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Hyperinflation Chronicles, Part 1: Einstein’s Scribble, Newman’s Watch, And Dot-Blockchain

When governments create insane amounts of money, the recipients of that money tend to behave accordingly. Consider:

Einstein scribbled his theory of happiness in place of a tip. It just sold for more than $1 million.

(Washington Post) – He is known as one of the great minds in 20th-century science. But this week, Albert Einstein is making headlines for his advice on how to live a happy life — and a tip that paid off.

In November 1922, Einstein was traveling from Europe to Japan for a lecture series for which he was paid 2,000 pounds by his Japanese publisher and hosts, according to Walter Isaacson’s biography, “Einstein: His Life and Universe.” During the journey, the 43-year-old learned he’d been awarded his field’s highest prize: the Nobel Prize in physics. The award recognized his contributions to theoretical physics.

News of Einstein’s arrival spread quickly through Japan, and thousands of people flocked to catch a glimpse of the Nobel laureate. Impressed but also embarrassed by the publicity, Einstein tried to write down his thoughts and feelings from his secluded room at the Imperial Hotel in Tokyo.

That’s when the messenger arrived with a delivery. He either “refused to accept a tip, in line with local practice, or Einstein had no small change available,” according to the AFP.

Instead, Einstein wrote two short notes and handed them to the messenger. If you are lucky, the notes themselves will someday be worth more than some spare change, Einstein said, according to the seller of the letters, a resident of Hamburg, Germany who is reported to be a relative of the messenger.

Those autographed notes, in which Einstein offered his thoughts on how to live a happy and fulfilling life, sold at a Jerusalem auction house Tuesday for a combined $1.8 million.

“A calm and modest life brings more happiness than the pursuit of success combined with constant restlessness,” reads one of the notes,written in German on the hotel’s stationery.

It just sold for $1.56 million. The letter had originally been estimated to sell for between $5,000 and $8,000, according to the Winner’s Auctions and Exhibitions website.

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Luxury homes can’t keep up with high demand

(CNBC) – The supply shortage that has been plaguing the nation’s housing market for the past two years has now affected the most expensive homes.

The number of multimillion-dollar listings is suddenly dropping, and that is only making these pricey homes, well, pricier.

The top 5 percent of homes by price sold in the third quarter saw their values increase 4.9 percent compared with a year ago, hitting an average of $1.71 million, according to Redfin, a real estate brokerage.

“There is still strong buyer demand for high-end homes,” said Redfin’s chief economist, Nela Richardson. “Despite declining inventory, luxury sales soared in the third quarter.”

Sales of homes priced at or above $1 million were up 11 percent from a year ago, while sales of homes priced at or above $5 million were up almost as much at 10 percent, Richardson explained.

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Paul Newman’s watch auctioned for record $17.8 million

(Yahoo!) – A constant beloved companion of Paul Newman for years, the late Hollywood star’s Rolex has sold for $17.8 million, setting a world auction record for a wristwatch, Phillips said Friday.

Given to him by his wife Joanne Woodward and lovingly inscribed while the couple filmed and co-starred in the 1969 movie “Winning,” Newman was photographed wearing the iconic stainless steel watch on countless occasions.

Auction house Phillips said it was snapped up late Thursday in New York by an anonymous telephone buyer for $17.8 million after 12 minutes of frenzied bidding in a sale that attracted collectors from more than 40 countries.

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Company adds ‘Blockchain’ to its name and its shares surge nearly 400%

(GATA) – A British company that has been investing in internet and information businesses is having its best day on record.

On-line Plc jumped as much as 394 percent today after announcing plans to change its name to On-line Blockchain Plc, following an initial climb of 19 percent on Thursday when it announced the news. It’s the biggest one-day gain for the small-cap company since its December 1996 listing. The trading volume that reached 2.9 million shares by early afternoon in London is equal to more than 16 times the entire year’s trading before the last two days.

The first question that comes to mind here is psychological/spiritual. Say you have a spare 20 mil lying around and can do one of two things with it: Either lift 40 or so poor kids out of poverty for a lifetime or buy some dead actor’s wristwatch. In Scenario One you spend your remaining years on this Earth following the progress of people who because of you are living good, useful lives (the details of which they’re happy to share with their benefactor). In Scenario Two you have a (seriously ugly) watch in a glass case surrounded by security sensors to show your friends. And you…choose the latter. Seems like a hard thing to carry around, but hey, the money keeps rolling in so maybe with the next 20 mil…

The second question concerns levels of self-involvement. You can spend a million dollars on a handful of Einstein’s countless extant words OR finance the research of a biotechnologist working on a cure for aging or cancer. If you’re rich and of a certain age, seems like you might be more concerned with living longer to enjoy your wealth than owning a piece of paper, regardless of what’s written on it.

