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by Free Market Duck

Stock market plunges 416 points in one day
(Mar 01, 2007)

Wall Street, NY – What's in your wallet?  A lot less than before yesterday if you were invested in the stock market.  And where should you move what's left of your paper money tomorrow?  Fixed CDs?  Mutual Funds?  Gold bullion?  Gold stock?  Under the mattress?

   FM Duck has been warning its readers for umpteen months about how the Federal Reserve central bankers have been hyper-inflating our non-backed paper currency and how China wants to dump its $1.3 trillion in U.S. T-Notes because they are losing lots of money via dollar devaluation. Was the last two days China's big move to dump its holding of U.S. National Debt and move into gold and other hard commodities or was it just the result of ex Fed Chief Alan Greenspan's casual remark about the U.S. heading into a "recession?"  Or neither?

   Hint # 1:  Think of paper money as an I.O.U. for the real goods or services.  Until both parties receive the real goods, the transaction is not complete.  After you receive the real goods, the I.O.U. is worthless and can be thrown away.

   Hint # 2:  Strip away the paper money and think of economic transactions in terms of only commodities and services.

   Hint # 3:  Now jump back in the market and tell me how it functions in terms of only real goods and no paper money (or credit).

   Conclusions:  All of a sudden, the Federal Reserve has no role, the central bankers have no role, the stock market is pure barter, federal deficits cannot exist, taxation is extremely difficult, Congress has nothing to spend, no special interest groups receive "earmarks" or pork barrel subsidies, monetary and price inflation does not exist, there are no definitions for terms such as Gross Domestic Product (GDP), trade deficits or trade surpluses, you trade potatoes and eventually receive tomatoes, and that's it.

   Want to make the economy a little spiffier than the above?  OK.  Introduce gold coins as a medium of economic exchange.  It's still barter since gold is a commodity.  Faster?  OK.  Introduce paper promissory notes to redeem the gold stored in a warehouse.  It's still barter but with contracts to repay gold for gold contracts.

    Will this economy work?  You bet it will and look who we got rid of:  the Federal Reserve, the central bankers, a deficit spending Congress, and other assorted paper money manipulating crooks including "black box" traders at the Big Board.  (See  12-19-2006 "Black box" trading on the Big Board...is it legal... is it moral?  Part 1  More... 12-26-2006 "Black box" trading on the Big Board...is it legal... is it moral?  Part 2  More... )

   So remember, strip away the paper money.  There are no such animals as GDP, trade surpluses, trade deficits, derivatives, carry trade, prime rates, yield curves, etc.  All of these terms are smoke 'n mirrors by the money manipulators who create it out of thin air, counterfeit it for inflation, sell it to you as a national debt at interest, sell it to others at interest for investment, churn it over and over and over and charge fees for churning, and then trade it to you for your cow.  You get paper; they get your cow.

   Now you know how to play with the crooks' fake paper money, outsmart them, and keep your cow.  Go for it. -- FM Duck

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