10 Secret Places Rich People Hide Their Money

10 Secret Places Rich People Hide Their Money

Michelle L. Black  Updated: Oct. 02, 2020

It's no secret that people with money like to shield their earnings from the IRS. What is often a secret, however, is how and where they do it.

No one enjoys paying taxes. So, no matter your income level, searching for new tax breaks can be a wise use of your time and energy. The ultra-wealthy, however, sometimes take steering clear of taxes to another level. Former treasury secretary Lawrence Summers, along with finance professor Natasha Sarin, recently released a research paper with some eye-opening claims. According to Summers and Sarin, the top 1 percent of taxpayers are projected to avoid more than $5 trillion in taxes between 2020 and 2029. Of course, the legal tax-reduction strategies used by rich people are worth reviewing and utilizing when possible. But it’s not a bad idea to learn about the illegal methods as well—so you can avoid them and their potential consequences. While we’re on the subject, check out some of the craziest tax deductions ever claimed.

Business Deductions

Starting a business (or multiple businesses) is a common way the rich aim to reduce their tax liability. But you don’t have to be wealthy to use this method, notes Jon Dulin, founder of Money Smart Guides. If you’ve been wanting to give entrepreneurship a try or even formalize a side hustle, this may be a good option. Of course, you have to go through the proper channels first: Creating a legal business entity typically requires a simple visit to the websites of your Secretary of State and the IRS.

Once you establish your business, tax deductions are just one of the benefits you may be able to enjoy. “For starters, you can write off losses the business incurs in the beginning and then use business expenses to offset business income to lower taxable income,” Dulin says. “

Additionally, you can put money into tax-deferred accounts, like solo 401(k) plans, which allow the business owner to save a lot more than traditional 401(k) plans since you are contributing both as the employer and the employee.” Wish you knew more about your 401(k)? Here are the answers to 10 common retirement savings and 401(k) questions.

Hiring family members

Another tactic the rich often use to shield income from taxes requires getting the family involved. If you have a business, you can use this strategy to your advantage, too, by hiring your spouse or your children and paying them a salary. The IRS even says that “one of the advantages of operating your own business is hiring family members.”

To continue reading, please go to the original article here:

https://www.rd.com/list/secret-places-rich-people-hide-money/

Why I Didn’t Have an Emergency Fund Until I Was 39

Why I Didn’t Have an Emergency Fund Until I Was 39

From Cash For Tacos

I don’t need an emergency fund. This was me for the majority of my adult life.  The thought of saving up all of that money “just in case I needed it” wasn’t very appealing.  Thankfully, I was lucky enough to have never found myself in need of an emergency fund.  It wasn’t until I was 39, five years into my personal finance journey, that I finally convinced myself that an emergency fund was essential for me.  

And I’m so glad I changed my mind. My emergency fund allowed me to easily replace an air conditioner in the middle of a humid midwest summer. And more importantly, it has given me peace of mind. 

If you are anything like past Mel and struggling to motivate yourself to tackle the emergency fund goal, this article is for you. Or if you are simply curious as to why it took me so long to have an emergency fund, read on. 

Here is why I didn’t have an emergency fund until I was 39 and why I changed my mind.  But first, a real quick explanation of what an emergency fund is.

What Is An Emergency Fund And What Is It Used For?

An emergency fund is a stash of cash that is meant to be used for an urgent need.  The keywords here are “urgent” and “need”. 

Urgent needs are considered things such as: 

• Home repairs like a flooded basement or broken water heater

• Car accident

• Veterinarian bills

• Costs of taking care of a loved one

• Medical Emergency

• Loss of income

On the flip side, emergency funds are not meant to fund our sudden wants. 

Things like:

• Last-minute vacations

• A shopping spree when you are feeling down

• New living room furniture because you are tired of your current stuff

• A new car simply because you want one

Now that we know what an emergency fund is for, let’s dive into how I convinced myself that it wasn’t a priority to create and save for an emergency fund. 

Reasons Why I Didn’t Have An Emergency Fund Until I Was 39

To continue reading, please go to the original article here:

https://www.cashfortacos.com/emergency-funds-why-i-didnt-have-one/

10 Attributes of Wildly Successful People

10 Attributes of Wildly Successful People

Lambeth Hochwald

You know those people who seem to ace everything in life? Researchers have uncovered their secrets to success.

Secrets Of Success

We all know people who seem to be accomplished in their every pursuit. So it’s especially interesting to read a new British study that drills into the 10 attributes that make people extra good at what they do.

And they all have a few things in common. For starters, they identify and understand their strengths when pursuing a goal, says Amanda Potter, the lead researcher, founder, and managing director at Zircon Management Consulting, a business psychology company in England.

High achievers also tend to be motivated by a negative or positive life event, and they credit their success to having someone in their life who believed in them.

After conducting interviews with 42 high-achievers, including a range of CEOs, entrepreneurs, sports stars, and media personalities, Potter concluded that we all have a different combination of winning attributes—in other words, no two winners are exactly the same—however, all successful people have some or all of 10 specific attributes.

“For example, it may be your single-minded focus and determination or it might be your curiosity and willingness to disrupt the current situation that makes you successful,” she says. Read on as our two experts explain why the qualities that engender success and why they’re so key.

Burning Ambition

Successful people are driven to achieve their goals, but for the ultra-successful there’s an even bigger mandate, says Isaura Gonzalez, PsyD, a licensed clinical psychologist in New York City.

“Burning ambition takes into account the desire to hit your mark each and every time as well as an unrelenting desire to be the best of the best.” Say these mantras every day to reach your goals.

Dogged Determination

Being doggedly determined means that obstacles are not deal-breakers, but mere inconveniences that need to be overcome. “There is no hesitation, just action, when it comes to success,” Gonzalez says.

“Success comes when you have hit your mark, and determination is the road on which you travel to hit that mark.” Get ready to troubleshoot with this guide to handling tricky interpersonal situations.

To continue reading, please go to the original article here:

https://www.rd.com/list/attributes-of-super-successful-people/

How Financial Advice Triggers Painful Money Shame

How Financial Advice Triggers Painful Money Shame

BraveSaver.Com

Maybe you’ve heard: debt is bad.  I have. I was raised on the conviction that debt=bad. I saw the effects of debt on family members and family friends. Dave Ramsey, the first financial figure I knew, centers his teachings on debt — and getting out of it to “financial freedom.”

I even heard about debt at church, making it a moral question. Debt was there: in bible study and Sunday school, used as a metaphor for sin — or a topic on its own.

The sum of all these messages I heard about debt was this: getting into debt was unwise, a sign of a weak will or mind. Debt was a form of bondage or slavery, and once you were in it, you were in danger of never getting out.

Fast forward to me, in 2012: 23 years old, in around $50,000 of debt — mostly student loans with a car loan and credit card debt, too.

I’d tried to make the best money choices from the options I was aware of, from taking out student debt for my undergrad degree to putting half an international trip on a credit card. But now, though, I was second-guessing myself. Would it work out? Could I really pull through?