The last question is about simple intelligence. If you’re rich you’re presumably old enough to recall the 1990s when stocks would soar after adopting a dot-com suffix – and what happened to nearly all of those stocks in 2000. And yet here you are falling for the same scam. A fool and his money indeed.

This is not to say that some of the trophy assets listed above aren’t valuable. But the opportunity costs of paying today’s prices for them are shockingly high. The fact that so many seem willing to accept those costs implies that beyond a certain point money doesn’t just destabilize the currency markets. It also twists its owners.

22 thoughts on "Hyperinflation Chronicles, Part 1: Einstein’s Scribble, Newman’s Watch, And Dot-Blockchain"

  1. The funny thing is/was, if you read Einstein’s autobiography, he wasn’t really that happy of a man. His love life and career were both full of turmoil. So just because he was great at physics and math, doesn’t mean he was great at human relations and happiness.

  2. After reading the comments here so far it seems to me that no one gets the whole picture.

    First of all, yes under “normal” conditions only regular banks create “money” via lending, but when they do it IS by “fractional reserve” but what that means is only a fraction of what is loaned/created is backed by customer funds that the bank has on deposit. Those funds are not loaned out so 100% of the loan amount is “created” but a fraction of it (usually around 3% but it can vary) is put in reserve sort of as bank savings.

    Now, under “abnormal” conditions like we have now, central banks (CBs) can and do “create”/”print” money through a process called “debt monetization”. The Fed did it mostly after 2009, and the Bank of Japan (BOJ) and European Central Bank (ECB) are still doing it to this day. The mechanism is for a CB to buy government issued bonds using newly “created”/”printed” money. For example, the Fed has bought around $4.5 trillion of US Treasury bonds since 2009 (but stopped doing so as of about 2012, I believe) and that is why it’s “balance sheet” has grown by that amount. In the meantime that $4.5 trillion was “injected” into the global economy. From a balance sheet perspective the created dollars are Fed liabilities and the bonds purchased are Fed assets. That is because the bonds can be sold for dollars, and the dollars can be used to wipe out their liability (which is to say the dollars go back into the “void” from whence they came.)

    Officially, the CBs do this to both lower interest rates and to induce price inflation in the economy. Buying government bonds causes bond prices to rise and thus lowers the interest rates they pay, and the (created “out of nothing”) currency used to buy them by dilutes the value of the existing “money” in the economy thus causing price inflation, or so the theory goes. Both the ECB and BOJ both admit readily that that is their intention, especially the BOJ. Japan has been expereincing price deflation for decades and the BOJ is trying to stop it by devaluating the yen. Furthermore, it is common knowledge that very few Japanese government bonds are not available for regular investors to buy because the BOJ is buying up nearly all of them, Similarly for the ECB but to a lesser extent.

    Now, why thus hasn’t created even more price inflation throughout the world than it already has is a fascinating subject, but there has still been tremendous inflation thus far IN CERTAIN ASSETS, namely real estate prices (which was the Fed’s main goal), stock and bond prices, food, and some commodities and manufactured goods. It was reflected in gold and silver prices by 2010 or so, but has since stabilized.

    I don’t pretend to know how this will all end and for how much longer this “can-kicking” can continue. I’ve been wrong about it so far. My biggest regret is that I took my money out the the stock market when the DOW was about 10,000, and bought gold and silver with it and now I feel like a chump. Not so much because I bought g/s but the rest of my cash stayed out the equity markets too. Now everything costs more than it did then so I’ve lost purchasing power. Had I stayed in the equity markets I would have the same or more buying power for food and shelter than I do now, at least as of right now.

    Playing devil’s advocate I would say that the current currency system of the dollar et al could remain intact simply because practically EVERYBODY is invested in it, and I mean that globally at at every level in the economy. It is in no one’s interest for it to fall apart.

  3. – @Mr. Rubino: You’re overlooking two things:
    1) Interest rates, here in the US, are set by a force called “Mr. Market”. Even the 3 month T-bill rate. And then the FED follows that rate. Never listened to Mr. Bob Hoye (Howestreet.com, you’re a regular guest there as well) ? I know this is heresy but it’s the truth.
    2) That thing called “Fractional Reserve Lending” (FRL) doesn’t exist. If the banks want to create $ 10 trillion in new credit every month then they can do so, without using ONE $ from your deposits. They can create “money”/credit “out of thin air” without any limits.
    This was actually acknowledged by – of all places – the Bank of England in 2014.
    – We don’t have Hyper-Inflation here in the US. If there was Hyper-Inflation then a gallon of gasoline wouldn’t be at say $ 2,3 or $ 4 but then gas would be at $ 2 million, 20 million, 200 million or even $ 2 billion per gallon.

  4. Excellent John! Well said! What a wonderfully refreshing perspective on exceedingly lavish and completely unnecessary purchases—frivolous purchases valued well into the millions that could have been used to help people who struggle just to get a meal each day. Its tragic and sad when viewed from the humanitarian perspective.

