Consequences of Monetary Changes in Thailand
Some of the impacts of inflation are felt from the way taxes are structured. During the stagflation that plagued Carter's administration it became known as "bracket creep." As people's nominal salary grew from inflationary pressure, they stepped into higher tax brackets, eroding their real purchasing power. And as capital was allocated, companies and people were reluctant to move resources around from failing endeavors to more lucrative prospects. Their initial investment might have grown in nominal value along with inflation, but when trying to reallocate capital, they would be taxed on this imaginary gain.
The real damage comes in long-term planning and allocation problems. Just like the house that was planned with one definition of a foot and constructed under another, contracts are written with one value of dollar and paid back in another. One side of the transaction gets hurt by the change. If inflation hits, the debtor is helped at the expense of the creditor, as now his loan must be paid back in less expensive dollars. The creditor's response is to raise interest rates or find different investment vehicles that will rise with inflation. If deflation hits, the creditor is helped at the expense of the debtor, as she gets more expensive dollars back in exchange for her cheaper dollars. This uncertainty of currency movement drags on the economy, diverting effort that could be used on something productive to finding ways to predict and hedge against the growing and shrinking of the ruler.
The US currency fluctuations of the 1990s showed how these monetary errors can be exported overseas with brutal efficiency. The Omnibus Budget Reconciliation Act of 1993 that pushed the top income bracket up to 38%, a 23% increase, was not signed into law until August, but back in March is when it was presented in the President's revenue proposal. Within two days, liquidity demand started falling because of stunted growth projection, leading to a 15% currency inflation by moving gold off its $330 line to $385 before the end of the year. While the US got off easy, countries that had pegged their currency to the dollar had to inflate too. Thailand increased baht holdings in their banking system, and these were fanned out through high risk loans to construct businesses.
From November to February, gold bounced around $385 when Chairman Greenspan decided that inflation was a serious threat. He didn't want the economy to run too hot and risk squeezing company profits. He was determined to choke the credit supply, and he raised the Fed funds rate seven times in rapid succession over a year, doubling it to 6% from 3%. However, the gold price remained stuck, and even though Greenspan once called gold one of his best inflationary indicators, he now thought it no longer had the same status. The problem was never that gold was unreliable, but that interest rates can be ineffective jasminlive tools. Behind raising rates is the paradoxical idea that you can make the dollar more valuable by making it more costly. While it can reduce the growth of the supply of dollars, it is a difficult proposition and must make up for the increased dollar cost it causes.
In December 1996, the market began to get a little excited with President Clinton pushing free trade and incoming congressmen bringing with them a capital gains tax cut (created in the bipartisan Taxpayer Relief Act of 1997), and it demanding more liquidity as gold broke below $370. In early February, Rep. Bill Archer (R-Tex), upon seeing Clinton's original proposal, commented that "it needs to accomodate broad-based capital gains relief."
Greenspan, no longer looking towards gold, failed to provide it, and instead in March 1997, fearing low unemployment numbers, he again stabbed at his imaginary inflation beast by raising the funds rate a quarter point. This time he called it "insurance" against possible inflation. From a gold price of $360, the Fed would let the dollar rise until on July 20, 1999, when it would top out, taking only $252 to buy a gold ounce.
As the dollar strengthened, Thailand now needed to defend their currency and monetarily deflate along with the dollar. The result was catastrophic. The loans that had been granted earlier now had to deal with a stronger baht and evaporating markets. Investors were forced to default on their loans, setting off a banking crisis in which more than 50 financial institutions suspended operations. Then on July 2, 1997, Thailand floated the baht. However, it was too late, and she had already been squeezed.
By the end of 1997, the deflationary gold signal was confirmed as the CRB commodity index started its dive from 300 to 210, crushing commodity producers. Prices fell so low that it caused investment in them to contract. Most notably in oil, small drillers closed down and large companies stopped searching for new sources as profits vanished. Then when the deflationary pressure finally ended in 1999 as the dollar stabilized, demand quickly outstripped supply, and prices shot up. In June, the Phillips Curve believers were still predicting inflationary pressure just around the corner, and they interpreted these energy price moves as the sign, even though gold had been in a steady fall for two years. They believed there was an inverse relationship between unemployment and inflation and saw low unemployment as inviting inflation into the economy. However, growth is inherently deflationary. The common way inflation is phrased is "too many dollars chasing too few goods," and conversely deflation is "too few dollars chasing too many goods." Under a constant money supply, as more products are brought into the market, each dollar needs to grow stronger, not weaker. Greenspan acted by raising interest rates six times (all the way through 1999 and 2000), and all he managed to do was invert the yield curve making long-term interest rates lower than shorter-term rates. This pinched the credit supply, only contributing to the deflationary process. Inflation never materialized even with unemployment rates hitting 4%, far below what was considered inflationary, the described Natural Rate.