One morning I sat at my $40 Ikea dining table in our roach-infested Los Angeles apartment, eating breakfast, unemployed and on a job search.  A barf sound effect interrupted my thoughts — a regular gag on the local morning radio show I had on in the background. It’d never bothered me before, but today, I felt queasy at the mere sound. Weird, was my first thought. Then, a few dots connected. Oh no, was I…? Three tests later and I knew for sure: I was pregnant.

My money shame: Financially failing at parenthood

This new event doubled my feelings of anxiety and shame about my financial situation. I was excited, but also terrified and ashamed.

I cried the first time I went shopping for maternity clothes. I started a job shortly after finding out, but I waited as long as possible to tell my manager. I loathed grocery shopping once I started showing. I wasn’t self-conscious about my changing body itself, but rather what I felt it told people about me. They could simply look at me and know the deep, shameful truth: I was pregnant and completely unprepared.

To continue reading, please go to the original article here:

https://bravesaver.com/2020/09/23/financial-advice-money-shame/

Money Is Everything … Until You Master It. Then It’s Nothing at All.

Money Is Everything … Until You Master It. Then It’s Nothing at All.

By Joe Freedom ·

I have been accused at times of worrying too much about money. And my retort is always the same: I don’t worry about money at all. But I do spend time carefully managing it, as I do with any other valuable resource.

The alternative of having no concern for money and devoting no time to prudently and wisely managing it seems to me to inevitably lead to financial hardship and ruin. But avoiding these adverse outcomes through concerted effort does not mean a lifetime of worry about money.

To the contrary—it means a lifetime free of worry related to money. I have a set of rules and guidelines that manage my financial behaviors, and a process for the related administrative work. I attend to money matters, I do not worry about them. There is a significant and meaningful difference.

Categories of (Money) People

I have observed three distinct categories of people in terms of their governing money-management psychology:

1. People that constantly worry about money (because they have no control over it). This group spends and consumes with reckless abandon, and as a consequence is perpetually worried about how they will fund tomorrow’s excessive consumption. This group is trapped in work and often trapped in debt. It’s a miserable existence. But most of them are blinded to the reality that it does not have to be this way.

2. People that never worry about money (and have no control over it). This can be great fun. Until the music stops and the reckless behavior catches up with you. Then there will often be a painful reckoning. But it’s fun while it lasts, which can often be a long time.

3. People that spend zero time worrying about money (because they have mastered it). This group understands that money is a valuable resource and a tool to be used responsibly and wisely. They understand what it can and cannot do, and have cultivated a healthy relationship with it.

They have a zen-like peacefulness in their money outlook, and are master of their own (money) domain. (Note here: While there may be a fourth group comprised of people that worry about money (but have mastered it), I have not seen much or any of this breed.)

Why the Heck Aren’t People Interested In Managing Their Money Resource?

Every time I get a new power tool that I haven’t used before I am initially intimidated by it. The raw power and potentially destructive force are, well, scary. But as I study the device and learn how to safely and correctly harness its power and apply it to my will, the fear diminishes and the elation of the possibilities of what I can do with the tool emerge.

Money is similar—you must devote some amount of time to learning how to safely and responsibly use the tool in order to deploy it in a productive fashion and to eliminate the fear that can result from potential misuse.

To continue reading, please go to the original article here:

http://trappedinwork.com/2017/06/money-is-everything-until-you-master-it-then-its-nothing-at-all/

QFS Stops The Deep State In Their Track

QFS Stops The Deep State In Their Track

Final Wake Up Call  By Peter B Meyer

The Quantum Financial System QFS

Little is it known that this new system has been designed in preparation for the takeover of the Central Bank Monetary Debt System to end the financial slavery and control over the populace. The Alliance gave President Trump the magic wand of taking over the old banking system without changing it.

Humanity does not have the technology to fight the Deep State’s financial system. Exterrestrials came to the rescue with alien or even other dimensional technologies to accomplish this task. In Quantum Computers, intelligence is embedded without 3D proprieties. No 3D creation is able to replace the power of a living being. To this end, artificial intelligence (AI) was designed to replace conscious beings.

 A spiritual entity was set up to fulfil physical realisation for all beings above the fourth dimension. Our earth is like a living being that obtains its life force from the planetary symbol ring. The QFS is expected to operate on Quantum Benevolent Intelligence with interaction on any financial transaction anywhere in the financial world.

As a guarantee that every transaction; is legal and transparent for every account holder. Someone who has mastered quantum physics can understand the effect this quantum information technology has on every financial transaction that passes through the quantum financial system. – It cannot be modified.

The confirmation and disclosure of this fortunate component of the QFS is the assurance and hallmark of a one hundred percent reliable, neutral and secure transfer system.

Some people try to discredit the QFS which is the greatest financial advancement of all time. This misunderstanding may be a result of the fact that the QFS has no comparison to anything that has ever been presented to the world before. It is like an antigravity machine compared to an automobile. There is no real basis to understand this technology.

It has no peer; it has no equivalent in advanced technology that anyone has had before. It is new. It reigns supreme in the technology it uses to accomplish the financial security and transparency needed for currency holders to perform all financial humanitarian objectives. With the QFS, the world can be flooded with gold-backed currencies that are designed to eliminate the old Cabal financial system with central banksters in control over all financial transactions.

QFS Destroys Central Banking System

With the activation of the QFS, the Alliance will have completely destroyed the Rothschild Central Banking system that has been designed by Meyer Amschel Rothschild (1744 – 1812) to control the world economy and put the world population into debt slavery.

R   http://finalwakeupcall.info/en/wp-content/uploads/sites/2/2020/09/No-Inflation-300x225.png

Truth is, the QFS has been running in parallel with the Central Banking System for some time and has countered many hacking attempts by the Cabal to steal funds. In the process, many banksters have been caught red handed and arrested.

This powerful quantum computer system could assign a digital number to every fiat dollar/euro/Yen sitting in every bank account all over the world and consequently monitor in real time money streams; knowing exactly where particular monies went, when it was transferred, who sent it by their login info, and which account received the money.

Imagine the frustration of a banker who has just stolen some money and this illegally transferred to another account and subsequently being arrested in real time for theft. These poor bankster devils, have been defeated. They are taking their last gasp of air before the weight of their ‘death plans’ comes crashing down on their pathetic, baby-blood-sucking, bodies.

Only gold-backed currencies that have a digital gold certificate can be transferred through the QFS. The gold certificate references a serial number on a piece of gold held in reserve to back the currency. Off-world technologies are used to quarantine the gold used to back the currencies. There is no way it can be stolen or taken out of the secure vaults where they are stored. That is why it is called gold-backed currency, it has to reference back to the piece of gold in the vault that is backing it.

References to ‘asset-backed currencies’ is the process of establishing a currency based on assets within the country of origin. Assets are the justification to establish the amount of currency available in a country, but all denominations of currencies must be resided within the QFS and been given a gold certificate to be active within the QFS.

If the assets are mined or extracted from the earth, they will be sold on the marketplace as with any other commodity. This is an enormous process, an assignment of no small feat to accomplish. But, a required process to ensure worldwide value to all currencies used within the QFS.

