I have always found that making your own beer and sharing it with your good friends is an extremely rewarding activity :). Start with beer. Its the easiest and requires minimal investment. Then do wine. Once youve mastered wine you can learn to distill and make your own hard liquour.I totally agree with you on gold though. Thats for rich people only. In a collapse type scenario history has shown in the US that they will confiscate it and make it illegal to use, so i dont see how that would be valuable.
HRunner asked a great question about SDRs. I too am in the dark. So I asked the ever-infallible Wiki to explain. Here's what wiki coughed up, or at least my executive summary:
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SDRs are a currency - the IMF's unit of account - and are only held by IMF member countries and "select organizations licensed by the IMF", not people.
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SDRs can only be exchanged for euros, yen, pounds, and dollars
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SDRs may represent an actual claim to currency held by IMF member countries forex reserves. Sounds like…a warehouse receipt for currency? Not sure why wiki said "may" rather than "is".
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whenever confidence in the buck as a reserve asset drops, nations start talking about SDRs, which gets the US upset and the issue usually vanishes again.
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right now 1 XDR = 1.53 USD.
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there are 476 billion XDR in the world today, or 728 billion dollars. About what the Fed prints in 9 months.
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they were issued to IMF member nations; it sounds like they were handed out like raffle tickets in exchange for membership.
http://en.wikipedia.org/wiki/Special_drawing_rights
So I'm not sure how printing SDRs ends up saving the day, but who knows. I'm with HRunner. I'd like to hear from Jim Rickards on how the mechanics of this plays out; who would be in favor, who against, who wins, who loses, and who had the power to pull the trigger to make it happen.
Good talk, but like most goldbug interviews, its basically two guys agreeing with each other and repeating facts and phrases we've heard before.
I am sure that CM knows that JGR has a very different view on the future of the Euro, so its dissapointing that he only asked JGR about subjects on which they fully agree.
It would have been more valuable to hear them tease out their differing stances on the future of the Euro. Rickards sees it surviving, while CM (like Mish, McLeod and every other UK or US pundit) seem unable to see that the ECB is on a radically different path to the Central Bank's of the US,UK and Japan and will win the currency wars.
The Euro was been envisaged with full expectation of dollar failure in the 1960-70's (see Triffin, Rueff, Zijlstra et al). The Euro has a balanced trade/current account with the outside world. The outsized debts between the member states will not be dealt with by exits/devaluing curriences, rather,with a revaluation gold upwards.
But we'll have to wait for dollar failure / Saudi ditching the dollar first.
,
[quote=ao]Believe it or not, I'm actually a pretty Zen guy in person.
[/quote]
LOL - Time to pull out the Keisaku then…
Fantastic post Safewrite. I so enjoy reading your thoughts.Thank you.
the SDR is another leg of the scam. Ask any 3rd world country what happens when you owe the IMF money.
Once they have bankrupted all countries and all countries are dependant on the SDR for operation, the IMF/World bank/BIS and its owners will effectively own the world.
Then we get our one world government, then chains on our legs and then death camps lovingly run by the blue helmets of orwellian doom.
Time to wake up, slaves.
And why would Rickards be promoting SDR's as a fix to the current crisis?SDR's are a form of a One World Currency. Another avenue to start over with a new FIAT/Interest bearing currency, to replace the old "buck".
Lather - Rinse - Repeat = Banker Controled Currencies over the centuries.
[quote=davefairtex]HRunner asked a great question about SDRs. I too am in the dark. So I asked the ever-infallible Wiki to explain. Here's what wiki coughed up, or at least my executive summary:
- SDRs are a currency - the IMF's unit of account - and are only held by IMF member countries and "select organizations licensed by the IMF", not people.
- SDRs can only be exchanged for euros, yen, pounds, and dollars
- SDRs may represent an actual claim to currency held by IMF member countries forex reserves. Sounds like…a warehouse receipt for currency? Not sure why wiki said "may" rather than "is".
