A New Universal World Currency

By Kain on Thu 5 January 2012

With all of this talk of fiat currencies and their imminent collapse, what do we do? How do we price things so that we are free from the inflation of the “printing press” economy? Gold is a widely-talked-about standard, the most stable standard for money throughout history. But how do we initiate that in practice, particularly in today’s society, geared heavily on digital payments?

We could use the “gg” (gold gram) as a standard, with 1 gg being 1/31.1034768 troy ounce. At $1600 per ounce, this is $51.44 per gram, or about 5 cents per milligram. This makes milligrams of gold to be a good standard unit to use. But, of course, the gram is defined as 1/1000 of the mass of a chunk of platinum-iridium alloy held in Paris (as shown here). This can be changed; not that it will, the scientific community will be outraged, and rightly so, were this to happen. But it suffers the same problem as the coins of old, in that if the platinum “master kilogram” were to be hacked away at, it has further repercussions than just the financial stability. (This would actually increase the value of physical gold in circulation.)

But, what is the smallest unit of gold that we can imagine, that isn’t dependent on any other measurement? Of course, that would be a single atom. So, we can use atoms of gold. The only stable isotope of gold is 197Au with an atomic mass of 196.966568662, or 3.270707×10-22 g, an amount too small to work with. We are saved by chemist Amedeo Avogadro, who gives us a fixed conversion from atomic mass units to grams. Thus, 6.02214×1023 of any substance measured in atomic units (particles, atoms, molecules) has a mass of that same number of grams.

So, one mole of gold, ie 6.02214×1023 atoms of gold has a mass of 196.966568662 g, and a value (at $1579.124672 per ounce, which it was a few days ago, 22:45 02 Jan 2011 to be more precise) of exactly $10000. This gives us another couple of units, a millimole of gold (mmolAu) of $10, and a micromole of gold (µmolAu) worth one cent. Alternatively, using a unit of one ten-thousandth of a mole, say, a “shi-mole” (“sī” is an ancient Chinese word for one-ten-thousandth, which entered Japanese as “shi”), also known as “that female rat-thing”. Thus, at this price, one shi-mole of gold (I’ll use the symbol §) is conveniently $1. It is only good for that point in time, but it serves as a good and convenient index to base dollar-to-gold pricing from. So, just take the dollar amount multiplied by the price of gold in ounces, and divide by 1579.124672, to get a figure in §. So at $1600 per ounce, $20 is worth §19.74; and at $10000 per ounce, only §3.16.

Topics: Finance, Geopolitics, Science/Mathematics | No Comments »

The Dollar Meltdown

By Kain on Thu 5 January 2012

This book from Charles Goyette is another piece suggesting exiting all other forms of markets such as equities (stocks), bonds, and other forms of “paper” or electronic savings, and of course real estate, and invest instead in gold and other precious metals.

In it, he details the historic use of gold and silver as currencies, and how governments (kings, emperors, etc) have shaved off small amounts of gold from coins, to mint new coinage to finance wars and their extravagances; how gold exchange certificates were used as a medium of payment instead of the actual gold coin, and thus how goldsmiths became the first bankers. This led to them issuing promissory notes rather than exchange certificates, like “I promise to pay the bearer $20 in gold”, leading to the first fractional reserve banking system.

This isn’t trying to play the blame game, demonstrating that both sides, Republicans and Democrats alike, are culpable. However, he has too much of a belief in the “free market”, which would be fine, if markets were truly free. The irony is that markets need to be regulated if they are to be truly free, to protect the freedom of that market from predators and abusers of that freedom (corporate monopolists). Typically, wages are a part of this. However, it is a one-sided relationship, where wages are set by the employer, and the employee has little to no say in the matter.

Thus, a minimum wage is necessary to stop a spiralling “race to the bottom” of wages, and is not there to “forbid people whose skills are worth less than the minimum from working”. This even contradicts earlier statements in the book, where he (correctly) identifies wages as lagging far behind inflationary increases (if they increase at all). The result is that real wages are decreasing, because prices of typical consumer needs increase at rates larger than the official inflation statistics.

Ok, what to do about it? Well, it’s the same answer as the previous books. Invest in gold and silver. Also invest in funds of commodities, such as oil, and agricultural products (ie. food). Also, investigate online gold payment services (think PayPal but using gold as the unit of measurement rather than dollars or pounds). … see next post for more of my thoughts on this.

Topics: Book Reviews, Finance | No Comments »

Buy Gold Now!

By Kain on Wed 4 January 2012

The title of Shayne McGuire’s book leaves nothing to the imagination about his view of the financial future. He also goes through the details of the past decades, with particular emphasis on the overinflated housing market. An article in today’s paper goes as far as to state that the average house price in Vancouver BC has topped the $1 million mark. It also goes to show that the term “millionaire” doesn’t mean much anymore. There is no doubt that these prices are grossly overinflated; in fact it is suggested that prospective house buyers wait for prices to drop to ten percent of their peak values. (Note, that’s drop to ten percent, not drop by ten percent!)
The main function of bashing the real estate market is to show that it too is in a prolonged bubble, and it is going to pop, probably when a lot of these properties vacate themselves. Thus, property is unreliable as a long-term investment. This generally leaves precious metals as the last tangible form of investment that has value.

