If you were offered all the money in the world, you would still be ripped off.
What do you think of when you visualize US dollars? When you hear of the printing press? When people on TV talk about the money supply?
When you think of printing US dollars, do you visualize a literal printing press rolling bills off by the sheetload?
Most do. This is what the media shows on almost every stock video.
This looks real, seems real, and is what we carry around in our wallets. But note... 'all the money in the world' that exists in paper and coinage form is in reality just a small percent, literally a few pennies on the dollar.
Fact 1: the total amount of US currency that exists is just around $1 trillion dollars. Sounds like a lot. But there are also a lot of people in the US, 307 million more or less. Assuming that US citizens alone cash out all the dollars in existence (to the exclusion of all foreigners) then this averages just ~$3,000 real dollars per person.
That's it. If every person in the United States got their fair share of money in paper and coin, there would only be enough for about $3,000 each with nothing left over. Not even enough for a 'like new' teal green Honda.
And even that number ignores skew from concentration of wealth. The collective net worth of just six: the Walton family (Wal-Mart), Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), Larry Ellison (Oracle), Michael Bloomberg (da Mayor), and Oprah (Harpo) is around $190 billion dollars. If these six decided to go to the bank and get all their money at one time, they would take almost 20% out of circulation, instantly, or about 1 out of 5 dollars, which means the take for all other billionaires, mere millionaires and people like you and me falls to around $2,500 apiece. Everyone else has just lost 18% of their equal paper share because of the wealth held by just the top six.
Now obviously cash outs on that scale just won't happen; it is impossible. Physical money is just one small part of the picture and no matter what your bank balance says there isn't enough to go around should everyone run to get it out.
First Class Money. Second Class Money. Third-Class Money... Home.
Let's round the bases. Not all money is created equal. Our wise asses in government and economics have created different classes of money. Being a baseball kind of guy I'll present them in terms of bases.
First Base: M1
There is a larger class of money than physical money. This is called "M1" by the Federal Reserve and associated economists. The M1 class is basically made up of all physical money + checking and travelers checks anywhere in the world, and is larger than all physical money. Much larger. Nearly $2.1 trillion in fact.
This accounting is nearly twice physical coin and paper. Congratulations! If they split that all out we'd all now have just over $6,000 in your pocket... but remember only $3000 is physically available for withdrawal so you'd have to settle for an IOU on the rest.
Second Base: M2
M1 is not all the money in the virtual pot, as it excludes other kinds of money on the books such as savings accounts, small CDs and money market accounts. When those are added in the Federal Reserve calls this "M2" money.
And M2 is much, much larger, about $9.5 trillion as of August 2011.
Congratulations your virtual share is now nearly $27,000! (but you'd only be able to get $3,000 of that in physical form)
Third Base: M3
There is a third class called M3 but it was growing so fast the Federal Reserve decided to stop tracking it in late 2006 so they wouldn't scare the kids.
M3 is estimated by Shadowstats.org to be between $14-15 trillion, about 14-15x all the physical dollars in the world.
If you were offered all the physical US dollar money in the world, you'd be the sucker who left 14x as much on the table for someone else to claim.
Home: Nearly all money that exists, is unreal
Most US Dollars in existence today are just electronic accounting ledger balances. Binary bits of electrons flipping "0" to "1" (and vice versa) on server farms throughout the world.
Money is a quantum touchstone... we strive badly to acquire that which does not exist.
The truth is we now could not cut down trees fast enough to create the paper stock cloth upon which greenbacks are printed.
If electronic versions in M1, M2, and M3 did not exist and we were forced to print our money like in the old days... you would see the dollar disappear in favor of the fiver, then the ten, then the yuppie-foodstamp (the $20), the hundred and so on as they added zeroes to the existing paper to keep pace with expansion.
This was the classical way inflation or hyperinflation was seen, the adding of zeroes to physical circulating currency. Changes were obvious and noticeable to people and these fiat forms of paper did not long survive.
Electronic classes for the investing masses... the printing press is a relic... with a few keystrokes one person can now create more money than the entire Mint in a year... and we don't notice because we get pretty bank statements every month that tell us how much money we have in our accounts.
This trend will continue. Physical money will continue to decline as a proportional share of total money supply, however it is measured.
Keeping the perspective that money is just electronic, just digital dollars, may help you become a better investor because it will help you better assess exchange rates between assets denominated in dollars with those with other fundamental valuations that are not necessarily dollar-denominated, such as bullion, commodities, land,oil, water, etc. If you are able to mentally view tangible and intangible (dollar) assets on the same scale you will have an edge in being able to determine buy-low/sell-high situations, and trade advantageously between them for long run success.
