D. Carlton Rossi

Economics



              Blockchains and Cryptocurrencies


Your attention may have been diverted in anticipation of the Brexit vote whereby Britain would decide if it would remain in the European Union of 38 states. At the same time, a meeting of 90 central banks was hosted around June 6, 2016 for three days by the World Bank, IMF and Federal Reserve with regard to blockchain technology.


This technology was derived from the Bitcoin platform. For those who are unfamiliar with Bitcoin it is difficult to find a comparison except to say that it resembles a personal barter system in terms of services. It is popular among the underworld and those who wish to remain under the radar. Understandably, the technology underlying Bitcoin may be held suspect because no one knows the identity of the designer whose pseudonym is Satoshi Nakamoto. It is conceivable that a system could be designed so that it could be easily hacked by the designer.


It is not surprising that the Federal Reserve is interested in blockchain technology. The Federal Reserve may be best known for low interest rates through quantitative easing. However, it deals extensively with bank settlements. As the central bank of the United States and private company it acts as a clearing house for financial settlements.


The Ethereum blockchain technology is a public blockchain platform with programmable transaction functionality which allows peer-to-peer contracts. It can be used by cryptocurrencies or other applications. Also, Java-like script programs like the DAO can be programmed to executable byte code.



It appears that central banks are on the verge of adopting negative interest rates. One of the main problems to implement this strategy is the presence of cash. As has been pointed out earlier by the author there will be a tendency for individuals simply to horde cash in a negative rate environment in order to avoid what amounts to a tax. This is defined as the Zero Lower Bound (ZLB) problem by Haldane who is a member of the Bank of England’s Monetary Policy Committee.


By processing transactions through an open decentralized blockchain program there is the potential to eliminate cash. This technological tactic is intended to avoid the hoarding of money (capitalism without capital) and to promote spending--thus triggering inflation. However, what discourages hoarding of cryptocurrencies? It may have to be a tax (or its equivalent).


It seems one has to clarify the meaning of “decentralized” since “central” banks are experimenting with their own applications. It seems decentralized is used in the sense that the currency is virtual and can be anywhere or everywhere.


One cannot avoid the conclusion that all is an experiment outside the realm of conventional monetary theory and practice. The elimination of gold and the attempt to eliminate paper currency is an experiment. The adoption of programs based on cryptocurrencies is an experiment. In fact, Buterin has admitted that the cryptocurrency application of the Ethereum is an experiment which may implode. The imposition of negative interest rates is an experiment. The impression of all this experimentation is that the mice (central bankers) are running people through the maze as was depicted in Hitchhikers Guide to the Galaxy.


It may be appropriate to mention the “Ether” which is the basic unit of Ethereum. Originally, in Greek, it meant “pure air” or that breathed by the gods. It was difficult for scientists or philosophers to define it; although, it generally represented the fifth element. Issac Newton was perhaps the most famous scientist with a hidden agenda as an alchemist to consider the ether. Of course, one of the aims of alchemy was to turn lead into gold. He was unsuccessful in this daydream. His scientific endeavors had used the concept of “ether”, but advances were difficult, so his choice (loosely speaking) was either ether or logic. It seems he rejected ether and developed the laws of physics and calculus.


Newton though is known for something else. He was Chancellor of the Exchequer. He used gold rather than ether to back the currency. As a result of a stable monetary system the British Empire thrived for 300 years.


The developer of the Ethereum platform is known. It was a nineteen year old Canadian by the name of Vitalik Buterin who had emigrated from Russia. Currently, he resides in Switzerland. He is learning Mandarin. Ming Chan is the Executive Director at the Ethereum foundation.


Basically, the program was crowdfunded—by the people, so to speak. It was the most successful crowdfunding program in history. But who really were these people? While the designer is known the people are not known—partially due to privacy issues. In addition, who purchased 25% of Buterin’s ETH (Ether) holding in April? Were the proceeds invested in Bitcoin? Furthermore, was the holding sold prior to June 17?


The symbol adopted by the Ethereum platform is a pyramid sitting on top of the base of another pyramid. While the poet hasn’t drawn this I’mage it is nevertheless familiar to him. The reason is that he was asked to correct a translation of a document. He needed clarification on the exact shape of the pyramid of Emperor Qin Shi Huang since the description baffled him. An expert was therefore consulted. It is an image similar to Ethereum’s. The original mound was 76 meters in height at Mt Li, Lintong. While excavations have not been made at the location it is believed by at least one expert that there is an inverse pyramid below it.


Who is Qin Shi Huang? You know him because he ordered an army of terracotta warriors for the afterlife. He built the Great Wall with conscripted workers. He also buried alive 460 Confucian scholars and burned Confucian books—particularly the Book of Songs and Classics of History. His dynasty was overthrown in a peasant rebellion.


His name, Huangdi, was a derivation. It came from the Three Sovereigns and Five Emperors. However, he also appropriated it from the name of the Yellow Emperor who had united the tribes and whose cult was popular.


In terms of philosophy, he was a Legalist which justified strict central control. It meant Rule by Law rather than Rule of Law. He eliminated the Hundred Schools of Thought which incorporated Confucianism. No opposition was tolerated.


He may have followed Daoist astrology since he was interested in the five elements. Incidentally, Daoist temples seem to have been spared in terms of banning or burning of books. He was born under the sign of water. This may explain why he took mercury pills and why a river of mercury ran through the underground of the tomb. Mercury was intended to confer immortality; although, it also hastened his death at the age of 39. The Qin Dynasty was short-lived, too.


The Ethereum platform is a virtual machine that uses the DAO. According to the Ethereum Foundation “A blockchain program is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.” Confidence in the DAO may have generally been inspired by religious overtones of the DAO and the faith and fervor of appish acolytes.


However, confidence was misplaced when the DAO was hacked on June 17th. Surprise! Surprise! Why is it a surprise since it had been reported that Buterin collaborated with hackers to design the DAO. It has also been said that the security flaw may have been known before it was hacked. No one knows who hacked the system, but one can say with confidence that it was a hacker. The hack of the DAO might have proven embarrassing to the central banks except for the fact that it seems to have been mysteriously underreported.


