Tag Archives: Money

End the Fed: Cyprus vs. the Federal Reserve?

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The government of Cyprus is dominating the headlines at the moment, thanks to an audacious scheme to seize the savings of bank depositors. Many Americans are aghast at the situation. But is it really all that different from what the Federal Reserve does to U.S. depositors on a daily basis?

The Cyprus Conspiracy?

Cyprus isn’t the first European Union government to find itself in financial straits. However, the approach to dealing with those straits is unique. Usually, the EU provides immediate bailout money to such countries. In exchange, those countries agree to cut costs, raise taxes, and restructure debts.

This time, the EU required Cyprus to raise 5.8 billion Euros in order to receive a 10 billion Euro bailout. In order to pay for part of the bailout, the Cyprus government is effectively confiscating money from bank accounts worth more than 100,000 Euros (roughly equivalent to $129,000). Losses on those excess deposits might be as high as 40%…or perhaps even higher.

The Federal Reserve Conspiracy: Revisted?

The Cyprus seizure is theft by government, plain and simple. Ordinary Americans may find it hard to imagine this sort of thing ever happening in the U.S. But is the Cyprus Conspiracy all that different from the Federal Reserve Conspiracy? Not at all. Here’s more from Thomas Sowell at The American Spectator:

The U.S. government is very unlikely to just seize money wholesale from people’s bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe?

No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever the politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed.

That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about “quantitative easing,” what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do — and has been doing in recent years, to the tune of tens of billions of dollars a month…

(See the rest at The American Spectator)

Why did the Poker Bubble Burst?

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In late 2003, the American poker industry exploded. New players flooded the game. Tournaments flourished. Poker games became a fixture on television. By 2008, the bubble had burst. People left the game in droves. Tournaments got smaller. Television programs ended up on the chopping block. So, why did this happen? What caused the poker industry to boom and bust? Curiously enough, the answer lies in money, or at least the Federal Reserve’s control over it. Here’s more from Peter C. Earle at the Ludwig von Mises Institute:

Nearly a decade ago, poker exploded in popularity. Between television programming, media coverage, and pop culture references to it—in particular, the Texas Hold ‘Em variant—the game became virtually unavoidable. The American Gaming Association estimates that nearly 1 in 5 Americans played poker in 2004, up 50 percent from 2003; also, that nearly 20 percent of those new players had begun to play within the previous two years.

The creation myth associated with the poker boom credits the improbable victory of a prophetically-named Tennessee accountant, Chris Moneymaker, in the 2003 World Series of Poker (WSOP). Other accounts source James McManus’s 2003 book Positively Fifth Street and the 1998 poker film Rounders. Still other, more mystical explanations refer to the game’s sudden “cultural resonance.”

But fads and surges of popularity come and go; these explanations hardly account for why, in a short amount of time, tens of millions of people suddenly flooded into a familiar—indeed, 150 year old—American card game, frenetically expending tens of billions of dollars on it. Nor do they explain why between 2007 and 2008 poker television programs were suddenly cancelled, tournaments saw a drop in participation, and many poker-related businesses scaled back or failed.

Austrian business cycle theory (ABCT) can, however, explain the origins and outcome of the poker bubble as well as its simultaneity with the housing boom, which, as will be demonstrated, are by no means coincidental…

(Read the rest at the Ludwig von Mises Institute)

War on the Federal Reserve?

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The Federal Reserve is no good. Its money monopoly has wrecked havoc for 100 years. So, I welcome currency competition from Virginia, although I’d prefer it came from the free market. That said, the Federal Reserve will continue to dominate as long as legal tender laws are in full effect. Here’s more on the war on the Federal Reserve from Fox News:

Virginia is one step closer to breaking ties with the country’s monetary system.

A proposal to study whether the state should adopt its own currency is gaining traction in the state legislature from a number of lawmakers as well as conservative economists. The state House voted 65-32 earlier this week to approve the measure, and it will now go to the Senate.

