A New Universal World Currency

By Kain on Thu 5 January 2012

With all of this talk of fiat currencies and their imminent collapse, what do we do? How do we price things so that we are free from the inflation of the “printing press” economy? Gold is a widely-talked-about standard, the most stable standard for money throughout history. But how do we initiate that in practice, particularly in today’s society, geared heavily on digital payments?

We could use the “gg” (gold gram) as a standard, with 1 gg being 1/31.1034768 troy ounce. At $1600 per ounce, this is $51.44 per gram, or about 5 cents per milligram. This makes milligrams of gold to be a good standard unit to use. But, of course, the gram is defined as 1/1000 of the mass of a chunk of platinum-iridium alloy held in Paris (as shown here). This can be changed; not that it will, the scientific community will be outraged, and rightly so, were this to happen. But it suffers the same problem as the coins of old, in that if the platinum “master kilogram” were to be hacked away at, it has further repercussions than just the financial stability. (This would actually increase the value of physical gold in circulation.)

But, what is the smallest unit of gold that we can imagine, that isn’t dependent on any other measurement? Of course, that would be a single atom. So, we can use atoms of gold. The only stable isotope of gold is 197Au with an atomic mass of 196.966568662, or 3.270707×10-22 g, an amount too small to work with. We are saved by chemist Amedeo Avogadro, who gives us a fixed conversion from atomic mass units to grams. Thus, 6.02214×1023 of any substance measured in atomic units (particles, atoms, molecules) has a mass of that same number of grams.

So, one mole of gold, ie 6.02214×1023 atoms of gold has a mass of 196.966568662 g, and a value (at $1579.124672 per ounce, which it was a few days ago, 22:45 02 Jan 2011 to be more precise) of exactly $10000. This gives us another couple of units, a millimole of gold (mmolAu) of $10, and a micromole of gold (µmolAu) worth one cent. Alternatively, using a unit of one ten-thousandth of a mole, say, a “shi-mole” (“sī” is an ancient Chinese word for one-ten-thousandth, which entered Japanese as “shi”), also known as “that female rat-thing”. Thus, at this price, one shi-mole of gold (I’ll use the symbol §) is conveniently $1. It is only good for that point in time, but it serves as a good and convenient index to base dollar-to-gold pricing from. So, just take the dollar amount multiplied by the price of gold in ounces, and divide by 1579.124672, to get a figure in §. So at $1600 per ounce, $20 is worth §19.74; and at $10000 per ounce, only §3.16.

Topics: Finance, Geopolitics, Science/Mathematics | No Comments »

The Dollar Meltdown

By Kain on Thu 5 January 2012

This book from Charles Goyette is another piece suggesting exiting all other forms of markets such as equities (stocks), bonds, and other forms of “paper” or electronic savings, and of course real estate, and invest instead in gold and other precious metals.

In it, he details the historic use of gold and silver as currencies, and how governments (kings, emperors, etc) have shaved off small amounts of gold from coins, to mint new coinage to finance wars and their extravagances; how gold exchange certificates were used as a medium of payment instead of the actual gold coin, and thus how goldsmiths became the first bankers. This led to them issuing promissory notes rather than exchange certificates, like “I promise to pay the bearer $20 in gold”, leading to the first fractional reserve banking system.

This isn’t trying to play the blame game, demonstrating that both sides, Republicans and Democrats alike, are culpable. However, he has too much of a belief in the “free market”, which would be fine, if markets were truly free. The irony is that markets need to be regulated if they are to be truly free, to protect the freedom of that market from predators and abusers of that freedom (corporate monopolists). Typically, wages are a part of this. However, it is a one-sided relationship, where wages are set by the employer, and the employee has little to no say in the matter.

Thus, a minimum wage is necessary to stop a spiralling “race to the bottom” of wages, and is not there to “forbid people whose skills are worth less than the minimum from working”. This even contradicts earlier statements in the book, where he (correctly) identifies wages as lagging far behind inflationary increases (if they increase at all). The result is that real wages are decreasing, because prices of typical consumer needs increase at rates larger than the official inflation statistics.

