The moneymen have their assets in fiat-denominated paper. What could possibly change that?

jmski52

I'm making some assumptions here. I assume that most of the important decision-makers, including the central bankers, the politicians and the corporate welfare crony capitalists - have **most** of their money tied up in paper money instruments such as bonds, stocks, Treasuries and the like. This makes some sense when you look at the pie chart for world asset holdings by asset class.

That being the case, I see a huge amount of inertia that will fight to keep things the way they are, financially - that is, in a fiat system. All legal contracts are tied into this system, in addition to real estate valuations. The ebb & flow of international currency valuations are a by-product of the system and the system itself is via fiat, i.e. by government decree.

In my view, the only way that fiat will be discontinued is when the whole interconnected system of finance, government and law are disassembled. As I follow the discussions about how business is now hogtied by thousands and thousands of pages of regulations, how special interests dictate the minutia of every thing we do - it becomes clearer to me that "something" definitely has to change in the direction of simplification.

With so many points of resistance to changing this crazy system, how will it happen? Promises get broken all the time. Mathematically, a dollar default is in the cards. How is it going to happen? Will another fiat system rise up and will the same guys be running it? Will money keep flowing into precious metals?

InYHWHWeTrust

Great questions, and may I add a couple others?

Will phony accounting principles ever go away and 'real math' re-emerge, not just for banks but for 'real' businesses traded on the exchanges?
Will Glass-Steagall, or similar, ever be restated to keep banks-banks and not investment firms? We needs banks, BUT NOT THE ONES IN POWER NOW.
Will anyone who has broken black-letter law go to jail ?
Will the Fed ever be audited/taken down or Congress assume its duties?
Which way will the heart of the American voter go? (and I despise the labels,but we have to keep it simple-- leftward, rightward and centrist?)
When American becomes more democratic and less representative, 50.1% decide what is right and wrong, and soon will be, ifnot already , GAME OVER if that 50.1% vote for continued stealing from the actual worker bees.
Will pitchforks and torches come out before American Idol is turned off (replace Monday night football or Pawn Stars or whatever is on cable?)
Will historical revisionism continue in the gov't schools and the secular humanist religion be continued to be forced on all taxpayers?

As RegTiger has alluded in many posts, blood may flow. I pray for peaceful turning around of this country but we seem to be headed for a wall or a cliff or something else bloody or nasty.

I doubt paper, electronic, etc. conveniences we enjoy now will return to 'hard' exchanges, without major pain, and possibly blood.

I know Baleyville doesn't think this possible, and I pray it will not .. everyday.

If black panthers show up at our voting stations in 2012, watch out.

cohodk

PMs are not the "cure-all"

Deflation is.


The G's of the world seem hell bent on wealth equality. They want to play a virtual Robinhood. Problem is they have it all wrong. The poor will not rise up to meet the rich, but rather the rich will fall to meet the poor. Anyone who holds assets--tangible included--will see the value of those asset drop. Deflation is the Great Equilizer.

derryb

<< <i>PMs are not the "cure-all"
Deflation is. >>


Does this include allowing salaries and benefits to be determined by the market?
Or is deflation only good if it doesn't have a negative impact on those that support it.

RedTiger

A reset, either system wide, or in selected countries. Greece might be the lab rat for an isolated example. Iceland is already running the lab maze. World War always makes for interesting times in international finance, and the next one may be especially interesting, because it will be the first one in a connected interdependent world economy. Sure trade occurred back in the day, but Americans didn't own equities and bonds in virtually every corner of the world and vice-versa.

Major change usually occurs in fits and starts. Major catalysts bring about rapid change after decades of slow as molasses movement. Again, the big four are major war, revolution (civil war), major famine (crop failures), major plagues. When one of those four historic catalysts occur, the mountain moves. Until then the status quo and minor changes are about all that can be expected. Some folks see the every day news as important events, but for the most part, the daily news is mostly made up of minor notes in a major symphony. The crescendos come with world war, or revolution in major powers, or events on that scale.