TheSubjectOfMoney.com Money 101 – Part 1 Note: What it is. Not how to earn it, budget it, save it,...

TheSubjectOfMoney.com

Money 101 – Part 1Note: What it is. Not how to earn it, budget it, save it, or invest it. And definitely not how to get rich quick!


The Precursor of MoneyWhat would we do without Money?

• Dystopia

• Utopia

• Barter Coincidence of wants


The Introduction of MoneyHave you ever wondered who invented money and why?

• Adam and Eve

• Cain or Abel

• Geico Caveman (so easy a caveman could do it!)


The Functions of MoneyAny thing can be money but the thing to be used as money must be able to perform the following functions:

1. A Medium of Exchange 2. A Store of Value 3. A Unit of Account

a)Divisible b)Fungible c) Accountable


The Functions of MoneyAnd the fourth requirement… the thing that is going to function as money must be some thing that requires work to get that thing.

4. Money equals Work!


The Value of Money1. Scarcity2. Utility3. Intrinsic Value4. Extrinsic Value

a) Religious Valueb) Social Valuec) Moral and Ethical Value


How to Devalue Money• The Roman Denarius

1 Denarius = 4 grams of Silver1,000 grams of Silver = 250 Denarii1 Denarius = 1 lb. mutton (The price)4 gm Silver = 1 Denarius = 1 lb. mutton – EQUALITY

To maintain equality, a change to one side of the equation, must be accompanied by a change to the other side of the equation!


How to Devalue MoneyCaesar wants to take over the world. He needs money to do it. How can he get more money without doing more work?


How to Devalue MoneyEconomic advisors suggest putting less silver in each Denarius:

• The Roman Denarius 1 Denarius = 3 grams of Silver1,000 grams of Silver = 333 Denarii (333 – 250 = 83)

To maintain equality, a change to one side of the equation, must be accompanied by a change to the other side of the equation!



1 Denarius = 4 grams of Silver1 Denarius = 3 grams of Silver

1,000 grams of Silver = 250 Denarii1,000 grams of Silver = 333 Denarii

1 Denarius = 1 lb. mutton (The price)1 Denarius = 0.75 lb. mutton (The price)

4 gm Silver = 1 Denarius = 1 lb. mutton – EQUALITY3 gm Silver = 1 Denarius = 1 lb. mutton – INEQUALITY


How to Devalue MoneyTo restore equality, the sheep herder can either increase the price of the pound of mutton or decrease the quantity per denarius:

1.33 Denarius = 1 lb. mutton – EQUALITY1 Denarius = 0.75 lb. mutton – EQUALITY


How to Devalue MoneyA hundred years go by…

Caesar wants to expand his empire and placate his people with social security programs. He needs money to do it. How can he get more money without doing more work?



1 Denarius = 3 grams of Silver1 Denarius = 2 grams of Silver

1,000 grams of Silver = 333Denarii1,000 grams of Silver = 500 Denarii

1 Denarius = .75 lb. mutton (The price)1 Denarius = 0.50 lb. mutton (The price)



How to Devalue MoneyTo restore equality, the sheep herder can either increase the price of the pound of mutton or decrease the quantity per denarius:

2 Denarius = 1 lb. mutton – EQUALITY1 Denarius = 0.50 lb. mutton – EQUALITY


How to Devalue MoneyA hundred years go by…

Caesar needs more money for more war and more bread and circuses. How can he get more money without doing more work?



1 Denarius = 2 grams of Silver1 Denarius = 1 gram of Silver

1,000 grams of Silver = 500 Denarii1,000 grams of Silver = 1,000 Denarii

1 Denarius = .75 lb. mutton (The price)1 Denarius = 0.25 lb. mutton (The price)



How to Devalue MoneyTo restore equality, the sheep herder can either increase the price of the pound of mutton, decrease the portion size, reduce his operational costs by feeding his sheep corn, offshore his business to a country with lower wages and lower taxes or ?

4 Denarius = 1 lb. mutton – EQUALITY1 Denarius = 0.25 lb. mutton – EQUALITY


How to Devalue MoneyThe Denarius eventually dies. It cannot be devalued, debased, or debauched any further.

It is reincarnated as the Argenteus (~250 AD) with nearly the same silver content as the original Denarius—4 grams.


How to Devalue Money

• Who is the source of inequality?

• Where were the Roman Citizens?• What happens when the money supply

increases arbitrarily without an equivalent amount of work?


