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Thought Exercise: There’s No Money

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  • Wed, Dec 09, 2009 - 05:17pm

    #1

    JAG

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    Thought Exercise: There’s No Money

Hi Everyone,

In the spirit of the Crisis Simulation threads, I would like to submit the following scenario for discussion. This particular scenario is very different from the Crisis Simulation scenarios in all but one way: it involves dealing with the unexpected. I’m sure many here will be tempted to dismiss it as unrealistic, but then again, how many of us can say that the future unfolds exactly as we expected.

 

  • In the near future, the fear of a coming hyperinflation reaches critical mass. The Fed and large banks become targeted by the public’s rage and anger. The “End the Fed” movement sweeps through the country, and in response to this aggression, the Fed decides to fight back and show the country “who is boss” here.
  • Faced with extinction, the banking system begins to systematically to remove all credit from the financial system. 
  • The banks “call-in” all outstanding loans and shut their doors.
  • The money supply is reduced to only the physical cash in circulation, and the bankers have most of it.
  • Without credit, nearly 70% of all existing business go bankrupt in the following year.
  • Unemployment exponentially soars to over 40%.
  • A country built on and addicted to credit, suddenly is forced to become a pay-you-go society, as the financial system as we know it ceases to exist.
  • The one thing that nearly everyone shunned only a year before is now the only thing that guarantees your survival, cash.
  • On a personal level, this translates to the following: 
    • The only money that you have, is the physical cash in your direct possession. 
    • Your job is gone. 
    • Your bank account is gone. 
    • Your safe deposit box is gone. 
    • Your 401K and retirement is gone. 
    • Your stock portfolio is gone. 
    • Your credit card is gone. 
    • And if you can’t payoff your mortgage on the spot, your house and/or farm is gone too.
  • Everywhere you look people are trying to sell anything to raise cash. The only problem is, the people with cash are hoarding it, so the only thing that sells is the bare necessities.
  • The people holding gold and silver bullion can’t find a buyer. With no job and starving family members, people begin trading Gold and Silver coins at face value. What would be considered a small fortune in gold just a few years before, is eagerly given away just to pay the taxes on the roof overhead. In an act of desperation, a one ounce gold coin is traded for 3 loafs of bread and a pound of ham.
  • The country is suffering in the midst of plenty, all because their is no money supply to effect trade.
  • At an opportune time, a new mega-bank emerges and begins to buy up anything of value for literally pennies on the dollar. 

 

 This scenario is of course a deflationary depression, and on the generational timeline, its overdue. If you think the idea that a central bank would create a depression by contracting the money supply is far fetched, you should know that it has happened in this country before (the depression of the 1890’s is just one historical precedence). 

 

Any thoughts on how to play this scenario, if I dare ask?


Thanks for your participation…Jeff

  • Wed, Dec 09, 2009 - 05:37pm

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

 

If this were to happen I hope society would then realize you don’t need money to do anything.  The real question is “do you have the resources?”  If so then keep producing.  That is how you destroy the banking crooks, stop using their instrument (money) that is the equivalent of a noose around ones neck.  

Communities would have to pull together and create their own independent livable economy without money.  Factoring in data such as supply and demand would be the concern.  I say “without money” because if we use the money system again, we will just end up repeating the same old patterns of the past.  

If you think about it, the masses rejecting the money system is really the Free Market (the people) at work.  Banking cartels have become to abusive, so naturally a form of rejection must occur.  Just like the human body fighting off a virus or flu.  

Educating that masses on how a small community resource based economy would work must be implemented too.  

Money is the tool the banking elite use to control you, money has become more of a control devise then it’s original intent, and that is a medium of exchange that is workable for society where the Produce, consumer and employee are all satisfied.  

Easier said then done, I know, but so is a lot of things suggested on this site.  

~Joe

  • Wed, Dec 09, 2009 - 05:42pm

    #3
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

Wouldn’t this force people to start all over from scratch … I mean in terms of creating money? Those who grow food would obviously have the upper hand for awhile, and people would start with bartering, maybe move to working in trade for food. But eventually, even farmers will need a tool fixed or a sick family member tended to and soon enough someone will break out a printing press and create local “money” that can be bartered back and forth within the community.

What I’m not clear on is, if the FED closes off all the sources of money, could they really confiscate your house for non-payment? They probably wouldn’t because then they’d have to deal with cold and starving masses and that kind of population can get dangerous. Isn’t that’s why there’s been a moratorium on foreclosures? It’s got nothing to do with giving people time to recover (how can they recover when there’s no jobs?) and everything to do with keeping us in the dark about how bad it already is and risking us pushing for change (not the Obama kind.) 

  • Wed, Dec 09, 2009 - 05:53pm

    #4
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

[quote=JK121]

I say “without money” because if we use the money system again, we will just end up repeating the same old patterns of the past.  

[/quote]

I can’t picture how this would work. Direct barter and even indirect to a certain extent, I can understand (i.e. between 3 or 4 people where one wants what the other has, but the other wants what the third offers, etc.) But how does one realistically operate exchange of goods, labor, services, etc without something that it can be exchanged for that everyone will accept? I’m open to a complete change of thinking – just not creative enough to envision it …

  • Wed, Dec 09, 2009 - 06:30pm

    #5
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

I believe as Chris talks about in the crash course.  If the dollars ceased to exist, a new version would pop up very quickly in it’s place.  Most likely that will be gold, silver, and other metals.

So I don’t think the scenario is likely.  Sure, the Fed can take their money and go home, but then their money is worthless since money is only good for what it will buy, and who would take it anymore?  After all, I think we are already most of the way there, the banks are not lending now.

  • Wed, Dec 09, 2009 - 06:36pm

    #6
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

I suppose we would default into a barter system but the real concern would simply be theft. Theft of anything and everything. People would be killed for a grain of rice. If you had anything of value you would have to violently defend it.

As for farms. They would need an army to protect what they grew from theft. The moral breakdown from fear and desperation would be the biggest concern if we had a polar switch in our monetary system like what JAG is suggesting.

  • Wed, Dec 09, 2009 - 06:49pm

    #7
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

[quote=rhare]

I believe as Chris talks about in the crash course.  If the dollars ceased to exist, a new version would pop up very quickly in it’s place.  Most likely that will be gold, silver, and other metals.

[/quote]

The problem with this argument, is that during the 1890’s depression (that this scenario is based on), gold was money. Gold, and silver to a lesser extent, are the easiest forms of money for a central bank to control. 

Not the mention that money is officially “money”, because the government accepts it as payment for taxes. So while I agree that other forms of barter currency would indeed materialize in this scenario, most people would still have a need for traditional cash.

  • Wed, Dec 09, 2009 - 06:50pm

    #8
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

The problem is taxes.  There is no way that the government will give up on taxes.  You can barter all the other necessities of life away until the tax man comes calling.  In the old West, people were food rich and cash poor.  The government WILL find a method to get their pound of flesh.

  • Wed, Dec 09, 2009 - 06:51pm

    #9
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

oops

  • Wed, Dec 09, 2009 - 06:55pm

    #10
    Peak Prosperity Admin

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    Re: Thought Exercise: There’s No Money

[quote=JK121]

The real question is “do you have the resources?”  

[/quote]

I think you nailed it Joe. No matter what happens in the future (hyperinflation, deflation, or the goldilocks economy) the critical aspect to survival seems to be one’s ability to furnish the basic necessities (clean water, food, clothing, shelter, protection, and medicine) with the minimal use of money.

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