- whenever confidence in the buck as a reserve asset drops, nations start talking about SDRs, which gets the US upset and the issue usually vanishes again.
- right now 1 XDR = 1.53 USD.
- there are 476 billion XDR in the world today, or 728 billion dollars. About what the Fed prints in 9 months.
- they were issued to IMF member nations; it sounds like they were handed out like raffle tickets in exchange for membership.
http://en.wikipedia.org/wiki/Special_drawing_rights
So I'm not sure how printing SDRs ends up saving the day, but who knows. I'm with HRunner. I'd like to hear from Jim Rickards on how the mechanics of this plays out; who would be in favor, who against, who wins, who loses, and who had the power to pull the trigger to make it happen.
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SDR is a buffer and poor one at that. I suspect it is used more as tool to teach lessons such as the Rubble Run.
@Snydeman
Just to give you a bit of support, I think you are right on track. In fact, everyone should be doing the same things, skill development, debt reduction, useful good storage et al…
To clarify, I think a number of people who buy and store gold are in the category of those who have some amount of wealth accumulated due to a lifetime of work and investing. After we "woke up" and realized the damage being done to the USD, plus all world currencies, and at the same time realized that our lifetime wealth was denominated in USD, and worse, was mostly in the form of electronic 0's and 1's, we began to see increasing risk and began to look for an alternative store of wealth.
At least a partial alternative to having all your life savings in digital USD. I mean the highly proclaimed "diversified" investments of "stocks" "bonds" "treasuries" "reits" "annuities" "pensions" "social security" "medicare". Those all can be lumped into one big category of digital dollars.
Physical gold and silver are real diversification. They are a recognized form of wealth for centuries, because of their monetary features (rare, assayable, fungible) and they are not digital.
I have been blessed to be able to earn and accumulate some amount of wealth. I imagine Chris and other "stackers" are in the same boat. I also just see gold as a backup or insurance policy. It is a bit risky to have a strategy for the future of "stack up gold and sit around and stare at your big stack". In fact, everything you describe is actually more important than stacking PMs in the priority list, IMHO.
All the criticisms of gold (just like there are criticisms of insurance policies) are valid- could be confiscated, doesn't return a yield, etc. It is just the best and most compact alternative to digital money or stacking drums of oil or timber or cotton that I know of.
Stacking vodka or beer is an alternative 'hard currency'. If you need someone to come over and give you feedback on your brewing efforts, I mean financial strategy, let me know.
when it comes to whether or not to invest in any PM. Since a home owner, especially if they own free and clear, has a tangible hard asset that can be further developed to provide resilence and self sufficieny, there is perhaps less need to invest in PM as a store of wealth. Investing in things such a solar sytem would seem to me like the better investment than owning some gold.
It is a different ball game for people like me who are renters. I simply refuse to keep all of my assets in paper or digital fiat. So in the absence of a hard asset like a house, I thought it prudent to have a small amount of PM as an insurance policy. As a renter I can only invest so much in my living situation. I have managed to do a lot in spite of that, and continue to find ways creative ways to expand my prepping - with many things that will be able to go with me should I move at some point.
Every person and their circumstances are unique. What is good for one is not necessarily good for another. As CM has said in the past, you have to trust yourself. That means truly knowing and understanding your own personal situation, and making your decisions based on what the best choices are for you. So many investing mistakes are made by doing what others are doing. Been there, done that. Now the only investing criteria I have is "is it good for me and does it fit in with my overall life plan? Will it contribute to my ongoing prosperity?" I find using this type of thinking helps me to make better decisions.