Any Fiat currency that cannot be regarded clean, clear, non-terroristic and not established to support illegal activities, that disqualifies most Fiat currencies, cannot become a legal currency in the QFS. – Fiat currencies received from legal activities will be exchanged for gold-backed currencies at the bank.

QFS Has No Equivalent In Advanced Technology

The Quantum Financial System – QFS has no comparison to anything that has ever been introduced to the world before. It has no peer; it has no equivalent in advanced technology of any other system before it. It is brand new. It reigns supreme in the technology it applies, in order to accomplish the one hundred percent financial security and transparency all currency account holders require.

With the QFS, the monetary system of the world can easily be changed to encompass gold-backed currencies that completely eliminate the use of the old Cabal central banking system. Regrettably, to fully comprehend the advanced QFS-structure, there doesn’t exist an equivalent technology to serve as an example.

Global Currency Reset

Without the ability to certify existing money into the new QFS, all Central Bank activities will cease to have any relevance within this new financial system. A country that is not GESARA compliant will be left out of the QFS and eventually will be left out of the international trade. Their oil or grains, or whatever, are still valuable but how is a GESARA compliant nation going to pay for commodities to a non-participant in the QFS?

The money cannot be transferred. Non-compliant countries, if any, will be left to barter commodities or work out a credit exchange with other countries, a system that is not presently available to do business at any level of relevancy. Talking about third world countries – non-compliant countries will be relegated to fourth or fifth world countries.

Each country must be GESARA compliant to participate in the QFS. The Alliance will use a specific quantitative formula to establish the amount of currency available, “in a country,” which is to be gold-backed in the QFS. The results of the formula will establish a fair value of each country’s assets as compared to one and another.

There is far more gold than needed to accomplish the gold-backing of all world currencies. Once established through the GCR, the price of gold will become irrelevant for the value of a specific currency against each other. All monies are equally calibrated.

If the price of gold goes up, the value of all currencies will go up as well, resulting in no net change to the par value of all currencies. The formula includes, in ground assets, the economy of the country, its awake population – which is one of the country’s assets, and a number of other parameters to determine the value of the country’s currency. This formula is to be applied to each country so that all currencies will be on par value with all other countries. 

The application of the formula and the common value of all gold, means that one country’s currency has to have the same value as another country’s currency. This is called the Global Currency Reset – the reset of all currencies on par with all other world currencies and each one has a gold certificate to validate authenticity.

It’s a requirement of each country to use the reset formula and apply the worldwide standard, to assure the QFS to function as planned. That is the reason why a country must be GESARA compliant to participate in the QFS.

Donald Trump re-elected as first President of the new Republic of America

The Alliance has confirmed that their goal of defeating the Deep State has been far more complex, time-consuming and difficult than had been anticipated and planned for. It is becoming increasingly obvious that world-changing information is about to be made public, probably sooner than expected.

This is likely to be accompanied by the much-anticipated mass arrests. There are literally over one hundred seventy thousand sealed criminal indictments ready to be executed, and partly already have been executed. Once Donald Trump is re-elected as the first President of the new Republic of America in this coming November, this sequence of events will take place, it will be up to the awakened readers to help everyone to understand what is going on, explaining the positive nature of the changes that already are occurring and those that are underway.

Never forget; the deliberate debasement of our fiat currency by central bankers is theft, and is the current monies are counterfeited. The Founding Fathers of the United States of America saw counterfeiting as a serious crime, deserving the death penalty.

The Deep State elites are in a panic, as more people are awakening and they realise they cannot stop it. They are continually trying with COVID, face masks, social distancing, riots, etc. to prevent or suppress this process, but the truth is coming out and cannot be stopped anymore.

 Now, it is time people learn to think for themselves, by becoming detached from hypes, in which for example multitudes of people, due to a mindless kind of group-think, come to the conclusion that something like fiat paper money is valuable, whereas if they were to think logically, they would come to the conclusion that this is not the case. Much in the world has been intentionally misinterpreted and misrepresented by the media.

For example, the idea Democracy is good and Anarchy is bad, which in fact is exactly the opposite. There is a great lack of independent, critically thinking people. This lack can easily be lifted by reading and studying my book THE GREAT AWAKENING, part 1 and part 2, and consequently experiencing and consciously understanding the upcoming developments with joy.

 To defeat the Deep State for once and forever; it is necessary that at least 50% of the populace is awake. If, just each one of the awake, wake up two more people and if those on their turn awake 2 other people, is in just 54 rounds the whole world populace awakes. It is very important for all of us that as many people as possible wake up and stay awake. Informing people in their native or familiar language is essential in achieving this goal; the goal of ultimately liberating humanity.

 Unity makes power

Awake people want to meet other awake individuals, without masks, for the reason, we together are stronger, and abler to defeat the Deep State cabal quicker. Our liberation process cannot be stopped anymore. Uniting with others who are like minded people creates and shapes our best reality. World wide awake networks are created, like in the Marbella / Malaga area who have been around for several months with increasing numbers of participants. If you would like to meet up with them contact Peggy via email.  Meetings and lectures in English are organised on a regular basis. 

If you found this information interesting, helpful, or insightful, please share it with everyone you know to help waking them up.

And don’t forget to put up your national flag showing the world you are awake.

The more flags out show the cabals are losing their grip of power over us.

There is much more enlightening information to follow, you most likely don’t want to miss! For which you could subscribe free of charge in the subscription box on this FWC-site.

http://finalwakeupcall.info/en/2020/09/30/qfs-stops-the-deep-state-in-their-track/

What Basketball Can Teach Us About Responsibility

What Basketball Can Teach Us About Responsibility

by Jim Rohn | Mar 13, 2020 | Personal Development

During the years when professional basketball was just beginning to become popular, Bill Russell, who played center for the Boston Celtics, was one of the greatest players in the professional leagues. He was especially known for his rebounding and defensive skills, but like a lot of very tall centers, Russell was never much of a free-throw shooter.

In fact, his free-throw percentage was quite a bit below average. But this low percentage didn’t really give a clear picture of Russell’s ability as an athlete, and in one game he gave a very convincing performance.

It was the final game of a championship series between the Celtics and the Los Angeles Lakers. With about 12 seconds left to play, the Lakers were behind by one point and the Celtics had the ball. It was obvious that the Lakers would have to foul one of the Boston players in order to get the ball back, and they chose to foul Bill Russell.

This was a perfectly logical choice because statistically, Russell was the worst free-throw shooter on the court. If he missed the shot, the Lakers would probably get the ball back, and they’d still have enough time to try to win the game. But if Russell made his first free throw, the Lakers’ chances would be seriously diminished—and if he made both shots, the game would essentially be over.

Bill Russell had a very peculiar style of shooting free throws. Today, no self-respecting basketball player anywhere in America would attempt to shoot this way. Aside from the question of whether it was an effective way to shoot a basket, it just looked too ridiculous.

Whenever he had to shoot a free throw, the 6-foot-11-inch Russell would start off holding the ball in both hands, about waist high. Then he’d squat down, and as he straightened up, he’d let go of the ball. It looked like he was trying to throw a bucket of dirt over a wall.

