Signs of another economic collapse coming?

[oldtimer]

Anyone familiar with the story of King Midas?

[Paducah Home Theater]

I could be wrong but old pennies might have more copper value than a penny.  What good is that?

I'm sure they do, but at the time that wasn't the case.

[oldtimer]

^{"I could be wrong but old pennies might have more copper value than a penny.  What good is that?  It is still only exchangeable as a penny or a quarter"}

 

^{If an old copper penny has more copper than a new copper penny couldn't you take it to a coin dealer and exchange it for the actual value of the copper?  I know it's that way for silver and gold coins in that a $20 gold coin has a face value of $20, but a coin dealer will pay you spot price for the gold in it which is a bit under $1300.}

Yes of course.  Now tell me exactly what you get in return.  Something you can use to buy either something you want or something to use to make more things with.  What exactly would that be?  And which is more useful?

Edited February 10, 2015 by oldtimer

[Paducah Home Theater]

Yes of course.  Now tell me exactly what you get in return.  Something you can use to buy either something you want or something to use to make more things with.  What exactly would that be?  And which is more useful?

There's nothing stopping you from using the gold coins to purchase something. You just have to find someone who is willing to accept it. The only thing that makes this argument seem even remotely sensible is the fact that people are used to accepting US currency and most wouldn't know what to do with gold. In the tech world, you can buy stuff in the same exact manner with Bitcoins. The fact that you can do this doesn't make them more valuable than gold.

Edited February 10, 2015 by MetropolisLakeOutfitters

[Fjd]

 

 

 

 

It's all backed by "something."  That something may be "the full faith of the US government,"

That would mean our government is who is issuing the money. There's a reason our cash says "federal reserve note" at the top. All this was trying to be fixed with executive order 11110.

 

 

 

Executive order 11110 just may be the reason I'm enjoying silver wire in the secondaries of my SET amps.

 

I beleive that the entire world has pretty much been operating with Fiat currency since 1971 when the United States suspended the convertibility of the US dollar into gold.

 

 

1971 was a technical default. Prior a country could exchange their dollars for metals.  After Nixon removed the gold standard you could only change your dollars for more....dollars. 

 

 

 

That was part of my point.  However, overall, I do not believe that the fractional-reserve structure, which has been around in some form since the 1600s, in and of itself is the cataclysmic problem as there are many other competing agendas involved including those with the goal of exploiting any opportunity they can for personal wealth at the expense of wealth distruction for others.

 

Overall, I'm curious as to what do you believe to be a proposed solution? 

 

Full-reserve banking?

 

Free banking?

 

Something like bitcoins (huge risk but Bitcoins could be a slick work-around to the ‘central bank’ systems of the world)?

 

Or, wouldn’t it be great to just recreate the stability of the 1950s through the 1980s where banks operated under the 3-6-3 Rule (e.g., paying 3 percent interest on deposits, lending money out at 6 percent, and being able to "tee off at the golf course by 3 p.m.”)?

 

In some respects I suspect that the financial issues we see in the news such as; fiscal sustainability, too much public debt, debt ceilings, sovereign risk; and several others we hear are probably non-issues and not much different than the global warming rhetoric that was debated in the other thread.

 

As Mark alluded, the “central bank” concept and fractional-reserve banking has been around since the late 1600s.  An aspect that is different now that evolved during the twentieth century is that the overall role of the central bank changed and grew where it now influences certain macroeconomic policy variables.  For example, the influence extends to include various measures of inflation and unemployment.  We also see the central bank policy attempting to extent to manage interest rates, reserve requirements, and certain measures of the money supply and monetary base. 

 

Now think back to what you have read about the "Crash" of 1929, which was the precursor to the Great Depression.  Margin requirements were 10% and similar to your Federal Reserve Bank example the brokerage firms would lend $9 for every $1 an investor had deposited.  When the market crashed and brokers tried to call in these loans, what do you suspect happened; the loans could not be paid back.  Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits in large droves, which triggered the multiple bank runs.

 

One of the bi-products of the 1929 crash was the Glass-Steagall Act that was in effect from 1933 until the 1999 Gramm–Leach–Bliley Act.  Note that from the Great Depression through 1999 the United States essentially maintained a separation between investment banking and consumer/commercial banks (the traditional depository institutions).   Today you have the traditional Wall Street “investment banks” such as Goldman Sachs and Morgan Stanley, among others operating under the banner of “commercial bank” and filing documents as "bank holding companies." 