The DAO blockchain was launched on July 30, 2015. On June 17, 2016 it crashed. Next generation smart contracts did not last a year let alone a generation—even in computer terms. The price of Ether dropped from $21.60 to $15.


Which hackers might have had financial motive to bring down DAO? Perhaps they were hackers of Ethereum’s rival or Bitcoin. It may also have been a hacker with mixed loyalties to Bitcoin and Etherium. The date of June 17 may not have been a coincidence.


The Bank of Canada announced on June 15, 2016 that it was developing its own version of the Canadian dollar based on blockchain technology. It is called CAD-coin. Other Canadian banks including a consortium called RC3EV were to participate. It would run on The Jasper Distributive Ledger Settlement Program. A scheduled speech by Bank of Canada senior deputy governor was set for June 17.


D. Carlton Rossi








                      




Cryptocurrencies backed by Rare Earth Elements



It seems that off-beat Max Keiser who is an expert on cryptocurrency has just confirmed what I was saying about a month ago. I had noticed that China was buying gold at a fast clip. In September, I believe they bought 5 tonnes of gold. Basically, Kaiser is saying today that China will back a cryptocurrency with gold in the next six to nine months as the United States had backed its dollar with gold in its heyday. Personally speaking, I suspect that the closer the United States gets to negative interest rates then the more likely it is that China will back a cryptocurrency with gold.

However, I might even go out on a limb. Let me explain first about Rare Earth Elements or REE's. They are to China what oil was to Saudi Arabia. China has a monopoly on REE's. Basically, it is China that prices REE's --not the United States. To eliminate the competition it keeps prices low. Furthermore, it has established a whole chain based on REE's. At the top of the chain is Huawei's 5G, surveillance, smart city and artificial intelligence industries.

It may be that China has been stockpiling gold for several years. However, it has also been stockpiling REE's. Let me explain. China is really only interested in the heavy REE's or HREE's like Terbium, Dysprosium, Neodymium and Niobium--in other words the magnet elements. It is now short of these elements so it imports them or develops foreign mines. It uses these elements to develop its high technology. Basically, though, it stores all the other REE's like Lanthanium, Cerium and Yttrium or the Light REE's. By doing so it keeps prices low to discourage foreign competition.

To me it would make sense therefore if China backed another type of cryptocurrency with REE's. Just as a cryptocurrency backed by gold can act as money so too could a cryptocurrency backed by REE's act as money. REE's though are rather common so think of them as the equivalent of silver rather than gold. A cryptocurrency backed by REE's is like one backed by silver. The US could also use REE's from Mountain Pass in the same way.

The equivalent of using gold to back a cryptocurrency would be to use HREE's to back a cryptocurrency. Just as gold has more value than silver so HREE's have more value than REE's or gold for that matter. Therefore, HREE's could be used to back a cryptocurrency. Those HREE's could be held in a strategic reserve rather than the Federal Reserve which has probably already sold off nearly all of its gold to Russia and China.


D.卡尔顿 罗西

D. Carlton Rossi

2019年11月04日







      Gold Banknotes  and International Reserve 

                                   Currencyi¥$   
                        





                                


The wine industry in the Xushui region has a long history. It began 5000 years about the time of Xūnyù. However, today, the region is plagued by counterfeit products.

Sun Dawu speaks of one of those companies that sold fake wine. The fake wine was produced by a company that no longer exits.  It was not able to develop its brand. Its customers lost trust in it. It had no currency so to speak.

The wine cost 18 yuan a bottle. It was luxuriously packaged. Almost unbelievably, the packaging and bottle cost 15 yuan a bottle. That left two to three yuan in profits; whereas, the actual cost of the wine was only .05 yuan.

On one occasion, the author remembers a Fujian peasant who brought out his best wine to offer as a toast to D. Carlton Rossi  It too was elaborately packaged and pored from an expensive bottle. It was supposed to be from a famous wine growing region of France. While the author was no connoisseur of wine he did recognize that he was offered red vinegar instead of wine. The author was also able to read the English label on the bottle. It said “piss on peon”. He regretted having to tell the truth to his friend. One doesn’t lie to one’s friend nor withhold the truth.

Sun Dawu began the liquor company of Dawu Group in 2009.  It is managed by his son. It was not established for profit. Rather, it was set-up to ensure that his workers and the local population would not be plagued by adulterated alcohol.

The roasting time of competitive brands of liquor vary. A poor quality liquor can be made in as little as 3 to 7 days. A medium quality liquor can last 40 to 60 days while a high quality liquor takes 80 to 90 days. These liquors vary in price, but are generally expensive. They are sold through expensive and extensive TV advertising.

In contrast, Sun Dawu took a different approach. He concluded that things can not deviate from their original purpose. He proposed that the liquor company use a slow flavor brewing method to produce a low price product of good quality in a mid-range package. The liquor ages two to three years depending on the brand. Basically, they are sold through word of mouth. They are then offered through the Group’s hotel, restaurant and spa.



                  

                               Copper Coin of the Tang Dynasty

The coin of the Tang Dynasty (618-907 A.D.) was made of gold, silver, copper and lead. It was called the Kai Yuan Tong Bao or Kai Tong Yuan Bao. The coin lasted throughout the Tang Dynasty without discontinuity when China was the commercial center of Asia through the Silk Road. Businessmen could cash them in at any time for a paper receipt in more than 40 offices throughout the kingdom. The dynasty reached its zenith during the reign of Emperor Xuanzong. During this period of 44 years the inflation rate was low.

The calligraphy of the Kai yuan was written by Ouyang Xun. He was the lead calligrapher of his age. Therefore, his style was praised by poets. Two of the most famous Chinese poets were Li Bai and Du Fu. The poem of D. Carlton Rossi called was inspired by the form of Du Fu’s poems; although, it was modified in a unique way.  

However, paper currency at the time of the Mongolian Empire undid it. Marco Polo writes how Chinese alchemists produced paper money with as much form and ceremony as if it were actually of pure gold and silver. Large quantities were printed. The system lasted only 100 years. In other words, barbarians introduced a counterfeit currency which bankrupted the dynasty. 

