Introducing the Chronicles of Atticus McShrugg:
Instead of typical article format, I’ve created a fictional character and will chronicle his interaction with the President of the United States during these trying times of global crisis. Atticus McShrugg, a staff member in the National Security Council (NYSE:NSC), is making his debut in order to speak into the fast-paced developments in the international political economy and global financial markets.
A brief conversation from the first week of the President’s term is in order to introduce McShrugg. The President was reviewing the roster of the National Security Council staff and saw a name he did not recognize; Atticus McShrugg, Special Assistant to the President, Director for Global Financial Market Stability. McShrugg’s job responsibilities are to include being the NSC liaison regarding matters of global financial market stability with the National Security Agency’s (NYSE:NSA) Office of Systemic Risk Analysis (OSRA), the CIA, the Department of Defense (NYSEARCA:DOD), the Federal Reserve, the Treasury, including the Treasury’s Plunge Protection Team (NYSE:PPT), and the Office of Homeland Security (OHS).
The President picked up the phone and dialed the line of Admiral Al Clark in the Eisenhower Building; Clark serves as Deputy Assistant to the President and Deputy National Security Advisor for International Economic Affairs, National Security Council (NSC). Admiral Clark came to the NSC during the prior administration, after a stint at the National Security Agency (NSA).
Admiral Clark: Hello Mr. President, what can I do for you?
The President: Good morning Admiral, I was reviewing the latest NSC roster and I had just one question for you.
Admiral Clark: Fire away Mr. President.
The President: Who is Atticus McShrugg?
Admiral Clark (chuckling): McShrugg is the latest edition to the NSC staff Mr. President, and if I may speak plainly, you are lucky to have him. McShrugg is a West Point man, top of his class, with a degree in international finance. McShrugg spent eight years in the service, reaching the rank of Major, Army Rangers for four years then Delta Force for four years. He was highly decorated. His service record is exemplary, but mostly highly classified; you can have the details if you are interested, but I would advise against it.
The President: Does he have any private sector experience?
Admiral Clark: After leaving the service, McShrugg spent two and a half years as a global financial market analyst at a top Wall Street firm. Evidently, McShrugg wasn’t pleased with the state of affairs on Wall Street. When word came that McShrugg was interested in making a change, the CIA and NSA recruited him hard, as well as other top competitor firms on Wall Street, but McShrugg wanted to work in national security in the executive branch, saying you were going to require someone that would pull no punches. He could be making seven figures, and probably a lot more, but he appears to have walked away from Wall Street without a second thought, in order to come to Washington to work for you.
The President: So what are McShrugg’s politics?
Admiral Clark: As you are aware Mr. President, the NSC does not typically use a political litmus test in our staff selection, but since you asked, McShrugg has a strong bent toward human liberty, freedom and individual responsibility. You really can’t pigeonhole McShrugg’s politics. He doesn’t fit any Democratic or Republican mold. You could call him an independent thinker.
The President: That’s just great, you are sticking a free market commando on the NSC staff.
Admiral Clark: Mr. President, I assure you McShrugg will prove to be the utmost professional, and will excel in his role at the NSC. We expect him to take required information gathering to a new level at the NSC.
The President: Yes, I’m aware we are beefing up NSC skills in the area of information gathering, but can you control him?
Admiral Clark (hedging): McShrugg has a reputation for executing his orders flawlessly.
The President: So what are McShrugg’s hobbies?
Admiral Clark: He will be working for you Mr. President. He will have no time for hobbies, but he will likely get in a little running and on the job reading. McShrugg also collects books, old and new. He has an excellent book collection. McShrugg has a penchant for obscure financial and economic theory, as well as an interest in philosophy, theology and theoretical physics.
The President: So essentially, he is a free market Delta Force bookworm coming to Washington by way of Wall Street.
Admiral Clark: You could say that Mr. President.
The President: That’s an odd mix Admiral.
Admiral Clark: And he played basketball at West Point. They say he still has some game, but I should warn you Mr. President that McShrugg is much younger than you, so be careful if you drag him out on the new White House court.
The President: OK, now we are getting somewhere.
Admiral Clark: There is something else you should know about McShrugg Mr. President.
The President: What’s that?