  5. Unless you’re in the for the very very long haul it’s a bit premature to start a chronicle on hyperinflation. It’s given that the “rich” are dumping their dollars for tangible assets which is a sign of hyperinflation. However, in todays bifurcated society the “poor” (rest of us ?) are nowhere near disowning (dumping) our currencies. If anything people are seeking more currency through low interest debt. Things can turn quickly once inflationary momentum is gained in the economy but given the low velocity of money and demographics of the baby boomer generation it is difficult to see where this momentum will come from.
    Eventually, this blog will be correct, the dollar will be deliberately sacrificed. It’s just going to take a lot, lot longer than this hyperinflationary chronicle (of the USA?) can survive with any continuity.

  6. All “money” is created out of thin air when banks issue loans. They charge interest for loaning you something they don’t have. 95% of all “money” exists only in the computer hard-drives of bankers. Paper notes and coin are made by the treasury, but are sold to bankers for the cost of production (less than 25 cents for a $100 bill). Only private bankers put paper money into circulation; never the central banks or the government. John Rubino is participating the disinformation campaign of the bankers by saying “governments create insane amounts of money.” He has been doing it for too long to be accused of ignorance. Rubino is a bankster shill.

  7. – Calling this “Hyper-Inflation” shows that DollarCollapse hasn’t got the faintest clue what’s REALLY going on. The government is NOT creating/printing “money”. It’s called “Credit” and that’s a complete different kind of animal.

      1. – I have listened to a bunch of podcasts with Mr. Rubino and there he showed that he doesn’t understand how money is created. And what the role of e.g. the FED is.
        – What it boils down to is that commercial banks (Citibank, JPMorgan, BofA, etc. can create LOTS of credit (NOT money !!!!) without ONE $ 1 from the government or the FED.

        1. Willy, it might help if you stop thinking of the big banks, the Fed and the government as separate entities. They may have been at one time but now they’re divisions in a bigger organization that runs pretty much everything. The executive/legislative branches map out general policy, the Fed creates bank reserves (base money) by buying financial assets, and sets interest rates at artificially low levels. The big banks then use these low interest rates to trick the rest of society into taking on excessive debt (which is the fractional-reserve, “credit” part of the process you fixate on).

          So when I say the “government” creates “money” that’s shorthand for the above, since the above is too long and complex to spell out every single time the money/credit creation process is cited.

        2. Willy and Pete, it might help if you stop thinking of the big banks, the Fed and the government as separate entities. They may have been at one time but now they’re divisions in a bigger organization that runs pretty much everything. The executive/legislative branches map out general policy, the Fed creates bank reserves (base money) by buying financial assets, and sets interest rates at artificially low levels. The big banks then use these low interest rates to trick the rest of society into taking on excessive debt (which is the fractional-reserve, “credit” part of the process you fixate on).

          So when I say the “government” creates “money” that’s shorthand for the above, since the above too long and complex to spell out every single time the money/credit creation process is cited.

          1. No, you are wrong. ALL money in our system is created out of thin air when bankers create loans. They charge interest for loaning something they never had. The bankers own the Federal Reserve which acts as a giant credit card for the US Government. In this way taxes are extracted from us at gunpoint to pay interest payments to bankers for loans created out of thin air. It is a legalized counterfeiting, debt-enslavement scam.

            95% of all “money” exists only in the computer hard drives of bankers. The remaining 5% is physical cash that is produced by the US treasury. HOWEVER, this currency is NOT spent into circulation by the Government; Bankers buy the currency for the cost of production (about twenty cents for a $100 dollar bill) and only the bankers issue the currency into circulation.

            The US Government gets all of its money from 1) taxation, and 2) borrowing from the limitless Federal Reserve credit card. If the US Government created it’s own money, why in the world would we be $20 trillion in debt to international bankers?

            The banks get away with this by keeping us confused, dumbed-down, and brainwashed with overly-complicated, fake explanations and a highly-polished disinformation campaign. The scam is actually incredibly simple. To quote John Kenneth Galbraith, “The process by which money is created is so simple the mind is repelled.”

            In Byron Dale’s book, “Tales From The Treasury,” he published many letters from the treasury where they clearly state and openly admit that all money is created by banks issuing loans.

            Mish Shedlock has written about this many times, and is highly critical of this legalized-counterfeiting scam.

            Ellen Brown lambastes this parasitic debt-money in her book, “Web of Debt.”

            In “The Creature From Jeckyl Island,” G. Edward Griffin refers to this money creation by private bankers as “The Mandrake Mechanism,” after a famous magician who supposedly created things out of thin air.

            There is even a TEDX talk by Ole Bjerg on youtube that describes the process just as I did. Here it is: https://www.youtube.com/watch?v=CvH66fz9nyU

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