But regardless of how he looked, as soon as Russell was fouled, he knew the Celtics were going to win the game. He was absolutely certain of it, because in a situation like that, statistics and percentages meant nothing. There was a much more important factor at work, something that no one has yet found a way to express in numbers and decimal points

To continue reading, please go to the original article here:

https://www.jimrohn.com/what-basketball-can-teach-us-about-responsibility/

5 Money Principles You Need to Know

5 Money Principles You Need to Know

by Jim Rohn | Aug 1, 2018 | Personal Development

Although finances shouldn’t be the highest priority in our lives, I will say money plays a major role and we need to see it for what it is: a tool. As my good friend Zig Ziglar says, “Money isn’t everything, but it ranks right up there with oxygen!”

Money is a tool that, depending on how we use it, can bring much joy to our lives or it can bring destruction. We need to be aware of all the possibilities it offers as well as the pitfalls. Some of the most amazing things have been done because people had the financial resources to fund them—businesses have been built, schools started and philanthropic charities founded that have accomplished much good. On the other hand, friendships have been ruined, illicit gains profited and lives destroyed—all over money.

So today, I want to focus on applying some simple financial principles, but I also want to teach the underlying philosophies that govern what good people can do and what tremendous accomplishments can be made when we see money for what it is: a tool to improve our lives and the lives of others.

John Wesley said, “Earn all you can, save all you can and give all you can.” A person who sees the powerful force for good that money can be will more likely keep their own life in balance by pursuing the disciplines of earning, saving and giving, which, together, create the perfect tension and balance.

But we must also remember that money has a seductive side and tells you it will solve all of your problems, but it won’t. It is great to have money—lots of it—as long as your life is in balance and you keep the proper perspective. It is important that we own our money and not the other way around.

The first way to make sure money doesn’t own us is to deal with the issue of debt.

Amer icans, along with most of the world, have more debt than ever. We would do well to remember the old proverb, “The borrower is the servant to the lender.”

When we are in debt, we owe someone, and because of this, they have a certain amount of control over us. We are, in essence, their servant. This is not the way of financial freedom.

Interestingly enough, when it comes to debt, I have found that many otherwise intelligent people just don’t get it. So, for a little help, here are five things you must understand to achieve financial freedom:

To continue reading, please go to the original article here:

https://www.jimrohn.com/money-principles/ 

To Exchange It All or Not?

To Exchange It All or Not?

Muhammad Ali   / Currencyexchangeplanner.com

​I was asked this question recently from one of my Currency Exchange Planner customers; his name is Robert from California.

Will you exchange all IQD or some and hold and wait if it comes out low?

Now I see 2 sides to this question, I’ll tackle the easy side first, if the value comes out low, for example $1 to 1 Dinar, I would only change a few notes and wait for the value to go higher before changing the bulk of my notes.  How much YOU would change would depend upon how many notes you hold?

​Now, let’s say the value comes out to $4 right away, would I still change all?  Again, I would still only change a few and wait for the rate to rise higher and then change more.  I already have my personal target in mind.

​OK let’s turn this question around, and change the focus from the rate to this: Will you exchange all IQD or some?

​Now, I know myself and my limits and limitations, but the answer to this question would be determined by YOU and how well you trust yourself.  I am going to give you a few scenarios and the main purpose of this article is to give you several vantage points for you to consider and think about.

​I have written several articles about the greatest enemy that we will encounter with this currency investment, and that is Sudden Wealth Syndrome, S.W.S.  It will eat us up alive and why is that? Because we failed to plan effectively.  It has proven itself, time and time again, and the statistics proves that, not me.  Statistically speaking 70% of people who receive sudden wealth blow through it within 2 years.  That is the statistics. 

​And for those who have been reading my articles you’ll remember that I talked about having a Work Free and Worry Free lifestyle.  Work free is clear, you’re a multi-millionaire, right?  So who needs to work?  BUT how can we have a worry free lifestyle if we are constantly worrying about SWS?  Does that make sense?

​I covered in my past article, Precious Metals - My Plan B, you can find the article on my website, that one way to provide a worry free lifestyle was to have enough gold and silver as a backup.

​You can find that article and read it again on my website, so I won’t go too much into it here.

​What if, we were to use some of our currency as a backup?  But how can we do that, if we already exchanged it all?   That’s the thing; if we exchange all of our currency then it is bye, bye baby.  She’s all gone, so should we really exchange it all?  So let’s address this and carefully think it through. 

There is so much talk of higher rates and contract rates and that we need to get as much as we can get from the go and there’s nothing really wrong with that thinking.  It’s logical.  But would it have been worth it, to seek after higher rates and only to then blow it all in 2 years?  So it wouldn’t of matter if you received an exchange rate of $4, or $10 or $28, the more you have the faster you might have blown it all away.  Only time will tell on that, and your ability to plan.

​Let’s get back on track here, and if you decided to withhold some of your currency to exchange later on, for example, 5 years from now, if required, first we need to understand the demonetization periods of the notes that we hold.  Meaning the time frame that these notes can be exchanged before they expire.  

For the Dinar, we have been told by the previous Governor of the Central Bank of Iraq that the period will be 10 years.  So let’s say you exchanged ¾ of your Dinars, leaving ¼ in a safe deposit box or safety deposit box, just in case SWS kicks you in the butt and you lose it all in 3 years. 

It’s not like you’ll find some guy still selling on eBay for $50 a note, right?  So not a problem, you had a safe guard in place, as you have ¼ of your Dinar stashed away in your box but when you go to exchange it, you find out that Iraq lowered the demonetization period to 2 years!  So now, you’re S.O.L.!

​Remember, when they Re-Instate their rate, they must officially post it on their website, so knowing the exact demonetization period WILL BE VERY IMPORTANT.

​Now how can we avoid this?  It’s very easy actually, by changing the old 25,000 notes to the new Dinar notes and store the new Dinars in your safe deposit box.  The new Dinar notes will not have an expiration date on them.  So this is the worry free way to go about it.  We are worried about the old notes expiring but we wouldn’t need to worry about the new notes, unless of course you left them in the box for 25 years and forgot about them. That’s another story!

So the point to get across here is that you can change some of your old dinars for the new dinars and store those away.  Just in case the rainy days comes around.

​And I hear some of you saying, ¼ of my Dinar is a few millions, Muhammad.  Just leaving that to sit in my box seems like a waste.  I could exchange that and put it in a fixed deposit account and make 5% per year and keep that as part of my worry free backup plan. 

​And I would say, well of course you can, but your money may be locked in a fixed deposit for 1 year; if the currency was in the box then you can liquidate it at any time. 

​And then you will say, What If I deposit some the IQD in an Iraqi Bank fixed deposit account and leave some in the box.  Then it is all still in Dinar, right?

​And I would say, hmmm now you’re thinking.  We know that many of the Iraqi banks are opening locations around the USA, Europe and Asia, so we may not need to go to Iraq to open an account.  You’ll need to further investigate this option.

