Posted on 06/06/2020 6:52:19 AM PDT by SeekAndFind
A funny thing happened on the way to the Fed. To keep the COVID-19 economy rolling, the Federal Reserve pumped in trillions of dollars — mostly by buying securities to increase the lendable reserves of commercial banks. The people behind all this didn't ignore us little folks, either: according to the most recent Fed data, they increased the amount of currency in circulation too.
That's money that folds folks — over 65 billion more dollars during the last sixty days alone. Its way more than we need to bribe a few government officials, but where did the rest of it go? It's not being spent.
Credit and debit card use at retail stores — mostly grocers these days — is way up. The popular story being bandied about is that cash carries the virus, so people are avoiding its use. Okay, let's buy into that line for a minute and assume that folks would rather have rolls of paper named "Charmin" than tidy stacks with pictures of dead presidents and founders. However, if that's really the case, then why are ATM withdrawals up so much that many banks are having to order extra currency just to keep them stocked?
Perhaps there's another force at play here. Look, we know the facts. There's a lot more currency floating around out there than just a few months ago, and most of it isn't being kept in bank vaults. Those extra greenbacks aren't being spent at Walmart for Pop-Tarts and beer, either. So that brings us to the reasoned conclusion that people are hoarding cash while using cards and cellphones for their transactions.
Folks, it's history lesson time.
(Excerpt) Read more at americanthinker.com ...
https://www.investopedia.com/terms/g/greshams-law.asp
Gresham's law is a monetary principle stating that "bad money drives out good." It is primarily used for consideration and application in currency markets. Gresham’s law was originally based on the composition of minted coins and the value of the precious metals used in them. However, since the abandonment of metallic currency standards, the theory has been applied to the relative stability of different currencies' value in global markets.
Understanding Good Money vs. Bad Money
At the core of Gresham’s law is the concept of good money (money which is undervalued or money that is more stable in value) versus bad money (money which is overvalued or loses value rapidly). The law holds that bad money drives out good money in circulation. Bad money is then the currency that is considered to have equal or less intrinsic value compared to its face value. Meanwhile, good money is currency that is believed to have greater intrinsic value or more potential for greater value than its face value. One basic assumption for the concept is that both currencies are treated as generally acceptable media of exchange, are easily liquid, and available for use simultaneously. Logically, people will choose to transact business using bad money and hold balances of good money because good money has the potential to be worth more than its face value.
Origins of Gresham's Law
The minting of coins provides the most basic example of Gresham’s law applied. In fact, the law’s namesake, Sir Thomas Gresham, was referring to gold and silver coins in his relevant writing. Gresham lived from 1519 to 1579, working as a financier serving the queen and later founding the Royal Exchange of the City of London. Henry VIII had changed the composition of the English shilling, replacing a substantial portion of the silver with base metals. Gresham’s consultations with the queen explained that people were aware of the change and began separating the English shilling coins based on their production dates to hoard the coins with more silver which, when melted down, were worth more than their face value. Gresham observed that the bad money was driving out the good money from circulation.
This phenomenon had been previously noticed and written about in ancient Greece and medieval Europe. The observation was not given the formal name "Gresham's law" until the middle of the 19th century, when Scottish economist Henry Dunning Macleod attributed the it to Gresham.
(Smiles in Silver Eagles)
Today, people see the good money as the one that is fiat. They are hoarding currency that gets its value simply by the government stating what it is worth. A piece of paper with Andrew Jackson’s picture on it is more valuable to the masses than a debit card with twenty bucks behind it in the bank.
It’s actually a vote of confidence in the government that people prefer to hoard cash and spend plastic. The opposite is true in countries like Venezuela, where the national currency, the Bolivar Soberano, blows in the streets like yesterday’s fast food wrapper.
The absence of positive news has driven Americans to make a choice: what is the good money? In choosing dollar bills, the message being sent is really a signal about belief in the government. Besides, all that negativity blasting at us every day? One not generally quoted as a sage, former vice president Spiro Agnew, said it best. “Bad news drives good news out.” It’s Gresham’s Law there, too.
Inflation has been going on for some time, and I expect it to accelerate for with the printing of trillions.
For example: take a look at canned goods. Not too long ago, used to be able to get them for a buck apiece (less during “can-can” sales). Now they’re upwards of $1.25. Look at the net weights. 20 oz is now 19.4 or some such. 5 lb bag of sugar is now a 4lb bag of sugar.
