'The Wreck of the Hesperus' and the Meltdown of Global Monetary System

Yesterday I was unpacking my books from China, a chore that took a few hours. I came upon a wonderfully illustrated, hardbound edition of Henry Wadsworth Longfellow's "The Wreck of the Hesperus." Unable to resist, I sat down and cracked it open – the copy is about 70 years old. (photo1 photo2)

For a little background, Longfellow was a New Englander who lived seaside for much of his life from 1807-1882. Many of his poems have a rhythmic cadence, and he is also very well known for the poem "Paul Revere's Ride."

In the past, the poem just brought thoughts of pity for the poor maiden and her headstrong father. This time though, an allegory struck me.

The Father/Skipper is the world's central bankers and governments who have fastened us, say Lady Liberty or the maiden, to the mast using the bonds of fiat money. We too, may have little warning before the time arrives when we realize that the central bankers are powerless and frozen dead at the wheel.

For the time being, the charade made by the Money Masters is still in place, but the storm still rages on. Meanwhile they lie, saying that we are in deflation of -2%, when the truth is prices are inflating at a +6% rate. They say unemployment is 10%, or 9.6% like it's some kind of going-out-of-business sale, when the truth is it's at depression levels of 21%.

Of course, their prime fear is a psychological realization of these facts by the population at large. Some have even told me that my writing is a disservice, as if the charade could be maintained forever.

The fact remains, it cannot. The US banking system is horribly insolvent. The $592 Trillion USD (.pdf) in notional derivatives contracts still hangs like the sword of Damocles above us. The prolonging of mass unemployment is, in a major fashion, due to government propping up the financial sector and housing bubble which should have - admittedly, rather violently due to the machinations of the Fed - collapsed back in 2007. However, a recovery would then have been rather swift, and the bankrupted firms quickly bought up by stronger hands. Instead the malaise spread to all other sectors of the economy.

In their desperation, the central bankers and world governments may turn to desperate delay tactics. At the G8 meeting this week, the Associated Press reports a group called United Future World Currency bribed [my terminology] world leaders with a gift commissioned by Italian Prime Minister Silvio Berlusconi, 10 handmade books bound with silk and gold thread with a marble bas-relief for the covers. The group also included 10 coins made of gold, valued at about $4,000 each for each of the world leaders. Members of the group, per its website, include Belgian central banker Luc Luycx and Italian central banker Guido Crapanzano.

It is extremely ironic that the gifts were made of true money, gold, and a lot of lip service is given to gold but the plans for the people would simply be the usual fiat, fractionally-reserved FRAUDULENT currency. See the design here, and logos here. Their website states that they are also seeking to destroy the anonymity of money, and make it completely traceable and have funded studies

to study the potential for a new coin with a high level of protection against counterfeits. In short, an 'intelligent coin' that can communicate with mobile phones, give and receive inputs and be recognized as fake or authentic.

Privacy advocates, including myself, will be screaming bloody murder.

Perhaps the most laughable section of United Future World Currency's website is the skewed version of monetary history written by Silvana Balbi de Caro. Ironically, the history still gives lip service and acknowledges that gold and silver have been money throughout all of human history. It even alludes to the uncontested fact that when the gold and silver coins are debased with base metals, it always coincides with the collapse of major empires. However, it skips the last 70 years of fiat monetary rule completely, and omits any admission of John Law, the Song dynasty's disastrous experiments with paper money, the closing of the gold window by Nixon, hyperinflations due to paper currencies like Weimar in the 1920s, Argentina in the 1990s, and Zimbabwe today. Its stupid conclusion:

Yet global market mechanisms are knocking at the door: the boundaries that divide us today will seem too narrow for tomorrow’s generation. Old national currencies will seem a relic from the past. And the utopia of a universal currency will become reality.

Always be wary when people speak of "utopia." It would be a utopia for central bankers – a new money worldwide that they can inflate as evenly as they so please. However this misses a key fact.

Consumers, not central bankers, are the true sovereigns of market economies. The marketplace should choose the currency, and people should be free to use whatever they so wish as money. In our United States, gold and silver coins are the only forms of lawful money the government is allowed to issue, yet we trade worthless scraps of linen embedded with cyanide, arsenic and mercury, bills of credit known as Federal Reserve Notes, as if they were money when the reality is that FRNs are merely ghosts and shadows of true money.