While it’s unlikely that Virginia will be printing its own money any time soon, the move sheds light on the growing distrust surrounding the nation’s central bank. Four other states are considering similar proposals. In 2011, Utah passed a law that recognizes gold and silver coins issued by the federal government as tender and requires a study on adopting other forms of legal currency.

Virginia Republican Del. Robert Marshall told FoxNews.com Tuesday that his bill calls for creation of a 10-member commission that would determine the “need, means and schedule for establishing a metallic-based monetary unit.” Essentially, he wants to spend $20,000 on a study that could call for the state to return to a gold standard…

(See the rest at Fox News)

Happy Birthday Income Tax (Now, go away already!)

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It’s been one hundred years since the modern income tax was created, via the 16th Amendment to the U.S. Constitution. Back then income tax rates ran from 1% for annual incomes over $3, 000 to 7% for annual incomes over $500,000 (that’s $11.6 million in today’s dollars!). Current tax rates run from 10% to 39.6%. Meanwhile, the income tax code has gone from a hefty 400 pages to a whopping 44,000 pages. My how times have changed. Here’s more from Delaware Online:

Pop Quiz: What book has more than 7 million words in multiple chapters, attempts to influence our behavior toward good ends, is complex and often contradictory, and requires interpretation by learned studiers of its texts to distill its basic principles for the masses of us for who this tome is supposed to provide benefit? It’s not the King James version of the Bible. It’s the current United States Tax Code.

The giveaway: While the U.S. Tax Code has more than 7 million words, The Bible is a relatively slim pamphlet at only 774,746 words. It wasn’t always this way. In 1913, the year the personal incomewe now labor under was instituted, the number of pages contained in the entire Tax Code stood at 400 (most of those dealing with tariffs). The Bible actually was longer at 1,291 pages.

As of 2010, the United States Tax Code stands at a whopping 71,684 pages (according to CCH Standard Federal Tax Reporter, though in fairness, that includes repealed or modified portions of earlier versions of the tax code. The current, live portion runs a mere 44,000 pages.) The original 1913 Tax Form 1040 blissfully topped out at a rate of 7 percent – the “fair share” due of the uber rich in the eyes of then President Woodrow Wilson who obviously never had been a community organizer at any point in his career…

(See the rest at Delaware Online)

Who was the Richest President?

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Mitt Romney’s net worth is estimated at $190 to $250 million. If he ends up defeating Barack Obama in the 2012 Presidential election, how would his wealth rank against other presidents? Would he be the richest president of all time?

Who was the Richest President of all Time?

It turns out that Romney’s wealth falls well short of the richest president of all time. Adjusted for inflation, George Washington was worth a whopping $500 million! JFK would’ve beaten that record but he didn’t live long enough to inherit his father’s massive $1 billion fortune. The figures were compiled by 24/7 Wall Street so I can’t verify them. And frankly, the article’s commentary sheds some light on the author’s stunning historical and economic ignorance.

“(For the first 75 years after Washington’s election)…because there was no central banking system and no commodities regulatory framework, markets were subject to panics.”

Clearly, this writer has never heard of the Bank of North America or the First Bank of the United States or the Second Bank of the United States. And even more clearly, the writer has no understanding of the lessons taught by the Austrian Business Cycle. With that said, here’s more on the richest presidents of all time from 24/7 Wall Street:

The net worth of the presidents varies widely. George Washington was worth over half a billion in today’s dollars. Several presidents went bankrupt.

The fortunes of American presidents are tied to the economy in the eras in which they lived. For the first 75 years after Washington’s election, presidents generally made money on land, crops, and commodity speculation. A president who owned hundreds or thousands of acres could lose most or all of his property after a few years of poor crop yields. Wealthy Americans occasionally lost all of their money through land speculation—leveraging the value of one piece of land to buy additional property. Since there was no reliable national banking system and almost no liquidity in the value of private companies, land was the asset likely to provide the greatest yield, if the property yielded enough to support the costs of operating the farm or plantation…

(See the rest on the richest presidents at 24/7 Wall Street)

The New York Gold Conspiracy?