So we could play Devil’s Advocate and go on and on until we’re blue in the face and believe me, I have done this with myself many times.  It’s actually fun, cause it really gets you to think.  And best of all if you used my Currency Exchange Planner, it’ll help you see the numbers in black and white, instead of in your head.  Getting the numbers out of your head and onto paper should be your priority.  I still have my CEP on promotion price so if you haven’t picked up your copy of it yet, you can save some money on the purchase price right now.

​What I suggest for you, on where to start is, take a blank paper, and write on it, in large print.  WORK FREE – WORRY FREE LIFESTYLE.  And stick it up somewhere that you’ll see it every day.  And that is where your planning will start.  If you can truly plan towards a work free and worry free lifestyle then S.W.S. will never find you.  There are other things that you can do, it just depends upon your creative mind and how you think things through.

​The idea behind this lifestyle is that you can travel, where ever you want to go and not worry about money, you can invest and lose and not worry about money, and you can even help others and not worry about money.  Worrying is not an option for you.  To have a TRUE work free – worry free lifestyle will depend upon how much currency you hold now.  Do you think you can do that with a few notes?  Probably not, but you may be able to achieve one or the other, either work free or worry free, that is possible but it all depends on you and your exchange plan.

Part of my Work Free plan is to have several bank investments, in low, medium and high risk categories that provide me a stable monthly income. How much I invest and how much you invest would be determined by the amount of currency we each hold.  Everyone’s plans will be different, so just work with what you have.

​Part of my Worry Free plan, is to have cash reserves to back up my investment capital and also to have gold and silver to back up my investment reserves.  This way, if my Wealth Manager mismanages my high risk trading account, then I am not worried at all as I have reserve funds as needed.  Trading can continue but with some changes. 

Like I said, the ultimate goal of the Worry Free plan is that you can travel and do other things and not have to worry about money. If your Wealth Manager takes a 2 week vacation and there’s no one monitoring your account, etc., we do not need to be concerned about it. 

We want to be enjoying our lives and not have to be checking charts and watching our account balances go down.  We’ll have safety measures in place for that and we just go fishing.  The amount of reserves you allocate would depend upon you and to the extent that you want to live worry free.

​If you have no plan then you’re probably going to fall prey to the S.W.S statistics of the 70% will lose their wealth in 2 years?  I was also made aware that 85% of the millionaires from the Kuwait raise in value lost their wealth in less than 6 months.  That’s even worse! 

I waited 14 years for this RV/GCR and I don’t want to lose my wealth in 2 years or 6 months!  And I don’t want my new wealth to stress and worry me out to my grave.  Our new wealth could either be a blessing or a curse and I choose the first.

​So please think carefully on what you want to do and I hope my article brings awareness to you and opens the creative tunnels in your mind towards beating S.W.S.  That is the name of the game after all.

​All the best with your planning, and please use my software, the Currency Exchange Planner and the Companion Edition.

​Muhammad Ali   The No. 1 Planning Tools for the Dinar community.

https://www.currencyexchangeplanner.com/article-35-to

Money Lessons From Disney Movies

10 Subtle (But Important!) Money Lessons From Disney Movies

By Michelle From Savings & Sangria  -- Happy Money Management

So I was watching Disney’s Up (for maybe the millionth time). And I died a little bit inside every time Carl and Ellie had to spend their Paradise Falls savings to cover a run-of-the-mill little emergency. And I thought that’s the perfect illustration for why you need an emergency fund separate from your dream fund. So I wrote a post about it.

But that got me thinking about all the subtle money lessons hidden in Disney movies. And I think I found some good ones! So let’s jump right in! Here are the top 10 subtle (but totally important) money lessons from Disney movies.

Starting with that emergency fund from Up…

1. Have An Emergency Fund   (Up)

Don't end up like Carl and Ellie! Keep your emergency savings separate from your dream savings so you can handle emergencies and achieve your dreams. Money lessons from Disney MoviesDisney/Pixar’s Up

Oh, the most heartbreaking of all the Disney/Pixar movies. Carl and Ellie are saving their pennies for the adventure of a lifetime: a trip to Paradise Falls. But every time their savings starts to grow into anything substantial, life happens. They need new tires, Carl breaks his leg, they need to repair the roof after a storm.

Life will throw emergencies at you without warning. And if you don’t keep an emergency fund separate from your dream fund, you’ll never save enough money to make your dreams come true.

2. Take Advantage Of Supply And Demand   (Frozen)

Understanding the supply and demand lesson from Frozen can help you make and save more money.

Yoo hoo!

Kristoff learns a little lesson in supply and demand when he tries to buy low-supply, high-demand winter gear in the middle of a snowstorm. The shop owner, Oaken, explains that the price of the winter stock jumped from $10 to $40 because “supply and demand have a big problem”. Of course Kristoff can appreciate the situation because he’s the one trying to sell ice when Arendelle is literally full of it. It’s the oldest lesson in economics. When supply is low and demand is high, the price skyrockets.

Here are a few practical ways to take advantage of supply and demand in the real world:

Build skills in in-demand fields. That will offer some level of income security. And you may be able to earn more money if you can do something few others can.

To continue reading, please go to the original article here:

https://www.savingsandsangria.com/10-subtle-but-important-money-lessons-from-disney-movies/

Lessons On Inflation From The Past

Lessons On Inflation From The Past

by Tyler Durden  Sat, 09/26/2020

Authored by Alasdair Macleod via GoldMoney.com,

This article examines two inflationary experiences in the past in an attempt to predict the likely outcome of today’s monetary policies.  The German hyperinflation of 1923 demonstrated that it took surprisingly little monetary inflation to collapse the purchasing power of the paper mark. This is relevant to the fate of the “whatever it takes” inflationary policies of today’s governments and their central banks.

The management of John Law’s Mississippi bubble, when he used paper money to rig the market is precisely what central bank policy is aimed at achieving today. By binding the fate of the currency to that of financial assets, as John Law proved, it is the currency that is destroyed.

The Economics of Inflation, which has been frequently reproduced and will be familiar to many who have read about Germany’s post-First World War inflation.

Looking at the progress of the collapse of the paper mark from its parity with the gold mark, we can take a punt on where the dollar might be today on this scale. The dollar has lost 98.2% of its purchasing power since the failure of the London gold pool in the late 1960s. That puts the dollar at 56 on the chart, which is approximately the equivalent of Germany’s paper mark valuation relative to gold in the first half of 1922.

If it follows the same course as the paper mark, in five- or six-months’ time it will be 100 and in ten- or twelve-months about 12,000. Instead of the paper mark’s original pre-1914 parity to the gold mark, the dollar started at $35 to the ounce, so the gold price in dollars would be $1960, $3,500 and $42,000 respectively. The final price at which the German inflation was stopped on 20 November 1923 when it was fixed to the rentenmark at a trillion to one would be the equivalent today of $35 trillion to the ounce.