How to Devalue MoneyJohn Maynard Keynes:

“Lenin was certainly right. There is no subtler, no surer

means of overturning the existing basis of society than to

debauch the currency. The process engages all the hidden

forces of economic law on the side of destruction, and

does it in a manner which not one man in a million is able

to diagnose.”


How to Devalue MoneyWhat was Lenin “right” about?

“Lenin is said to have declared that the best way to destroy the capitalist system

was to debauch the currency. By a continuing process of inflation, governments

can confiscate, secretly and unobserved, an important part of the wealth of their

citizens. By this method they not only confiscate, but they confiscate arbitrarily;

and, while the process impoverishes many, it actually enriches some. The sight

of this arbitrary rearrangement of riches strikes not only at security but [also] at

confidence in the equity of the existing distribution of wealth.” (The Economic

Consequences of the Peace by John Maynard Keynes, 1919. pp. 235-248.)


The Types of Money1. Commodity

a) Soft (Wheat)b) Hard (Precious Metal (Silver))

2. Representative

c) Shekel (weight of barley)d) Paper Money


The Types of Money3. Fiat Money

Source: http://www.merriam-webster.com/dictionary/fiat

http://www.merriam-webster.com/dictionary/fiat

http://www.thesubjectofmoney.com/wp-content/uploads/2015/02/fiat.jpg


The Types of Money3. Fiat Money Currency

a) Partial-Fiat: Partial Commodity Backingb) Quasi-Fiat: Implied Commodity Backingc) Fully-Fiat: No Commodity Backing


The Types of MoneyThe Difference between Currency and Money

• Money is a medium of exchange, a store of value, a unit of account and a thing that takes work to get.

• Currency means “in circulation” (https://en.wikipedia.org/wiki/Currency)

https://en.wikipedia.org/wiki/Currency

https://en.wikipedia.org/wiki/Currency


The Types of Money“All the perplexities, confusion and distress in America arise not from defects in the Constitution or Confederation, not from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation.” – John Adams, at the Constitutional Convention in 1787


The Supply of Money• Commodity/Representative Money –

Naturally anchored to work.

• Fiat Currency – Economists determine the appropriate amount/supply.


The Supply of MoneyMonetary Aggregates

Monetary Base – is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve)M1 – is defined as the sum of currency held by the public and transaction deposits at depository institutions (which are financial institutions that obtain their funds mainly through deposits from the public, such as commercial banks, savings and loan associations, savings banks, and credit unions)M2 – is defined as M1 plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares(http://www.federalreserve.gov/faqs/money_12845.htm)

http://www.federalreserve.gov/faqs/money_12845.htm

http://www.federalreserve.gov/faqs/money_12845.htm


The Supply of Money

Source: http://research.stlouisfed.org/fred2/series/MYAGM2USM052N

http://research.stlouisfed.org/fred2/series/MYAGM2USM052N

http://research.stlouisfed.org/fred2/series/MYAGM2USM052N

http://www.thesubjectofmoney.com/wp-content/uploads/2015/02/M2.jpg


The Supply of Money

Definition of Inflation• It is not “rising” prices

• It is an increase in the money supply with rising prices as a byproduct

• Are prices increasing or is the value of the currency decreasing?


The Supply of Money

Source: http://research.stlouisfed.org/fred2/series/CUUR0000SA0R

http://research.stlouisfed.org/fred2/series/CUUR0000SA0R

http://www.thesubjectofmoney.com/wp-content/uploads/2015/02/CPI.jpg

The Supply of MoneyHyperinflation in Zimbabwe


http://www.thesubjectofmoney.com/wp-content/uploads/2015/02/OneHundredTrillionZimDollars.jpg

http://www.thesubjectofmoney.com/wp-content/uploads/2015/02/Toilet_No_Zim_Dollars.jpg


The Evolution of Money

Commodity Money to Representative Money1. Medium of Exchange

2. Store of Value

3. Unit of Account

a) Divisibleb) Fungiblec) Accountable

The dEvolution of MoneyRepresentative Money to Fiat Currency

• Goldsmiths – Strong Room with “Vaulted” ceiling• Store your money in a private vault. • Entrepreneurial Financier hatches plan to put to use the

money sitting unused in the vault• Fractional Reserve Banking

See “History of Banking” (https://en.wikipedia.org/wiki/History_of_banking)


https://en.wikipedia.org/wiki/History_of_banking


The dEvolution of MoneyWhy didn’t some brilliant person think of this innovation before the 1500s?