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On September 24, 1869, the price of gold on the New York Gold Exchange hit $162 an ounce. Shortly after, it plunged to $133 an ounce, ruining scores of investors in the process. What was the Black Friday New York Gold Conspiracy?

Jay Gould & James Fisk: The Plot to Corner the Gold Market?

During the Civil War, the U.S. government began issuing “greenbacks” in order to raise money. Greenbacks were a fiat currency (similar to that used today) and thus, were not backed by gold or anything else. After the war ended, the government began to withdraw the greenbacks from circulation. This was accomplished by buying greenbacks with gold. This allowed the price of gold, which had reached $300 an ounce, to return to a more normal level of $130 an ounce by early 1869.

Around that time, a group of investors, led by Jay Gould and James Fisk, saw an opportunity to generate enormous profits. They wanted to, in effect, “corner the gold market.” But they feared the U.S. government’s tendency to stabilize gold prices. They needed to find a way to temporarily take the government out of the game. And in order to do that, they needed to seize control of its monetary policy.

Gould and Fisk recruited Abel Corbin, President Ulysses S. Grant’s brother-in-law, to their cause. Together, the three men badgered Grant to stop selling government gold, arguing that it would make farmers more competitive in overseas markets and thus, raise farm prices.

Black Friday!

By September 1869, Gould and Fisk were convinced that their plan had worked. They began buying large amounts of gold with very little money, thanks to small margin requirements. As they accumulated a large position, they were able to manipulate the market price higher and higher, making plans to unload it before the inevitable fall. Prices rose and stocks fell. President Grant immediately grew suspicious of his brother-in-law and told his wife to add a note in a letter written to her sister:

“Tell your husband that the President is very much distressed by your speculations, and you must close them as quick as you can.”

On September 23, gold reached $142 an ounce. Gould, who’d learned that Grant was on to the scheme, began secretly unloading his position. Fisk, completely unaware of what was about to happen, did not. The next day, Black Friday, the price of gold ran all the way up to $162 an ounce (the actual blackboard is shown above). Then word reached the New York Gold Exchange that the Treasury was selling $4 million of gold. Abruptly, prices collapsed, sending gold reeling back to the mid $130s.

Many investors, who’d bought gold on margin, were ruined. Gould “was rumored to have cleared $10 or $11 million” although this remains in question. Fisk is believed to have escaped harm by repudiating his trades.

Guerrilla Explorer’s Analysis

Black Friday caused a brief financial panic. But for the most part, no one paid a price for the scandal. Gould and Fisk escaped punishment, thanks to sympathetic Tammany Hall judges. President Grant was accused of being involved in the Black Friday scheme. However, it didn’t stop him from being reelected in 1872.

Over the years, others have tried to corner various types of financial markets. But Gould’s and Fisk’s Black Friday attempt might just be the most audacious of them all. By enlisting the gigantic hand of government to aid their cause, they took corporatism to a whole new level. On a relative basis, one could make the claim that Gould and Fisk caused the biggest one-day crash of gold in U.S. history on Black Friday, maybe even of all time, and got away with it.

What is the Most Valuable Piece of Currency?

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I’m willing to bet that many of you have held a $50 bill in your hands. Maybe even a $100 bill. But have you ever held a $500 bill? Or something even larger? What is the most valuable legal tender bill in existence today? And what about the fabled 100,000 dollar bill? Does it exist?

The Most Valuable Piece of Legal Tender = 10,000 Dollar Bill

According to Life’s Little Mysteries, the most valuable piece of legal tender in existence is the $10,000 bill. It was printed from 1928 to 1946 and featured Salmon Chase. Chase was chosen for creating the modern system of banknotes by introducing the greenback, which was the first U.S. federal currency. Interestingly enough, he later expressed regret for this after becoming Chief Justice of the Supreme Court.

