The Byzantine Blueprint: A Guide for America’s Monetary Revival

Problems with Elastic Money [Morning Reckoning] July 04, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Byzantine Blueprint: A Guide for America’s Monetary Revival Asti, Northern Italy July 04, 2024 [Sean Ring] SEAN RING Good morning Reader, The doom and gloom surrounding the Presidential race is both undeniable and justified. America seems tapped out. It’s out of money. It has lost the moral high ground. It resorts to coercion to keep its allies – or rather, vassal states – in line. And it prints money to cover its lies. There’s a reason the Founding Fathers wrote hard money into the Constitution. Article 1, Section 10 of the Constitution reads as follows: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility. The Fathers knew that the new government wouldn’t succeed for very long with elastic fiat paper money. Heck, “not worth a Continental” became a saying soon after the Continental Congress began issuing Continental notes. From [AIER]( In 1775, practically at the outset of hostilities, the Continental Congress authorized an issue of $2 million in paper money. By the end of 1776, $25 million was in circulation, already at a 30 percent discount relative to silver. By the end of 1777, $38 million was in circulation, at a 70 percent discount relative to silver. By the end of 1779, $192 million was in circulation, and $1 in paper money was worth only 1 or 2¢ in silver. The states were issuing their own paper money, contributing to the inflation. So, from our own history, we know elastic currencies all go to their intrinsic value: zero. And we even know how to get out of the mess: by making gold and silver legal tender. But in these dark times, it’s worth learning how another empire bought itself another 700 years. We don’t concentrate too much on that empire in our history classes, much to our detriment. The Byzantine Empire has much to teach us, particularly about how to get out of an elastic currency hole. The Byzantine Empire offers a critical case study of the effective restoration of economic stability through monetary reform. As the United States grapples with the consequences of its long experiment with elastic money, it’s worth examining how the Byzantines saved themselves from similar turmoil. This historical blueprint could provide a roadmap for America to reclaim financial integrity and stability. But first, let’s review why elastic fiat paper money is a bad thing. [ATTENTION: Your name’s on my iPad.]( [Click here to learn more]( You could be one of them. What does that mean? You see, I just discovered that you haven’t been taking advantage of our most profitable trade ideas in our company. I made a quick video explaining this urgent situation and how to fix it. [Click here to watch my important message before Monday.]( [LEARN MORE]( Problems with Elastic Money One of the most significant risks of elastic money is inflation. As the money supply increases, the value of money decreases, leading to higher prices for goods and services. We still haven’t recovered from Bidenflation in 2022 and may never do so. With no tangible value backing it, fiat currency is susceptible to devaluation. This devaluation erodes savings and diminishes purchasing power. The dollar has lost 97% of its purchasing power since the Federal Reserve came into being in 1913. The ability to print money can lead to fiscal irresponsibility. Governments may finance deficits and debt through money creation rather than sound economic policies, leading to long-term economic instability. You’re living through a case study in fiscal dominance, which is when a legislature handcuffs a central bank from doing its rightful job of raising rates and forces the bank to buy the government’s debt. Now, let’s go back in time to see how the Byzantines made a mistake and corrected it. The Byzantine Example: From Crisis to Stability A Brief History of Byzantine Currency The Byzantine Empire, which arose from the Eastern Roman Empire, initially continued the Roman tradition of solid gold coinage with the solidus. However, by the 7th century, the empire faced severe economic pressures: invasions, plagues, and internal strife. These challenges led to the debasement of their currency. The once-reliable gold solidus became increasingly adulterated with lesser metals, undermining trust in the currency and destabilizing the economy. By the 10th century, the Byzantines had realized the perils of a debased currency and initiated a series of reforms. Under the leadership of emperors like Constantine VII, the gold content of the nomisma (the Greek term for the solidus) was restored to its former purity. This move re-established the currency’s integrity, stabilized the economy, and restored trust both domestically and internationally. The Byzantine Reforms The Byzantines recommitted to a high gold content in their primary coinage, re-establishing the nomisma as a coin of significant value and reliability. Byzantine rulers enforced strict controls to maintain the gold content, preventing future debasement. With a stable and trustworthy currency, the Byzantine economy flourished. Trade expanded, and economic confidence was