“All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.“

– John Adams

[Special Reminder: In case you missed our recent announcement, The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge here. If you’ve been a member of The Essential Investor, please keep an eye out for your new benefits.]

July 5, 2024 — In 1787, George Washington, whose mug adorns our most basic unit of currency, wrote to a former Deputy Governor that paper money “could ruin commerce, oppress honest people, and lead to fraud and injustice.”

Since we’ve been waxing nostalgic this week, we’ll wrap it up with a few thoughts on the nation’s money.

Thomas Jefferson was against fractional reserve banking and called the Bank of the United States “one of the most deadly hostilities existing, against the principles and form of our Constitution.”

He also wrote to his granddaughter in 1811 after leaving the presidency: “Never spend your money before you have earned it” … advice our own government has consistently ignored since Andrew Jackson was president in 1845. Jackson was the last – and only – president to pay off the entire national debt.

It was the first Secretary of Treasury, Alexander Hamilton, who set a potentially leaky foundation from the get-go.

The financial system he designed included the First Bank of the United States, established in 1791 on a 20-year charter. Even then, the paramount problem facing Hamilton was a huge national debt incurred by the revolutionary war.

Fittingly, he proposed that the government bank assume the entire debt of the federal government and the states.

Of course, it also made the United States the best credit risk in the Western world.

Hamilton established another practice we continue today. He was forced to leave the office of Treasury Secretary under personal financial pressure. The gig was only paying only $3,500 a year at the time. Hamilton resigned in 1795 and joined the New York Bar.

He’d been a personal aide de camp to Washington during the war. Hamilton kept up the relationship after leaving government. As a lawyer, Hamilton prospered giving financial advice to, among other clients, Washington.

The Constitution contains only two sections using the word money. Section 8 permits Congress to coin money and to regulate its value. Section 10 also says no State can “make any Thing but gold and silver Coin a Tender in Payment of Debts.”

A broad interpretation of Section 10 gives Congress the right to issue “gold and silver” as money. Congress established the Federal Reserve, effectively the Third Bank of the United States, in 1913 to do just that… print money. Richard Nixon took care of that pesky connection to gold once and for all in 1971.

“Today,” writes contributing Grey Swan member John Rubino, “nearly every major government is doing exactly what past printing press owners have done, but – thanks to modern technology and globalization – they’re doing it on a scale that has never been attempted before. So this time around, the entire global financial system finds itself drifting inexorably toward the chaos that has claimed all previous fiat currencies.”

Citizens of the United States also enjoy a cruel honor…

By virtue of printing the world’s reserve currency its bonds still enjoy the best credit risk in the Western world. When there’s a rally, in say, an AI chipmaker like Nvidia, the dollar rallies against all the other whirring printing presses around the globe. Everyone sees the market going up, the citizens feel, even think, they are getting richer.

Here’s the cruel part. As a nation that prints its own reserve currency never has to declare bankruptcy, so go the profligate airheads sitting in various plush chairs around Capitol Hill in Washington.

The longer Congress, with the power of the pursed continues, ignores Jefferson’s warning to “never spend your money before you have earned it,” the more expensive it gets for Johnny Q and his buddies to grill brats, swill Bud Light from a can and set off fireworks by the back yard pool.

The closer, too, the nation gets to fulfilling Washington’s forecast regarding paper money.

Below is an excerpt from Brian Lutz, from dollarcollapse.com, founded by John Robino and published by fellow contributing member Mark Jeftovic’s Bombthrower Media [link dollarcollapse.com].

Brian walks us through three charts and what they portend for the dollar and the health of the economy in the second half of 2024. Enjoy ~~ Addison

CONTINUED BELOW…

>>>>>SPONSORED<<<<<

CONTINUED…

How Money Dies, In 3 Charts
Brian Lutz, Editor, Dollarcollapse.com

Nowadays, most mainstream economists believe that consistent increases in the money supply not only benefit the economy, but can pull the nation out of a recession.

And that makes a growing money supply good.

For them, it shows that an economy is growing, but in fact that may only be the case for a short period of time.

Moreover, it is also the way money becomes worthless.

Now, let’s look at the past two years until we see the pattern.

After about two years of the Fed’s plan to reduce their balance sheet we see M2 growing once again.

According to their reasoning, this should improve the economy.

Turn Your Images On

Is the expansion of the M2 supply improving the economy?

Since the Fed started raising interest rates in 2022, you can see the velocity of the M2 Supply increase, below.

Turn Your Images On

  Velocity is the frequency at which people are using their money to buy goods and services. So, it is how often the money is being used to contribute to real things.

Now it is flatlining, but over time we see it following the same downward path.

The pattern is fairly consistent.

Overall, as the money supply increases, it becomes less and less effective in the real economy of goods and services.

Turn Your Images On

Now you can see M2 Supply increasing, and velocity returning to negative percentage change overall.

So relationship seems to be correcting itself.

Whenever the Money Supply increases, it increases for a moment then the effectiveness of the new money wears out.

The whole process repeats itself from the mid-90s onward. That’s when the Clinton administration chose to start Big Bank bailouts.

This eventually happens until there is so much money no one really knows what effect it can have on the economy.

Then money dies.

On another note…

To make this hit home, here’s what to expect from the pattern in the next year.

The pattern is also the same when you look at changes in the Velocity of M2 versus CPI.

Turn Your Images On

Every time there’s a recession the response has been to fill the economy with more money.

Then inflation rises dramatically as the new money enters the economy until inflation hits once again.

In 2008, the answer was to add more money, then start sucking it up out of the economy through Quantitative Easing(QE).

As you can see, printing more money, and engaging in QE has not improved the effectiveness of the US economy.

QE has only brought increases to inflation intervention after intervention…

When you compare the intervention of 2008 to 2020, the same pattern is playing out again, only on a larger scale.

This time the money will become worth less much faster. ~~  Brian Lutz

In today’s age of inflation, where it feels like everyone is getting less than they feel they were promised, we would like to thank Brian for promising three charts and delivering four, in addition to his excellent analysis. That’s service.

So it goes,


Addison Wiggin
Founder, The Wiggin Sessions

P.S. The U.S. Mint first made the dollar in 1794. It was made of silver and showed a woman who represented liberty on the obverse with an eagle on the reverse. And it was worth… one dollar.

If you had one of those actual dollars today it would fetch somewhere in the range of $975,000 on the collectibles auction block.

If you have a paper dollar in your wallet today, it has the equivalent buying power of three of those little copper coins with Lincoln’s head on them.

P.P.S. How did we get here? An alternative view of the financial, economic, and political history of the United States from Demise of the Dollar through Financial Reckoning Day and on to Empire of Debt— all three books are available in their third post-pandemic editions.

Turn Your Images On

(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites:Bookshop.org; Books-A-Million; or Target.)

Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com