The Final Fate of Zimbabwe Cash

British Pound Debasement: UK Royal Mint begins pulling Cupro-Nickel 5 & 10p from Circulation

As Canada has been doing with their old pure nickel coins, the UK has begun pulling in all the cupro-nickel 5p and 10p coins that have been in circulation since the early 90s.  Britain stopped making coins of .925 Sterling in 1920 and debased to .500 silver.  Then in 1947 they took the silver out entirely and went to Cupro-Nickel.  In 1970-1971 when the British Pound was decimalized, the equivalent coins stayed about the same size until 1990-1992 when the 5p and 10p were made smaller (the size circulating today).  Now the cupro-nickel is being recovered and replaced by nickel-plated steel.  As you can see, the debasement has been consistent and ongoing, robbing the British saver of the value of their money.  What comes after steel coins, plastic?  Hopefully this is a clear case study of why many people have concluded gold and silver are the safest physical money to save.

http://www.royalmint.com/discover/uk-coins/cupro-nickel-replacement

"In January 2013, the Royal Mint began a programme to recover cupronickel five pence and ten pence coins from circulation.
All new five pence and ten pence coins have been made from nickel-plated steel since January 2012 and to date 330 million nickel-plated steel coins have been issued into circulation.
This programme will recover the metal alloy contained in the old specification coins. The value of the metal in both the cupronickel and nickel-plated steel coins is still less than their face value.
HM Treasury and the Royal Mint will continue to ensure that there are enough coins, of the right denominations, to meet public demand. This programme will not affect the number of coins in circulation, and coins made of cupronickel alloy will continue to be legal tender."

Breaking currency news: US Dollar to be banned in Syria due to Conflict

As hyper-inflation eats away at the Syrian Pound and rebels use US Dollars to buy weapons (presumably), Assad has outlawed the US Dollar inside Syria.


Video from FTM Daily: http://www.youtube.com/watch?v=PqDl74bgGOk


 

Here is another report that the Syrian banknotes are rumored to be currently produced in Moscow and are only fit to be circulated inside Syria: http://english.al-akhbar.com/node/8901

UPDATE: I noticed that the Wall Street Journal has stopped listing the exchange rate of the Syrian Pound in the Commodities & Currencies section of the newspaper.  It still has Lebanon, Jordan, Bahrain, Israel, Egypt, etc.  I wonder if anyone knows the true value of the currency at this point.

Re-orienting to a Saver & Producer Mindset

In America, and indeed most of the world now, the ideas of consumerism, materialism, Keynesianism, etc have been sold and swallowed by most people in one way or another.  Granted, terms like “consumerism” and “materialism” are loaded words that can carry different connotations to different people depending on worldview and context, so let’s just say that I’m speaking to the macro idea that “consumers drive the economy” or “consumer spending is 70% of the American economy” and notions advanced by the current American president that the middle-class best contributes to economic growth by spending all their income on consumer goods.  There is much that can be said about this from an Austrian (see: mises.org) economics standpoint, but consider the matter in the simplest of logical terms:  how is it logically possible for consumption to make up a larger part of the economy than production?  Are not the two, by physical necessity, in very near equilibrium (other than extenuating circumstances such as large-scale war where pre-existing and surplus capital is destroyed/consumed and not immediately replaced)?  And furthermore, is it not logically impossible for consumption – the using up of goods and resources – to “grow” the economy if production remains the same?  Wouldn’t this lead to shortages and higher prices rather than growth?  Everyone knows the “consumer mindset” is destructive to the individual or family balance sheet, but there is the myth that, in the aggregate, its a good thing for people to fritter their money away on non-productive assets like TV, boats, sports cars, second homes, jewelry, etc.

