I have been saying they are for about two years now – and have gotten quite the push back. “money needs to be FUNGIBLE and DIVISIBLE!”. In my video series nearly 2 years ago, I made note of the definition we all learn about money, but I went in the wayback machine 5,000 years ago to understand better what money was.
Yesterday, I was reading a Vince Lanci article where he quoted a recent Zoltan post…
So in February, 2022 – Zoltan said “commodities are collateral, and collateral is money”.
I had created this chart going back to my 2 hour video series on financial energy on May 15, 2021, where you see this.
I used that picture in the bottom right a lot since then in my blog writings. Since then, I slightly modified some of this (property is utility).
I also brought this chart out in a via a video I did with Jim Forsythe at citizens for sound money below
Here is my original picture, feel free to share. I added my name in there now 🙂
In my slideshow with Jim, I went a little further about how the durability of the commodity/item makes it good for long term money, but the need for it to consume (like beef) which has a shelf life, is good for shorter term money.
If you go back 5,000 years, you can potentially see a pattern with farmer of producing goods that provide the population food in exchange for a commodity that can store that value for a long time and then be used to buy other commodities. This is why I had posited that, even today, gold is the center of the financial universe due to its universal acceptance as a method of settlement.
In my broader definition of money, I then made no distinction between beef and canned goods. They essentially are the same, and used for the same purpose.
5,000 years ago they didn’t have shrink wrap, refrigeration, etc – so you have to see how the food an emergency supplies have evolved – but think about a time of crisis. What can get you a bottle of water to drink? A hot meal? The items on this list are intended for consumption near the top, and storage near the bottom.
My contention is that all of this is money. I then went into a separate asset class of “property” to discuss your home, washing machine, baseball glove, tools, baseball card collection, and crypto currency. Crypto currency had more of a leaning towards beach front property than any commodity. While it is true you can potentially store wealth in bitcoin, it trades like art. In good times, you can get massive inflation to a piece, but in bad times, liquidation to find a bid could have you lose your ass.
Why I’m writing this?
In the land of academia, usually someone who makes a discovery or says something first is attributed to this person. In my case, I’m a nobody in the grand scope of the financial system, but Zoltan is a somebody. I believe I needed to be on record about MY findings of commodities a year previous to his quote on this – not because I care THAT much about credit, but I do NOT want to be accused of ripping HIS ideas off. Clearly, this guy is not reading my blog, so unless he watched Jim Forsythe’s video of me or my YouTube video, it’s likely he came to the same conclusion I did independently of me.
To me, that helps me:
- show that my independent research is drawing the same conclusions as world renowned economists
- it adds to the weight of evidence of my writings, in that I probably have over 2 dozen writings here using commodities as money, and with this, it supports those writings more
- Demonstrate a clear timeline so work of mine 10 years from now cannot be called into question
For example – I know many of you can NOT see a gold PEG ever again. Reluctantly, after 3 years of trying to fit the square peg in the round hole, I have come to the conclusion that it is NOT possible to put that genie back in the bottle, either. Why? We have gone from a savings-based economy to a credit-based economy. This dynamic has accelerated credit usage and money creation – and with that, if you are not maximizing credit availability, to some extent, you fall behind your competition. Why? Money creation (and credit creation, etc) increase far more rapidly than any savings mechanism can. Meaning – you cannot hold cash for any duration of time as the spending power erodes, and you must find “batteries” to store that financial wealth in. While gold doesn’t yield, it is clear the asset appreciates against an ever-decreasing fiat currency. It doesn’t do this on a straight line, but it jumps up, digests, and jumps up more. Why? Because asset classes get over and under valued to each other, and with this, you have these oscillations.
When I wrote this piece a few weeks back about oil, gold, and commodities – I surmised a new BRICS currency would not have a PEG to gold in a gold-BACKED system, but rather a gold-BASED system – where gold and other commodities…are COLLATERAL for bond creation. It was a follow on to THIS piece, which I discussed again how gold is the center of the entire financial system and has relative value to all other things. The east appears to know this, and this is why I think the BRICS system of money, whatever it is, may cause a major headache for the USD. Maybe not next week, but clearly if they have gold and energy in their plans, with primary production of a million other commodities, we need to account for this with any 5-10 year macro forecast.
It would still be a fractional reserve system, of sorts, but perhaps the state can then use these commodities as collateral for bonds to create currency. Maybe 5:1 or 10:1. The idea is that the currency borrowed would be paid back and you would not need to ever touch the collateral. But if you default, you hand over the collateral. This also presents problems on its own, but what you prevent is a bond creator just simply borrowing money infinitely to pay back your bonds in ever-diminishing value of currency.
In a Palisades interview about 2 months after my financial energy series was put out, I had a discussion with Tom about it at a high level, where he talked with me about gold to oil. This was summer 2021. I postulated that gold is the HELIOCENTRIC model and fiat is a GEOCENTRIC model. Meaning, if you have gold at the center, you know roughly what other things are worth, in g of gold. But what are things worth in fiat? Fiat has no intrinsic value, and therefore when you try and price things in fiat and not gold, you obfuscate the value of the underlying asset.
While I’m NOT a PhD level economist, I took a decent amount of economy, finance, all the other MBA types of fun – so I cannot write you a 60 page white paper on how the mechanics work. I can, however, make observations that I can present at a high level for discussion.