in 1790 the Foundation Act was promulgated. The Act rejected the war loans. In any case the government, through the Foundation Act, accepted to pay loans at a less favorable rate. Et voilà, les jeux étaient faits. This is witchcraft.
Governments always find solutions. Solutions that are favorable to governments, of sure.
Why the Continental Currency Default of 1779 and the Continental Domestic Loans Default of 1782 can be illustrative? Illustrative of what? Do you find analogies with the current US financial situation? I mean, increasing US government debt (increasing debt ceiling), increasing monetary supply, loss of the purchasing power? Can a default be the result?
If the continental currency default of 1779 and the Continental Domestic Loans Default of 1782 are not enough I’ll provide you another example of how things work: the GREENBACK DEFAULT OF 1862.
In 1861 the US was involved in the Civil War. The famous American Civil War. Those interpreted by Vivien Leigh and Clark Gable in “Gone with the wind”. The war between the Northern States and Southern States. The war for the release from bondage.
How to finance the war? The answer is always the same. Printing paper money.
Printing the green American dollars. The event that leant to another currency default.
Liberty Currency Default
Well, in order to finance the Civil War, the Congress printed the “Greenback”, a new currency which name was due to the green color ink. A money that went around the US for 100 years, until the 1971.
The notes were printed for an amount of 60 billions of dollars and were redeemable at any time at $20.67 an ounce or silver at $1.293 an ounce, at the government’s discretion. But at that time gold was cheaper than silver. Therefore in 1861 government redeemed the notes for gold. The rate was of 0.048375 troy ounces of gold per dollar.
Only 5 months later the credit currency default happened.
The Congress was not able to redeem the notes on demand.
This because, as already remarked, the ransoming was on demand. It was easy to forecast a currency default. And so happen. In 1862 the Treasury Default declared the currency default.
History repeats itself. People repeats “mistakes”.
Be aware, have plans.
Matt