Consider a second logical problem.  Imagine an economy that is 100% service sector.  We’ll say for purposes of example that there are six people in the economy, a barber, a teacher, a retail shopkeeper, a doctor, a lawyer, and an accountant.  The barber keeps everyone looking good, the teacher educates the doctor lawyer and accountant, the shopkeeper sells them their necessities, the doctor treats the sick, the lawyer settles disputes, and the accountant keeps everyone’s books.  Let’s say there is 1 million dollars in this little economy that shifts from party to party as the services are provided.  Everyone has access to the other service providers and everyone’s immediate needs seem to be met.  Its perfect, right?  Well, eventually the barber will need a new pair of scissors, the teacher will need a new computer, the shopkeeper will need a new roof, the doctor will need a new CAT scan machine, the lawyer will need a new fancy car, and the accountant will need a new calculator.  Their economy, which was humming along trading 1 million dollar amongst themselves without any production, must now import new capital goods and export dollars, leaving everyone still trading amongst themselves but with fewer dollars.  After a few cycles of this there will be no money left in their economy unless people from productive economies visit them and use their services while in town (tourism).  Or they can delay and mask the decline of their service economy by printing their own money to replace that which they lost to import capital goods.  But this will only lead to the money becoming diluted; in the long-run its of no use because if you double the number of money units without an increase in production, you are merely going to double prices.

Now consider on the other hand a producer economy.  You have a steelmaker, an electronics manufacturer, and a farmer.  The steelmaker takes coal and iron, very cheap goods, and turns them into steel, a more expensive good.  The electronics manufacturer takes plastic, silicon, and copper (cheap goods) and turns them into high-dollar widgets.  The farmer takes inexpensive seeds and free rain water and turns them into valuable corn.  In all three of these cases, the economy has more valuable goods than it started with, rather than merely recycling the same amount of money amongst each other like the barber, teacher, and lawyer.  This increase of valuable goods from production is true economic growth, which is properly supplemented and complimented by the service sector lawyers and doctors who can help it run more efficiently by enforcing producers’ contracts and keeping producers healthy.  Thus, capital is the fuel, production is the engine, services are the lubricant, and partial consumption is the end reward (total consumption would prevent future production, since re-investment is constantly needed to replace worn out capital goods, as with the example of the barber who needs new scissors – this is where “saving” comes into the equation).   It is because we have this equation almost entirely backwards that the American economy is in so much trouble.

(This article was originally published on my other blog, urbansaving.org on July 26, 2013)

An abandoned factory in Cincinnati, Ohio:

PS – It is no coincidence that Germany, the most manufacturing and export-oriented country in the Euro-zone, is the best performing economy in Europe with the lowest unemployment.

PSS - I've noticed that I'm getting a lot of hits on Silver Squirrel from Germany in the last couple months.  Thanks!

My Other Blog (Why I haven't updated Silver Squirrel lately)

I apologize for the lack of new posts and original material these last six months, but I have a new blog I've been working on that is similar, but less focused on coins and bullion.  I hope you will take a look at urbansaving.org!!!

Now that I've got some good original content going over there, I will hopefully start posting on here again as well.  At the very least I'll try to post some bullion and banknotes of the month and links to good videos, even if I end up putting more in depth content over at Urban Saving.  

Prediction confirmed, Argentina experiencing double-digit inflation.

In March of 2012 I made a blog post calling their central bank president a lunatic (http://thesilversquirrel.blogspot.com/2012/03/argentine-banker-mercedes-marco-del.html). This may have seen harsh, but my prediction of inflation there has now been fully confirmed as they are now experiencing double-digit inflation and the government is instituting price controls! See this video here from MoneyBags73, who cites multiple sources:

The Argentine Peso is now trading 1:5 against the US Dollar when it used to be closer to 1:3.  Its pitiful what misguided cenrtal bankers like Mercedes Marco del Pont do to their own countries.  I don't know enough about how that bank is governed so say whether she is the main culprit, or if there is board or committee that sets the monetary policy.  But at the end of the day, a woman who claimed printing money does not create inflation was made the head of the bank, which shows "the inmates are running the assylum" in Argentina.