Sunday, February 28, 2010

The Disappearance of my Cents.

One percent of one hundred equals one - one hundred multiplied by one equals one hundred.

I was thinking this when I bought an item in a shop and it cost me $9.99. So, I considered asking for my change from a $10 dollar note. Of course I never would have received it, One cent coins disappeared in 1990 along with their piggy bank chum, the 2 cent coin. Even though they they were no longer minted, they were still legal tender but they were just too expensive to produce and distribute compared to their worth.

Whatever happened to my original one cent - where did it go?

I understand that I can't hold it in my hand as change but somehow it should be mine. It was unjust. The shopkeeper assured me that it was not his profit because many of the items in his shop carried a lower price and the total stock sales averaged out. But I noticed that there were never prices of $9.91 or $9.96. Every transaction is rounded off to the nearest 5 cents. So 1,2,9 and 8 become 0, 3,4,6 and 7 become 5, so who's got the change and where is my one?

It doesn't seem to exist as real tender except when it appears on paper as a digit. Very clever accounting. It's counted but not accounted for.

It was initially considered that the original range of coins introduced in Australia in 1966, at the change to decimal currency, represented the least number of coins required to make any given amount. They were the 1,2,5,10,20 and 50 cent coins. Take any of these out of circulation and out of your pocket and and you must either carry more money or spend more money to get change.

How has my cent disappeared?

The Cent ceased to become significant with the introduction of plastic card money. Bankcard was the first mass produced credit card in 1974 and at its peak membership in 1984, the $1 coin was introduced. The $2 coin came in 1988 and then 'eftpos' in 1989. One and two cent coins stopped in 1990. Bankcard ceased operation in 2006 even though it was created and supported by the largest banks in the country.

What a strange thing that is. My coin cent went missing when plastic money arrived! It no longer counted in my pocket but still added on a receipt, and it had piled up with all the missing others in endless accounting balance sheets for the last thirty years.

But maybe there is a way to get my cent back.

But I need to buy in bulk to increase the value of my dollar whereas the seller makes more profit from selling things individually. If I buy 10 things at 99 cents for $9.90 I get 10 cents change from $10. The shop sold 10 things. If I only buy one thing I lose one cent. They sell 10 things singularly and make ten cents profit over the sale price. There is actually an automatic 1% profit margin in everything that is sold and the only way I will get my one cent change is if I buy 3 things and get 5 cents change. But if I don't, the money disappears.

Who gets the money if I only buy one thing?

Obviously I'm being encouraged to buy in bulk and buy with plastic but there is also something else going on here. If all my cents and your cents are not being repaid and being hoarded somewhere, isn't that theft or fraud or deception? And if all these accumulated cents are being spent some how or where, shouldn't I know about it?

Maybe I do, but I have become so accustomed to the large frivolous money movements orchestrated by banks, countries and economies that I barely notice the small details. Of course there is only one big problem at the moment - it's called a RECESSION and it's the one we had to have to return a semblance of balance back to the economy.

The Great Depression of the 1930's has since been followed by a few minor recessions. But now, the common thread is the inability of the banks to call in loans when the borrower does not have time or money to pay. Worsening future prospects cause the banks to begin refusing loans and start hoarding money and then the downward spiral begins. As Irving Fisher said in 1933, about the mechanics of boom to bust : "A fall in nominal interest rates and a rise in deflation adjusted interest rates."

It is possible that key decisions made by central banks to re-establish the Gold Standard following its abandonment after the First World War was the primary cause of the great depression *(see: Ahamed 2009). The financial crisis that preceeded the great depression began with a stock market crash and spread to the banking system. Whereas the current financial crisis began in the credit markets and then spread to the banking system and the stock market.

A few comparisons indicate some similarities between the severity of the 1933 and the 2007 depressions.

World trade volumes fell by 30% over three years then, but now they have already quickly dropped by 20%. An extended period of strong growth in stock prices before both crises and the falls during the current downturn are of a similar size to those in the first 12 to 18 months of the Great Depression. Gross Domestic Product in OECD countries during the first year of this current depression fell only slightly less than in the first year of the GD *(see: Gruen and Clark 2009).

Highlighting a few comparisons between in actual money value for the same periods will help to illuminate the insanity of the current situation.

Australian Net Debt in 2009 = $647 Billion
USA Net Debt in 2009 = $11.4 Trillion

Australian Exports in 2009 = $123 Billion
USA Exports in 2008 = $1.84 Trillion

Australian Exports in 1933 = 98.7 Million Pounds Sterling
USA Exports in 1933 = $1.7 Billion

$25 in the USA in 1969 would buy the equivalent of $150 in 2010.

In 1969 Richard Nixon abolished the USA Gold Standard. This effectively turned the USA economy into a FIAT economy, ie: no backing for money.

The USA is the only country in the world that enjoys the luxury of paying off its debts in the same currency that it alone can print. It has enjoyed this privilege since 1971 because of its military and economic dominance and because the rest of the world needed to do business in a stable currency and the USA dollar fitted the bill. (*1).

In the 1980's, Reaganomics preached that greed was good and science was no good. At the same time Australian Banks were deregulated. Coincidentally, The $1 coin was also introduced to the currency at that time and was soon followed by the introduction of EFTPOS plastic money transactions.