Today, China’s central bank is in a very different situation. It holds a large reserve of gold which might be used to establish the remnimbi as an international reserve currency. It is obvious that China did not purchase this vast store of gold so that it wouldn’t earn interest. One wonders how they will react with Japan’s introduction of an unconventional monetary program called “negative interest rates” after the failure of the Bank of Japan’s unconventional quantitative easing.

If China should back its currency with gold or for that matter include it within its trade-weighted basket of currencies then what might its implication be for countries which do not have a gold reserve and yet are part of the basket? Fortunately, the number of these countries is minuscule. The most negative consequences might be experienced by any of these countries which do not have a gold reserve and yet introduces negative interest rates. The result might be a flight to safety of gold. It is not gold that is a barbaric relic, but rather the neo-barbarism of fiat and virtual currency coupled with negative interest rates.


                       

September 23, 2011



      Gold Banknotes  and International Reserve

                                  
Currenci¥$
 

Gold Banknote© immediately reinforces trust in a currency.  It has a strip of gold on it which inspires confidence in the currency.  Many civilizations have recognized the value of gold as a standard of value. Many currencies have trusted gold throughout the ages. It is therefore natural for an international reserve currency to be based on a Gold Banknote© 

Let us say hypothetically that Country A (United States) has a large proportion of gold in its foreign reserves. That gold is sitting in a vault in deep reserve. It is unseen. It serves little purpose. It is valued in a nominal way.  In a sense, it has returned to the bowels of the earth from which it came. 

Let us say hypothetically that Country B (China) may have a relatively small amount of gold in its reserves in proportion to foreign currencies. However, it produces many tonnes of gold every year to meet domestic demand. It is the largest producer of gold in the world.

It would seem that both countries might have an interest in adopting a Gold Banknote © in terms of an international reserve currency. The former might hypothetically want to maintain its currency as an international reserve currency for a longer period of time. The latter might hypothetically wish to establish its currency as an international reserve currency in a shorter period of time.

D. Carlton Rossi

 


Gold Banknotes©  and International Reserve

Currenci¥$©



August 31, 2011


                    The Real and the Unreal

There is a negative trend in Canadian currency that is taking place at a rapid pace.  The trend is to depict the unreal rather than the real. Real is defined by that which does not imitate or copy while unreal is that which is imagined or supposed.  This short report will deal with the unreality of the Canadian $20 paper cotton banknote.

The $20 paper cotton banknote has several features to prevent counterfeiting that are unreal. These unreal features are being added to make it difficult for counterfeiters to copy the entire banknote. However, in order to prevent counterfeiting the features utilized seem to be illusory and unreal distortions of reality.

This $20 banknote has a recognizable portrait of Queen Elizabeth II.  It is somewhat life-like; although in green colour. However, there is also an unreal watermark in the off-centre of the bill. It sort of resembles its life-like version but it is much smaller. It appears ghost-like and to float.  It is a ghost supposedly seen in the light and not in the dark—very strange. Any ghost though is unreal. Just because there is a name for it doesn’t make it real.
Another feature which appears unreal is what is called a broken number 20. Under ordinary light though it appears as mere squiggles that have no resemblance to a number. It magically resolves itself into a 20 when backlit. However, magic is an illusion and not real. When the note is turned around it really doesn’t resemble a 20 at all.

On the back and when backlit it may not appear to be a number 20 to someone for three reasons. First, the zero is horizontal and above a horizontal two. Not only that but the first number or 2 is at the bottom rather than at the top.  Second, the bill has to be turned clockwise to view the ghost-like number which is composed of both red and green colours. The colours are unreal because most numbers we see are black or if not black then are consistent throughout. These numbers have alternate colours which give the appearance of non-numbers.  Finally, when viewed from the back it appears most often as a 50 rather than as a 20. Are we to believe that what is real is on the front but not on the back?  Is it a fifty dollar bill or a twenty dollar bill?

On the front of the banknote in the lower right hand corner is a large green number 20.  When viewed in the awkward circumstance of being backlit and from the back it resembles a strange image that begins with a 0 but ends with what appears not to be a number. One is led to imagine though that it is a backward number two.  However, if one is encouraged to use one’s unreal imagination then one can see a number 50.  Is it a fifty dollar bill or a twenty dollar bill?

Be aware that there actually is a fifty dollar bill. It, too, has the same problem but in reverse. In some ways the 50 resembles a 20.  However, the way the 5 is drawn makes it less likely to confuse with a 2.
Another security feature that appears of unreal nature is the metallic strip on the front.  It’s a holograph which seems to have images of the number 20 and maple leaves along its length. However, a holograph does not offer any information about the displayed object.  It may be termed therefore as unreal.

The holograph appears to be made of silver and perceived to be of value.  However, there is no silver in this metal.  It is aluminum and PET.  The imitation silver may be construed as unreal.

On the back of the bill is a security thread. It is the counterpart to the holograph on the opposite side of the bill. It is partially seen. It is evident though that when backlit it is partially hidden. Under certain circumstances the line is perceived to be complete and under other circumstances the line appears broken.  Is a line there or is it not there? This is not a question one is normally confronted with when one sees something in everyday life; so there is an unreality to it.

There is an unreality to the perceived colour of the thread. In one light it appears green which is traditionally associated with paper banknotes, but in another light it appears gold. This switching back and forth confuses and tricks the eye contributing to a sense of unreality. It would seem that the general public would have difficulty in distinguishing the unchange reference colour and the colour shifting area.

Finally, there are two questions about the colored thread that shoud be addressed. Why sell almost all the gold reserves and yet give the appearance of gold on the security thread?  Is this intended to increase the security of the currency which was once backed by the security of real gold?

The thread’s counterpart which is the hologram appears to be silver. It is not. The thread itself appears to be gold. It is not. The thread is made of silica blocks vaporized and deposited on a metallic alloy.  Both silver and gold look-alikes are copies of the real metals which have value.  Both are copies of real metals that have been regarded as currencies for thousands of years.