Playing around with figures like these is not a replacement for sound reasoning, but it does impart an interesting perspective. A better understanding of the possible demise of the unbacked dollar is not to think of the numbers of dollars per ounce of gold rising or gold potentially hitting $42,000 within a year, a seemingly ridiculous number, but to think of gold as being broadly stable while the dollar loses its purchasing power. The presentation of an impossibly steep and accelerating uptrend is less believable than a collapsing one. Furthermore, the commonality of the paper mark and the dollar is that they were and are unbacked state-issued currencies liable to the same influences, a fact the consequences of which are becoming increasingly apparent.

Germany’s 1920s Hyperinflation

For the paper mark it all started in 1905, when a German economist and leader of the Chartalist movement, Georg Knapp, published a book whose title translated as the State Theory of Money. Thus encouraged, under the direction of Bismarck the Prussian administration financed the military build-up to the war to end all wars by utilising the state’s seigniorage. And when Germany lost, any thoughts of raiding the wealth of the vanquished came to nought. Instead, it was Germany that faced reparations and a post-war crisis. Just as the Fed is responding to the covid crisis today, the answer was to print money. Monetary inflation became the principal source of government finance, just as it is now in America and elsewhere.

There is hardly an economist today who does not condemn the Reichsbank for its inflationary policies. Yet they are supportive of similar monetary policies by the Fed, the European Central Bank, the Bank of Japan and the Bank of England. We should compare the stewardship of Rudolf Havenstein at the Reichsbank with that of Jay Powell, who after reducing interest rates the previous week, on 23 March issued an FOMC statement promising an inflationary policy of “whatever it takes”. And Rishi Sunak, the British Chancellor, used the phrase multiple times in his emergency budget.

But there is a difference. Today, alternatives to inflationism are never discussed amongst policy makers, who are like a blind cult believing entirely, with only minor variations, that monetary inflation is the cure for all economic ills. At least in Germany, the actions of the government were the subject of wider debate both in Germany and without, even though the answers were mostly ill-informed.

Part of the problem was the quantity theory of money was dismissed in a confusion between cause and effect. As Bresciani-Turroni put it, a great number of writers and German politicians thought that government deficits and paper inflation were not the cause, but the consequence of the external depreciation of the mark. A financier, politician and one of the leading German economists at the time, Karl Helfferich put it this way:

“The increase of the circulation has not preceded the rise of prices and the depreciation of the exchange, but it followed slowly and at great distance. The circulation increased from May 1921 to the end of January 1923 by 23 times; it is not possible that this increase had caused the rise in the prices of imported goods and of the dollar, which in that period increased by 344 times.”

It is a valid and important point, but not in the way Helfferich thought. The disparity between the increase in the money quantity and the increase in the general level of prices should be noted by observers today. Crucially, it did not require hyperinflation of the money supply to cause a hyperinflation of prices, a point we address later.

As well as dealing with the post-war economy and the capital dislocation that needed to be corrected, there was the burden of reparations. Many blamed the collapse of the paper mark on the latter, which is an inadequate explanation, when the Austrian crown, the Hungarian crown, the Russian rouble and the Polish mark all collapsed at roughly the same time.

Having resorted to monetary inflation as the means of marginal finance it rapidly became the principal source of government revenue. The German authorities then observed a dislocation between the increase in the quantity of money and the effect on its purchasing power, as described by Helfferich. It was taken as evidence against the quantity theory, as expounded by David Ricardo a century before, and upon which Peel’s Bank Charter Act of 1844 in England was based. Clearly, the dismissal of the quantity theory paved the way for more inflationary financing in 1920s Germany in the manner of today’s monetary planning. It led to the observation that the money supply was insufficient for an economy faced with rapidly escalating prices for imported goods.

The disparity between increases in the money supply in Germany and the effect on the paper mark’s purchasing power was so great that the accuracy of the underlying numbers does not matter. But today, while we can presumably rely on monetary statistics being reasonably accurate, the statistics that reflect the effect on prices are not. Today’s suppression of increases in the general price level simply disqualifies any statistical analysis, and in that sense, Helfferich’s observation is a more honest appraisal than those of today’s monetary planners.

On the surface, his deduction appeared to have some merit. He goes on to say,

“The depreciation of the German mark in terms of foreign currencies was caused by the excessive burdens thrust on to Germany and by the policy of violence adopted by France; the increase of the prices of all imported goods was caused by the depreciation of the exchanges; then followed the general increase of internal prices and of wages, the increased need for means of circulation on the part of the public and of the State, greater demands on the Reichsbank by private business and the State and the increase of the paper mark issues.

Contrary to the widely held conception, not inflation but the depredation of the mark was the beginning of this chain of cause and effect; inflation is not the cause of the increase of prices and of the depreciation of the mark; but the depreciation of the mark is the cause of the increase of prices and of the paper mark issues. The decomposition of the German monetary system has been the primary and decisive cause of the financial collapse.”

The starting point in this logic is it is never the government’s fault but always the fault of external factors and markets. And doubtless, as the dollar declines in the foreign exchanges over the coming months and commodity prices rise, we shall continue to see similar arguments embedded in future FOMC statements.

The error common to both is to misunderstand the underlying subjectivity of money. Money takes its value from the marginal value placed upon it relative to owning goods. If money is widely regarded as sound, an economising man is happy to hold a reserve of it, only exchanging it for goods and services when they are needed. This is the most important quality of metallic money, to which people have always returned when government money fails.

A further benefit, which state currencies lack, is that gold and silver as money are accepted everywhere, having the same values in New York, London, and Mumbai. With the exception of cross-border trade, investment, and perhaps longer-term strategic considerations, government currencies are generally restricted to national boundaries. Paper currencies are therefore vulnerable to changes in demand in the foreign exchanges in a way gold and silver are not; if the foreigners don’t like your currency, they will reduce their exposure by selling it, irrespective of fundamental considerations.

In a currency collapse, the foreign exchanges are often the first to be blamed, as a press cutting from Germany towards the end of 1922 illustrates:

“Since the summer of 1921 the foreign exchange rate has lost all connection with the internal inflation. The increase of the floating debt, which represents the creation by the State of new purchasing-power, follows at some distance the depreciation of the mark. Furthermore, the level of internal prices is not determined by the paper inflation or credit inflation, but exclusively by the depreciation of the mark in terms of foreign currencies. To tell the truth, the astonishing thing is not the great quantity but the small quantity of money which circulates in Germany, a quantity extraordinarily small from a relative point of view; even more surprising is it that the floating debt has not increased much more rapidly”

Blaming a falling currency on foreign influences is the oldest excuse in the fiat book, but generally, foreigners who do not have much attachment to a national currency are only the first to sell. Initially, domestic users notice that prices have generally risen and that their income and savings buy less. It is a cause for complaint instead of a reasoned assessment, and of the logic employed in the press cutting above. And despite the evidence that it is the currency losing purchasing power instead of prices rising, the purchasing power can fall substantially before a currency’s users abandon it altogether.

Given upcoming events, we can see a similar trend for today’s paper money, particularly when represented by the American dollar. The first covid wave was assumed to be a one-off, hitting the American economy but to be followed by a rapid return to normal — the V-shaped recovery. Everywhere the official story was the same, that following lockdowns the economy, wherever it was, would return to normality. But it drove the US budget deficit to over $3.3 trillion in the fiscal year just ending, up from a previously forecast trillion or so. The Federal deficit is already one hundred per cent of Federal tax revenues.