Consumer Price Index
Gold being the most sensitive to monetary changes, it illuminates future price changes. First its price changes, then the other commodity prices follow, and the effects of monetary changes filter down through an economy at an uneven pace and with uneven results. Maybe a year later, that bottle of Strawberry Hill rises to $4, and a couple months after that, the Jack cost $38. This delayed and uneven change in the general pricing structure is what can make monetary inflation difficult to measure and have also lead to the belief that commodity prices (especially energy) cause inflation, when they predict rather than cause.
The Bureau of Labor Statistics releases a monthly survey that attempts to determine the change in retail power of the dollar. During the middle of the month, you can turn on almost any news channel and hear about the Consumer Price Index for All Urban Consumers, the CPI-U or more often just referred to as the CPI. It is a weighted aggregate of thousands of goods and services -- from the cost of pets to college tuition to food. However this only measures the ripples well after monetary change started it all.
Besides the CPI's lag making it difficult to match monetary movement with price movement, it also has a tendency to overstate inflation. The CPI is a static basket of goods determined from a survey of consumer buying habits. If you usually buy two gallons of orange juice and one gallon of grape juice a month, but as inflation moves the price of orange juice upward faster than grape juice, you may substitute a gallon of grape juice for a now relatively more expensive gallon of orange juice. The CPI does not capture this flee to cheaper goods. (This is called a fixed-weighting since the quantity of goods in the basket are fixed until rebalanced, and there are suggestions to move to a chain-weighted scheme that would effectively rebalance quantities each year, as was done with GDP.) There is also no way to compensate for a www.chaturbaterooms.com consumer's ability to find the best deal, especially given the new Internet services that can have a dramatic effect on price. Further, there is no effective way to measure quality, and this particularly effects newer technologies, like computers. From one year to the next, the price of a computer may remain constant, but its power might double, making a strict cost comparison invalid.
The British Method For Dealing With Seditionists And Dissidents
The London Gold Pool and Bretton Woods Agreement
While the world's most important currencies have been tied to gold in some way for most of history, the most recent golden anchor was the Bretton Woods Agreement. In 1944 those responsible for the major world currencies -- US dollars, British sterling, and French francs -- met in Bretton Woods, New Hampshire to create a new monetary order by linking the dollar to 1/35th of an ounce of gold and then linking other major currencies to the dollar.
Inflationary pressure pushed gold prices to $40 an ounce and gold began to flow out of the US Treasury. In 1961 the London Gold Pool was created by the US and seven European central banks as a way to defend the dollar and keep gold at the Bretton Woods price. This managed to keep gold stable for a short time, but as more currency left the central banks and Britian's 1967 devaluation of the pound, the gold reserve was being rapidly depleted leading to a two week sell-off in December 1967 of over 1000 tons from the pool. France jumped ship and started sending dollars back to the US demanding gold in return, and Vietnam War spending further chopped away at its value. By March 14, 1968, the dollar had been so beaten down that the pool was hemorrhaging gold, selling 225 tons on that single day. The London gold market was closed that evening for two weeks, and President Lyndon Johnson withdrew the US, signaling the end of the London Gold Pool. Trading continued at other markets driving the price of gold to $45 an ounce.
This was the beginning of the end for the anchor that had served the https://www.jasminelive.online/ world so well. On August 15, 1971, pressured by his economic advisors, President Richard Nixon shut the gold window, ending convertibility of the dollar. Instantaneously, the price of gold soared -- from a July average of $40.95 to the end of 1972 when gold would command $63.91 -- and by 1973 Bretton Woods was officially abandoned, entering the world into a free-floating regime and thinking the wisdom of a few people could better direct monetary policy than a millennia-old standard. By January 1980, the dollar was only worth 1/850th of an ounce of gold.
The London Gold Pool and Bretton Woods Agreement
The failed insurrection of August and the shipping off of the suspected Irish leaders to remote parts of the colony did not dampen the convict populations enthusiasm for organized rebellion. In September of 1800 another insurrection was planned. This one was to use the pikes that hadn't been found from the August attempt. The rebels were to assemble at Parramatta on a Sunday morning when the local authorities and hierarchies would be in Church service. There the rebels would over-power the soldiers and then march on Sydney.
