Zimbabwe is infamous for its hyperinflated currency, with its citizens carting wheelbarrows full of money to the market just to buy a loaf of bread. The country’s hyperinflation hit a peak in 2008, reaching 5 billion percent, making the Zimbabwean dollar virtually worthless. After that, citizens began using foreign currencies, such as the U.S. dollar and the South African rand.
Now, the Zimbabwean government is finally ditching the currency, offering a deal to citizens in which they can convert their bank account balances to USD. Accounts with balances up to 175 quadrillion Zimbabwean dollars will receive USD$5; accounts in excess of 175 quadrillion Zimbabwean dollars can convert their money to USD at an exchange rate of USD$1 for 35 quadrillion Zimbabwean dollars. People who still hold old Zimbabwean dollar notes can exchange 250 trillion old notes for USD$1.
Zimbabwe’s disastrous hyperinflation is a textbook example of the dangers involved with using fiat currency. Granted, Zimbabwe’s monetary horror story occurred because of extremely irresponsible policies that are not present in the developed world. However, strong currencies like the US dollar are not very different from the Zimbabwe dollar in terms of fundamentals. Both currencies are managed by a central bank and can be printed at will, with no restriction on supply. The only real differences between the two currencies are that the Federal Reserve is better at managing its money supply, and the political climate in the U.S. is much more stable than in Zimbabwe. But those two things could change at any time, placing the U.S. in a similar situation to Zimbabwe.
The only way to guarantee a reliable currency is to completely get rid of central control over money. Arguably, the best way to accomplish this goal is by adopting a currency with a limited supply, as well as preventing banks from issuing money substitutes in excess of real cash. That way, the money supply cannot grow beyond the amount of cash the banks have in reserves. Under such a system, not only would it be impossible for banks and government to create destructive inflation, but volatile business cycles would likely be prevented as well.
Historically, “sound money” has been synonymous with gold. However, as modern technology progresses, the market has produced potential alternatives to gold. Zimbabwe’s move to the United States dollar will undoubtedly be a welcome change for the country’s economy. However, Zimbabweans should understand that the USD is not fundamentally different from their own failed experiment with fiat currency. In the future, they should seriously consider a sound money alternative to fiat currency.
Fort Knox and the New York Federal Reserve are the most highly recognized gold depositories in the U.S. Legislation approved in Texas will soon allow the “Lone Star State” to store precious metals like gold and silver through a bullion depository for public agencies, business and nonprofit corporations, banks as well as individuals. At the time of this writing, this legislation is expected to be signed by the governor.
All of this is the brainchild of Rep. Giovanni Capriglione, R-Southlake, who has championed this measure for two years. It authorizes the state comptrollers office to establish the depository, making Texas the first state in the nation to take this unprecedented step. Undoubtably one of the catalysts prompting this measure are investment funds connected to the state’s public universities and other entities, including over $1 billion dollars in gold that Texas has currently stored in other states
Somewhat surprisingly, news of this has led to a global groundswell of interest among individuals desiring to secure gold in this mecca of the American Southwest. Some surmise that maintaining gold within the state will allow avoidance of federal oversight, while capitalizing on storage efficiencies that accommodate large amounts with minimal space.
This new legislation could foster a new normal for gold and silver deposits thereby fostering an environment of sound money. Here, by tying this to regular, daily consumer transactions, this new initiative could have a broad reaching effect on the economy. Experts believe that gold and silver transactions across multiple states will have a chilling effect on the federal government’s monopoly on money
What Does This All Mean?
For starters let’s give the State of Texas props for this ingenious promotional branding move. It’s no wonder that the economic fortunes of the “Lone Star State” are the envy of the nation. The secret Texas barbeque sauce here: As the state receives it’s anticipated mother lode of gold and silver deposits, it will be able to earn revenue off of the fees. Moreover it allows the state to leverage their own precious metal assets to hedge against an economic downturn or inflation. As the slogan goes, “Don’t Mess With Texas,” particularly as it relates to the state’s repute as a robust economic engine of prosperity.
It’s no secret that the Texas’ fiercely self reliant, independent style is at odds with Washington. Some in fact have suggested that this latest initiative could be characterized as a “middle finger” shot at the feds. Could all of this be signaling rumblings of discontent leading to howls of succession from the union?