On this particular banknote that is viewed there is a bank stamp.  It appears to be a hand stamp rather than an ATM stamp because it is slightly off-kilter. Normally, this should mean the withdrawal of the banknote because it has been intentionally defaced.  The portrait of Queen Elizabeth II is defaced, too.
On the hand stamp there is a bank transfer number. Through this number the exact location of the branc can be determined. Other data can be gleaned from this information of a highly sensitive nature that cannot be disclosed here for various privacy and security reasons.The presence of this bank stamp on the banknote contributes to a sense of unreality and opens up many questions as to why it is there.

 

August 29, 2011

 

 
                     The Natural and the Unnatural

                                  

There is a negative trend in our Canadian coinage from the natural to the unnatural. Natural is defined as that which is pure, unadulterated and in harmonious relation to Nature. In 1920, the fineness of “silver” coins was changed from .925 fine silver to .800 fine silver.

This lower level of fineness continued in our Silver Dollar which was first issued in 1935. While it had the name “Silver Dollar it was not fully the same as silver because the dollar had a sliver less of silver. In this sense, it was unnatural because it was composed of only 80% silver and the rest was copper. In other words, it was called something of a higher value, but it was something different of lesser value.

The Voyageur series ran for years. It was called Voyageur because the reverse side had a design of a voyageur and aboriginal paddling a canoe.  Why wasn’t it called an Aboriginal?  He is at the front of the canoe and he had been here in Kanata for time immemorial. ("Kanata" is the Huron name for village that became  name "Canada") The Aboriginal is the original who lived in harmony with Nature.  The Voyageur exploited Nature for profit motive. He nearly brought the beaver to extinction. Today, the silver-copper Voyageur is relegated to the category of “junk silver” because it is not pure silver. Its sale is taxed unlike pure silver.

Canada celebrated its Confederation in 1967. The Mint waited until the following year and then changed the Silver Dollar. The Silver Dollar became the Nickel Dollar because it was composed of 100% nickel. This was an outright debasement of the currency. It was still commonly referred to as a Silver Dollar and not a Nickel Dollar. There seems to be some misplaced currency in a mere name.

The new dollar coin whose design was chosen in 1986 was also to have a voyageur theme. It was to give the impression of maintaining tradition while completely changing it. There was one problem. The master dies were “lost” by the courier service on their way to the Canadian mint. The notorious Chicago thief, Marcus Looney, was ruled out because he had died.  Rocky and Mugsy who had heisted 14 carats worth of gold in the Looney Tune's cartoon "Bugsy and Mugsy" were crossed off the list, too.

The Voyageur theme was replaced by the Loon theme.  The year 1986 was also notable in that the Bank of Canada began selling its gold reserves or rather turning them into unnatural debased paper currencies.   

The Loonie gave the appearance that it was more through its gold-like lustre, but it was actually less through its composition.  It was a debased nickel Voyageur coin.  It was 91.5% nickel and 8.5% bronze plated. It was an alloy the Mint called “aureate” to signify that it was of a golden colour derived from the Latin word “aur”. However, in general English, the word “aureate” refers to excessively ornamented speech. In other words, it looked like something of more value, but was something different of lesser value.

The slang term “Loonie” was coined by the general public.  It refers to a bird called a loon that has a strange call, wail and yodel.  A loonie in everyday English refers to someone who has lost his sense or might it be a dollar that has lost its cents?

In short, the Government of Canada sold its gold reserve for foreign paper currencies.  It created a nickel coin with a bronze (tin, copper) coat or what the mint called an aureate alloy that resembled the colour of gold.  The coin was nickelnamed the “Loonie” by the public who were not fooled by reverse alchemy.

There is a negative trend in our Canadian coinage from the natural to the unnatural. Natural is defined as that which is pure, unadulterated and in harmonious relation to Nature. In 1920, the fineness of “silver” coins was changed from .925 fine silver to .800 fine silver.

This lower level of fineness continued in our Silver Dollar which was first issued in 1935. While it had the name “Silver Dollar it was not fully the same as silver because the dollar had a sliver less of silver. In this sense, it was unnatural because it was composed of only 80% silver and the rest was copper. In other words, it was called something of a higher value, but it was something different of lesser value.

The Voyageur series ran for years. It was called Voyageur because the reverse side had a design of a voyageur and aboriginal paddling a canoe.  Why wasn’t it called an Aboriginal?  He is at the front of the canoe and he had been here in Kanata for time immemorial. ("Kanata" is the Huron name for village that became  name "Canada") The Aboriginal is the original who lived in harmony with Nature.  The Voyageur exploited Nature for profit motive. He nearly brought the beaver to extinction. Today, the silver-copper Voyageur is relegated to the category of “junk silver” because it is not pure silver. Its sale is taxed unlike pure silver.

Canada celebrated its Confederation in 1967. The Mint waited until the following year and then changed the Silver Dollar. The Silver Dollar became the Nickel Dollar because it was composed of 100% nickel. This was an outright debasement of the currency. It was still commonly referred to as a Silver Dollar and not a Nickel Dollar. There seems to be some misplaced currency in a mere name. 

The new dollar coin whose design was chosen in 1986 was also to have a voyageur theme. It was to give the impression of maintaining tradition while completely changing it. There was one problem. The master dies were “lost” by the courier service on their way to the Canadian mint. The notorious Chicago thief, Marcus Looney, was ruled out because he had died.  Rocky and Mugsy who had heisted 14 carats worth of gold in the Looney Tune's cartoon "Bugsy and Mugsy" were crossed off the list, too.

The Voyageur theme was replaced by the Loon theme.  The year 1986 was also notable in that the Bank of Canada began selling its gold reserves or rather turning them into unnatural debased paper currencies.   

The Loonie gave the appearance that it was more through its gold-like lustre, but it was actually less through its composition.  It was a debased nickel Voyageur coin.  It was 91.5% nickel and 8.5% bronze plated. It was an alloy the Mint called “aureate” to signify that it was of a golden colour derived from the Latin word “aur”. However, in general English, the word “aureate” refers to excessively ornamented speech. In other words, it looked like something of more value, but was something different of lesser value.