Now we face a second covid wave, which will require more money-printing. The US Government budget deficit in the next fiscal year will again exceed revenues by a substantial margin. From last March, it has been in the position the German government faced in the early 1920s: monetary inflation has become the dominant source of government funding over tax revenue.

The slide in global cross-border trade, which is the consequence of the imposition of trade tariffs between America and China, comes at the end of a decade-long period of bank credit expansion, replicating the fragile position in America at the end of the roaring twenties. The stock market and economic collapses that followed had limited inflationary effects at the price level only due to a working gold standard; but even that could not withstand the political consequences of the depression, leading to a dollar devaluation in January 1934. This time, there is no check for the dollar, which is doubly afflicted by coronavirus lockdowns.

In Germany, the collapse of the paper mark ended by being stabilised at the rate of a trillion to one gold marks on 20 November 1923, the equivalent of 4.2 trillion to the US dollar. The paper mark was then replaced by a new unit, the rentenmark which was simply given the value of the gold mark. This arrangement only became legal on 11 October 1924. The success of the stabilisation, despite an inflation of the rentenmark — the quantity increasing from 501 million on 30 November 1923 to 1,803 million by the following July — has confused economists ever since.

Students of the Austrian school, and particularly of the writings of Ludwig von Mises should deduce that after the final flight out of money into goods, the emergence of a new money requires its users to accumulate a reserve of it. All that was required was a growing acceptance that the rentenmark would stick. The increase in cash and savings balances in the economy absorbed the increased inflation of the rentenmark with the result that consumer prices remained broadly stable.

If the stabilisation arrangement had been introduced before foreigners, businesses and the wider public had not discarded the paper mark entirely, the stabilisation would have failed. Those who think a German-style inflationary collapse today can be avoided by an early currency reset with a different form of fiat should take note.

The Comparison With John Law’s Crisis In 1720

The collapse of the paper mark is not the sole representation of how a government currency loses its facility. The advantage of its comparison with today is that a substantial cache of books, records and statistics exist on the subject, prompting economic historians to use it as a template for all the other hyperinflations of fiat money recorded since.

The economic history of John Law’s experiment in France in not so blessed in this regard. Exactly 300 years ago, his Mississippi bubble deflated, taking his currency, the livre, down with it. But to understand the relevance to the situation today, we must first delve into the facts behind his scheme.

The death of Louis XIV in 1715 left France’s state finances (which were the royal finances) insolvent. The royal debts were three billion livres, annual income 145 million, and expenditure 142 million. That meant only three million livres were available to pay the 220 million interest on the debt, and consequently the debt traded at a discount of as much as 80% of face value.

Following Louis XIV’s death, the Duke of Orleans had been appointed Regent to the seven-year old Louis XV, and so had to find a solution to the royal finances. The earlier attempt in 1713 was the often tried and repeatedly failed expedient of recoining the currency, depreciating it by one-fifth. The result was as one might expect: the short-term gain in state revenue was at the expense of the French economy by taxing it 20%. Furthermore, the Controller General of Finances foolishly announced the intention of further debasements of the coinage with a view to raising funds. This bizarre plan was announced in advance as an attempt to somehow stimulate the economy, but the effect was to increase hoarding of the existing coinage instead.

At about this time, John Law presented himself at court and offered his considered solution to the Regent. He diagnosed France’s problem as there being insufficient money in circulation, restricted by it being only gold and silver. He recommended the addition of a paper currency, such as that in Britain and Holland, and its use to extend credit.

Banknotes did not previously exist in France, all payments being made in specie, and Law persuaded the Regent of the circulatory benefits of paper money. He requested the Regent’s permission to establish a bank which would manage the royal revenues and issue banknotes backed by them as well as notes secured on property. These notes could be used as a loan from the bank to the king at 3% interest instead of the 7½% currently being paid on billets d’etat.

On 5 May 1716 he gained permission to establish Banque Generale as a private bank and to issue banknotes. Law succeeded in persuading the public to swap specie for his banknotes. He was so successful that after only eleven months, in April 1717 it was decreed that taxes and revenues of the state could be paid in banknotes, of which Law was the only issuer.

Law could now capitalise his bank. Besides his own money, this was done mostly with billets d’etat, in the books at their face value but obtained at a discount of 70% or so. He used public anticipation of future currency debasement to encourage the public to swap metallic money for his notes, which he guaranteed were repayable in coins that had the silver content at the time of the note issue. Law’s banknotes became an escape route for the general public from further debasement of silver coins.

The banknotes rose to a fifteen per cent nominal premium over coins within a year. The bank was exempt from taxes, and by decree foreigners were guaranteed their deposits in the case of war. The bank could open deposit accounts, loan money, arrange for transfers between accounts, discount bills and write letters of credit. Law’s banknotes could be used to settle taxes. There was no limitation placed on the total number of banknotes issued.

Money that had been hoarded for fear of further debasement was liberated by the premium on Law’s banknotes, and the improved circulation of money rapidly benefited the economy. Other private banks and moneylenders used Law’s banknotes as the basis of extending credit. This success meant his credibility with the Regent, the French establishment, and the commercial community was secured.

The use of his banknotes to settle taxes gave the bank the status of a modern note-issuing central bank. The expansion of circulating money stimulated trade, particularly given the banknotes’ convenience compared with using coin. It is worth noting that the earliest stages of monetary inflation usually produce the most beneficial effects, and this combined with Law’s apparent financial and economic expertise, particularly measured against the ineptitude of the Controller-General of Finances, gave the economy a much-needed boost.

It is worth noting that at this stage, there was no material inflation of the currency, banknotes being issued only against coins. However (and this appears to have generally escaped economic historians) it was clear that a loan business was facilitated on the back of Law’s paper money, which inflated the quantity of bank credit in the economy.

Law could now turn his attention to raising asset prices to pay down the royal debts, to enhance the public’s riches, and thereby his own wealth and that of his bank.

The Mississippi Connection

The Regent was understandably impressed by Banque Générale’s apparent success at issuing paper currency and rejuvenating the economy. The bank was being run on prudent lines, with banknotes being exchanged only for specie, and the quantity of what today would be called narrow money had not expanded materially beyond the release of hoarded specie. But Law had a problem: the note issue and the fact the bank had been capitalised on a mixture of partial subscriptions and billets d’etats at face value meant the bank had insufficient capital and profits to achieve its ultimate objective, which was to reduce the royal debts and the interest rates that applied to them.

Consequently, Law developed a plan to increase the bank’s assets as well as those under its indirect control. In August 1717, Law had requested of the Regent and was granted a trading and tax-raising monopoly over the French territory of Louisiana and the other French dependencies accessed by the Mississippi River, the existing trading lease having lapsed. A major attraction was supposed to be precious metals as well as the tobacco trade.

The Mississippi venture’s corporate title was Compaigne de la Louisiane ou d’Occident, but ever since has been commonly referred to as the Mississippi venture. For nearly two years, Law kept the project on hold while he established his bank. The shares languished at a discount to their nominal price of 500 livres, and what was needed was a scheme of arrangement to beef up the both the bank and the company.