Admiral Clark: You are aware of the required Secret Service psychological profile test for any staff with access to you.
The President: Of course.
Admiral Clark: McShrugg outscored every member of your Secret Service security detail on protective instincts and skills. Those instincts apply to you and the entire First Family. Mr. President, Major McShrugg would take a bullet for you, the First Lady, or the kids in a nanosecond. God have pity on the fool that threatens any of you in his presence. Since he will be traveling with you occasionally, he is one of the few on your staff cleared by the Secret Service to be armed at all times. McShrugg will effectively serve as Secret Service backup when he is with you. He has gone through additional training for this special role.
The President: OK, you’ve won me over Admiral, I’ll give McShrugg a shot.
Admiral Clark: One more thing Mr. President.
The President: Go ahead Admiral.
Admiral Clark (hesitating): McShrugg’s protective instincts for his country were just as high as they were for you and the First Family. He has already demonstrated his unwavering tenacity in this regard with the Rangers and Delta Force.
The President: McShrugg sounds like a keeper Admiral.
Now dear reader, let’s fast forward to a beautiful fall morning in 2010. The regular 9:00 am NSC briefing of the president on global market stability has just ended, with a global currency war sweeping the globe. The President has recognized that McShrugg has a knack for explaining to him matters of international finance, where others fall short, and occasionally asks him to stay for a few minutes of additional discussion.
The President: McShrugg, could you stick around for a minute. I’d like some clarification on a few points from your footnotes in today’s global market stability report.
McShrugg: Certainly Mr. President.
The President’s Assistant: You have the Chinese Finance Minister Xie and the Treasury Secretary in five minutes Mr. President.
The President: You lost me on one item McShrugg. On the subject of the global currency war, in today’s report you referred to Gresham’s Law working in reverse. You concluded that it may help explain how the escalating currency war is driving the rally in gold, and that it may produce a paradigm shift in global currency markets. McShrugg, I need you to help me get my mind around Gresham’s law working in reverse in this particular case.
McShrugg: My pleasure Mr. President. The basics of Gresham’s Law are that when you have two forms of commodity money, the bad one will chase the good one out of circulation, since anyone making a purchase will keep the good money in their pocket and spend the bad money. Of course, we don’t have commodity money today, and Gresham’s law only works if both forms of money are legal tender, so keep that in mind.
The President: McShrugg, I understand Gresham’s law. I was more interested in your observation regarding Gresham’s Law working in reverse, and it being triggered by the dawning age of digital gold currency. You also mentioned other forms of electronic gold, such as ETFs. You noted that a new emerging DGC paradigm might be responsible for triggering the rising price of gold and falling dollar. No one else has brought this up to me.
McShrugg: OK, I will dispense with the Gresham’s Law background and go straight to the new DGC forces in play. The rise of digital gold currency (DGC), gold held in storage for the owner but with digital access, appears to be creating a new paradigm that central banks, the IMF, supranational corporations and global investors have not fully recognized.
The President: Chairman Bernanke says he cannot explain the price action of gold.
McShrugg: In fairness to Bernanke, he is being asked to deliver prosperity and jobs through monetary policy when fiscal policy is an absolute train wreck. You have to expect him to obfuscate a bit Mr. President. Bernanke clearly understands more than he is letting on regarding the price of gold. How can he deliver $1.7 trillion in QE1 and lead the market to believe there are trillions more where that came from for QE2, and not expect to have an impact on the price of gold.
The President: You are getting off topic McShrugg, and the ambassador is waiting, let’s drop Bernanke’s inability to understand the price of gold for now.
McShrugg: Gresham’s Law addressed two forms of money in a single national economy. DGC has a unique place in the history of “good” money because it has created an environment with the ability to immediately convert any currency from anywhere in the world into physical gold in an account in vaults in London, Zurich, Hong Kong or elsewhere over the Internet. Third parties audit the accounts, and Lloyds of London or another reputable insurance company may insure the accounts.
The President: So a merchant anywhere in the world can take in a given currency today and have it stored in the form of gold in a vault in Zurich this evening, or at least within a few days.
McShrugg: Precisely Mr. President and the implications are far reaching, creating a new global digital gold currency paradigm that is not yet recognized.