The dEvolution of MoneyBygone bylaws against Banking

Exodus 22:25 - If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest.

Deuteronomy 23:19-20 - You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. You may charge interest to a foreigner, but to your countrymen you shall not charge interest, so that the LORD your God may bless you in all that you undertake in the land which you are about to enter to possess.

King James Version19 Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:20 Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.

TheSubjectOfM

oney.com


The dEvolution of MoneyRisky Business…

How are you compensated by your brother in this new venture?

Banker loans money at 6%, pays depositors 2%, and he makes 4% for doing nothing. Priceless.


The dEvolution of MoneyReserve Requirement—It’s only a fraction


The dEvolution of MoneyMoney Fiat MultiplierThe Money Multiplier, m, is the inverse of the reserve requirement, R.

Calculation for a reserve requirement of 10% (or .10):

m = 1/.10m = 10 (just use a calculator)

Deposit Amount x Money Fiat Multiplier (m) = Newly Created Money Fiat

100 oz. of Gold x 10 = 1,000 oz. of Gold


The dEvolution of Money


The dEvolution of Money• What if something goes wrong?

• What if your brother is not able to repay his loan?

• The system doesn’t work in reverse.

• Claims/loans in the amount of 512.58 on 100 ounces of Gold. How?


The dEvolution of Money

Velocity of Money Fiat

(Source: http://en.wikipedia.org/wiki/Velocity_of_money)

http://en.wikipedia.org/wiki/Velocity_of_money



The dEvolution of MoneyVelocity of Money Fiat

(Source: https://research.stlouisfed.org/fred2/series/M2V)

https://research.stlouisfed.org/fred2/series/M2V


The dEvolution of MoneyHarvard Economics Professor, John Kenneth Galbraith, said

“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.”Money: Whence it came, where it went (1975)


The dEvolution of MoneyThe famous Ford father of the American automobile industry, Henry Ford, said:

“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”


The dEvolution of MoneyBankruptcy (Bank Rupturing) - with so many claims multiplied exponentially on a finite amount of money, you can see why banks go broke (are ruptured).

Risk pooling• Local Banks• State Banks• Federal Banks


The dEvolution of MoneyHistory of US Banking (very brief history)1791 – 1811 First Bank of the United States (20 year charter)

1816 – 1836 Second Bank of the United States

1836 – 1862 Banks chartered by StatesThis era was characterized by panics:Panic of 1837, 1857, 1873, 1893, 1907etc.… (

https://en.wikipedia.org/wiki/List_of_banking_crises#19th_century)

1863 -1913 National Banking Act (Funding for the Civil War)

Prior to 1913 Fractional Reserve Banking with no Central/National Bank

https://en.wikipedia.org/wiki/List_of_banking_crises#19th_century


The dEvolution of MoneyThe Creature from Jekyll Island1913 – 2015 The Federal Reserve Act – created a lender of last resort (This fixed everything, right? No, 20 years after the creation of the Creature, what catastrophe occurred? The Great Depression—not a painful panic. A devastating depression.

What happens when there is a run on the central bank or when it runs out of gold? (Change the rules)


The dEvolution of MoneyTime to change the rules…1933 The Great Depression, FDR, and Executive Order 6102

Private ownership of gold prohibitedFederal Reserve purchases gold from public for $20.67/oz.

1934 The Gold Reserve Act Congress confiscates the gold from the Federal Reserve


The dEvolution of MoneyTime to change the rules…How can Caesar/FDR make more money?Hint: There is no silver or gold in a Federal Reserve Note so he can’t reduce the amount of precious metal.

The price of gold: $20 = 1 oz. of GoldHint: Gold is still connected to money (but you can’t own gold)

How does Caesar/FDR increase the money supply?Answer: increase the price of gold which decreases the value of the dollar (devalue/debase/debauch)


The dEvolution of MoneyThe Real New Deal…

The price of Gold: $35 = 1 oz. of Gold



The Old Deal: $20 = 1 oz. of Gold$20 = 5 lbs. of mutton$20 = 5 lbs. of mutton = 1 oz. Gold $4/lb. of mutton

This is equality prior to the New Deal



FDR’s NewDeal: $35 = 1 oz. of Gold$35 = 5 lbs. of mutton$35 = 5 lbs. of mutton = 1 oz. Gold $7/lb. of mutton

The result: Inequality!!!