Jan
And why would Rickards be promoting SDR's as a fix to the current crisis?I don't see Rickards as promoting SDR's as a fix. He's just observing that this is a possible (likely?) outcome. Big difference. And neither do I see him as a shill for the banking elite or the powers that be, as has been suggested. I don't doubt that they exist; I just doubt that Rickards is one of them. He calls this "One of the greatest failed experiments of all time". Hardly the words of a cheerleader for the team. He is harshly critical of all the steps that led us here and of all the 'solutions' to the predicament. I will admit that his criticism seems muted but I think that is more a function of his dispassionate coldly-analytical style, a style that I like frankly. I call it the Sgt. Joe Friday approach, "Just the facts Ma'am". He also suggests buying a little gold---not exactly Big Bank 'barbarous relic' type thinking. Just my opinion.
[quote=earthwise]I don't see Rickards as promoting SDR's as a fix. He's just observing that this is a possible (likely?) outcome. Big difference. … He calls this "One of the greatest failed experiments of all time". Hardly the words of a cheerleader for the team. He is harshly critical of all the steps that led us here and of all the 'solutions' to the predicament… He also suggests buying a little gold—not exactly Big Bank 'barbarous relic' type thinking.
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I agree with Earthwise. Here are a few quotes from Rickard's Currency Wars (2011) regarding SDRs. This comes from Chapter 11: "Endgame: Paper, Gold, or Chaos?" In this chapter, Rickards says that the four succeedingly disruptive possibilities of what might fill the reserve currency vacuum if/when the dominance of the USD falters are "multiple reserve currencies, special drawing rights, gold, or chaos." Any bold emphasis is mine.
Here's a quote from p. 203, under the header "Special Drawing Rights"
"Perhaps no feature of the international monetary system is more shrouded in mystery and confusion for the nonexpert than the special drawing right, or SDR. This should not be the case because the SDR is a straightforward device. The SDR is world money, controlled by the IMF, backed by nothing, and printed at will. Once the IMF issues an SDR, it sits comfortably in the reserve accounts of the recipient like any other reserve currency. In international finance, the SDR captures the mood of the 1985 Dire Straits hit 'Money for Nothing.' moving on to page 206, still in the section on SDRs "Here in all its technical IMF-speak glory is the global power elite's answer to the currency wars and the potential collapse of the dollar. Triffin's dilemma would be solved once and for all, because no longer would a single country bear the burden of providing global liquidity. Now money could be printed globally, unconstrained by the balance of trade of the leading reserve currency issuer. Best of all, from the IMF's perspective, there would be no democratic oversight or accountability on its money printing operations.... (p.207): The IMF is explicit in its antidemocratic leanings, what it calls 'political considerations.' The SDR blueprint calls for the appointment of"an advisory board of eminent experts' to provide direction on the amount of money printed in the new DR system. Perhaps these 'eminent experts' would be selecte from among the same economists and central bnkers who led the international monetary system to the brink of destruction in 2008. In any case, they would be selected without the public hearings and press scrutiny that come in democratic societies and would be able to operate in secret once appointed."Rickards caps off this critique of the IMF's SDR plan with the following Keynes quote, probably well-known to many PP members:
"There is no subtler, surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law ont he side of destruction, and does it in a manner which not one man in a million is able to diagnose."Rickards concludes his section on SDRs by saying that in spite of two potential flaws (slow implementation process and the ability of the US to veto an SDR proposal) the SDR has decent prospects as a partial or total replacement to the USD reserve currency regime, short of the IMF's SDR proposal becoming a campaign issue in the 2012 U.S. presidential election, and Obama being replaced by a president who is less interested in multilateral solutions. (Note: If monetary policy and currency ever became a serious election issue, it would be a mark of distinction for the U.S. electorate, whether or not a Demublican or a Republicrat won.) Unless the global elite conspirators - assuming such a group exists and is truly coordinated - are weaving a very tangled web indeed, it seems that Rickards is not at all supporting them or being allowed to speak by them. He certainly does not seem to be a supporter of SDRs, unless he's changed his tune since writing Currency Wars. Cheers, Hugh
All great stuff, thank you very much for the deeper dive. Hugh, thank you especially for the detailed CURRENCY WARS paragraph.