Ok, what to do about it? Well, it’s the same answer as the previous books. Invest in gold and silver. Also invest in funds of commodities, such as oil, and agricultural products (ie. food). Also, investigate online gold payment services (think PayPal but using gold as the unit of measurement rather than dollars or pounds). … see next post for more of my thoughts on this.

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Buy Gold Now!

By Kain on Wed 4 January 2012

The title of Shayne McGuire’s book leaves nothing to the imagination about his view of the financial future. He also goes through the details of the past decades, with particular emphasis on the overinflated housing market. An article in today’s paper goes as far as to state that the average house price in Vancouver BC has topped the $1 million mark. It also goes to show that the term “millionaire” doesn’t mean much anymore. There is no doubt that these prices are grossly overinflated; in fact it is suggested that prospective house buyers wait for prices to drop to ten percent of their peak values. (Note, that’s drop to ten percent, not drop by ten percent!)

The main function of bashing the real estate market is to show that it too is in a prolonged bubble, and it is going to pop, probably when a lot of these properties vacate themselves. Thus, property is unreliable as a long-term investment. This generally leaves precious metals as the last tangible form of investment that has value.

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Don’t Think of an Elephant

By Kain on Tue 3 January 2012

by George Lakoff is a good resource on the psychological tools used by the right to frame the issues, in contexts that make them seem “sensible” to people. The main point is, when facts disagree with the frame, it is human nature to discard the facts, or alter them to fit the frame. The main types of frame are the nurturant family versus the disciplinarian father (you can guess which is which). He discusses the various “values” of the right: fiscal conservatism, abortion, same-sex marriages, etc, and how the conservative view fits in with the disciplinarian frame.

For example, fiscal conservatism is viewed as the individual being disciplined enough to make it to the top 1%, and those who are poor are poor because they are undisciplined, so they must be punished and shouldn’t have social programs such as welfare and medicare. This is why they advocate tax cuts, not so much to consolidate more wealth in the hands of the upper echelon, but also to ensure that once their pet departments are sated: defence, prisons, and police, there is no money in the pot for social programs.

The left needs to reframe the issues, for instance, by showing that there is no such thing as a self-made billionaire; every one of them has had some benefit from government programs, ranging from modern medicine to the Internet, to the road infrastructure, all of which were provided from tax revenues.

Topics: Book Reviews, Finance, Geopolitics | No Comments »

Opening a Chinese bank account

By Kain on Mon 2 January 2012

To open a bank account in China, you have to actually go to the country. However, you can still open a CNY-denominated bank account from within Canada or the USA, at branches of the Bank of China.

In Canada, you can open a basic savings account (with no minimum balance, paying 0.1% interest), or a term deposit (with a minimum of 5000 yuan, paying 0.15-0.35%); you can exchange CAD/USD, or you can deposit yuan notes. You can also withdraw yuan (if they have the banknotes), or exchange for CAD or USD. Their branch locations are:

Greater Toronto:
00012-308: 3265 Highway 7 East Unit 3, Markham ON L3R 3P9
00022-308: 396 Dundas Street West, Toronto ON M5T 1G7
00062-308: 3300 Midland Avenue Units 33-34, Scarborough ON M1V 4A1
00072-308: 1170 Burnhamthorpe Road West Unit 33, Mississauga ON L5C 4E6
00092-308: 3040 Don Mills Road East Unit 28, North York ON M2J 3C1

Metro Vancouver:
00030-308: 1025 Dunsmuir Street, Vancouver BC V7X 1L3
00050-308: 8060 Westminster Highway, Richmond BC V6X 1A6

Calgary:
00109-308: 505 Third Street SW, Calgary AB T2P 1C4

In the USA, the accounts are rather more restricted; they have a minimum opening balance of the CNY equivalent of US$500, and you can’t deposit or withdraw CNY notes. In addition, they only open CNY accounts for personal customers at the New York branch in the NYC area, or for businesses at the New York or Los Angeles branches, for those in in the NYC or LA areas.
026003269: 410 Madison Avenue, New York NY 10017-1174 (NYC residents & businesses only)
122041662: 444 South Flower Street Suite 3900, Los Angeles CA 90071-2940 (LA area businesses only)

Anyone in the US wanting to invest in CNY cash might be better off making the trip across the border to Toronto, Calgary, or Vancouver.

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