A Guide for America’s Monetary Revival

Problems with Elastic Money [Morning Reckoning] September 03, 2024 [WEBSITE]( | [UNSUBSCRIBE]( A Guide for America’s Monetary Revival Baltimore, Maryland September 03, 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. You have [(1) item]( on hold at our warehouse: Item #: [51987]( Status: On hold Value: Approx. $300 Claim by date: MIDNIGHT TONIGHT To see how to claim yours before midnight, simply [click here]( our Head of Customer Experience will show you what you need to do. [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. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Elon Musk’s Genius Plan to Save the US Dollar from Collapse?]( [Click here to learn more]( Elon is about to flip the switch on [his new money project…]( And it could trigger the biggest change to our financial system since the creation of the federal reserve in 1913. Could this save the US dollar from a complete collapse? [Click here to see the details because]( Elon said he could flip the switch “as early as mid 2024.” [LEARN MORE]( In Case You Missed It… A Philosophy For Life Sean Ring, Editor [Sean Ring] SEAN RING Good morning Reader, When scrolling through X (formerly Twitter), I usually hunt for juicy financial, economic, or political information that will inspire a newsletter piece. Last night, I came across a person I had never met who wrote the most immediately helpful thread I’ve ever seen. This thread was so brilliant that I created a bookmark list called “Best Advice” so I would never lose it. I knew right away that I must share it with you. But before I do, let’s meet our contestants. [Tim Denning]( a blogger with 77,000 followers, published the list I’m about to show you from Kevin Kelly, a confidante of Tim Ferriss. I didn’t know who Denning or Kelly was, but I’m a big fan of Tim Ferriss. I found all of Ferriss’ books helpful. Kevin Kelly is one of Tim’s friends and is, in his own right, an excellent writer and futurist. He is the founding executive editor of Wired magazine. His chapter in Ferriss’ Tool of Titans didn’t hit me that hard when I read it. Now, I think the man is a genius. After you read this, you’ll probably feel the same way. Now, let’s delve into Kevin Kelly’s unique philosophy of life, a perspective that is sure to intrigue you. 1. “Don’t take it personally when someone turns you down. Assume they are like you: busy, occupied, distracted. Try again later.” Right off the bat, we’ve got a huge winner. Jim Camp, of negotiation fame, wants his clients or negotiating adversaries to say “No.” That way, he knew where the negotiation boundaries were. When you’re always trying to “get to yes,” you’re not living in your client’s You’re living in your But more than that, you become more tenacious when you get used to hearing no. There’s always something more to talk about. And that’s how deals get done. Indeed, try again later. 2. "Over the long term, the future is decided by optimists." My good friend, colleague, and Paradigm’s options expert Alan Knuckman constantly hammers me with this. And I must admit, he’s right. It’s changed my way of thinking when it comes to trading and investing. I’m not as jittery. I have faith that things will turn out alright. Now, that doesn’t mean you should ignore danger signs. But it does mean you probably won’t overreact to bad news. That’s an essential skill when the U.S. markets tend to go up over time. It would have been a different story if we had been in Japan over the last 35 years. 3. "The purpose of a habit is to remove that action from self-negotiation." Think of it like this: a habit is an algorithm. The point of creating one is to automate a process. If you do something enough times, your mind automates it into a habit. Then you don’t have to “decide” to do it anymore. Decision fatigue is a huge energy suck. Now, you can create the habits you want by repeating positive actions and turning them into uplifting algorithms that’ll happen like magic. 4. "Perhaps the most counter-intuitive truth of the universe is that the more you give to others, the more you’ll get.” Imagine. Manifest. Share. That’s the magic formula. Everyone imagines. We all daydream about how things could be. Some take that forward by manifesting whatever that product or service is. We physically bring it from the inside to the outside of our heads, from our brains to the real Then, we share, sell, or barter what we made with other people. The more you do that, the more you’ll get. 5. “You don’t want to be famous.” Luckily, I got this one early. I always wondered why people wanted other people to follow them around snapping pictures all the livelong day. Kelly suggests reading the biography of any famous person. You may not like what you read. Kelly also says you can’t hit the reset button once you have fame. The attention you should seek should be from your loved ones, not some strangers in a parking lot snapping pictures of you. 6. "Most amazing or great things are done by people doing them for the first time." If you’re running a business, Kevin thinks you should hire people based on their natural abilities and then train them for the skills needed to be good at the job. If their mindset is right (growth), the rest is teachable. 