The dEvolution of MoneyHow did we escape the Great Depression?

WWII?

OR

Increasing the money supply (by 75% (20-35/20))?


The dEvolution of MoneyThe Dollar StandardHaving confiscated all the gold in the U.S. by legal theft and a big chunk of the world’s gold by offering to pay 75% more than the going rate, the U.S. and its arsenal of Dollars was ready to finally dethrone the British and their Pound Sterling and take its seat atop the global financial system as the world’s reserve currency. (He who has the gold makes the rules.)


The dEvolution of MoneyWorld War Destroys Europe and Japan

America left mostly unscathed (except Pearl Harbor)

America has most of the world’s gold

Time to change the rules…


The dEvolution of MoneyThe New World Order: Bretton Woods• Ski Resort Summit (http://brettonwoods.com)

• Foreign currencies pegged to the US Dollar and the US Dollar pegged to gold at $35/oz.

• The US Dollar is “As good as gold”

http://brettonwoods.com/




The dEvolution of MoneyThe New World Order: Bretton Woods• July 1944 Ski Resort Summit (http://brettonwoods.com)

• Foreign currencies pegged to the US Dollar and the US Dollar pegged to gold at $35/oz.

• The US Dollar is “As good as gold”





The dEvolution of MoneyPost WWII…• Europe and Japan start to recover economically. (Thanks to U.S.)• U.S. fights communism and is the World’s Policeman (Expensive wars in

Korea and Vietnam)• U.S. funds government social programs to eliminate poverty and racial

injustice (Lyndon Johnson’s Great Society)• Military adventurism and expensive social programs cause foreign countries

to lose faith in the US Dollar. They begin to wonder if it really is as “good as gold”.

• US Dollars are exchanged for physical gold. Reserves are drawn down to precarious levels. Government officials panic! Time to change the rules!!!


The dEvolution of MoneyThe Nixon Shock!!!

August 15, 1971 President Nixon issues Executive Order 11615 that, together with the Economic Stabilization Act of 1970, effectively defaults on the Bretton Woods Agreement.

• The U.S. will no longer exchange US Dollars for gold!• Turns out that the Dollar wasn’t as good as gold after all • All the world is fiat.


The dEvolution of MoneyThe Oil Shock!!!

• 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) cartel embargoes oil as a weaponized response to the U.S. supplying arms to the Israelis during the Yom Kippur War

• OAPEC threatens to prices oil in gold.• Kissinger “shuttles” back and forth between OAPEC and US

Representatives.• In exchange for arms and protection, the House of Saud agrees to sell oil

priced in Dollars.• The Dollar isn’t backed by yellow gold but it is now backed by black gold

(oil)• The birth of The Petrodollar (all oil is priced in dollars)


The dEvolution of MoneyThe Awesome Eighties

Back to Business as usual…• Savings and Loan (S&L) Crisis – thousands of financial

institutions fail (https://en.wikipedia.org/wiki/Savings_and_loan_crisis)

• October 19, 1987 Black Monday – DOW’s largest one-day percentage decline ever—22%

https://en.wikipedia.org/wiki/Savings_and_loan_crisis


The dEvolution of MoneyThe Naughty Nineties

• 1991 Mild recession at the beginning of the decade largely blamed for Bush Sr. not winning re-election

• 1998 By the end of the decade, the financial system is dealt a nearly deadly blow when bets made by the geniuses at Long-Term Capital Management backfire. (See When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein) (https://en.wikipedia.org/wiki/Long-Term_Capital_Management)

https://en.wikipedia.org/wiki/Long-Term_Capital_Management


The dEvolution of MoneyY2k and The Great Recession• Y2K and the official turn of the millennium was greeted with another

moderate recession in 2001 that was attributed to the bursting of the dot com mania bubble. With savers smarting from the slaughter of Pets.com, they turned to their one safe and sound source of security—their homes—that they then abused like an ATM by pulling out all the money they could in the form of second mortgages and home equity lines of credit—because home values never go down if you just believe. The popping of the housing bubble led to the Great Recession of 2009.

