Sunday, December 4, 2016

When will people ever learn?

The corrupt, shitty government of Venezuela just had to issue new bank notes of much higher denominations because the crap cash they issued before now must be tendered by means of backpack for even relatively small transactions.  Yes, Venezuelans are expressing their collapse in confidence in the issuing authority by getting rid of the fake money of the issuing authority as quickly as possible on the black market - trading it for whatever other thing that they can get.  Anything but Bolivars.

I often write that hyperinflation is not the direct result of money printing as so many would have us believe.  It is in fact a result of loss of confidence in the issuing authority.  Past money printing might be one contributor to this but so is the realization that governments are corrupt organized criminal cartels.  For example, if the US government is found to have had a direct hand in 911 I think it could lead to massive inflation if not hyperinflation simply because it will destroy the notion still held by so many clueless people that our government is somehow good and beneficial or any thing else other than a voracious parasite.

Being able to watch other shitty governments in action gives us a real time view of what is going on here.  The Venezuelan government is NOT hyper-inflating the bolivar any more than the Wiemar government did.  Look at the facts.  Look at the reasons for issuing notes of higher and higher denominations: the people are carrying around sacks of lower denomination bills which have lost value in the economy - in the eyes of the people that is - such that it takes a back pack full of notes in order to make small transactions.

By printing notes of higher denominations, the Venezuelan government is hyper-inflating the currency, they are simply formalizing the decision that has already been made by the people.  You rarely if ever see anyone expressing hyperinflation in this way but the proof is before us in real time.  First came the devaluation of the currency in the minds of the people and then came the larger notes, not the other way around as many on the wen and tellers of incorrect history would have you believe.  And you know why it happens like this??  Because sellers do not set prices!  Buyers set prices.  Sellers suggest prices and buyers either agree or disagree.  Government is selling its currency to the people in exchange for their labor and the people are demanding more and more of the increasingly worthless paper currency before they will make the trade.

Smart people in Venezuela who have enough excess earnings as to allow them to generate savings will GTFO of the bolivar as soon as they possibly can.  And instead of changing it to dollars or Euros they should be changing it into gold and silver coins because there is nothing special about dollars, euros, yen, yuan or any other fake paper money in the world. It is all inherently worthless and its current trading value is based on nothing more than the current confidence level in the issuing authority.  Since all global issuing authorities are in such levels of debt that they can never be repaid, only a fool has confidence of any kind in them.  They will all eventually default to the last one of them and all of their fake paper money will at some point go worthless.


Nobody knows the date and the hour but we do know this: there is not nearly enough gold and silver in circulation right now to even come close to being traded for the paper assets that are out there at current prices.  NOT EVEN CLOSE.  At some point a loss of confidence will occur and the herd will begin to stampede into the metals.  While there is no such thing as a 100% certain outcome for anything, I have history, logic and math on my side so I like my chances of being right about this.

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