The World’s Reserve Currency

When we own something that is becoming less valuable like spoiled food, we give it to the dog and eat good food instead.

As mentioned before, rareness is what creates value. We have a cardinal who pecks on our windows and sits on door handles to look in at us. We call him Redd. It would be a real tragedy if Redd was harmed. I’m not sure if he is the same one, but a few years ago we had one like this. He had a wife who was in the junipers making warning sounds and I found that there was a cat near her. That was the last we saw of Redd and his wife until this past winter after we were without cats for a year or so. Redd as cat food would be sadder compared to a sparrow in the same role.

The U.S. dollar is now the sparrow of currencies. There are lots of them.

The $4.8 trillion President Biden has borrowed for us pales in comparison to the $7.5 trillion in debt left us by former President Trump. Some of you out there might want to get off your Trumpian high horse. Senator Charles Grassley pointed out to me that all this unconstitutional government power was approved by the courts over the years. The courts using case law have incrementally destroyed any limits the Constitution put on government power. It’s like the telephone game. Each piece of legislation that stretches constitutional limits paves the way to further lawlessness.

On the world stage, the destruction of the dollar has led to our once trusted money, being shunned and replaced with Chinese yuan.

As we’ve seen a meteoric rise in stock prices through recent years, some are coming to realize those stock valuations are relative to the weak dollars used to purchase them; not strong companies. Improving economic conditions as measured by expensive stocks are an illusion; an illusion created to bolster popularity of incumbent politicians. Trump’s claims of a strong economy were based on a flood of cheap dollars.

We have to recognize the upside of the degraded dollar. To U.S. politicians, diplomacy has been threats and bullying based on sanctions through our dollar as the world’s reserve currency. Without that power at their disposal those politicians will have to negotiate in a friendly manner looking for mutual benefits for all parties rather than pushing other countries around. Honest money may ensure peace.

On the negative side, China will take a cue from past U.S. relations and push us around instead. U.S. politicians will call China naughty and pass laws to act as band aids in response. Either way, inflation has destroyed the savings of countless retirees and put an improved lifestyle out of the reach of many middle class families. There are huge reasons why we are warned about the dangers of debt in the Bible.

Thanks to shyster politicians buying votes from gullible and ignorant voters, we will be answering to China. It won’t take an invasion. Our huge military is helpless to stop it, and its gargantuan budget is part of the problem.

Paul Singer

In a WSJ interview hedge fund manager Paul Singer is quoted regarding money printing for bailouts: “The result is to destroy market discipline and and encourage bankers to behave recklessly.”

In the Wall Street Journal these bailouts are constantly referred to in a positive light. They cause stock prices to rise. The short term thinking comes from a willingness to abandon principle based on the Golden Rule. Writers at the Wall Street Journal know that the money printing and bailouts are a way to trickle-up wealth from the general population into the pockets of these reckless bankers.

Banking Follow-up

Fractional reserve banking is another aspect of the banking business seldom discussed. Banks only have to keep 10% of deposits on hand. That is, if all depositors wish to withdraw their money from the bank at the same time there would only be enough for each of them to withdraw 10% of their money. The system gambles on a stable environment where each of us acts independently and randomly.

In these days of (I hate to use this overused term but oh well) identity politics where individuals have become mere pieces of demographic classifications, a bank run seems a little more possible. The fact that we are individuals is what makes us strong as a society. Each of us making decisions as part of a chaotic crowd softens blows like a diversified savings portfolio prevents losing it all.

Fractional reserve banking makes the economy more volatile. In the same way that the Fed creates money out of thin air, the fact that banks can pretend there is more money out there keeps interest rates low. Lower rates stimulate borrowing where it might not have occurred and investing in riskier ventures; like when home sales are strong because of low rates.

Of course if the bank is serving its purpose, to keep your savings safe while providing capital for projects that need cash, all those savings won’t be at the bank all the time. The money won’t be available at the spur of the moment for everyone. So it is really important that no panics occur. What is the best way to prevent such a thing?

I remember one of the primary reasons we were happy to quit farming: marketing. If it weren’t for government reports on crop yields or supply, prices would gently fluctuate as world news and local conditions impacted prices. Spring brought uncertainty. Fall brought supply bottlenecks. Hot, dry summers came gradually, influencing prices as storm clouds delivered or not.