The slang term “Loonie” was coined by the general public.  It refers to a bird called a loon that has a strange call, wail and yodel.  A loonie in everyday English refers to someone who has lost his sense or might it be a dollar that has lost its cents?

In short, the Government of Canada sold its gold reserve for foreign paper currencies.  It created a nickel coin with a bronze (tin, copper) coat or what the mint called an aureate alloy that resembled the colour of gold.  The coin was nickelnamed the “Loonie” by the public who were not fooled by reverse alchemy.   

 

D. Carlton Rossi



August 25, 2011

                                                           

                       1862 $10 Legal Tender Banknote

Historically, the banknotes of the United States were green.  They had greenbacks during the Civil War and they were called “Greenbacks”.  It may be supposed that they were also green because they represented a promise of the future credit of the United States which depended on a favourable outcome of the Civil War.  It was though a war which went on longer than expected.  Don’t most wars go on longer than expected? Don’t most civil wars go on longer than expected?

It is well known that counterfeiting was a serious problem in 1860.  It is estimated that one-third of the banknotes were counterfeit. When the Union decided to print banknotes to fund its war efforts it had to confront the problem of counterfeiting.   The Secretary of the Treasury, Salmon P. Chase, contracted the American Bank Note Co. to produce a coloured ink that would not erase.  A green color was chosen.

The color green was chosen for another reason.  The technology of photography at the time of the Civil War could not produce color.  Therefore, the back of the banknote was green rather than black to prevent counterfeiting. 

It is not entirely certain though why a green color was chosen over a number of other colors.  It was known that when a green banknote was photographed it became a gray colour.  The question that should be asked therefore is not why the back of a banknote was green but rather what is significant about the color of a gray photograph of a banknote.

A gray photograph has a similar color to the uniform of the Confederate soldier. It may be surmised that unauthorized banknotes in the North were easily recognized because the color was similar to the gray uniform of the enemy and the “Grayback” currency of the Confederacy. In this way, the word “counterfeit” and “confederate” may have been linked in a subtle way.

The North was industrialized. It had the engraving and printing technology. Counterfeit confederate banknotes were printed there to undermine the economy of the South. It resulted in price inflation in the South.

The open question may be as follows. Were backs of Union banknotes green so that they could be deliberately counterfeited through photography in the North to be distributed in the South? Confederates might more readily accept a counterfeit Union note whose back was gray.

 

D. Carlton Rossi




August 19, 2011          

           Gold Banknote  currenci¥$©


There are two extremes.  On one side, there is too much fiat currency. On the other side, there is not enough gold. 

It is difficult to return to a gold standard.  It’s true that gold lasts, but it is equally true that it is scarce. It’s hard to find: it’s expensive to mine. The opposite of a gold standard currency is a fiat currency.

A fiat currency doesn’t last in the sense that new anti-counterfeit steps must be regularly devised and applied. It doesn’t last in the sense that it wears out.  It’s supply is also almost limitless. It’s inexpensive to produce, too.

Gold is most suitable for an old-style barter economy.  This type of economy limits trade in terms of scope and dimension. It favours barter for goods as opposed for services. Fiat currencies can replace a gold currency.  They can foster international trade in both goods and services.  However, their scope and dimension are almost unlimited. For example, a country can borrow money now and then print money later to pay for it.

Of course, a country can back a currency with a reserve of gold. However, what large-sized country has a large enough reserve to back its own currency at the current price of gold? What large-sized country has a large enough gold reserve to back an international reserve currency at the current price of gold? What block of countries has a large enough collective reserve to back a common currency at the current price of gold?

The unscrupulous counter that currencies should be entirely abstract ideas.  Generally speaking, we are moving relentlessly in this direction with our credit cards, our debit cards and our automatic deposits. This means that we have no need to hear, see or touch what is of value.  We don’t need to hear the ring of a gold coin.  We don’t need to see a reserve of gold buried in a vault.  We don't need to feel the quality of a linen banknote.  We don’t need to be human.  

The unscrupulous want to replace everything material with their immaterial ideas, however unsound they might be.  They want to manipulate you.  They don't want to shake your hand, but rather they want to shake you down. They want to control without hands or in a hands-off way.  They want to control in an unseen unseemly willy-nilly way.

The solution is neither to move backward to gold as a currency nor is it to return to a currency backed by gold.   The solution is not to move totally toward a virtual currency that has no materiality, but has the potential of total controllability and manipulability. The solution is a Gold Banknote©. 

D. Carlton Rossi

 



August 11, 2011

                          Gold Banknote©

In an earlier column I introduced the concept of a Gold Banknote© .  It would have been easier for a country like Canada to have introduced a Gold  Banknote© when it had a relatively modest reserve of gold. That reserve was sold. 

One can say that Canada’s gold reserves are not so much in the bank but rather in the ground. The ground reserves can supply sufficient gold for a new Gold Banknote© . Of course, the gold will have to be purchased at the current spot price rather than that supplied from the bank reserve which valued it at $35 per troy ounce in the past. This is a pity.

In terms of the United States, it is easier to establish a Gold Banknote©. The United States has 147.2 million troy ounces of gold in its reserves. Neither the Treasury nor the Federal Reserve Board regard it as money. However, the price of gold is fixed at $42.22 a troy ounce. This is significantly below the spot price of gold which varies by the second. Today, spot gold trades at $1776 per troy ounce.  

If gold is valued by the FRB at $42.22 per ounce then a gram of gold is worth $1.35.  A sixteenth of a gram is worth .0848 and a thirty-second of a gram would be proportionately less.  It seems that it is quite affordable if added to a linen or polymer banknote in terms of cost. 

The public cannot see stored gold.  The public believes what it sees.  A gold strip on a banknote can be seen and believed. Stainless trust doesn't rust.

The IMF holds considerable reserves of gold, too.  It is valued at $47 per troy ounce. The gold is gradually being sold off to help poor countries. Of course, this gold reserve could be used to back or issue a new SDR banknote.  However, in keeping with the mandate of helping the poor it would be better to loan gold to poor countries at zero interest so that they can use it on their own banknotes.  It is also necessary that the IMF insists on an agreement among nations about the percentage of a gram of gold that will be used on their own Gold Banknote©  so that there is a uniform standard set.

