12 May 2012 Trade & Barter Cash De-emphasized

Money as a medium of exchange has long been taken for granted as a permanent feature the
world over. It will undergo an unprecedented role change in the next few years, playing a key
part in the metamorphosis of humanity on Earth.

Money is a value voucher that exists on belief. Economists call it fiat money because of its
value based on faith. Until the mid 20th century, many world currencies were based on
perceived precious metals, but even this is subject to, and will in fact, change.

Sidebar example; aluminum was considered so valuable in the mid 19th century that the
Washington Monument in the capital city of the USA, a 555ft/169m tall white stone obelisk, is
crowned by a solid pyramid of it. A small lump was not produced until 1825; by 1845 it was
more valuable than gold or platinum. Its value began falling around 10 years later; today gold
costs almost 22,000 times as much. Aluminum is used to make cans.

British currency is still referred to as the pound sterling; even US currency briefly saw issuance
of silver certificates, stating plainly on the note that it was redeemable to the bearer in that
amount of the precious metal. US currency was taken off the gold standard in 1971, established
as part of the Bretton Woods agreement of 1944 which set exchange rates and the US dollar
price of gold.

Since then, governments are no longer bound to maintain reserves of precious metals to support
issuance of currency. The most obvious beneficiary & victim was Brazil, which printed massive
amounts of money and set off decades of hyper-inflation. Confidence in the value of Brazilian
currency, the 5th most populous nation in the world, sunk and stayed submerged for decades.

Today, the total amounts of currency in banks, circulation and billfolds & wallets has exploded;
shortages of currency contributed to economic troubles in the early 1930s and many central
banks have moved in recent years to avoid this problem. This is a curious juxtaposition, as the
majority of people affected by economic downturns are in that situation precisely because they
do not have enough of it. Who has all the money, then? The people and their entities who had
most of it before economic downturns set in, thats who. The US dollar, as the reserve currency
of the world, has the unique position of being necessary for trade in key commodities such as
crude oil. One factor contributing to higher oil prices is that there are simply more dollars in
existence, by virtue of the US governments near runaway printing of it, than just a few years
ago. Oil traders, producers and suppliers accordingly want more dollars per barrel, entirely
logical. A German buyer of oil must first buy US dollars, so the effect transfers across the world.

As production of oil is cut back and that entire business begins to shrink vigorously, holders of
dollars will hoard them; new hiring and investment, at a virtual standstill across many nations
since 2008, will shrink. Receipts to taxing authorities will drop faster than obligations and
payouts, which in fact will be pressured to increase payouts; this is already happening. The only
solution as borrowing screeches to a halt will be to print even more money. At some point
not-too-far-from-now, confidence in the value of a nations currency will slide. The potential
positive aspect is that relative values of currency between nations will cease to matter as trade
between nations money flowing in opposite direction to the goods and services stops.
Accordingly the values of reborn Deutschmarks and Spanish pesetas to one another will not
matter much.

None of this has been lost on investors, who have bid the price of gold into the clouds. Silver and
platinum have followed the trend. Gold has intrinsic value for jewelry and industrial production.
When gold is no longer in much demand for jewelry and industrial use has dropped
precipitously, so will its purchasing power and value. Many perceived refuges from currencys
erosion in value and the collapse in paper investments like stocks, bonds and other instruments
will encounter similar changes as did aluminum 150 years ago. Half the loss in value of any
medium of exchange will be that many of the things previously in demand, thus valuable, will no
longer be made or wanted. Automobiles, aircraft and many types of industrial equipment will no
longer be made, not in current form or amount.

Internally, greatly tarnished central authorities, far smaller versions of their former selves, will
no longer be able to issue currency with confidence. Little belief in its ongoing value will be
given. Having likely already passed the hyperinflation stage, no longer will such currency be
accepted. Absent the ability to issue stable currency, individual trade & barter will rise. Inflation
indexing techniques & methods which attempt to restore some trading confidence will appear.

The holders of massive amounts of cash, at this step in economic decline, will have already
converted as much as possible into hard goods or invested in futile attempts to retain value.
Hoarding of cash will lose appeal; temporary, band aid solutions and their nature will become
apparent in short order.

Humanitys rising awareness of our purpose on Earth will frame the pursuit of wealth, savings,
acquisition and consumerism in a new way. The exchange of a persons good labor, service and
products will no longer be seen as constantly measured in so many bits, crowns or quid.
Currencies will become more like or replaced by the vouchers they really are. Trade, like
society, will be localized and will rely more heavily on the faith of the parties to transactions
than a central authority whose viability has long since been cut back.