And that is where building riches in heaven comes in.
RE: Inflation has been going on for some time, and I expect it to accelerate for with the printing of trillions.
Then based on Grisham’s Law, money will eventually flow into the financial instrument that best protects it from inflation.
Will it be another currency? Will it be Gold?
I am not hoarding cash, unless by “cash” you mean 9mm rounds.
Perhaps they have no faith in the banks, and if the dems seize power they will destroy the remnants of the economy.
I was out on vacation in Vegas just before the lockdown (practically, literally, shut the city down) I came home with several hundred in cash that I would’ve, normally, deposited right away as I don’t like carrying that much cash around.
I did not and have not.
I also have an online brokerage and a local bank (because the online brokerage won’t accept cash deposits from ATMs!) - normally I transfer most of the money from the local bank to the brokerage account but, again, I’ve stopped doing that and let the local bank accrue deposits.
The cash is in case the local bank crashes and splitting the assets is also a “just in case” defense if either the brokerage or the bank goes under.
Yeah, they’re both FDIC backed but that will take time to get the money back.
Way better than cash.
How about America?
The stock market includes investors from all over the world who are investing in America by buying stocks.
There is going to be inflation and the stocks will rise in price accordingly
For every can of beans that increases in price by 25%, there's an airline ticket that sold for $300 a few years ago that you can now get for $99.
To understand the dynamics of deflation, just look at how differently the U.S. approaches the oil industry today than it did even just 25 years ago.
We used to hate OPEC because they imposed production cuts to drive up the price of oil.
Now we have the President of the United States pushing Saudi Arabia and Russia to impose production cuts to drive up the price of oil.
You can't make this sh!t up. LOL.
RE: and if the dems seize power they will destroy the remnants of the economy.
If so, why hoard cash backed by the US government? Better to put your money in the currency of another country? But which one?
If (God forbid) the remnants of the US economy were destroyed, which country will be a safe haven, seeing how the USA is over one fifth (nearly one fourth) of the world’s economy ?
Because they are losing their value, as prices are going up.
Hoarding paper money makes no sense. The money will lose value whether it’s in your drawer, or in the bank. Has nothing to do with confidence in the US government.
What about gold sales? Are they up or down? Gold keeps much of its value during times of rampant inflation. If the monetary system collapses, when it’s over you can sell your gold since it will have kept some of its value, while those paper dollars will be good for stuffing pillows.
It makes more sense to hoard tubes of toothpaste or rolls of toilet paper. They never lose their value, but instead increase in value in times of crisis.
Same reason shop owners covered their windows with plywood after cops failed to prevent vandalism.
Lack of confidence in gummint.
Ca$h will be illegal and eliminated (globally) within 10 years, perhaps sooner.
CASH? This is the beginning of the END for “cash”.
No more “Cooti Cash”.
In answer to your question: If the dems destroy the economy, the best thing would be to have hard currency such as gold, but in the short term aftermath, cash would certain beat a mythical figure in your bank account if things really got bad.
Maybe the answer is too obvious for these elite phds.
Where are we going to spend the money?
My wife and I are spending most of our money at Walmart, Costco and Raley’s for food and some household supplies.
We have filled up with gas for our 2 vehicles, once since 13 March, and that wasn’t necessary. We didn’t want to be out of gas as we approach fire season in N. California.
We picked up dinner and brought it home to eat 2 times.
My wife like some of her friends bought some exercise tops and pants from Costco as she was afraid she would wear out her shelter and cower outfits.
At 81, I don’t wear clothes out anymore, and I got some nice new casual clothes for Christmas.
I had a haircut last week, and she will have her hair done next week.
She bought 6 tomato plants, and they are doing well.
Her Meyer lemon tree is still producing more lemons than we can eat. She trades lemons with a friend, who raises/harvests olives and makes them into incredible olive oil. We had a good supply of pepper corns and Himalayan salt that we grind and use in cooking and seasoning.
The Salvation Army and our church got a good % of our stimulus checks.
No extra health care expenses as we have not had any new emergencies or illnesses. Our Rxes still come by mail and they are charged as usual.
One of our adult son’s and his lady with no kids at home or in college, ate dinner out 2-3 times per week before the Corona BS. Yesterday, was their first dinner out since March, and they got their hair cut this past week. They both have friends, who are great amateur gardeners. These friends share their blessings with their friends.
No one is traveling!
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