The leaders used an escaped convict, John Lewis to send messages from farm to farm. Unfortunately Lewis was captured, gaoled and eventually talked of the rebellion. From the information Lewis gave, Captain John MacArthur of the New South Wales Corps[9] received a shakily written letter that relayed that a 'Croppie' uprising was about to occur. MacArthur's advice to the Governor was to wait for the convicts to rebel and once they were out in the open deal with them. The rebel leaders learnt of their plan being discovered and halted their operations.
In reprisal the New South Wales Corps gaoled the ringleaders. Marsden once again zealously set about trying to discover the hidden pikes. Two Irish convicts suspected of making and hiding pikes were Maurice Fitzgerald and Paddy Gavin. Marsden unlawfully flogged them both in an attempt to get information out of them. Holt and Harrold were still being detained from the previous insurrection. Marsden made Holt and Harrold watch the floggings. Holt's account of the two Irishmen receiving five hundred lashes from the cat is particularly horrific;
The place they flogged them their arms pulled around a large tree and their breasts squeezed against the trunk so the men had no power to cringe ... There was two floggers, Richard Rice and John Johnson the Hangman from Sydney. Rice was left-handed man and Johnson was right-handed, so they stood at each side, and I never saw two threchers in a barn move their strokes more handier than those two man-killers did. ...
I [Holt] was to the leeward of the floggers ... I was two perches from them. The flesh and skin blew in my face as it shook off the cats. Fitzgerald received his 300 lashes. Doctor Mason - I will never forget him - he used to go feel his pulse, and he smiled, and said: "This man will tire you before he will fail - Go on." ... During this time [Fitzgerald] was getting his punishment he never gave so much as a word - only one, and that was saying, "Don't strike me on the neck, flog me fair."
When he was let loose, two of the constables went and took hold of him by the arms to keep him in the cart. I was standing by. [H]e said to them, "Let me go." He struck both of them with his elbows in the pit of the stomach and knocked them both down, and then stepped in the cart. I heard Dr. Mason say that man had enough strength to bear 200 more.
Next was tied up Paddy Galvin, a young boy about 20 years of age. He was ordered to get 300 lashes. He got one hundred on the back, and you could see his backbone between his shoulder blades. Then the Doctor ordered him to get another hundred on on his bottom. He got it, and then his haunches were in such a jelly that the Doctor ordered him to be flogged on the calves of his legs. He got one hundred there and as much as a whimper he never gave. They asked him if he would tell where the pikes were hid. He said he did not know, and would not tell. "You may as well hang me now," he said, "for you never will get any music from me so." They put him in the cart and sent him to the Hospital.
Several more informants came forward, including one who named the still gaoled Bryan Furey as a pike maker. From the increasing information the New South Wales Corps was able to round up the ringleaders. These included William Silk, Micheal Quintan, Maurice Wood, John Burke and Thomas Brannon. They were punished with a thousand lashes and then in an effort to isolate them from the general convict population, they were sentenced to hard labour on the hulk Supply which was wallowing in Sydney Harbour. The remainder of the rebels that were rounded up were given either five hundred or two hundred lashes.
A Dollar
The dollar, and currency in general, is meant to have three functions: a medium of exchange, a store of value, and a unit of account. As a medium of exchange, currency develops out of barter economies to make trade easier. Dollars lubricate the economy, like grease for an engine. This is easily seen any time you purchase something. However, the other two responsibilities seem to have slowly collapsed. As a store of value, your labor is represented by those green pieces of paper. When you work, you are not paid in food, but instead are handed bills. Those bills are not themselves wealth, but saved labor to buy wealth, like that new flat-screen or 49ers season tickets. In order for money to be a storage vehicle though, it needs to retain its value over time, and that requires a way to measure value. So money must also be a unit of account, a monetary ruler. Just like I am 6-feet tall -- a bottle of Boone's Strawberry Hill is $3 and a fifth of Jack Daniel's is $30.
The hyper-inflation of the 1970s and deflationary pressure that started in the late 1990s were a result of a breakdown of this monetary measuring stick, a shrinking and growing of the ruler. As it changed, it caused the general price level to change with it. Just as if the foot were redefined to be ten inches instead of twelve, I would then be 7-foot-2. The dollar is a common standard, like the meter or second, and its present value, as well as future value, needs to be known in order for the economy to run smoothly. If you hired me to build a house for you, giving detailed plans and exacting measurements, yet the definition of the foot continually changed while I was building your home, the constant adjustments to these changing measurements would make building a reliable structure in a short time and without wasting too much material impossible. Similarly, when contracts and loans are signed, a constantly shifting monetary standard causes distortions at each step that are ultimately paid for with lower quality, longer waiting time, and wasted resources.