What do you think of when you visualize US dollars? When you hear of the printing press? When people on TV talk about the money supply?
When you think of printing US dollars, do you visualize a literal printing press rolling bills off by the sheetload?
Most do. This is what the media shows on almost every stock video.
This looks real, seems real, and is what we carry around in our wallets. But note... 'all the money in the world' that exists in paper and coinage form is in reality just a small percent, literally a few pennies on the dollar.
Fact 1: the total amount of US currency that exists is just around $1 trillion dollars. Sounds like a lot. But there are also a lot of people in the US, 307 million more or less. Assuming that US citizens alone cash out all the dollars in existence (to the exclusion of all foreigners) then this averages just ~$3,000 real dollars per person.
That's it. If every person in the United States got their fair share of money in paper and coin, there would only be enough for about $3,000 each with nothing left over. Not even enough for a 'like new' teal green Honda.
And even that number ignores skew from concentration of wealth. The collective net worth of just six: the Walton family (Wal-Mart), Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), Larry Ellison (Oracle), Michael Bloomberg (da Mayor), and Oprah (Harpo) is around $190 billion dollars. If these six decided to go to the bank and get all their money at one time, they would take almost 20% out of circulation, instantly, or about 1 out of 5 dollars, which means the take for all other billionaires, mere millionaires and people like you and me falls to around $2,500 apiece. Everyone else has just lost 18% of their equal paper share because of the wealth held by just the top six.
Now obviously cash outs on that scale just won't happen; it is impossible. Physical money is just one small part of the picture and no matter what your bank balance says there isn't enough to go around should everyone run to get it out.
First Class Money. Second Class Money. Third-Class Money... Home.
Let's round the bases. Not all money is created equal. Our wise asses in government and economics have created different classes of money. Being a baseball kind of guy I'll present them in terms of bases.
First Base: M1
There is a larger class of money than physical money. This is called "M1" by the Federal Reserve and associated economists. The M1 class is basically made up of all physical money + checking and travelers checks anywhere in the world, and is larger than all physical money. Much larger. Nearly $2.1 trillion in fact.
This accounting is nearly twice physical coin and paper. Congratulations! If they split that all out we'd all now have just over $6,000 in your pocket... but remember only $3000 is physically available for withdrawal so you'd have to settle for an IOU on the rest.
Second Base: M2
M1 is not all the money in the virtual pot, as it excludes other kinds of money on the books such as savings accounts, small CDs and money market accounts. When those are added in the Federal Reserve calls this "M2" money.
And M2 is much, much larger, about $9.5 trillion as of August 2011.
Congratulations your virtual share is now nearly $27,000! (but you'd only be able to get $3,000 of that in physical form)
Third Base: M3
There is a third class called M3 but it was growing so fast the Federal Reserve decided to stop tracking it in late 2006 so they wouldn't scare the kids.
M3 is estimated by Shadowstats.org to be between $14-15 trillion, about 14-15x all the physical dollars in the world.
If you were offered all the physical US dollar money in the world, you'd be the sucker who left 14x as much on the table for someone else to claim.
Home: Nearly all money that exists, is unreal
Most US Dollars in existence today are just electronic accounting ledger balances. Binary bits of electrons flipping "0" to "1" (and vice versa) on server farms throughout the world.
Money is a quantum touchstone... we strive badly to acquire that which does not exist.
The truth is we now could not cut down trees fast enough to create the paper stock cloth upon which greenbacks are printed.
If electronic versions in M1, M2, and M3 did not exist and we were forced to print our money like in the old days... you would see the dollar disappear in favor of the fiver, then the ten, then the yuppie-foodstamp (the $20), the hundred and so on as they added zeroes to the existing paper to keep pace with expansion.
This was the classical way inflation or hyperinflation was seen, the adding of zeroes to physical circulating currency. Changes were obvious and noticeable to people and these fiat forms of paper did not long survive.
Electronic classes for the investing masses... the printing press is a relic... with a few keystrokes one person can now create more money than the entire Mint in a year... and we don't notice because we get pretty bank statements every month that tell us how much money we have in our accounts.
This trend will continue. Physical money will continue to decline as a proportional share of total money supply, however it is measured.
Keeping the perspective that money is just electronic, just digital dollars, may help you become a better investor because it will help you better assess exchange rates between assets denominated in dollars with those with other fundamental valuations that are not necessarily dollar-denominated, such as bullion, commodities, land,oil, water, etc. If you are able to mentally view tangible and intangible (dollar) assets on the same scale you will have an edge in being able to determine buy-low/sell-high situations, and trade advantageously between them for long run success.
No comments:
Post a Comment