As a first step, in the summer of 1719 he acquired three other companies to merge with the Mississippi venture. These had exclusive trading rights to China, the East Indies and Africa, which effectively gave Law’s Mississippi company a monopoly on all France’s foreign trade. To pay off these companies’ debts and to build the ships required for transport, Law proposed a share issue of 50,000 shares at 500 livres per share, 10% payable on application. By the time legal permissions were granted, the shares stood at 650 livres, making the new shares worth three times their subscription price in their partly paid form.

Law’s earlier success with his banknote issue, and the contribution made to improving the French economy, coupled with his ability to enhance the share price by issuing bank notes, were a guarantee that his scheme would be spectacularly profitable for anyone lucky enough to have a subscription accepted.

The bank was re-authorised as a public institution and renamed Banque Royale in December 1718. At the same time, the Regent authorised the further issue of up to a billion livres of notes, which was achieved by the end of 1719. While it had been the Banque Generale, notes had only been issued in return for specie to the extent of 60 million livres, but this new inflationary issue was entirely different. While it is impossible at this distance to forensically track the course of this money, we can be certain that it was used to manage the share price of the Mississippi venture, and it fuelled much of the public’s panic buying of shares that year.

But it was not only the printing of money to push the share price that fuelled the bubble. Law’s skills as a promoter took its inflation to a new level, with further issues of 50,000 shares approved in the summer of 1719 and executed as rights issues that autumn. Existing shareholders were offered the opportunity to subscribe for one share for every four old shares held, to be partly paid with an initial payment of 50 livres, the next payment deferred for over a month. These could be sold for an immediate profit, while providing a low-price entry point for new investors.

The expansion of the banknote issue without an offsetting acquisition of specie was used by Law to assemble and finance a total monopoly of France’s foreign trade. As well as this monetary expansion, we can be sure that private banks and moneylenders used it as a base to expand credit. We know this to be the case from court documents in London when Richard Cantillon in 1720 successfully sued English clients in the Court of Exchequer for £50,000 owed to him (about £18 million today), despite having already sold the Mississippi shares as soon as they were deposited as collateral.

It seems obvious to us that to give to one man both the monopoly of the note issue and monopolies on trade, and then for him to use the notes to create wealth out of thin air is extraordinarily dangerous. It seems equally obvious that such an arrangement was certain to collapse when the excitement died down and investors on balance sought to encash their profits.

It seems less obvious to us today that the principal elements of Law’s monopolies exist in modern government finances, which use paper money to inflate assets providing their electorates with the illusion of wealth.[xi] The difference is not in the methods employed, but the gradualness of today’s asset inflation, and the claim by the state that it is acting in the public interest, rather than one individual making the same claim on the state’s behalf.

Meanwhile, the Mississippi venture share price had continued rising, and by the end of 1719 it stood at 10,000 livres. Increasing pressure from share sales by people who sought to take profits had to be discouraged. The announcement of a 200 livres dividend per share was undoubtedly with that in mind, to be paid, like in any Ponzi scheme, not out of earnings but out of capital subscriptions. The price finally peaked at 11,000 livres on 8th January 1720.

By late-1719, Law had found it increasingly difficult to sustain the bubble. The banknote issues continued. In late-February 1720, the Mississippi Company and the Banque Royale merged. Afterwards, the shares began their precipitous fall, and by May, Law lost his position as Controller-General and was demoted. By the end of October that year, the shares had fallen to 3,200 livres, and a large portion of them had faced further unpaid calls throughout that year.

The year 1719 saw monetary inflation take off, directly fuelling asset prices. The decline of the Mississippi share price the following year was not as sharp as might otherwise have been expected, but against that must be put the fall in the paper livre’s purchasing power, particularly in the later months. The exchange rate against English sterling fell from nine old pence to 2 ½ pence in September 1720, most of that fall occurring after April as the price effect of the previous year’s inflation worked its way through into the exchange rates.

In the last three months of 1720 there was no sterling price quoted for paper livres, indicating they had become worthless.

The Relevance To Today

John Law’s ramping of a single financial asset by monetary inflation correlates with the Fed’s monetary policy today. The material differences are the suppression of interest rates, and therefore the market costs of government funding, and the far wider range of financial assets being inflated on the back of government bonds. The importance of maintaining financial asset prices is not only Fed policy, but it is increasingly realised that it is a policy that cannot be allowed to fail.

To the extent that other central banks are suppressing yields on their government bonds, this policy extends beyond America. This time, the John Law strategy has gone truly global, with the consequence that the future of fiat currencies is tied to the perpetuation of current financial bubbles.

In this regard it is interesting to note that the most astute banker in John Law’s time, Richard Cantillon, never played Law’s game on the bull tack. He made his first fortune extending credit to others for the purchase of John Law’s stock, which as collateral he promptly sold. Subsequently, he sued for the return of the loans to those who refused to pay up, thereby getting two bites of the cherry. His second fortune was shorting Law’s scheme in 1719, not by selling shares in the scheme, but by selling the currency for foreign exchange. In other words, he calculated that when the scheme failed, it would be the currency that collapsed more than the shares. He was right.

Conclusion

The two empirical models by which we can judge the collapse of a fiat currency offer food for thought in our current situation.

The policy of deliberately rigging financial markets replicates that of John Law’s scheme, suggesting the collapse of currencies will be tightly bound to the end of the government bond bubble. Today’s bubbles in financial assets are sustained by equally artificial means, even more transparent than Law’s market rigging — quantitative easing, suppressed and negative interest rates etc., to which we can add the manipulation of price inflation statistics.

The German experience in the early 1920s showed how it did not take as much monetary inflation as monetarists might think to collapse a currency. Karl Helfferich’s quote about the relationship between the 23 times increase in the money quantity while the number of paper marks to the dollar increased 344 times gives us an important perspective: it will not require a hyperinflation of the money supply to destroy paper currencies today.

A fundamental difference is that the greatest sinner, if not on scale but likely effect, is the Fed in its puffery of the dollar, everyone else’s reserve currency. And unlike Germany a century ago and unlike France three centuries ago, there is no foreign currency against which to measure the dollar’s decline, except perhaps in the short run, because all central banks follow similar inflationary policies with their fiat currencies.

In the past a suitable foreign currency was fully exchangeable into silver or gold, so the decline and collapse could only be measured accordingly. It also means that it will be impossible for businesses to bypass the currency collapse by referencing prices to other currencies, being all similarly fiat. Many businesses in Germany survived the paper mark collapse in this way, but their modern equivalents will not have this option.

The final collapse of a currency is always a flight out of government fiat currency into goods. That can be the only outcome from the continuation of current macroeconomic policies. But above all, it would be a mistake to think it cannot happen, nor that it will be a long process giving us all plenty of time to plan. The final flight out of paper marks took approximately six months. Law’s scheme took slightly longer to destroy his livre. These should be our reference points.

https://www.zerohedge.com/economics/lessons-inflation-past