One of the main impediments to revaluing the gold reserves of the IMF were objections from Canada. The government objected to sales of IMF gold because it would depress the gold price. The Canadian government was concerned about the health of the gold mining industry in Canada. The interests of a few were put ahead of the interests of many. Today, it seems that this is true, too.


D. Carlton Rossi





 

July 19, 2011

                       Gold Banknote© 

It seems to me that a coinage currency composed of gold or silver is a natural and real one.  Both are metals found in nature.  They are real in terms of their weight, lustre and ring.  They are also rather rare or scarce metals.  However, there are two main disadvantages.  They can be debased.  They are also not so suitable for large trading economies that depend on growth. 

Several countries have polymer biaxially-oriented polypropylene banknotes.  They are far from natural.  They are not real in terms of weight, lustre and ring.  Polymer is neither rare nor scarce.  The main problem faced by banknotes is a kind of replication called counterfeiting. Polymer banknotes though (and earlier paper versions) have promoted the growth of international trade. 

A polymer banknote with a face value of $100 is inexpensive to produce.  The cost is roughly nineteen cents.  The cost to produce a paper-linen banknote is even less. For the U.S. $100 banknote issued on February 10, 2011 the cost was 11.8 cents. From a cost point of view there is virtually no limitation as to the number that can be printed.  Governments print many—far too many paper currenci€¥$©. 

We are wowed and awed by the new holographic security features on polymer banknotes.  However, there is a metal that has a characteristic that is unique and not easily emulated. The metal is gold and the characteristic is ductility. Gold is ductile. It can be formed thinner than a hair.  It may be possible to embed a thin, gold strip into the middle of the bill. This would be almost impossible to imitate or counterfeit. However, the issue of counterfeiting pales into insignificance compared to governments that legally issue too many banknotes. Those governments have both demonized and demonetized what they call the barbaric relic.

The way to restrict the printing is to require banknotes to have a gold content. The weight of the gold would be a fraction of a gram.  Perhaps it would be only one-sixteenth of a gram. However, it is gold and gold is expensive.  The cost of this gold limits the number of banknotes that can be printed. Of course, the gold content adds value or a premium over the face value of the bill. It also reintroduces a natural element into what has become an unnatural and unlimited abstractedness. Lower face value banknotes would use proportionately less metal element of gold. These are banknotes you can trust. These are notes you can bank on.

 

D. Carlton Rossi

 


July 14, 2011

                             

On the 140th Anniversary of Macleod's View
of Gresham's Law


However, I would like to draw your attention to a paper called Uses and Abuses of Gresham's Law in the History of Money published in 1998 by Professor Robert Mundell. It so happens that I had the honour of attending a lecture roughly fifteen years ago given to a doctorate class at the Chinese Academy of Social Sciences by this Canadian born Nobel Economist.  Just as a point of interest I asked him whether the large expansion of the money supply would lead to inflation in China.

In a prior commentary, Gresham's Law was discussed in terms of the nineteeth century novel call Doctor Thore by Anthony Trollope. Doctor Thorne was published in 1858. It was the third novel in Trollope's series known as the Chronicles of Barsetshire. The novelist draws on Gresham's law both in the economic and moral sense. It is no coincidence that Gresham's law is the theme of the novel. In 1858, the British economist Henry Dunning Macleod published a paper on it; thus, reviving interest in this theory of money. It says basically that bad money drives good money out of circulation.

However, I would like to draw your attention to a paper called Uses and Abuses of Gresham's Law in the History of Money published in 1998 by Professor Robert Mundell.  It so happens that I had the honour of attending a lecture roughly fifteen years ago given to a doctorate class at the Chinese Academy of Social Sciences by this Canadian born Nobel Economist.  Just as a point of interest I asked him whether the large expansion of the money supply would lead to inflation in China.

Professor Mundell implies that Gresham’s Law is not so easy to express nor understand. The phrase ‘bad money drives out good,’ is not a correct statement of Gresham's Law nor is it a correct empirical assertion.” The correct expression of Gresham's Law is "cheap money drives out dear, if they exchange for the same price."  In the empirical sense it is the opposite case. “Good money drives out bad”.  As he says, the great international currencies have always been good money which have driven out weak currencies.


Author's note of February 13, 2016:

Is it any wonder that the Canadian copper penny was driven out of circulation because the value of the melted copper was worth more than the penny's face value.



D. Carlton Rossi

 


July 11, 2011

This is notice of copyright.  The word and image of currenci€¥$©  D. Carton Rossi  July 11, 2011 12:38 pm  is used.

 D. Carlton Rossi




June 20, 2011


                          

                            Image Credit: One Last Continue

Jan. 13, 2010: The Supreme court of South Korea has ruled that virtual currency is the equivalent of real money



Bitcoin Worth less than a Penny

On Sunday June 19th I watched the collapse of a virtual currency called Bitcoin. It fell to less than a penny before there was any recovery. Bitcoin is both the name of the open source software that allows trade and a P2P network (Peer to Peer) that is formed by running the software.

There were several reasons as to why owners wanted to own Bitcoin. It seemed that the primary one was that owners were disenchanted with fiat currency which has a centralized issuing authority. With Bitcoin there was a limited and controlled expansion of the monetary base and it is known to everyone in advance.

The second reason of interest was that early participants would benefit the most. This was because there was a diminishing geometric expansion of the money supply with an expansion of users. However, later participants might own a deflated currency as the programmed money supply of Bitcoin reaches 21 million. In this sense it may resemble a pyramid scheme.

Thirdly, the Bitcoin whitepaper of an anonymous Japanese student called Satoshi Nakamoto was adopted by hackers.  It was a means of bartering services. “For example, a Hacker News community member named Nicholas Carlson just boasted that he is being paid for a programming project in bitcoins” according to Jason Calacanis and the LAUNCH team in an article called L019: Bitcoin P2P Currency: The Most Dangerous Project We've Ever Seen.