• The Great Recession – The Big Short (https://www.youtube.com/watch?v=fny1Xp-ixgs)

• Time to change the rules—again.

https://www.youtube.com/watch?v=fny1Xp-ixgs


The dEvolution of MoneyToo Big to Fail• To prevent the Great Recession from becoming a Greater

Depression, a titanic TARP was thrown over the losses at AIG and the Too Big to Fail Banks.

• The New Deal/Rule: Privatized profits for banks/financial institutions and publicized losses for taxpayers/citizens.

• Near collapse was an “Inside Job” – not an outside threat. (http://www.sonyclassics.com/insidejob/)

http://www.sonyclassics.com/insidejob/


The dEvolution of MoneyFederal Deposit Insurance Corporation (FDIC) – An illusion of security

• This can’t be true, can it? And there are safeguards built into the system, right?

• Insurance – How it works.

• What’s the DIF?

The dEvolution of MoneyDeposit Insurance Fund• Dodd-Frank requires 1.35%

loss reserve ratio.• Currently at 0.84% or 51

Billion

Source: https://www.fdic.gov/deposit/insurance/2014-10-02_notice_dis_d_mem.pdf

https://www.fdic.gov/deposit/insurance/2014-10-02_notice_dis_d_mem.pdf



The dEvolution of MoneyDIF – A Broken Piggy Bank

• Negative 20.9 Billion in 2009 (Yes, broken)

• Deposits insured up to $250,000 from $100k

• Why does it even matter?

Must. Keep. Illusion. Going.

The dEvolution of MoneyWill there be a happy ending?If you read the Fed comic book…

Source: http://www.newyorkfed.org/education/addpub/Comic_FRS.pdf

http://www.newyorkfed.org/education/addpub/Comic_FRS.pdf



The dEvolution of MoneyIf you believe in magic, or Rumpelstiltskin, or Peter Pan, or fairy tales (the goose that lays golden egss), alchemy…

“Reserve requirements are a powerful tool because they affect the ability of the banking system to create money fiat”

Source: http://www.newyorkfed.org/education/addpub/Comic_FRS.pdf




The dEvolution of Money• Has the whole world gone mad?

• Fiat Currency and Fractional Reserve Banking make about as much sense as the appointment of King Arthur. https://www.youtube.com/watch?v=-8bqQ-C1PSE

• Who are the crazy people? The sheeple?

• How did this happen?

• What were we doing/thinking?

https://www.youtube.com/watch?v=-8bqQ-C1PSE




The dEvolution of MoneyOther less comical books to read:

• The Creature from Jekyll Island - G. Edward Griffin• The Ascent of Money – Niall Ferguson

(http://www.pbs.org/wnet/ascentofmoney/)

• Currency Wars & The Death of Money – Jim Rickards

• TheSubjectOfMoney.com

http://www.pbs.org/wnet/ascentofmoney/


The Failure of MoneyWhen the Money Failed in the Land of Egypt

• Everyone knows the story from the time Joseph got his technicolor dream coat to the restoration with his father and brothers in Egypt.

• What happened after their reunification?

• Genesis 46-47

http://www.kingjamesbibleonline.org/Genesis-Chapter-46/#31


The Dilemma of FiatThe Million Dollar Question: WHAT TO DO?

Take the Red Pill or the Blue Pill

“You take the blue pill, the story ends. You wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland, and I show you how deep the rabbit hole goes.“ –The Matrix


The Restoration of MoneyHow to opt out of the madness…

• Utah Legal Tender Act

• Utah Precious Metals Association – http://www.upma.org

• Other states following Utah’s lead:Virginia, Arizona, Montana, Idaho, Colorado…(http://lis.virginia.gov/cgi-bin/legp604.exe?111+ful+HJ557+pdf)

• Join the cause!

http://www.upma.org/

http://lis.virginia.gov/cgi-bin/legp604.exe?111+ful+HJ557+pdf


Recommendations…

• Get Oil (https://www.lds.org/scriptures/dc-testament/dc/45.56-57?lang=eng)

• Get Food Storage (https://www.lds.org/topics/food-storage?lang=eng)

• Get Physical (Convert your fiat/paper claims where possible)

• Get out of Debt

https://www.lds.org/scriptures/dc-testament/dc/45.56-57?lang=eng

https://www.lds.org/topics/food-storage?lang=eng




Last thoughts…

• Do we really need money?• Money, capitalism, and the Law of Consecration

TheSubjectOfMoney.com Money 101 – Part 1 Note: What it is. Not how to earn it, budget it, save it,...

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