Karl Marx, in Capital, penned this idea of a monetary standard as the "universal measure of value." It was his ultimate function of money, and the way this important standard was kept most accurately was by measuring money in Marx's "equivalent commodity par excellence," gold. A dollar was non-interest bearing debt on the government. For over 2000 years, gold has been that ruler by which all else is measured by, "as good as gold" being a common way to describe the value of something. There have been experiments with other commodities and metals, but over time gold has won out.
The golden ruler held its standard length far better than anything else. Gold's rarity has made it difficult to mine and, so far, impervious to technological assault. While silver and copper are pulled from the Earth with relative ease and sometimes in erratic quantities, gold has a slow, constant trickle from the Earth's veins, the above ground stock growing about 1.5% each year. Gold's uselessness is what paradoxically makes it the superior metal. Whereas silver's massive industrial demand of 800 million ounces a year can move prices, gold is relatively unused. Only slightly more than a 9-foot cube of gold is utilized in a year. While most silver that has ever been mined is now lost to use, most gold is still accounted for. And when at one time central banks owned most of the gold in the world, after draining their vaults for 30 years, they now hold only a fifth of all reserves. So if the amount of gold isn't changing, and the demand for gold isn't changing, but the price of gold changes, the only thing that could have changed would be the value of the dollar.
More Rebellion and Insurrection Uncovered
Back in the eighteenth century it was pretty cheap for a seafaring nation to deport prisoners to the other side of the world. Things were cheap then, and continents of land, such as Australia, were a dime a dozen. Therefore sending criminals away was the obvious thing to do. Things have changed in these 200 years, though. Land is much costly and human rights prevent us from simply deporting people disruptive to our society. On the other hand, the number of criminals has risen to the stars and our glorious United States can afford to buy many lesser countries.
There's a group of entrepreneurial individuals from the fine country of Liberia about to travel to our United States to propose the creation of an American prison inside of a valley in Liberia which would hold up to 10 million prisoners. The valley is naturally isolated so little would have to be done in the way of security. Also, there's plenty of natural resources so the prisoners could provide for themselves - I myself cringe at the idea of paying with my tax dollars to feed all these wrongdoers.
These news are about to hit american networks but the Liberian news station AllAboutLiberia.com already has the story. Please let's reflect on this important issue which can not only cut on our taxes by saving on prison upkeep but most importantly make our streets safer by removing the damaged wheels from the machine of society. Please address the White House and tell of your support, too, so that it may become a reality.
A Renewed Gold Standard
The problem is that there are some that benefit from the chaotic dollar. Currency and gold traders make a living off of it as well as many bond and futures traders. Investment banks that have the staffing and experience to minimize the impact of a floating currency have an advantage over all those just starting out. A return to linking the economy to the Earth would be one of the biggest benefits to the American people that could be achieved.
But, there is no need to return to minting gold coins and fully backing all bills with gold bars in Fort Knox. The US dollar could be pegged to gold with only partial backing as long as it is defended by Federal Reserve open market operations such as selling bonds. The goal is only to provide an indicator of how many dollars are needed to conduct transactions in the econony, not to provide metallic backing for every bill in circulation.
If the goal is to keep the dollar stable, a gold price could be set at the level where most long-term economic decisions has been decided. Today, that value might be around $370 an ounce. Once set, the actual value is irrelevant, only its change relative to the peg. A small 1% band of movement would be allowed. The Treasury would then announce a policy to buy and sell gold, buying at the $372 ceiling and selling at the $368 floor, to whoever desired.
When people started showing up demanding dollars for their gold, that would signal that there was not enough liquidity to lubricate transactions. The Fed would them release dollars into the world by monetizing debt, buying up bonds with fresh printed dollars. When people started turning in their dollars for gold, that would signals that there was too much liquidity, choking transactions that would soon lead to inflation. The Fed would sell bonds, drawing dollars out of the world, and extinguish the dollars it received.
This would be the easiest way keep the golden ruler stable and without requiring large gold reserves, returning to the non-inflationary growth of the past. The CPI is too slow to react to run monetary policy on and have over-estimation problem. Rulers made of any other commodity will stretch and contract more from their own imperfections. Gold wouldn't be perfect either, but it is the best the Earth has given us.