The fact remains that there is only one surefire way of escaping the Hesperus before it wrecks. The bonds strapping you down can be cut with a blade forged of physical gold and silver. View buying a little physical gold and silver as calamity insurance because our trusty Skippers remain adamant to keep at sea as the perfect storm continues to rage.

For the Republic!

Special thanks to AH for the tip on United Future World Currency.

Comments

[socrateazz:]

Interesting. I think currencies are the last thing to fail in a society which has moved from production to moving around wealth for little actual positive result. We are moving that way quickly. I expect your belief will be realized. I do not think it is because paper is worth that much less than gold. I believe over production overwhelms values of goods causing those goods to become worth less. So monies go to less and less needed purposes until there is an imballance between the level of currency and the need for it. Meaning the nonproductive get most of the money and the producers are not able to continue to produce due to lack of money. that will go the other way sometime!

Jul 10 12:26 PM

[DONE_SONZ:]

Maybe they used the fiats as wrapping paper for the coins.

Jul 10 01:19 PM

[Jason Rines...:]

HaHa. Funny Done Sonz. Nice article Mr. Towne. Congrats on your announcement to run for Congress. Nice to see someone doing more then just talking about changing the political and financial system. The URL is towneforcongress.com . I hope the investment community will support other investors running for office whom understand the necessity of babysitting the mental dwarves in Washington.

Jul 10 02:23 PM

[cameroni:]

We do need to track inflation numbers for ourselves. The most serious concern of course is the rapidity of the onset of a hyper-inflationary event.

In Israel during 1982 the inflation rate rose from about 120% to over 360% in a single year (figures courtesy of IMF world economic outlook). The astonishing speed of a hyperinflation and it's equally quick subsidence sets it apart from any other type of economic event. It is a creature unto itself. People are slow to react to macro events but this kind of inflation has the power to rob and destroy savers faster than a bank-job on a moonless night.

Oh what the hell. It's Friday. I can be a little poetic. I'm in the mood.

Jul 11 01:53 AM

[OldFordTruck:]

Beautifully written article! Every time I get into this subject, I look at my two young children and feel nothing but depression and rage at what is happening in my country and to their future. This is the first article I have read that makes me feel optimistic despite the challenges that lie ahead.

Jul 11 11:59 AM

[User 353732:]

There is a popular and to my thinking, specious, arguement that the current monetary system must prevail until a replacement is found; becuse no replacement has beed devised, ergo, the current system cannot fail and the dollar cannot be supplanted.
There is nothing in the laws of economics, engineering or nature that declares a system can only fail once a successor has been found.
Indeed, our common historical experience tells us that human designed financial, physical and social systems often fail with no replacement and that there are gaps before successor systems come into existence.
These gaps are so well known that we have a term for them: "The Interregnum".
It is not improbable that the current global system of financial exchanges will fail with no comprehensive formal system to immediately replace it. The ensuing period will be a time of both disruption and experimentation. There may well be a financial, trading, capital flow interregnum where is there simultaneous global fragmentation and regional or "sphere of influence" integration. And then, after several years a new model of global integration, that develops at a different pace in different parts of the global econmy, will emerge.
The old order will pass away and the new order may be born not instantly but after an interim or series of interim orders.

This sequence has been experienced and recorded several times even in the past 2,000 years and certainly hinted at for all recorded history.
The king is dead; Long live the king is only one outcome. The king is dead; let the wars of succession begin; long live the new king is just as likely an outcome.

Jul 11 03:41 PM

[Steve in Gr...:]

Great article, Mr. Towne. Good luck on your run.

And thanks for the smile. Guido Crapanzano! What a great name for a central banker! There's truth in advertising for you.

Jul 11 06:45 PM

[Jake Towne:]

Dear OldFordTruck -
You may also be interested in this article

The Gray Champion

"We may not wish the Gray Champion to come again - but come he must, and come he will." - from The Fourth Turning

www.nolanchart.com/art...

On Jul 11 11:59 AM OldFordTruck wrote:

> Beautifully written article! Every time I get into this subject,
> I look at my two young children and feel nothing but depression and
> rage at what is happening in my country and to their future. This
> is the first article I have read that makes me feel optimistic despite
> the challenges that lie ahead.

Jul 13 09:02 AM