restored, leading to several centuries of relative prosperity. The answer is quite simple, but not easy. Get America back on the gold standard and stop printing its way out of trouble. Money has to be reliable and trustworthy. The American Experiment with Elastic Money The United States’ monetary policy has undergone significant transformations, especially since the abandonment of the gold standard with the Nixon Shock in 1971. This shift marked the beginning of the elastic money era, characterized by the Federal Reserve’s ability to expand and contract the money supply at will. While this system offers flexibility in responding to economic crises, it also presents risks, including inflation, currency devaluation, and loss of fiscal discipline. We’ve experienced all these things in the past few years. Learning from the Byzantines: Steps for U.S. Monetary Reform First Step: Reestablish a Hard Money Standard The first step for the United States is to reestablish a hard money standard, akin to the Byzantine return to the gold nomisma. This could be done in one of two ways. Pegging the U.S. dollar to a fixed quantity of gold would limit the Federal Reserve’s ability to print money indiscriminately. This move would stabilize the currency and restore confidence domestically and internationally. If returning to the gold standard is politically or practically unfeasible, the U.S. could introduce a new gold-backed currency alongside the existing dollar. This dual system would allow market forces to determine the preferred medium of exchange. Second Step: Implementing Strict Monetary Controls Just as the Byzantines enforced strict controls to maintain the gold content of their coinage, the U.S. would need robust mechanisms to uphold the integrity of its hard money standard. The U.S. must establish an independent monetary authority to oversee the implementation and maintenance of the hard money standard. This body should operate free from political influence to ensure objective decision-making. Finally, listen to Ron Paul’s excellent advice: conducting regular audits and transparent reporting on gold reserves and monetary policy would foster trust and accountability. Third Step: Fiscal Discipline and Economic Policy Monetary reform must be accompanied by sound fiscal policies to ensure long-term economic stability. The U.S. must reduce fiscal deficits through prudent spending and efficient tax policies. This move would complement the hard money standard by reducing the need for debt financing through money creation. It must also create tax incentives for savings and investment that would support economic growth and stability. A stable currency would naturally encourage these behaviors by preserving the value of savings. Fourth Step: Restoring Confidence and Encouraging Trade Hopefully, this step takes care of itself. A stable, gold-backed currency would restore confidence in the U.S. dollar, encouraging domestic and international trade. With a trustworthy currency, consumers and businesses would be more likely to engage in long-term planning and investment, driving economic growth. A gold-backed dollar would be attractive in international markets, potentially becoming the preferred currency for global trade. This move would enhance the U.S. position in the global economy and increase demand for the dollar. Wrap Up The Byzantine Empire’s return to hard money offers valuable lessons for the United States. By restoring the integrity of their currency, the Byzantines stabilized their economy and laid the foundation for centuries of prosperity. The U.S. can replicate this success by committing to a hard money standard and implementing complementary fiscal and economic policies. The United States stands at a crossroads. The experiment with elastic money has yielded the current undesirable state, and the risks of continuing on this path are becoming increasingly evident. By learning from the Byzantine Empire and returning to a hard money standard, the U.S. can restore economic stability, control inflation, and foster long-term prosperity. The path forward requires courage and discipline, but the rewards are substantial. A stable, trustworthy currency would benefit all Americans, preserving the value of their hard-earned money and fostering a more robust and resilient economy. The Byzantine blueprint is a proven model, and it’s time for the United States to embrace it. By adopting these reforms, the U.S. can overcome the economic challenges posed by elastic money and secure a stable and prosperous future for posterity. And that’s something to celebrate. Have a wonderful 4th! