By Nick Giambruno
This definitive sign of a currency collapse is easy to see…
When paper money literally becomes trash.
Maybe you’ve seen images depicting hyperinflation in Germany after World War I. The German government had printed so much money that it became worthless. Technically, German merchants still accepted the currency, but it was impractical to use. It would have required wheelbarrows full of paper money just to buy a loaf of bread.
At the time, no one would bother to pick up money off the ground. It wasn’t worth any more than the other crumpled pieces of paper on the street.
Today, there’s a similar situation in the U.S. When was the last time you saw someone make the effort to pick up a penny off the street? A nickel? A dime?
Walking around New York City recently, I saw pennies, nickels, and dimes just sitting there on busy sidewalks. This happened at least five times in one day. Even homeless people wouldn’t bother to bend over and pick up anything less than a quarter.
The U.S. dollar has become so debased that these coins are essentially pieces of rubbish. They have little to no practical value.
Refusing to Acknowledge the Truth
It costs 1.7 cents to make a penny and 8 cents to make a nickel, according to the U.S. Government Accountability Office. The U.S. government loses tens of millions of dollars every year putting these coins into circulation.
Why is it wasting money and time making coins almost no one uses? Because phasing out the penny and nickel would mean acknowledging currency debasement. And governments never like to do that. It would reveal their incompetence and theft from savers.
This isn’t new or unique to the U.S. For decades, governments around the world have refused to phase out worthless currency denominations. This helps them deny the problem even exists. They refuse to issue currency in higher denominations for the same reason.
Take Argentina, for example. The country has some of the highest inflation in the world. In the last 12 months, the peso has lost over half its value.
I was just in Argentina, and the largest bill there is the 100-peso note, which is worth around $7. It’s not uncommon for Argentinians to pay with large wads of cash at restaurants and stores. The sight would unnerve many Americans, who’ve been trained by the government through the War on Cash to view it as suspicious and dangerous.
For many years, the Argentine government refused to issue larger notes. Fortunately, that’s changing under the recently elected pro-market president Mauricio Macri. His government has promised to introduce 200-, 500-, and 1,000-peso notes in the near future.
This is the opposite of what’s happening in the U.S., where the $100 bill is the largest bill in circulation. That wasn’t always the case. At one point, the U.S. had $500, $1,000, $5,000, and even $10,000 bills. The government eliminated these large bills in 1969 under the pretext of fighting the War on Some Drugs.
The $100 bill has been the largest ever since. But it has far less purchasing power than it did in 1969. Decades of rampant money printing have debased the dollar. Today, a $100 note buys less than a $20 note did in 1969.
Even though the Federal Reserve has devalued the dollar over 80% since 1969, it still refuses to issue notes larger than $100.
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