The President: OK, so how does this trigger Gresham’s Law working in reverse, through what you called an emerging two-tier currency system?
McShrugg: The analogy is not perfect Mr. President, but obviously, if Gresham’s Law is working in reverse then “good” money is driving out the “bad” money. During the Weimar hyperinflation in Germany, farmers and others refused to accept the legal tender and began to horde food. There was sufficient fear that the legal tender money would become worthless and that it was no longer accepted. Money that was backed by something, especially gold, was accepted. However, this was before the Internet and DGC accounts. This is just one of the reasons why Germany is choosing austerity instead of Keynesianism now.
The President: McShrugg, I don’t have time for a German history lesson. You are getting off topic.
McShrugg: Today there is a growing number of merchants and investors that accept and operate with the legal tender currencies in their particular country, only because it can immediately be converted to global DGC, before it falls further in value.
The President: You are saying that we are seeing the beginning of a trend where consumers, investors and merchants around the world are willing to use the “bad” money, but only because they can immediately convert the “bad” money to the “good” money, i.e., electronic gold or DGC, thus effectively creating a two-tier global currency system?
McShrugg: Exactly. It is early in the trend. However, the advent of the global Internet and DGC has accelerated the trigger point at which Gresham’s Law begins working in reverse in a high technology two-tier currency system. Technology is compressing time lines in the currency wars, or maybe you could call it a currency revolution with DGC.
The President: It works both ways I presume. A consumer, merchant or investor could also use this two-tier system by making purchases using a credit card in a “bad” money or currency, and then at the end of the month just convert enough “good” money or DGC required to pay off the “bad” money. OK McShrugg, I can now see how your two-tier currency concept could be driving Gresham’s Law in reverse.
McShrugg: The global currency war, with countries trashing their currencies to increase exports, is just the new name for a trade war, and it is accelerating the shift to global DGC.
The President: Now I understand your argument McShrugg.
McShrugg: Granted, it is just a theory for now Mr. President, but the next few months should validate the rising force of DGC and its role as the favored global reserve currency.
The President: To summarize, it is your view that the escalating currency war is really just a beggar-thy-neighbor trade war, and is accelerating the rise of the new DGC paradigm, the advent of a high-tech international gold currency.
McShrugg: Precisely. You have a solid grasp of the issues Mr. President.
The President: The Fed is fighting deflation with QE2, trying to generate some inflation. It would seem to me Gresham’s Law working in reverse actually helps with that objective.
McShrugg: Yes Mr. President, it would be accurate that accelerating the move to DGC could trigger inflation. However, deflation remains a threat due to debt levels and overcapacity. I’m not sure the Fed can print fast enough. A bout of deflation could initially hit gold.
The President: Bernanke assures me he can print fast enough to stop deflation. And since QE2 makes the dollar the “bad” money, and DGC the “good” money, it should help stop deflation.
McShrugg: QE2 will definitely accelerate the rush into gold and DGC around the world, but whether he can stop deflation remains to be seen. It might not be as easy as Bernanke thinks.
The President: So how wide spread is the use of this new global digital gold currency or DGC?
McShrugg: A few private banks with gold vaults in Switzerland are out in front at the moment. The gold ETFs are a hybrid form of DGC. However, the Treasury departments in India, China, and Russia are evaluating the DGC option, as well they should. They don’t trust the IMF. They see it as a tool for western domination. They all have large gold holdings. Also the United Arab Emirates are mulling a DGC, or digital golden dinar for the Arab world based in Dubai.
The President: The UAE is considering a DGC system?
McShrugg: If my information is correct. The Saudi’s are also behind it. And of course the ECB has quit selling gold, and the German Treasury has one of the world’s largest stock piles of gold in the world. They could turn that into an advanced DGC system in a heartbeat. It dovetails with their push for austerity. It could give them a major global advantage.
The President: Let’s not discuss German austerity now, I realize you are a fan McShrugg. Back to DGC. You’re saying we will see sovereign players in the rise of DGC, a global digital gold currency system?
McShrugg: It appears that is the case.
The President: How about in the United States? The gold in Ft. Knox?
