The Phaserl


Redefining the Terms

by Stefan B.

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”
               – Thomas Jefferson (1816)

The man who spoke those immortal words could not see the future, nor did he have any need to. He saw only the past, and that was enough for him to reach that conclusion. However, when Thomas Jefferson used the words “inflation” and “deflation”, he was not using them in the same way that we generally use these terms today. To properly understand the real economic issues facing us, I’m going to redefine a few terms, and commit the offense of actually using them properly for a change.

     The term depreciation is not used nearly enough in modern economics. Depreciation is the real term for what most Keynesian economists refer to as inflation. Simply stated, depreciation is when paper currency loses its purchasing power. It is the inflation of the paper currency supply which causes the depreciation of the purchasing power of those paper notes in circulation. This is why prices rise constantly, over time. The paper notes are depreciating in purchasing power. To get a sense of just how much of this depreciation we have been forced to endure, read my recent article, “What is a Dollar?

     Contrary to common belief and opinion, inflation is not the amount that C.P.I. increases annually. Even if you foolishly trust the government C.P.I. data (and there is certainly no intelligent, non-masochistic reason to do anything that ridiculously naïve), this value which we are given is still not something that you should rightly call inflation. That, as we now know, is properly called depreciation. Rather, inflation is what occurs when currency is created. The expansion of the currency supply, itself, is inflation. The term literally has nothing to do with the price of rice in China. The simple act of creating new currency is inflation (i.e. to inflate the currency supply), regardless of the measure of depreciation in purchasing power caused to the paper currency notes in circulation. So to look only at currency creation, this is what inflation looks like in America today:

Once you understand why silver has gotten cheaper, while the volume of currency in circulation has grown endlessly, you will understand the nature of the fraud that has been perpetrated on us. But first, we have to define a few more terms.

     Any property with a fair-market value is capital; from a house, to an ounce of silver, to a can of soup. Capital can be money, like gold or silver, but capital can also be real estate, or an automobile. The civil war was fought over whether or not our fellow human beings could be traded as capital. Remember that the next time you hear someone talking nostalgically about the higher morals of yesteryear.

     Currency is not capital. Rather, by looking at the Latin roots of the word, we find it comes from word “currentum” which means a “condition of flowing.” This is also where we get the words for an electrical current, or a current of water (i.e. something that has a “condition of flowing” ). Currency is thus merely a means to move capital; a way to make capital flow. Thus, banks, in economics, are literally called banks for the exact same reason that riverbanks are called banks. They guide the flow of the currency/current.

     Money is any highly liquid, easily exchangeable form of capital. Gold and silver are money, because they are a physical piece of capital property, with a fair-market value. Money can be used as currency (if you were to pay someone for service with a gold or silver coin), but the “Federal Reserve Notes” in circulation today are not money, in any sense of the word. “Federal Reserve Notes” are currency, not capital. They are but only a means of moving capital.

Modern economics, since Nixon ended the gold standard in 1971, is much like a large game of musical chairs. There is a certain amount of capital (i.e. real property), and this capital is represented by six chairs. There is also a certain amount of currency, represented by seven dancers. However, in this game of musical chairs, the music never stops playing; ever. In fact, new dancers arrive endlessly, for hours on end. The room slowly continues to fill with dancers until eventually some of the dancers begin to feel uneasy. They all start to realize that there are hundreds and hundreds of dancers, but only the six original chairs available for when the music stops playing. Indeed, they have been dancing so long that most have forgotten the music is supposed to stop playing at all. Then something very terrifying happens. Even while the music continues to play, hundreds of dancers dive towards the chairs, but the chairs were all taken while most people were still dancing. All at once, decades of worthless non-capitalized currency tries to pounce on the same small pile of capital property. It is not a friendly game of musical chairs, and a lot of people are going to get hurt in the ensuing chaos. The currency which fails to land on capital, becomes like the dancer who did not get a chair before the music stopped playing; the victim of a rather sick, and unfair game.

Thomas Jefferson was talking about the inflation of the paper asset bubble, followed by the deflation of that same paper asset bubble, made possible only by inflation of the currency supply, followed by the ensuing rush back to capital property. Jefferson never laid eyes on a “Federal Reserve Note” in his life. In his time, the American constitution was still followed, and only gold and silver coin was minted as money. So if we priced the stock market (using the Dow-Jones) in Thomas Jefferson’s money (i.e. gold), we might finally see what this wise man was trying to warn us about. Have a look for yourself:

First by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property…

Just a “heads up”… You might want to grab a chair relatively soon… This dance is filling up quickly, and while we are all busy dancing, somebody appears to be quietly taking all the available chairs out the back door.

Best Regards,
Stefan B.

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1 comment to Redefining the Terms

  • andrew james

    Looking at the adjusted monetary base chart I can see where people can come up with the $500/oz figure. Once the Au/Ag ratio reaches 10 (I think it will go lower temporarily) I will diversify my portfolio. It won’t be long after that that both Au and Ag price movements become directly proportional to each other again. Naturally this time of course unless JP Morgue is still hammering things down.

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