 

However before the 1999 Gramm-Leach-Bliley Act, let’s look at legislation passed during the 1980s.  The Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St. Germain Depository Institutions Act of 1982 both went a long way to reduce the distinctions between banks and certain “other financial institutions.”

 

This first attempt at "deregulation," appears to have been the main catalyst for the failure of over 700 savings and loan associations between 1980 and 1988, and the subsequent failure of the Federal Savings and Loan Insurance Corporation (FSLIC) whose obligations were assumed by the FDIC in 1989.

 

Not many on this forum probably remember the savings and loan crisis of the 1980s and 1990s that resulted in the failure of 747 of the 3,234 savings and loan associations in the United States.  A 1995 report put the estimated total cost for resolving these failed institutions at $87.9 billion. The bailout contributed to the large budget deficits of the early 1990s and had huge impacts on the housing market too.

 

Next we had the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 amended the laws governing federally chartered banks in order to restore the laws' competitiveness with the recently relaxed laws governing state-chartered banks, which created a new set of loop holes to exploit.

 

This brings us to the Gramm–Leach–Bliley Act of 1999 that repealed the provisions of the Glass-Steagall Act that prohibit a bank holding company from owning other financial companies, which essentially  removed the separation that previously existed between the Wall Street investment banks and depository banks.

 

In a “nostalgic” time a long time ago, the Wall Street investment banks were in the business of facilitating a market structure to create capital for business.  They were smart about taking risk when they where under the partnership structures and had to assume the loss. 

 

However, today Wall Street is able to pass the risk of loss to others, seems to be riddled with perceived conflicts of interest, overly large pay packages, cartel-like behavior, oligopoly-like behavior, taking both sides in transactions, and its overall lack of transparency, among other things.  Overall, the business of Wall Street today looks nothing like the original intent of facilitating the creation of capital for business growth.  

 

Therefore, what should we expect when the Wall Street investment banks are allowed to enter the arena of traditional consumer banking? Maybe we should have known it would be something like just opening up the gate and letting the fox in the hen house?

 

From a practical standpoint, the financial crisis itself ended sometime between late 2008 and mid-2009.  While many try to point fingers away from the causes for the financial crisis by stating it was a normal business cycle, note that the Levin–Coburn Report by United States Senate found that "the crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."

 

It seems that even good regulation will be watered down over time (regulatory capture) and sometimes it just seems that we can't even seem to keep honest people honest for long.

[oldtimer]

 

I could be wrong but old pennies might have more copper value than a penny.  What good is that?

I'm sure they do, but at the time that wasn't the case.

 

LOL.  Everything he talked about only needs Congress to make happen.  Of which he was a  member at the time.  Instead of jawing a non legislator why didn't he get anything done where it needs to be done? Jaw at his fellow members, write up the legislation.  it was easy for him to pass the buck....I wonder also if he bought gold at 1800 an ounce and is enjoying his store of value at 1200.

Edited February 10, 2015 by oldtimer

[oldtimer]

 

Yes of course.  Now tell me exactly what you get in return.  Something you can use to buy either something you want or something to use to make more things with.  What exactly would that be?  And which is more useful?

There's nothing stopping you from using the gold coins to purchase something. You just have to find someone who is willing to accept it. The only thing that makes this argument seem even remotely sensible is the fact that people are used to accepting US currency and most wouldn't know what to do with gold. In the tech world, you can buy stuff in the same exact manner with Bitcoins. The fact that you can do this doesn't make them more valuable than gold.

 

You're right it doesn't.  But if they are accepted more universally then it does make them more useful as a medium of exchange.  Even if they are backed by gold, which really means backed by a promise of gold.

 

In the case quoted you actually are using the metals to purchase something at the coin store---dollars!

Edited February 10, 2015 by oldtimer

[Fjd]

^{"I could be wrong but old pennies might have more copper value than a penny.  What good is that?  It is still only exchangeable as a penny or a quarter"}

 

^{If an old copper penny has more copper than a new copper penny couldn't you take it to a coin dealer and exchange it for the actual value of the copper?  I know it's that way for silver and gold coins in that a $20 gold coin has a face value of $20, but a coin dealer will pay you spot price for the gold in it which is a bit under $1300.}

 

 

I have read in the Michael Lewis book titled "Boomerang" where Kyle Bass, the founder of Hayman Capital hedge fund that had accumulated huge profits from the collapse of the housing market, bought 20 million nickels.

 

The book indicated that Bass apparently believed that the metal in each nickel is worth 6.8 cents essentially resulting in the face value being below the underlying value of the metal in the coins.