It’s an intriguing question that is certainly worth its weight in gold.
Michael Scott, Bookmark Global Connect, Inc
Denmark is quickly approaching the point where cash might no longer be necessary. Legislators recently proposed a law that would allow some retailers to only accept digital payments via a credit card or mobile device. If it passes, it’s likely that many brick-and-mortar shops will gladly free themselves from the burden of paper and metal money. Some citizens, on the other hand, are worried about the trackability of non-cash transactions.
This trend is not especially new. Already a third of Danes use MobilePay, an app created by the nation’s largest bank, for making transactions. One report even said that in 2012, 84% of Danish transactions took place with credit cards. Several other European countries have also expressed a desire to do away with cash. For example, in Sweden’s larger cities, the bus systems already restrict payments to digital forms like credit cards and prepaid passes.
Some people are worried about how their privacy will hold up in a cashless society. Right now, paper money is often used as a way to avoid tracking. Records are not essential for cash transactions because they involve the transfer of physical objects. With relative certainty, we can always know who owns the money because we can see who holds the actual paper bills.
Digital money, however, has to be treated differently. Banks and payment processors almost always attach an identity to artificial transactions. In our legacy financial system, that’s the only way to ensure that money doesn’t get lost, duplicated, or misdirected. Many argue that the authorities would have a field day with this kind of information. Electronic databases are extremely easy to search, analyze, and preserve, so the government could theoretically watch where all of our money goes.
Privacy is definitely a legitimate concern, but it’s important to remember that digital transactions do have some serious benefits for businesses.
Physical money is notoriously difficult and expensive (and even unhealthy) to handle, which I can illustrate with a personal anecdote. Like many others, I spent a decent portion of my teenage years working in a fast food restaurant and I remember muttering all the time about how annoying cash was. Without exaggerating, I can say that it often took five to ten times longer to sort bills and count change than it did to swipe a card. That’s a huge factor when you’re trying to serve 120 cars in an hour and it’s only a fraction of the full cost. The owner of the restaurant also had to pay the managers to count money drawers (and the entire safe) several times a day. Then there’s the cost of having bills and heavy change delivered and picked up by armored trucks, and how about touching dirty paper while serving food!
Daniel Brown is the editor-in-chief of You, Me, and BTC. He’s also the “Everything Elf” at Liberty.me.
At this point (Spring 2015) in our constantly changing world of global economic and financial uncertainty, every American should own physical gold and silver. Period. Everyone. No matter how much or how little you earn or have invested.
Sadly, the average person understands very little about gold and silver. But the fundamental logic for every American to own physical gold now is enduring and inescapable.
Do You Have insurance?
It’s a fair bet that you have your home, car and health insured. Perhaps you even have life insurance. But do you have your wealth insured through ownership of physical gold and silver? Owning gold and silver is the ultimate hedge against inflation, deflation and currency depreciation, and it is a great tool for transferring wealth to your children and grand-children.
Your portfolio is not properly diversified if it does not include physical gold & silver amounting to – at the very least – 5% of your total net worth. A much more prudent allocation would be 15%.
A Declining Dollar
The purchasing power of the U.S. Dollar has declined over 95% since The Federal Reserve was created in 1913. The cumulative rate of dollar inflation over the last 100 years is 2,238%, according to The Fed, which has been fudging annual Consumer Price Index (CPI) statistics since the early 1980s. ShadowStats estimates that the cumulative rate of dollar inflation since 1915 is actually over 9,000%. So what cost $1 in 1915, costs over $90 today!
Do You Trust Your Government?
A 12/18/13 Gallup Poll revealed that 72% of Americans think Big Government is the biggest threat to the U.S. in the future. This is the same ever-expanding Big Government that prints money like a Third World despot, reads your e-mails, eavesdrops on your cell phone conversations, rides roughshod over The Constitution, and uses government institutions like the IRS (targeting Tea Party organizations) and Justice Department (Operation Choke Point) to punish individuals and entities it simply does not like. Although Americans are becoming increasingly powerless to stop this juggernaut of Orwellian oppression, gold and silver empower the disenfranchised.
You Must Own Gold & Silver
With gold & silver, you never lose your investment. Add to your precious metal holdings over time, and be certain that you are doing what you can to preserve your wealth and to secure your family’s future in an uncertain world.