However, I must say that SDRs and an SDR world is still opaque. I am guilty perhaps of "concrete-ism" (made up word) in that I need concrete explanations and personal scenarios to feel like I really understand something. Telling me Triffin's dilemma is solved is interesting, but does not lift the shroud.
Assuming a shift to an SDR world happened over the weekend, what would a post SDR world look like?
Would I still go to the gas station and swipe my VISA card to pay for gas?
What would my gold be worth?
How much would bread cost? Would my bank account say SDR 10,000 instead of $10,000? What if I traveled to Verona, Italy this fall and wanted to buy a pair of dress shoes? Would I pay in Euros, SDRs?
What would be the major impacts on U.S. economy and economic sectors (energy, healthcare, finance, manufacturing, agriculture)?
Would my USD (assuming I still use USD versus some "World Kumbayah Currency") be worth more, less, or the same as on the Friday before the Great SDR Reset.
Clearly what we are talking about here is a war-gaming type discussion, something Rickards said he actually participated in with DOD. I'm asking Rickards or some smart soul to play the role of the IMF in this scenario (seems kind of important since it is one of two that Rickards mentioned in his PP Voices with Chris).
Again, not being horsey here, just trying to take the next logical step toward keener understanding. And to inform preps.
H
Just a note to say I find Rickards Twitter tweets very entertaining and enjoyable. He is very active.
Due to time constraints, I usually read a week's worth on the weekend, unless something very anxiety-provoking is happening.
Check it out.
Just search Jim Rickards at twitter.com.
Almost as pithy and prickly as Pimco's Bill Gross, and a lot funnier (at least Jim tickles my funny bone)!
[quote]Stacking vodka or beer is an alternative 'hard currency'.[/quote]And yet, paradoxically, highly liquid. ;^)
The way each of us lives our lives is the problem. Pick your religous/spiritual saint/prophet or intelectual giant, sports hero, scientific genius, whom ever you admire, put them in whatever possition of power you want, head the of fed, president of the USA, head of the Rothschild family, IMF, world bank, whatever. Give them omnipotent powers and a heart of pure gold. I have a very strong feeling that nothing changes.
Eric Fromm argues in Escape from freedom that we choose forms of totalitarianism as a way of escaping from uncertainty. The truth is a pathless land, we will need all our wits to navigate what is ahead. Uncertainty is the creative present moment where true freedom exists. But can we live comfortably in the unresolved duality created by our fractured intelect or will we choose certainty of the "correct answer" that our curious intellect demands? If we name the person, find the "bad guy", change the policy, right the wrong will we suddenly be on yellow brick road travelling comfortably into the sunset?
Is there anything new in the current political schemes of the rich and powerful. Do we have to imagine a powerful cabal planning world events. Or is it a more mundane picture of a relatively small group of people, small minded and self centered, with a lot of power, acting out in there own self interest. Why do we need to project all our personal responsiblity and power onto this group?
treebeard,
An excellent post as usual, especially this statement:
"Possession is not a one way street, however you choose to store your "wealth", it has a drag on your existance, it is a trade off we must make thoughtfully, carefully and consciously."
However, I view the above two quoted points a little differently. First, investment in skills brings a certain level of security and peace of mind but that security and peace of mind are limited. For example, if you have a stroke or head injury or other certain types of injuries, your physical skills can be gone in a heartbeart. Similarly, your intellectual skills can disappear just as quickly under those circumstances. In that case, material possession is a useful back-up.
Second, becoming what we hate tends to be an overused cliche. I don't see anyone I know personally who is opposed to the evil going on in the world giving up their power to it nor becoming it. I do see this type of thinking often offered up though as a likely occurrence when in fact, in my personal circle of contacts, it appears to be rare. Among sociopaths, however, the latter is probably far more commonplace while among neurotics, the former is probably far more commonplace.
http://www.imf.org/external/np/exr/facts/sdr.htm
The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.Mechanically, it appears that if a nation retains all of its allocation of SDRs, there is no penalty and no benefit. If a nation accumulates more SDRs, they receive interest payments. If they fall short (i.e. by selling their SDRs) then they pay interest payments.However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.