 

While on the surface this seems like an obvious way to make money by hoarding nickels, the catch is that melting U.S. coins is now illegal. During 2006, given the rising prices of metals such as nickel, copper and zinc, the U.S. Mint became concerned that speculators could remove pennies and nickels from circulation and sell them as scrap for profit; therefore, passed an interim rule that banned melting coins, which became permanent during 2007.

[oldtimer]

rule that banned melting coins, which became permanent during 2007.

 

Don't you just hate that?

[Mallette]

I find the talk of "precious metals" funny.  The PAW's parents are "worldwide collapse" types from the "fear du jour" and talk of what to do a lot.  The PAW was asking me about what to do about money.  I said 5k or so in gold was adequate, as in a collapse it would immediately be worth far more.  However, I added this caveat:  Make sure you dump it well before Planetary Resources, Elon Musk, or any other entity develops deep space capability.  These metals are "precious" only because they are scarce on earth.  The moon and asteroid belt are ROTTEN with the stuff and the first small asteroid with a heavy platinum content would equal all that has every been mined. After that, it's just a useful metal. 

 

Space cadet stuff?  Aside from Musk and others, the Planetary Resources billionaire boys club is serious as a turd in the punch bowl about mining the asteroids sooner rather than later.  They aren't satisfied with being billionaires and it was that scatter brained dreamer Neil DeGrasse Tyson who proclaimed a few years ago 'The first trillionaire will be made in space." 

 

Chris Lewicki, President and Chief Engineer commented warmly on a post I made on their blog to the extent that, when the shortage of rare earths, titanium, and the like came up my comment was usually "Hey, did you know there is a place only 350 miles from here where the supplies are inexhaustible?" 

 

"Precious Metals" will become what they should be, excellent materials for amplifiers and such. 

 

That isn't a dream or some distant future prediction.  The mechanisms are in place now and I will probably live to see the first shipments return.  Those will likely be from PR, as their plan will use robotic craft to maneuver asteroids to near earth orbit where they'll be easily accessible. 

 

Dave

Edited February 10, 2015 by Mallette

[Mallette]

Wish my dad had kept his cowboy pay.  He told me that he was given one 20 dollar gold piece a month. 

 

Dave

[Guest Steven1963]

Gold during the depression was confiscated I think. Only the rare coins were left to the public and the reason I think I read was because Roosevelt was a collector and left those alone. Could happen again.  I'd rather own silver they'll not worry about that as much.

[Gilbert]

Anyone familiar with the story of King Midas?

 

LMAO...... thanks, I needed that.

[Ski Bum]

 

Anyone familiar with the story of King Midas?

 

LMAO...... thanks, I needed that.

 

Music tie in: remember how Midas' got his donkey ears?  I still think Pan would take Apollo in a musical head chopping showdown.  Pan played rock, and got the ladies juices flowing.  He knew what it was all about.  Apollo played foofy easy listening crap for the stodgy establishment, on some silly harp.  Give me a break.

[Mallette]

Me, I am a Jupiter guy with his giant subwoofer in the sky.

 

Dave

[Mallette]

BTW, asteroid mining positions open:  http://us5.campaign-archive1.com/?u=86e5e3fd66ecbdeda82b09373&id=ac881278b7&e=594c9af34b

 

Dave

Edited February 10, 2015 by Mallette

[Paducah Home Theater]

LOL.  Everything he talked about only needs Congress to make happen.  Of which he was a  member at the time.  Instead of jawing a non legislator why didn't he get anything done where it needs to be done? Jaw at his fellow members, write up the legislation.  it was easy for him to pass the buck....I wonder also if he bought gold at 1800 an ounce and is enjoying his store of value at 1200.

We can't even get the federal reserve to tell us where 2.3 trillion dollars went. We can't exactly just make them change major policy that easily.

[oldtimer]

Really?  Of course it is not easy.  But Congress has the power.  Time to elect new congressmen.  Start by eliminating democrats and republicans.

[Guest Steven1963]

Really?  Of course it is not easy.  But Congress has the power.  Time to elect new congressmen.  Start by eliminating democrats and republicans.

 

Yes. Throw them all out on their behinee's and demand the newly elected members dismantle special interest. It's a start.

[Gilbert]

 

Really?  Of course it is not easy.  But Congress has the power.  Time to elect new congressmen.  Start by eliminating democrats and republicans.

 

Yes. Throw them all out on their behinee's and demand the newly elected members dismantle special interest. It's a start.

 

 

 

Now, now. Just toss the lawyers (both sides) and everything will work itself out just fine.