As the price of gold, denominated in US dollars, soars, it heralds the death of the dollar. This fact can be illustrated very well in the Charts below where I compare the reciprocal of the M2 currency supply to the US National Debt. The conclusion indicates a zero sum game.
The M2 currency supply growth results from ‘money printing’, credit creation by the central banks. The inverse, the reciprocal of M2, then represents, is a proxy for, the value of the currency at any moment of time. This is shown as curve (1) on Charts 1 and 2 below. Notice curve (1) is exponentially headed to zero.
If real money was used, which you cannot ‘print’ or create out of thin air, then there should be a small growth in supply as gold is mined out of the ground. Curve (1) would not be an exponentially decreasing function indicating the declining value of the dollar as a function of time. No, it would be essentially a constant. But that is not what we have now. Fiat ‘money’ is a gold substitute, which central banks are licensed to ‘print’. And the US M2 currency supply has been expanded exponentially since 1914 when the Federal Reserve was established. This then represents the massive devaluation of the not-so-almighty US dollar.
Consider $1 in 1960 dollars deflates in value according to curve (1) in Chart 1. An appropriately chosen constant is needed to multiply curve (1) to normalise it to $1 in 1960 in this example. But it could be done for the dollars in any year.
Therefore the value of the 1960’s dollars is expressed in units of 1/M2 where M2 denotes the total nominal dollars at the time of creation (curve (1)). Compare that to the US National Debt (in units of $ billions where $ denotes the nominal dollar at the time of the debt creation) (curve (2)).
The value of the dollar declines exponentially as the National Debt grows exponentially. These two curves cross in 1990. See Chart 2. (The exponential fits (red dashed curves) are not perfect over the whole range and cross in 1993.)
This cross is best seen on the log scale plot in Chart 2. This illustrates the underlying fact that the monetary unit is a debt unit. Apart from the magnitude differences indicated by the scales of the two units plotted here the exponential exponents are similar in magnitude. That means that as the debt is expanded the value of the dollar decreases proportionally.
In physics we would describe this by some conservation function but in a fiat monetary system it may not represent the conservation of anything other something like in a game of Monopoly where the central bank can create debt. Fake money is created using fake debt in the same game. The product of the value of the ‘money’ (curve (1)) and the debt (curve (2)) tells me that the game has essentially a fixed value, which is approximately the same value it started with. I contend that that value is relatively small. Actually the net effect is a small linear growth of debt above the M2 dollar devaluation. But in principle the following discussion holds.
This does not take into account accumulation of actual real physical stuff which may be the result of using the capital supplied through debt. I am only aiming at the big picture view of the credit creation/debt process.
This is more of an in principle description than anything exact. It would be exact if all the National Debt was matched by the exact same amount of M2 currency creation, which it is not. The National Debt is currently $34 Trillion and the M2 supply $21 Trillion. Perhaps this is the outcome of the Treasury issuing its bonds bought by the banks through currency creation but the bond has a coupon value payable on maturity. This means the debt associated with the bond is greater than the amount of the currency created to buy it. So how does the government pay that interest? By creating more debt and Ponzi scheme rolls on.
By issuing more debt (credit) the central bank is proportionally issuing more fiat bank notes (actually just credit) in a zero sum game. It was a zero sum game from its inception. This is what the cross of death indicates. As the value of the ‘money’ heads to zero it highlights that there was no wealth there in the first place.
Again I can compare this situation to something in physics, well, actually cosmology. The big bang universe allegedly started in a zero energy state. It started from nothing, as Laurence M. Krauss says in his book “A Universe from Nothing”. Simplistically, as the universe expanded kinetic energy and potential energy remained in balance but of opposite sign so that the total energy in the universe remained zero. A zero sum game also.
Fiat monetary issuance and debt creation is perhaps best described the same way. The zero sum game means fiat currency net ‘wealth’ is an illusion. It is the fraud of the century and the last century. Literally. But there are winners and losers. Any wealth that there is, is shifted from the losers to the winners in a zero sum game.
Alternately we could say, like the big bang universe, the Federal Reserve started with nothing and created credit and debt out of nothing so that in the end it still is nothing. But the fact that there does remain a small linear growth of debt over the dollar devaluation means that the ‘energy’ in the Federal Reserve’s universe is growing even more negative than zero.
In the real universe that is impossible.
In this fiat monetary and fiscal universe I can answer Krauss’ questions. “Where did the universe come from? What was there before it? What will the future bring?”
The fiat currency/debt economy was a creation of the mind of man. It has had no real substance to it since the gold window was closed. Before it there was money, real money, which did not devalue. The future will bring the death of the dollar.
Recommended Reading
- Book: Apocalypse Now: On the Revelation of Jesus Christ
- Book: Merchants of Death: Global Oligarchs and Their War On Humanity
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One response to “The Cross of Death for the Dollar”
Very good. It can be noted that a currency can go to zero and below in some cases because the state has confiscation powers. When fannie mae and freddie mack the US Fed took on the debt. While both were government guaranteed government mortgage funds and were broke some of the properties were not broke so the fed essentially confiscated those. The Fed essentially confiscated billions of dollars of city government assets in the Covid period. These in theory were not even local government property that it had the right to hand over.
All this profit is auctioned off to the Feds friends at a huge discount.
Its fairly clear that this will end with a return to Gold and Silver with a bitcoin digital back end for online transactions. Putin and Xi with their brics scam are in play but India and Brazil the other two member are bleeding them dry of cheap stuff. Discount oil and gas and to ship it Russia has had to reflag most of its tankers are Indian or Brazilian. They will never go back. Both India and Brazil is gearing up to take the low skill factory jobs in the process.
China has stopped inflating. The government is trying but its not working. Xi threatened the west and blocked western companies moving capital and profits out of China. It stopped buying Australian resources. We found other buyers: India, Vietnam, etc. Its an unrecoverable craft. There are no orders coming from the west to Chinese companies. millions have left the cities for the country town they once called home. They have stocked up on rice and tinned protein and await Xi’s fall.
In many parts of Russia men march to their doom without hope and women buy up and jar all the food they can find because the fall of Putin will be slow and messy.
The American left will scream and scheme as Trump is elected but there is nothing they can do.
Trump wants an orderly transition back to gold and will get it. I’m expecting the US communists to retreat back to real communes and in some places try to cut themselves off from reality totally.
God has decided to wreck them.
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