Livinglies's Weblog

Boom and Bust Cycles: Predictions on American Life — PART I MONEY

The best predictor of future behavior is past behavior. It’s all we have really. Of course the problem with using past behavior is that we relying on defective memories or reports from people who had their own agenda in relating “facts” that tend to enhance their own future. Thus it is with something of a grain of salt that we take what is reported and convert it in our minds as something we know. 

Accordingly, our predictions are sometimes right and sometimes wrong depending upon the quality of the information we used, our ability to process that information and of course the ever-present probability of intervention of unforeseen acts, events, or plain bad intent. 

This is why when news was news, reporters would seek corroboration from multiple reliable sources before reporting it as fact. Now they report things that are unsubstantiated, partial and misleading, or mere statements of opinion in a hash that is known within their industry as fact based entertainment. It follows that anyone forming opinions on “mainstream” reporting is more likely to arrive at miscalculations and wrong conclusions than before.

Nevertheless, there are some things we know from American HIstory and World History that appear to be true, except for those instances where “revisionists” undertake to change public opinion by denying the painfully obvious with such fervor and passion and persistence that at least some portion of the population comes to doubt their own senses. It is clear that central policies of the United States are increasing resulting in failure to affect outcomes in economics, politics, war, or world society. we can argue over why, but the facts are inescapable as are the conclusions regarding our presents status.

Boom and Bust seems to be a fact if not an inherent part of human nature. We bunch up a group of ideas and theories, right or wrong, and act as if they were not only true but absolute. After a while, with the passage of time, the idea or theory becomes obviously true because “that’s the way it works.” The concept of a theory “proving” true because of people validating it with their behavior (despite obvious flaws in the idea or theory) usually does not occur to anyone — except for old texts, rarely read, by people who started with more basic questions and arrived at reality is which is far more ambiguous and ambivalent than prevailing political and economic theory, slogans or sound bites. 

In the context of this ambivalence and ambiguity we attach our perceptions of American Boom and Bust here for your entertainment or edification. Here are some thoughts on past, present and future which we believe have a high degree of integrity and reliability, based upon our reading, measurements, and interviews with those “in the know” (i.e., people who espouse a theory or slogan that gains currency and  thus, for a while, becomes a self-fulfilling prophecy which is “true” — at least long enough for book royalties and trading of securities to fill their own pocketbook).

MONEY: BOTTOM LINE: After years of enjoying the benefits of being the currency of choice, the U.S. dollar is declining in value and status and will continue to diminish tot he point where our wealth and fortunes depend upon the decisions of foreign sovereign nations and private companies rather than the U.S. treasury or the Federal Reserve. 

The United States will be called on to pay is debts and a series of deep recessions and possibly depression will ensue as a result of our obligation and attempts to pay off the debts created by our borrowing and the free ride that ends when those holding U.S. currency convert to other currencies or other forms of “money.”. This will cause tension in our foreign relations and could lead to war rather than payment.  

Within the last 250 years of American history, 

• the Colony of Massachusetts declared wampum, the currency of native Americans to be the official currency of the colony. 
• Virginia used tobacco as currency, 
• there was no Federal Reserve or central bank at all, on and off, in our history, and 
• at times the Fed was only as strong or directed as its leader (like Strong who died 18 months before the 1929 crash), 
• our coin currency came from Spain (the origination of the “dollar”), 
• paper currency came alternatively from 
  • individual banks where a central exchange was used to publish their relative values, or 
  • paper currency came from the King of England, or 
  • paper currency came from the Federal government or 
  • paper currency came from states or groups of states, and 
  • even now the money supply comes from multiple sources and issuers 
  • only one of which is the Federal government through the Federal Reserve and the United States Bureau of Engraving and Printing. 
• The rest of our money supply basically comes from private systems of payments varying in media from paper, conversation, or digital representations on some accounting or reporting host located out in cyberspace. 

In ALL cases, the issuance of money led to boom and eventually bust of that currency, which means according to the paradigm we have adopted here, that our current money supply is in for some major changes. Wampum for example, went to zero in value because colonists figured out a way to mass produce it ( a scenario not unlike the current mortgage meltdown which derives from a Ponzi scheme using derivative securities to vastly increase the money supply and circumvent monetary policy). “Not worth a continental” was an expression of disgust with the issuance of currency from our new government during the war of independence. Greenbacks alternately received the same reception, only to come back in other forms. State Bank notes went out of favor only to come back as bank sponsored prepaid branded or co-branded plastic cards. The list is endless. The conclusion is inescapable: currencies come and go. Money changes because it is based upon confidence and trust in the issuer. 

Our prediction is that 

• private proprietary “money” which has already supplanted government efforts to control the money supply will continue to expand exponentially through issuance of private paper including derivative securities like collateralized debt obligations (which despite the current situation are not likely to go away anytime soon), 
• together with adoption and acceptance of some foreign currency in lieu of the U.S. dollar by private individuals and companies will lead to an “obvious” conversion (i.e.,  recognition long after the fact) to our money supply, and a deep erosion of the ability of both the Federal Reserve or the U.S. Treasury to have any significant impact on monetary supply. 
• Thus monetary policy of the United States will increasingly become irrelevant and be regarded as such. It is already happened. This is past and is not a prediction. 
  • Merchants in Manhattan and other places are asking for Euros instead of dollars. 
  • Electronic payment systems go through the Federal Reserve not in its position of authority but rather as a logistical clearing operation between member banks. 
  • “Prepaid” debit and ATM cards, some with “overdraft” (i.e., loan privileges) including payroll, loyalty, wire transfer emulation and other electronic accounts that the Federal Reserve never sees, except indirectly through total balances at member banks, are rapidly taking the place of paper currency or even traditional electronic payments. 

In succeeding installments we will cover the rise and fall of mass transportation, healthcare, war, oil, pharmaceutical companies, education, technology and innovation. In brief we believe the relevant historical cycles point to a severe continued downdraft for current dominant players in oil, healthcare, prisons, pharmaceutical companies (because of innovation in stem cell applications and innovation in protocols that currently result in each aging consumer to ingest hundreds if not thousands of expensive pills per year), insurance, and financial services, while an updraft of great significance is in the works for new companies, transportation, energy, education, medical protocols and procedures and personnel. The big new industry might be the protection of your identity and personal information from everyone including the agencies, companies and people who now pretend to do it for you.