McShrugg: It could actually make sense. The United States has the greatest gold stockpiles in the world, sitting in Ft. Knox and at the New York Fed. Why not consider putting it to work in a sovereign U.S. DGC system, run by the U.S. Treasury. No fractional gold nonsense, it should be a pure DGC system, ounce for ounce, bar for bar, ton for ton. No paper required, just digital gold. Many smaller countries would want to pay for gold vault storage at Ft. Knox. It is arguably the safest place in the world for gold deposits.
The President: Should private DGC in the United States be allowed?
McShrugg: No law prevents it currently. However, a Constitutional amendment that grants the right to create private DGC banks and grants a U.S. citizen the right to a DGC account would help it to flourish and create jobs. DGC could be authorized as a legal tender, along with the dollar, but it doesn’t have to be. DGC account holders can just convert from DGC into and out of dollars or other legal tender currencies as required.
The President: And the Bank of International Settlements in Basel Switzerland will clear this digital gold currency, just like any other currency?
McShrugg: XAU is the currency symbol for gold in ounces. They are doing it now.
The President: Where did you get the information of DGC in play for sovereign states? Especially the UAE?
McShrugg: Do you really want to go there Mr. President?
The President: No need for that McShrugg. You are doing an excellent job. Keep the information coming. And I’d like to say thank you for your sacrifice, for what you are doing for your country. I’m aware you could be making a lot more money elsewhere, and I realize you don’t agree with many of my policies.
McShrugg: Actually, most of your policies Mr. President, but may I speak bluntly.
The President: Please McShrugg, always.
McShrugg: There was only one man fit to be a sacrifice. I’m not that man. Based on your own words, you know of whom I speak Mr. President. He said, “It is finished.” He was speaking of sacrifice. After that point in history, no additional sacrifice can be required. That is what explains true individual liberty and freedom, the heart and soul of freewill. It is now time to get to work, to find our purpose, our destiny. We delude ourselves into thinking we are making sacrifices, or that anyone has the right to demand a sacrifice.
The President (a thoughtful pause): I’m with you McShrugg. I’m with you.
McShrugg: There may be some hard work, though times, pain and suffering. There may even be a few martyrs required along the way. However, the great things placed in our hearts and minds that we must achieve, and the effort and time they demand, they are not sacrifices. They are purpose Mr. President. Destiny beckons purpose, not sacrifice.
The President: Yes, I see your point McShrugg.
McShrugg: It is an insult to my Army Ranger and Delta Force friends that died in Iraq and Afghanistan by suggesting their lives were sacrifices, they were not. They fulfilled their destiny and they died for purpose. Moreover, they would all do it again, if only they had the chance.
The President: That is a refreshing perspective McShrugg.
McShrugg: Working for you is what I choose to do Mr. President. It is my purpose for this time. Those rats abandoning you and jumping overboard, they were confused. They mistakenly thought they were making a sacrifice working for you and their country. God’s speed to them, but they were dragging you down Mr. President.
The President: Yes, I’m beginning to realize who I can count on these days. There have been a few disappointments, but also a few pleasant surprises.
McShrugg: You would not be in your position if you were not here for a great purpose Mr. President. However, be aware that life loves to throw us curves. Your purpose will likely prove to be far different from what you originally imagined in the role you have been entrusted. I intend to assist you in fulfilling your true purpose to the best of my ability, but if I ever take a bullet for you Mr. President, remember that it was not a sacrifice, it was my destiny.
The President: Thanks McShrugg, I appreciate that coming from you, but tell me, why are you really working for me?
McShrugg (pause): As you know Mr. President, I have a respectable record as a global financial analyst. The global financial disaster that most think is now over was just a warm up. The next leg down is only just beginning. Have you read Dante’s Inferno?
The President: Are we getting off topic again McShrugg?
McShrugg: Dante’s imagery is apropos. Odds are good that the crisis will be so severe it will threaten the national security of the United States. Civilization itself is coming under siege. Bluntly speaking Mr. President, the world is facing systemic shock. I thought you might benefit from the unique perspective I can bring to the table at this important time in history. In addition, it is an honor to have your back Mr. President.
The President: The honor is all mine McShrugg.
The President’s Assistant: Your appointment with the Chinese Finance Minister Xie and the Treasury Secretary Mr. President.
Disclosure: No Positions