After World War II, the Treasury stopped printing any bill with a denomination over $100. Thus, the $500, $1,000, $5,000, and $10,000 bills were consigned to the dustbin of history. The Federal Reserve made the discontinuation official on July 14, 1969. While the Fed destroys these bills when they see them, “they remain legal tender while in circulation.”

Thus, you could technically waltz into your favorite store, fill up your cart, and whip out a $10,000 bill to pay for everything. But you’d be foolish to do so (and it’s doubtful that the store would take you seriously anyways). According to the most recent figures I could find, there were just 336 $10,000 bills known to exist as of May 30, 2009. There are 342 $5,000 bills, 165,372 $1,000 bills, and an unknown number of $500 bills. Due to their scarcity, these denominations command large prices among collectors. I found one site that’s asking $98,500 for a fine example of a $10,000 bill.

The Fabled 100,000 Dollar Bill?

However, there’s one bill that boasts a larger denomination than the Chase bill. That is the fabled 100,000 dollar bill (actually a gold certificate) featuring President Woodrow Wilson. For those of you who know about the Federal Reserve and Wilson’s role in creating that institution, this should come as no surprise.

Guerrilla Explorer’s Analysis

The Treasury printed 42,000 of these 100,000 dollar bills between December 18, 1934 and January 9, 1935. They were never released into general circulation and instead, were used by Federal Reserve Banks to facilitate transactions with each other. This form of business changed during the 1960s and most of the 100,000 dollar bills were destroyed. There are a few surviving copies, one of which currently resides at the Smithsonian Museum of American History.

Who is the Richest Person of All Time?

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On March 10, 2011, Forbes Magazine declared Mexican industrialist Carlos Slim to be the richest person in the world. This marks his second year in a row in that position. But how does his fortune of $74 billion rank against wealthy people from the past?

Who is the Richest Person of All Time?

There are two ways to compare wealth. First, we can consider non-inflated sums. Second, we can attempt the difficult task of accounting for inflation, giving a far more accurate comparison.

In terms of the first method, the richest person of all time is Bill Gates. On April 5, 1999, his fortune was estimated at an astounding $101 billion.

However, non-inflated figures mean little, especially over the course of decades or even centuries. After accounting for inflation, the richest person of all time may have been John D. Rockefeller. Rockefeller was the founder, chairman, and major shareholder of Standard Oil. On September 29, 1916, he became the first person to amass a fortune greater than $1 billion, a number which rose to $1.4 billion at the time of his death. Incredibly, his wealth was equal to about 1.53% of the U.S. economy at that time. Overall, historians believe that he amassed a fortune equivalent to $336 to $663 billion in terms of today’s dollars.

But is John D. Rockfeller really the Richest Person of All Time?

Rockefeller’s grip on the title of “The Richest Person of All Time” is controversial. Historical inflation figures are difficult to calculate and records of wealth were not always well-kept or made public. Other contenders for the title include:

  • Marcus Licinus Crassus: Lived from 115 BC to 53 BC. His personal fortune, which has been estimated at 170 million sesterces, was roughly equivalent to the “entire annual income of the Roman treasury.” However, the size of his wealth is debatable and some scholars place it closer to $200 million to $2 billion.
  • Musa I: Became the 10th emperor of the Malian Empire in 1312. Supposedly traveled with a huge caravan that included 60,000 men, 12,000 slaves, and 80 camels that carried between 50-300 pounds of gold dust apiece. Some value the entire caravan in excess of $400 billion in today’s dollars.
  • The Rothschild Family: Some historians place the value of the mid-19th century Rothschild banking and finance dynasty at hundreds of billions or even trillions of dollars. However, this is disputed.
  • Genghis Khan: He was the Khan, or emperor, of one of the largest contiguous empires in history. However, to my knowledge, no estimates for his wealth exist.

Guerrilla Explorer’s Analysis

So, there you have it. While somewhat controversial, the best evidence we have today points to John D. Rockefeller as “The Richest Person of All Time.” And with a fortune that was at least five times greater than that of any fortune today, it seems likely that he will hold that title for many more years to come.