Fiatch

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Cities and counties are tumbling to states for funds.  States are tumbling to the federal government.  Seemingly without reservation, The Feds are running the presses as fast as they can.

For now, “It’s good to be the [reserve currency].”

See Mish’s”Pension Crisis Hits Critical Mass in West Virginia.”

Via The Oil Drum:

The value of fiat currencies erodes over time, while remaining high quality energy increases in strategic value, even if not recognized in monetary terms.  We have a monumental problem - a system whose claims on the future are higher than its real assets.

[image source]

“China Allows Yuan Trade Settlement, Offers Tax Breaks” via BB:

China will allow companies to use the yuan to settle cross-border trade and let them keep their entitlement to export tax rebates, seeking to reduce the reliance of importers and exporters on the U.S. dollar. The People’s Bank of China will encourage banks to offer yuan settlement services from today.

“It’s China’s first step to make the yuan global,” said Shi Lei, an analyst in Beijing at Bank of China Ltd., the nation’s largest foreign-currency trader. “It will protect exporters from swings in exchange rates and boost the yuan’s role in the world currency system.”

US To Trade Gold Reserves For Cash

“Dollar Caught in Catch-22: Default or Debase?” via Minyanville

included with “Russia Backs Return to Gold Standard to Solve Financial Crisis” in the Telegraph.

“The Dangers of Printing Money” via Time:

Forget toys: with as many as 4.2 trillion marks to the dollar by late 1923, German children played in the streets with worthless money.

76 years ago today, President Roosevelt signed into law a bill passed by the US Congress that outlawed gold held by citizens.  Keep in mind that private ownership of gold was not decriminalized until the 1970’s.

Here is an excerpt from Wikipedia on the Emergency Banking Act of 1933:

The Emergency Banking Act (also known as the Emergency Banking Relief Act) was an act of the United States Congress spearheaded by President Franklin D. Roosevelt during the Great Depression. It was passed on March 9, 1933. The act allowed a plan that would close down insolvent banks and reorganize and reopen those banks strong enough to survive.

On March 5, 1933, the day after Roosevelt’s inauguration, he called a special session of Congress which instituted a mandatory four-day bank holiday. This act provided for the reopening of banks after federal inspectors had declared them to be financially secure.

The bill also gave the Secretary of the Treasury, William Hartman Woodin, the authority through an amendment to the Trading with the Enemy Act to confiscate the gold of private citizens, excluding dentists’ and jewelers’ gold and “rare and unusual” coins. These citizens received an equivalent amount of paper currency which was subject to later devaluation with relation to gold. Ultimately, the US dollar was devalued by approximately 40%, ending the deflationary spiral the American economy was experiencing.

Within 3 days of the act’s passage, 5,000 banks had passed inspection and were reopened. Roughly two-thirds of U.S. banks quickly reopened under this act, and faith in banking institutions was somewhat restored.

This act was a temporary solution to a major problem. The 1933 Banking Act passed later that year presented elements of a more permanent solution, including formation of the Federal Deposit Insurance Corporation (FDIC).

For additional info, see also:

• LAT reports “Roosevelt Closes All Banks; Congress Meet Thursday” from March 5, 1933.
• WSJ reports “Bill Seeks to Let FDIC Borrow Up To $500 Billion” from March 6, 2009.

Jim Rogers spoke with CNBC on February 9, 2009.  Among comments about the UK and other topics, he related:

• I’m buying gold just because periodically I buy gold. I do expect it to be much higher over the next decade.
• Btw, if the IMF sells their gold — and the IMF is dying to sell their gold to bail everybody out — then gold could go down a fair amount.  But that would be the bottom for gold if the IMF does.  Now, I hope the IMF does sell their gold for two reasons: 1. We would get a low price for gold, and 2. then we could get rid of the IMF because, after they sell all their gold, nobody else is going to give them any money, and then the IMF would have to dissolve somewhere down the road.

If only.

The WSJ reported on February 27 that “US To Take Big Citi Stake and Overhaul the Board:”

As a condition, the government is demanding that the New York company overhaul its board of directors, the people said. Treasury will call for Citigroup’s board to be comprised of a majority of independent directors. Chief Executive Vikram Pandit is expected to keep his job under the agreement.

The government will convert its stake only to the extent that Citigroup can persuade private investors such as sovereign wealth funds do so as well, the people said. The Treasury will match private investors’ conversions dollar-for-dollar up to $25 billion.

The size of the government’s new stake will hinge on how many preferred shares private investors agree to convert into common stock. The Treasury’s stake is expected to rise to up to 40% of Citigroup, the people said.

An agreement would mark the third time since October that Washington has come to Citigroup’s rescue. Twice last fall, the government pumped a total of $45 billion into the company, and also agreed to protect Citigroup against most losses on $301 billion of assets. That gave the U.S. a 7.8% stake in the company.

The WSJ reported on February 25 that “Bernanke Again Pushes Back Against Nationalization:”

In response to a specific question about Citigroup Inc.’s current woes, Mr. Bernanke told the House Financial Services Committee, “We will see how their test works out and we’ll see what evolves.” Nationalization, he said, misses the point.

Asked if the Citigroup could end up nationalized, Mr. Bernanke said he doesn’t see that happening. “It may be the case that the government will have a substantial minority share in Citi or other banks, but again we have the tools… to make sure that we get the good results we want in terms of improved performance” without the negative effects of a bankruptcy process or seizure, which would be disruptive to the markets, Bernanke said.

He added that he defines nationalization as the government taking over 100% of a firm and zeroing out stock. “I don’t think we want to do that,” he said. “I don’t think we need to do that.”

So, it’s not “nationalization” according to the Fed Chairman unless one government controls the entire 100%? How convenient.

The US will match other sovereign wealth funds dollar for dollar to acquire up to a 40% stake in Citigroup for the Feds.  Call it what you will, e.g. call it “Unicornization,” but Citigroup is a private organization no more.  It’s been nationalized.

President Obama lies to our faces about earmarks with easy self-confidence.  His Fed Chairman follows his lead to openly proclaim with confident detachment utter nonsense.

Do you trust these people?  If so, why?  Without question, they are lying constantly.  You cannot believe the words.  That’s not possible if you are honest.

Despite the lies, do you believe in the goodness of the intent behind the lies — that these leaders, so-called, are deceiving us with a wink and for our own good?  Is that your view?  Have you even thought about it?  Or are you also complicit in all this dishonesty by actively deluding yourself?

On a related note — do you believe the dollars in your pocket?  If so, why?

Have you ever bought a gold coin?  Have you held a bar of silver?  I relive my first experience each time I acquire more.  Holding these items always strikes me as an odd thing.  What is different?  Why do these objects seem special?  What is this feeling?

Oh. This is money.

The other junk we keep in our pockets represents the lies of our leaders rendered into print in such a manner that we can all participate in the delusion.  For Americans, it’s been a wonderful setup for decades because the whole system is so ruthlessly rigged in favor of the US dollar.  What happens if this massive shared dream ends?

What if the ideas of the Austrian school of economics are correct?  If so, what happens next?

What builds trust?  What destroys it?  What store of value is safe?