It would indeed be ironic if a hacker was paid in Bitcoins to compromise Bitcoin virtual currency. Last week malware was discovered to steal users’ credentials. Recently, Symantec said that the 'Infostealer.Coinbit' Trojan aims to find your wallet file and then mail it to the attacker. There is also similar code which looks for the file, but uses FTP to transfer it to the attacker's servers. Today, Bitcoin users are less than awed by a flawed system. 

 

D. Carlton Rossi

 


April 4, 2011 

uninterpretedanduninterrupted

I stood on dusty road on an arid plain. There lay land of sand with low lying desert plants typical of M. E. The day was bright.  I was we of the four horsemen. We were the four horsemen of the Apocalypse, but we were horseless. We were the horseless men. On the right side of the road was a fallen amphora. An invisible hand stood it upright. This handless amphora was dark brown in color and had an intricate design of flames cut out of the side.  A fire lit in it.  Its purpose was to light the way for horseless men. Other amphorae did upright themselves in the distance on either side of the road. The year was 3 B.C. We sat at wood bench by side of road. Earth Mother met me. She put a mud mask on my face and told me that it would give me special powers. Mud was placed on the faces of my companions, too. I was given two weapons and so were the others. They were called axes. They reminded me of adzes. However, they were more like small hoes. The handles were made of wood and were about two feet in length. They would make us invincible in battle. We arrived at the palace at hour midnight. The palace was made of white marble. We entered a large, bright room. All was white. In front of us was a spiral staircase. On top of the staircase were four, white, marble busts. I led the horseless men to the right of the staircase. At this point one of the busts behind me spoke and I turned around to address her.  It was a woman of classical features. She asked me "Where are you going?"  I said to her that "I'll kill the IMP." Then she said to me that "The question began not with Who but with What". While she said this she looked down. I then knew the answer to our quest was at the bottom of the staircase. We turned round and walked down twenty steps. We entered the subterranean underground. The cavernous, cadaverous basement was also made of white marble blocks and shone. The ceiling was high. There was a lone sentry in our way and he ran away to the left when he saw us. The passages went a short distance to the left and right and then curved to the front. The wide corridor ahead sloped downward and went as far as the eye could see. On the floor was a variegated wave pattern. We stood abreast at the juncture of the sword's hilt. Our four held high our axes in both hands. A mass of men ran toward us. They were clad in black scaled armor. Perhaps there were twelve men across the front line and the whole corridor was filled with a cacophony of swelling yelling. There was a chaotic echoic roar. Our four could maneuver better because we had more space to handle our weapons. Each axe was swung exceedingly fast in a set pattern. They were of the bee, locust, fly and mosquito. The whole line of four arched like a bow. Our bodies arched like a bow. A charge went through our bodies and our hair stood on end. A high- pitched twang was ear heard from the bow. Aeroarrow was propelled at fantastic speed. It went through basemen. The breathless army collapsed in an instant. At our feet was metal coinage of grey-black color. The coins were shaped like pharaonic vultures. The debased coinage piled some twelve inches thick. But the coinage was still alive. We horseless men stamped on the coinage with the heels of our feet to kill our foe.  It died.  


D. Carlton Rossi

  

 

March 13, 2011 

                            Hell Bank Note          

It is normally regarded as bad luck to burn real money.  However, some believe that it is good luck to burn fake money.  Of course, you will need real money to buy fake money which will be burned, so this may not be the best investment.  Pictured here is the 100 yuan Hell Bank Note of China.  It can be used in both Heaven and Hell.  Notice how the number WF190888 means "only want to make more money".  On the front of the bill is the Jade Emperor whose name is Yuk Wong or Yu Wong.  He is the Taoist Monarch of Heaven. The money is burned as a tribute to Yan Luo who is the King of Hell.  In other words, live relatives can ask the King of Hell for a shorter stay or escape from punishment for their dead ancestors. 



                     



                         
 

 

February 7, 2011                     

                        

                           Gresham's Law


Sir Thomas Gresham was financial agent of Queen Elizabeth I.  He made an observation about coins containing metal of different value but have the same value of legal tender.  In his opinion, coins made of cheaper metal will be used for payment while those of more expensive metal will be hoarded or exported.

I'd like to direct your attention to a dusty old novel by Anthony Trollope called Doctor Thorne. It was completed in 1858.  I've paid homage to Trollope by writing a poem inspired by the novel. 

In the novel, there is a Squire named Frank Gresham.  He is Gresham of Greshambury.  Now Gresham owned a lot of property, but also owed a lot of debt.  He sold a third of the whole value of the property to pay the debt. The Squire also borrowed large sums on mortgage.

The property had descended from one Gresham to another without entail.  Squire Frank Gresham encumbered it.  He sold it, too.  One could say that the bad coin—Frank Gresham—drove out the good coin of his ancestors.

The Squire and his wife Lady Arabella proposed a radical solution to the estate's problem.  Their only son—Francis Newbold Gresham—who was also known as Frank Gresham must marry money.  He should not marry Miss Mary for love but must marry a woman of fortune.  The good son Francis Newbold Gresham eventually marries Miss Mary for love; but, fortunately she had gained a fortune through inheritance.  Therefore, young Gresham was doubly blessed.

The United States is the world's largest debtor.  The question is will it marry for money or for love? Can it marry for both reasons?

D. Carlton Rossi

 


February 6, 2011
     

                   

The dollar was the idea of Secretary of the Treasury, Salmon P. Chase. It was he who had it created, and it is his portrait it bears. Later, it was Chief Justice  Salmon P. Chase of the Supreme Court who voted against the legality of the paper tender. 


                         The Civil War

It was in 1862, during the American Civil War, that the United States Note became legal tender.  It was issued by the Treasury as a form of fiat currency to pay expenses of the Union.  It was eventually expanded by The Third Legal Tender Act to the limit of  $450,000,000. 

The Legal Tender Notes had little behind them.  They were not backed by gold.  They were not backed by bank deposits.  They were not backed by government reserves.  They were popularly called 'greenbacks'.

The Treasury of the Confederate government relied heavily on the printing of notes which were not compulsory legal tender.  The notes were backed by public confidence in the Confederacy's survival.  The Confederacy printed $1.5 billion in paper money.