There are "voluntary trading arrangements" where particular members stand ready to buy or sell particular quantities of SDRs - i.e. they are willing to be market makers, within a pre-defined limit. So the US might have signed up to either buy or sell XDR 10 billion above or below its allocation; willing to either receive interest payments or pay them out depending on supply or demand in the marketplace. Apparently, 19 nations have signed up to be XDR market makers.
Now I'll step through what I think might be a scenario.
If there was some sort of crisis, it is likely that there would be a big demand for dollars from foreign businesses and people in order to repay dollar-denominated debt. Without intervention, the buck would scream higher, as people and companies scrambled to sell their local currency to buy USD. Today, to help keep volatility down, the Fed currently stands ready to provide foreign central banks with dollar-local currency swaps with the respective central banks, who then run out and provide dollars to their local market, keeping the currency moves under control. Presumably after the crisis abates, the swaps are repaid.
Under an XDR regime, the IMF would do one of those special allocations - i.e. the IMF would print (say) 5 trillion XDR and hand them out to all the members. Then, the members would take their XDR during that crisis, and exchange them for dollars. They would pay an interest penalty during this period, but presumably when things normalized, the money would flow back, and they would receive their XDRs back again.
It seems like an XDR is just a different way to account for what the US Fed already does - namely, make massive currency swap deals with other nations central banks in order to provide liquidity for dollars (to be used to repay dollar debts) during a crisis, restraining massive currency moves with otherwise would have taken place.
So if we assume the Fed decides it won't provide these swaps anymore, the IMF can do this SDR thing. As long as the Fed signs up to exchange XDRs for dollars, and everyone agrees that XDRs have a particular exchange rate, then the Fed can loan out dollars, receive XDRs, and the books are balanced. In fact, any member nation can sign up to do this - China, Japan, Saudi Arabia. "You need dollars? Give me a chunk of XDRs, I'll hand you some dollars, and you can sell them into your local market for your local currency in order to provide dollars to your local businesses who otherwise would buy them on the international market sending your currency through the floor."
The XDR is basically a marker, an IOU for a (theoretically temporary) currency flow imbalance that has happened in the past. The interest rate is a penalty paid for having that imbalance.
Its basically faux gold, with an artificial scarcity maintained by the IMF, and the agreement among the members that an XDR can be traded for currency maintains its value. It all works as long as everyone plays along. Of course, there is a default scenario for the SDR regime: if a desperate country - or group of countries - sends all its SDRs off to somewhere else for dollars, pays off all its debts, and then withdraws from the IMF - i.e. engaging in a default - the "faux" nature of the SDR becomes apparent. The dollar lender is left holding a bag full of SDR, while the borrower has a fistful of dollars (!) that have real value - at least more real value than SDRs do. Presumably the remaining nations in the IMF would be upset about the default but they would have to engage in military or economic actions for redress.
Under a gold regime, replace SDR with the word "gold" and you can see that no default is possible. To get more dollars, you've sent off gold - something of real value independent of the organization - and so even if you withdraw from the organization, the lender has your gold so no harm done.
I'm not sure if I've explained it clearly, but I think I get it, for what its worth. The IMF can print huge amounts of SDRs, which can then be exchanged for dollars. It enables dollar (and other-currency) swaps without requiring the Fed to provide them, assuming everyone plays along.
Is there anything new in the current political schemes of the rich and powerful. Do we have to imagine a powerful cabal planning world events. Or is it a more mundane picture of a relatively small group of people, small minded and self centered, with a lot of power, acting out in there own self interest. Why do we need to project all our personal responsiblity and power onto this group?I think you nailed it in one paragraph. I could say more, but I'd likely annoy far too many people, and I think they're more likely to receive your information if I remain silent.