7. "Almost anything money can do, friends can do better. In so many ways, a friend with a boat is better than owning a boat." Hear! Hear! Money is great, but what you can experience with the boys, girls… or posse… is much better than counting the gold in your vault. Your “stuff” won’t matter in your dying hours, but your friends and memories will. 8. "Being enthusiastic is worth 25 IQ points." I’d add, “Being a Negative Nancy is worth minus 25 IQ points.” Enthusiasm makes you optimistic, and we talked about that above. But being negative closes your mind to the possibilities. So, find a way to get excited about your project, whatever that is. Or get another project. 9. "Pros are just amateurs who know how to recover from their mistakes gracefully." It took Edison 10,001 attempts to make the lightbulb work. What did he say about that? “I have not failed. I’ve just found 10,000 ways that won’t work.” That’s enthusiasm, optimism, and grace all in one quote. Even if you favor Nikola Tesla, this advice is worth hanging on the wall. 10. “Eat beans and rice for a year.” This is his most unique piece of advice. Kevin says this because “any time you have to risk something in the future, you won’t be afraid of the worst-case scenario.” I remember quitting my broking job in London in 2006. The first thing I bought at Tesco, my local supermarket, was a can of Heinz beans. It tasted fine, and I knew I’d be alright. 11. “When crisis and disaster strike, don’t waste them.” Without problems, there would be no creation or solutions. Learn to thrive on problems, to welcome them. Every time you solve a problem, you get better. 12. “Finite games are played to win or lose. Infinite games are played to keep the game going. Seek out infinite games cause they yield unlimited rewards.” This is why you quit your job to run an online business. The goal is freedom, not money. You stay in the game longer than trying to hang on to a job by your fingernails. 13. “Your behavior, not your opinions, will change the” It’s all about what you do, not what you say. That’s why merit-based systems thrive. 14. “The greatest teacher is called ‘doing.’” Get kinesthetic, baby! Take things apart and put them back together again. Hilariously, I’m not allowed to convert my driver’s license here, so I’ve got to do the whole course, including the theory, with eighteen-year-old kids. You know what? I love it. I’m learning all about cars, which they didn’t make me learn in New Jersey in the early 90s. I know an albero del motore is Italian for “crankshaft.” I’m learning to speak Italian better because I have to take this class. Watching videos isn’t always the best way to learn. 15. “Your growth as a mature being is measured by the number of uncomfortable conversations you are willing to have.” I once knew a Wall Street managing director who got drunk before he told his number one he wasn’t getting a promotion this year. He couldn’t bear to have the conversation. His underling decided to stay home the next few days and not come to work. Then, he vowed never to work for that MD again. Those drinks cost the MD $500,000 because his bosses were so incensed they took it out of his hide. Master discomfort. Know what it feels like. Accept it. And then do it anyway. 16. “Very few regrets in life are about what you did. Almost all are about what you didn’t do.” My million-dollar mistake was not buying a flat in London in the early 2000s. My billion-dollar mistake was not buying Bitcoin when my crazy libertarian friends told me to. Sure, I’m not proud of some of the things I’ve done, but those things don’t keep me up at night. 17. "When you die, you take absolutely nothing with you except your reputation." I watched the podcast [Inside of You with Michael Rosenbaum]( a few months ago. His guest was John Rhys-Davies, who played Sallah in the Indiana Jones films. He shared a thoughtful anecdote. Rhys-Davies was teaching an acting class and asked the class who Sir Laurence Olivier was. No one raised a hand. Then someone sheepishly asked, “Was he a writer?” Rhys-Davies said, “If they don’t know who Olivier is, what chance do they have of remembering me?” He knew he had been right to put his energy into his family. Wrap Up I hope you found that as helpful as I did. It’s a list to live by. Have a wonderful long weekend. You deserve it! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( 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. 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