On the other hand, government reports were hotly anticipated. Analysts were interviewed on the radio about next week’s report. Then when the report came out prices would soar or drop in limit moves, making or breaking a summer’s work in minutes. That would be described as a panic.

Stability in markets comes from freedom. It comes from millions of individuals doing what they think is best for themselves. Volatility comes from government, whether it is commodity markets or any other good or service we use. To have changes come from any central authority bypasses the will of the diverse millions.

The value of the dollar and the stability of that value has been destroyed by the rampant growth in the money supply. That supply of money was used to fuel the huge spending bills used to ameliorate the COVID crisis, the inflation crisis (even though inflation is the direct result of that action itself), the climate crisis, and the war in Ukraine.

While Russia, China, India, Brazil, and many other nations, making up the majority of world trade, are moving away from the unstable and untrustworthy dollar as the international currency of choice, we are being distracted by Trump’s payment to a porn star. Wow. We should look at the ramifications of this more closely.

It’s Not the Greedy Grocer

It’s old news that groceries are expensive. When we were first learning how to talk most of us asked why if our parents told us to do something that interrupted our fun; such as, “Get that snake out of your sister’s shoe.” Is anyone asking why groceries are expensive? Many people blame greedy grocers, processors, and farmers.

Put yourself in any of these positions. If you were a farmer and priced your tomatoes at a dollar when it cost 50 cents to deliver one, do you think a neighboring farmer would sell his for 75 cents or dump the unsold inventory in the compost pile? It’s the same for grocers and any middlemen along the way.

If you have a humid and rainy summer and your tomatoes suffer severe blight the supply would be smaller. Your neighbor might have no tomatoes at all. Over the years all of us have suffered losses like this. When you’ve mulched to eliminate soil splattering onto the plants, planted resistant varieties, and kept them widely spaced, you get a decent yield in spite of the weather. This is where you make up for those bad years. You don’t sell tomatoes for 75 cents if there are no tomatoes to be had anywhere else. Imported tomatoes cost $1.50. You could get $1.50 because locally grown fresh tomatoes taste better than imports.

If we are smart and ambitious we can afford the $1.50 tomato. If we only work hard when the boss is around, call in sick because of a hangover, or don’t get along with co-workers, we might be part of the 64% of Americans living paycheck to paycheck. Living like that leaves us vulnerable to illness, a family emergency, or being laid-off.

So far I’ve been assuming that the value of money remains constant. I bought a brand new VW Bug for $2,000 in 1967. The cheapest new car we can buy now is $18,000. That price increase is not the result of a greedy car company. The money we spend on the car is worth less because there is more of it in circulation, like when we have a hot, dry summer and tomato yields are high. Prices would be low because of a plentiful supply.

When people debated issues or explored puzzling questions this conversation would naturally lead to “Why?” But the lure of victim-hood or villain-blaming is strong. Relying on authorities and experts is easier than critically tracing answers to their source. The simple answer is that more dollars and less tomatoes equals higher priced tomatoes.

But why are there so many dollars? The Federal Reserve “loans” dollars to big banks to stimulate the economy. The dollars are printed out of thin air. The increased number of dollars in circulation reduces their value so it takes more of them to buy anything than it did when less money existed.

The Federal Reserve was created in 1913 as a way for former pacifist Woodrow Wilson to fund our entrance into World War I in spite of strong and widespread opposition by the American people.

With the recent bankruptcy of some big banks it is way past time to explore the mysterious banking industry. We’ll visit that in the coming weeks. It’s more interesting than one might think.

Wall Street Journal gun control letter

Dear Editor,

In his letter (April 4 Journal, A Problem Too Deep for Gun Control to Solve) David Gellatly laments our lack of a solution to the violence plaguing our land.

If we look at the dates he cites, late 1960s and ’70s, correlation might not equal causation, but who can deny that the biggest removal of personal responsibility in this country happened about this time.

Various regulations on society and the workplace made one on one diplomacy extinct. The welfare state turned fathers into sperm donors. Generally, relations between individuals were filtered through officials before any conversation even started. Add that to the fact that our government maintains a simpleton good guy / bad guy attitude toward most countries in the world backed up with threats of violence.

These sickos learn from example with little family structure to temper their rage.

Fritz Groszkruger

1820 Warbler Ave.

Dumont, IA 50625