Topics: Book Reviews, Finance | No Comments »

Don't Think of an Elephant

By Kain on Tue 3 January 2012

by George Lakoff is a good resource on the psychological tools used by the right to frame the issues, in contexts that make them seem “sensible” to people. The main point is, when facts disagree with the frame, it is human nature to discard the facts, or alter them to fit the frame. The main types of frame are the nurturant family versus the disciplinarian father (you can guess which is which). He discusses the various “values” of the right: fiscal conservatism, abortion, same-sex marriages, etc, and how the conservative view fits in with the disciplinarian frame.

For example, fiscal conservatism is viewed as the individual being disciplined enough to make it to the top 1%, and those who are poor are poor because they are undisciplined, so they must be punished and shouldn’t have social programs such as welfare and medicare. This is why they advocate tax cuts, not so much to consolidate more wealth in the hands of the upper echelon, but also to ensure that once their pet departments are sated: defence, prisons, and police, there is no money in the pot for social programs.

The left needs to reframe the issues, for instance, by showing that there is no such thing as a self-made billionaire; every one of them has had some benefit from government programs, ranging from modern medicine to the Internet, to the road infrastructure, all of which were provided from tax revenues.

Topics: Book Reviews, Finance, Geopolitics | No Comments »

Opening a Chinese bank account

By Kain on Mon 2 January 2012

To open a bank account in China, you have to actually go to the country. However, you can still open a CNY-denominated bank account from within Canada or the USA, at branches of the Bank of China.

In Canada, you can open a basic savings account (with no minimum balance, paying 0.1% interest), or a term deposit (with a minimum of 5000 yuan, paying 0.15-0.35%); you can exchange CAD/USD, or you can deposit yuan notes. You can also withdraw yuan (if they have the banknotes), or exchange for CAD or USD. Their branch locations are:

Greater Toronto:
00012-308: 3265 Highway 7 East Unit 3, Markham ON L3R 3P9
00022-308: 396 Dundas Street West, Toronto ON M5T 1G7
00062-308: 3300 Midland Avenue Units 33-34, Scarborough ON M1V 4A1
00072-308: 1170 Burnhamthorpe Road West Unit 33, Mississauga ON L5C 4E6
00092-308: 3040 Don Mills Road East Unit 28, North York ON M2J 3C1
Metro Vancouver:
00030-308: 1025 Dunsmuir Street, Vancouver BC V7X 1L3
00050-308: 8060 Westminster Highway, Richmond BC V6X 1A6
00109-308: 505 Third Street SW, Calgary AB T2P 1C4

In the USA, the accounts are rather more restricted; they have a minimum opening balance of the CNY equivalent of US$500, and you can’t deposit or withdraw CNY notes. In addition, they only open CNY accounts for personal customers at the New York branch in the NYC area, or for businesses at the New York or Los Angeles branches, for those in in the NYC or LA areas.
026003269: 410 Madison Avenue, New York NY 10017-1174 (NYC residents & businesses only)
122041662: 444 South Flower Street Suite 3900, Los Angeles CA 90071-2940 (LA area businesses only)

Anyone in the US wanting to invest in CNY cash might be better off making the trip across the border to Toronto, Calgary, or Vancouver.

Topics: Finance | No Comments »

The Day After the Dollar Crashes

By Kain on Mon 26 December 2011

Completely the opposite from the other books, this one by Damon Vickers is almost entirely a right-wing tirade, talking about the emerging “New World Order”, and all that. Well, what do you expect if it has a “gold star” of praise from Glenn Beck on the front cover?!?

It is at least correct about the crash of the dollar. However, they put the blame on “liberals” and the “move to the left” of finance and politics. In actual fact, as we know, it is the opposite. The exact same policies that this book criticises against, that is the cause of the impending collapse of the dollar, are all implementations of right-wing régimes… Nixon, Reagan, and the Bushies.

Having said that, if you visit the book’s website, the publishers will send you a $50-trillion Zimbabwe dollar note.

Topics: Book Reviews, Finance | No Comments »

The Coming Collapse of the Dollar…

By Kain on Sat 24 December 2011

…And How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets is a book by James Turk and John Rubino, about the coming hyperinflation. The entire book can basically be summed up in two words: BUY GOLD. It has more than just that, of course. It goes into the details of other metals, such as silver, palladium, and platinum; as well as exploring alternatives such as stock in gold mining companies.

Given that this book was published in 2004, it does seem a bit dated, but some of its predictions did come true. Gold is currently around US$1600 per ounce, nearly a fourfold jump from eight years ago. There was, of course, the economic downturn from 2008, which is still going on, which fuelled the rush for gold.