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Man who Predicted Trump’s Win in 2016 Issues 2024 Prediction]( [Click here to learn more]( In 2016, even though surveys were giving Hillary Clinton more than 99% chance of winning right up until election night… Former advisor to the CIA, the Pentagon and the White House Jim Rickards predicted Trump’s win. You won’t believe what he’s predicting now. [Click here to see it because it’s a SHOCKER…]( And it could have huge implications for the financial markets. [LEARN MORE]( In Case You Missed It… Here's What They Aren't Telling You About TSLA Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Now’s the perfect time for the red-hot semiconductors to take a nap. If this year’s major chip winners – NVIDIA Corp. (NVDA), Super Micro Computer Inc. (SMCI) and Micron Technology Inc. (MU) – continue to chop sideways or retest key support levels in July, what will be your next big trade this summer? We’ve discussed several potential summer rotation trade ideas over the past several weeks ranging from energy names, industrial stocks, and even small-caps. Any one (or all) of these plays could catch higher from here. But there’s another group – and one stock in particular – that’s already showing signs that it might take the lead during the third quarter. I’m talking about Tesla Inc. (TSLA). Groups of tech-growth names and the main Magnificent Seven laggard Tesla are waking up and beginning to break out as third-quarter trading gets underway. But before I get into the details of this summer breakout, we should address the elephant in the room… I can sense the skepticism every time I make a bullish Tesla argument. I get it! After all, this is a company that evokes strong emotions from just about everybody. Whether we’re talking about Elon Musk’s politics or online trolling, the latest Cybertruck recalls, or dwindling demand throughout the EV space, even casual investors hold strong opinions on Tesla. Most of them are negative! I don’t necessarily disagree with a lot of the criticism. In fact, I could easily cobble together more than a few convincing bearish arguments against Tesla. And it’s almost impossible to escape the negative news swirling around Musk and the company that helped launch him into the public eye as one of the world’s most polarizing billionaires. Despite a roaring tech rally, TSLA shares have remained out of favor for nearly three years. Most recently, the stock broke from its Magnificent Seven brethren in late December and spent most of the first quarter digging itself into a deep hole. Tesla shares have lost as much as half their value so far this year. Based on performance alone, we can reasonably assume sentiment is extremely bearish. As most of the household name mega-caps were soaring to new highs back in the spring, Tesla was catching some serious flack as it badly lagged behind its Big Tech peers. But something changed in the spring that would set the stage for the incredible comeback unfolding this week. Bad Numbers, Good Results One of our main concerns heading into spring trading was how some mega-caps like Apple Inc. (AAPL) and TSLA were decoupling from the melt-up. Back in early May, TSLA shares bottomed out alongside AAPL after both stocks managed to rally on what the financial media and Wall Street analysts insisted were “bad” earnings. Apple beat top and bottom line estimates, yet reported a 10% year-over-year drop in iPhone sales and offered lackluster guidance. The stock gapped higher and has since rallied nearly 25% to new all-time highs. Just a week earlier, Tesla reported quarterly profits sinking to 3-year lows, along with a slew of other concerns ranging from pricing pressures and questions about whether full self-driving features would ever come to fruition. The stock was already in freefall, plummeting to new 52-week lows in the days leading up to its Q1 earnings announcement. Yet the stock gapped higher and ran for five trading days, erasing the April meltdown and climbing back into its choppy range. After a quick trip back into the $190s, the stock consolidated for nearly two months. That changed last week as shares started to build toward a breakout. The stock turned higher on Wednesday, then broke above the $200 level on Monday on a decisive 6% move. Not only did TSLA break above $200 for the first time since February – it also filled the January earnings gap to close at 5-month highs. Remember, most investors continue to expect the worst from Tesla. Yet despite a strong, positive reaction to mediocre earnings numbers along with bullish follow-through and a clean breakout, bearish sentiment prevails. This could add fuel to the fire should Tesla continue to post any positive surprises. Second quarter earnings will drop on July 17. Is the stock setting up for a big beat? Are expectations so low that even small improvements will entice additional buyers? It’s possible! Despite this latest base breakout, TSLA shares are still off by more than 15% this year. Even a modest earnings beat late this month could ignite a longer-term move. Sometimes, a stock is so hated that the bar for “good news” becomes extremely low. I think that’s the case here. No one is thinking Tesla can beat earnings or announce anything productive regarding deliveries or full self-driving advances this summer. But what if they’re wrong? Price is telling a very different story. If this breakout above $200 holds and extends higher, the downtrend that has trapped TSLA since late 2021 could be finished. If you’d like to watch a complete breakdown of this trade idea with Doug Hill, check out the video we shot last week for the Paradigm Profits YouTube channel. Click below to watch… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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