The price of gold has been rising since 2000 but gold production has not. In late 1998 the gold price was in the mid $200 and annual global production was just under 2500 tonnes per year. Since then the gold price is now up 340% yet production in 2010 is set to be just over 2400 tonnes. (*2).

Compare this chart of Gold versus major currencies over the last ten years:
Commodity currencies, high-saving countries, managed floats, large debt-to-GDP ratios.....none of it mattered, real money beat paper money over the last ten years. (*3).

Has anyone yet noticed a pattern to economic fluctuations in the periods since the Great Depression, the 1960's, the 1980's and 2010?

When Ronald Reagan moved into the White House, total U.S. debt equaled 168% of GDP. The next 27 years took the total to 370%; it was heralded as a triumph of the Anglo-Saxon free enterprise system, but it left people with an additional $27 trillion of debt. (*4).

There are two important factors at play here, INFLATION and DEREGULATION.

Bankers and Accountants the world over know how to manipulate the figures to their advantage. (they really don't deserve to have a capital letter attached to their title, but they are so important people - they like to think!)

How is it that entire countries are hitting the wall?

The list of casualties continues to increase: Iceland, Dubai, United Kingdom, Greece, Spain, Italy. How many more "P.I.G.S." will fall before the entire world needs to re-structure and re-finance?

(Remember: the USA net debt in 2009 was $11.4 Trillion dollars. The UK has just announced cuts in public sector spending by $36 Billion dollars. Please say those figures slowly to realize the true size of the amount of money that is being lost. Also consider that the Europeans and the Americans have differing definitions of Billion and Trillion!).

I keep wondering where all this money is coming from and going to. I am amazed that there are still some people who are actually making fortunes from government mandated schemes such as superannuation, internet banking, investments and the stock market. ( In Australia there is a $1.4 Trillion dollar 'super' honeypot just waiting to be milked).

With plastic money (invisible money) so readily available for everyone to spend over the last 20 years it has been easy to be conned into a false sense of security regarding our actual individual worth. Most individuals, economies and governments don't know how much money they have or even where that money actually is.

The often respected financial accountants are the wizards of the 20th century!

Be very wary of the emperor's new clothes!

Watch out for delusion by stealth and the illusion of wealth.

Inflation, inflation, inflation - the price of everything keeps going up, automatically indexed in tandem with some unknown long since forgotten benchmark.

A case in point. Please let me illustrate by considering the real value of one of the oldest currencies in the world, the Lire, and one of the newest currencies in the world, the Euro.

The smallest coin in the Italian currency is 50 Lire. This is equivalent to USA 2.58 cents. The smallest banknote is 1000 Lire which is equivalent to 0.5 of the Euro (the Lire originally represented 1 pound weight of silver, like the pound sterling).

1 Euro = 1.58 $ Australian dollar.
$100 Australian dollars = 127,297.88 Italian lire before 1999.
$100 Australian dollars = 0.08 XAU gold ounces.

Do you see what is really happening here?

Because the government economies are slaves to inflation, they need to continually adjust their exchange rates to stay in the race. Your money is always not worth what you thought it was!

Plastic money, ie: any card transactions, is a very clever instrument for disguising the real value of what you just spent.

Clearing times for cheques and internet banking transactions are illusory.

The wizards of finance have perpetuated a myth that financial transactions are not instant. The reality is that they are instant, but just not for you or me.

You better believe it - someone, somewhere, somehow, has found a way to spend those cents, make a profit on them and return the original amount to your account.

This should not be a legal way to do business - it is fraud and deception.

If $1 AUD = 1272.9788 Lire before 1999, how much of this value actually disappeared with the conversion to the Euro? And where did it go and who has it? It has to be somewhere. Those anally obsessed accountants would not let such a trifling amount slip through their fingers. Or would they if they could? It's very likely they found the way to disguise the loss by clever manipulation of one of the basic Keynesian principles of generating economic growth for governments: "Hire people to dig holes and fill them up."

We were conned! Governments have enforced inflation and taxation by stealth so as to manipulate the false economies presented by the bean counters. Stock markets, the Dow Jones Index, time zone differences, daily fluctuations in exchange rates, the abolition of the gold standard, easy credit plastic card money and the obsession with turnovers instead of profit, and the policies of greed have catapulted all of us into the greatest recession the world has ever experienced.

Do not be deceived by the spin doctors. The economy of the entire world is sick, and the medicine that our governments pump into the ailing patient is still called HELP but it is really only CREDIT.

The patient cannot be revived with bad medicine - it is not dead - but in limbo, where it will stay until democracy realizes that BIG BROTHER is manipulating us all.

Where is all the money that is being promised that will revive our economy coming from?

Yep, now I know. All those cents that have been rounded up or down. All that money that is counted but not accounted for. All that credit card plastic money. All that money that doesn't really exist but we are encouraged to spend - complacent as we revel in the luxury of greed.

Someone knows were all those missing cents are and they are hell bent on spending them.

I'm as mad as hell and I want MY cents back!

Do you want YOURS?


*1 - Daily Reckoning, 16.03.10
*2 - Daily Reckoning, 16.12.09
*3 - Daily Reckoning, 06.01.10
*4 - Daily Reckoning, 11.05.09).

And finally, I would like to suggest the address of a web-site that will help you keep track of your missing cents :