I am no analyst, or advisor, but looking at these numbers… the really scary one being the US unfunded liabilities, the sum of the social security, prescription drug, and medicare liabilities. This is to pay for all the pensions and medical needs of the soon-to-be-retiring baby boomers. This was not a problem, of course, as with more people entering the system and working, it was able to cover the pensions of the pre-WWII generations. That will no longer be the case. This pot of money is emptying faster than it can be filled, to the tune of about $1 million every ten seconds, currently at $117 trillion. In other words, those of Gen X’ers and beyond will have to work until we drop, to pay for the pensions of the boomers.

Of course, what this means is, massive hyperinflation, probably (but hopefully not) to the extent that Zimbabwe has just seen. Even so, in Zimbabwe, they were able to use more stable currencies, such as the US dollar, the euro, and the pound sterling. So, what will users of these currencies do when they’re faced with the same hyperinflation? What sort of stable standard will they turn to? Chinese yuan? Maybe, but yuan aren’t (yet) openly tradeable. I guess we’ll have to rely on the 79th element.

Between 1918 and 1924, the value of the Reichsmark fell by a factor of 1 trillion versus gold. Let’s take the same period (hypothetically, I hope!), 2018 to 2024. For the sake of simplicity, call gold $1600 per ounce at the start; and take a commodity, say, a $2 loaf of bread, or 40 mg of gold for a loaf. By 2024, it will still be 40 mg of gold for the bread, but it will be $2 trillion. If you diligently save(d) $1000 per month for the 40 years starting in 1984, and using a very generous 12% savings interest rate, you’d have about $15 million dollars. about enough to buy a few milligrams of bread.

Honestly, I don’t see the reason to invest in anything other than gold or silver, or something tangible, rather than this paper — or worse, electronic — money, which doesn’t even have physical form. And by this, I mean to actually have the gold in your hand, and say, leave it in a safe place, say, a tin buried in the garden. Not a safety deposit box, because as Turk & Rubino said, the government can order another gold seizure, and crack open the bank vaults. This is also a reason to use small coins rather than large coins or bars; easier to conceal from snooping G-men. Even with the currently rapacious markup on a 1/20-ounce coin (35%), or half that at 17% on a 1/10-ounce coin, that’s still nothing compared to the value once the fiat currency economy crashes.

Incidentally, at the abandonment of the Zimbabwean dollar on 12 April 2009 (using an exchange rate of 250 fourth-revision ZWD (2.5×1027 original ZWD) to 1 USD, gold at 880 USD per ounce, and 9.51×1022 atoms per ounce, it would have been over 23 million (original) ZWD per atom of gold! And in 1994, an old girlfriend expressed amazement that the little £1 coin was a huge 13 dollars in Zimbabwe!

Topics: Book Reviews, Finance | No Comments »

Existential Pleas and Resignations Mad Libs

By Kain on Tue 20 December 2011

This is by Ed Murray, and is taken from The 4-Hour Work Week, by Timothy Ferris. It just screams “4chan meme” that I can’t help but post it!

Dear [preferred deity of choice],

I realised something very [adjective] today as I was washing my [animal], and that something is this: You are a/an [adverb] cruel [personal expletive pronoun].

Last night, after drinking seven shots of [least favourite spirit] and [smoking/snorting/shooting] enough [drug] to make [politician] blush, it became clear: It really is them, and not me.

I am the one who is completely [helpless state of being] when it comes to the [favourite colour] personal relationships in my life, and yet, I share my innermost [type of candy] with no one else on this [adjective] planet … because they are all [insulting adjective] [extinct animals].

I [emotion] them all, and I hope they meet a [adjective] demise choking on a platter of their own [Applebee’s appetiser].

This [adjective] catharsis made me feel [smiley emotion] and strangely alone, simultaneously. How can I connect with these [herd animals] I am surrounded by on a daily basis? I am just so sick of [synonym for “crying”] in the [part of house] every day … Maybe it would help if I shoved a fistful of [vegetables] into my [bodily orifice]. It makes my heart [verb] when I see the defeat in my parents’ [body parts], and it becomes [adverb] clear that they love the [type of car] more than [sibling’s name] … Maybe I should stab my [genitalia] with a [sharp object].

Today I have decided to buy a [noun], which will serve as a [metaphor], and as a [timeless adjective] symbol for the [expletive]-faced servitude I am bound to in this life … no more in control than the most [adjective]-minded of [farm animals]. I am trying desperately to [“st_p”] myself from [active violent act] all of my cow-orkers … except [person in the room]. I’ve always wanted to [forceful sexual act] him/her/it. I didn’t ask to be [verb].

If reincarnation does exist, please leave me out of it.

Topics: Book Reviews, Finance, Humour | 1 Comment »

Game Theory

By Kain on Sat 17 December 2011

Ken Binmore from his book Game Theory (page 106) says:

The fat cats who get regulated squeal a great deal about the virtues of the free market, but they know that the pleasant properties of perfectly competitive markets only apply when there are large numbers of small buyers and sellers. When there are only small numbers of [large] sellers, they always end up [ab]using their market power to screw the consumer unless restrained by government regulations.

[words in brackets added by me]

Topics: Book Reviews, Finance, Science/Mathematics | No Comments »