The Union and Confederate governments differed in their ability to raise money to finance the war effort.  The Union government relied on loans, income taxes, tariffs and excise taxes. On the other hand, the Confederacy derived about 75% of its revenue from Treasury notes.

As a result, the inflation rates in the north and south differed.  In the north it reached 80%.  In the south, there was runaway inflation which appeared with military reversals in 1862.  It reached 9000% by war's end. 

It was Lincoln who introduced the Legal Tender Note which was not backed by gold.  It depreciated currency for the masses.  However, government bonds paid interest in gold. Therefore, the banks that loaned the money received sound money in gold.

The Legal Tender Note depreciated in relation to gold. The Anti Gold Futures Act was passed in mid 1864.  This prohibited all gold futures contracts and imposed severe penalties.  The note reached its nadir during the summer of 1864 when the Union government temporarily shut down gold trading for two weeks in June.

On the other hand, the Canadian dollar (from August 1, 1854 under the Province of Canada and later under the Dominion of Canada) was on a gold standard of both the American eagle and the British gold sovereign. The dollar was defined as 15/73 of the British gold sovereign. It was also convertible upon demand.

The U.S Treasury Note depreciated against the Canadian dollar during the Civil War. The note fell from close to parity in 1862 to less than 36 Canadian cents.  On July 11, 1864 a Canadian dollar was equal to $2.78 United States dollars.

D. Carlton Rossi

 

 

February 4, 2011 

                   

                     

                     Non-Raptor Petrosaurus


Petrosaurus is a non-raptor found in the Athabasca Tar Sands of Alberta. Its colour is black gold.  It lives on dead plant and marine organisms.  It may also eat other dead dinosaurs. Truly, it is a voracious scavenger.


It resembles its modern relative the vulture.  Its wingspan is sixty feet.  The head is bald like the bald eagle; however, its colour is like night rather than daylight. In other words, the colour of its bald head is more loon-like than moon-like.  It tears apart its food with hooked beak.


This dinosaur has a heavy environmental footprint.  The depth of the footprint exceeds 75 meters.  During periods of low flow it can drink 1.3% of the annual average flow of the Athabasca River.  Its effluent is highly toxic and accumulates in tailings ponds.


Its ancestors lived in the early Cretaceous times which began 144 million years ago.  The climate was warm and subtropical.  There was no polar ice.  Petrosaurus is a unique dinosaur. It can not only modify the environment, but these modifications change the climate which in turn change the environment in a vicious cycle.  


 

February 3, 2011       



                   

                             Petrosaurus by Neuquen


                                  Petrosaurus

On January 30, 2010, Mike Stathis wrote an article called "Dismantling John William's Hyperinflation Predictions". He says that "As a consequence of this link (dollar-oil), it could be argued that the dollar is not exactly a true fiat currency.  At the same time, the dollar is not backed by a finite asset directly under its possession". 


The Gold Standard was introduced into Canada in 1853.  It was based on both the British gold sovereign and the American gold eagle.  The gold sovereign was legal tender at one pound equals $US4.86. 

In January 1929, Canada no longer redeemed Dominion notes in gold.  This meant effectively that Canada was no longer on the gold standard. Most of its gold reserves were sold in the late 1980's and early 1990's under the then government of Canadian Prime Minister Brian Mulroney.  Money of Canada has now no direct link to gold.

Canada has the second largest oil reserves in the world.  These reserves are under its control and in its possession.  The production from the Alberta oil sands is increasing.  It is estimated that production will reach 2.7 million barrels by 2015.  A great proportion of the exports will be to the United States. According to Kathy Lien in an article called "Commodity Prices and Currency Movements", the correlation between the Canadian dollar and oil prices was approximately 80% between the years 2006-2009.  For example, when the oil price soars the Canadian dollar soars. Canada currently has a petro-currency.  It is called Petrosaurus.

D. Carlton Rossi















December 18, 2010  


The Logic of Illogic




Cut taxes by $858 billion for two years.

Quantitative easing of $850 billion over two years.



D. Carlton Rossi





December 3, 2010     




                            
                        

                           Canada's Gold Reserves


Canada's reserves of gold totaled 21 million ounces in 1980. One metric tonne of gold equals 32,150 troy oz.  The Bank of Canada's sale of gold reserves reached their highest level from 1991 to 1996. 


D. Carlton Rossi



 
         
                   
                             
                                A Free Society


"Deficit spending is simply a scheme for the confiscation of wealth.  Gold stands in the way of this insidious process.  It stands as a protector of property rights".

Gold and Economic Freedom, 1966, Alan Greenspan


"To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities"

Guidotti-Greenspan, 1999






The poet publicly discloses that a fiften page analysis which posits an hypothesis has been completed with respect to the former gold reserves of the Bank of Canada. It highlights the previously undisclosed involvement of various, public officials both within the United States and Canadian governments as well as executives of a particular listed company in regard to the sale of those reserves. The outcome was the total depletion and deletion of Canada's gold reserves. 



D.卡尔顿 罗西

November 29, 2016











                                              



                   Blockchains and Cryptocurrencies

Your attention may have been diverted in anticipation of the Brexit vote whereby Britain would decide if it would remain in the European Union of 38 states. At the same time, a meeting of 90 central banks was hosted around June 6, 2016 for three days by the World Bank, IMF and Federal Reserve with regard to blockchain technology.

This technology was derived from the Bitcoin platform. For those who are unfamiliar with Bitcoin it is difficult to find a comparison except to say that it resembles a personal barter system in terms of services. It is popular among the underworld and those who wish to remain under the radar. Understandably, the technology underlying Bitcoin may be held suspect because no one knows the identity of the designer whose pseudonym is Satoshi Nakamoto. It is conceivable that a system could be designed so that it could be easily hacked by the designer.  

It is not surprising that the Federal Reserve is interested in blockchain technology. The Federal Reserve may be best known for low interest rates through quantitative easing. However, it deals extensively with bank settlements. As the central bank of the United States and private company it acts as a clearing house for financial settlements.

The Ethereum blockchain technology is a public blockchain platform with programmable transaction functionality which allows peer-to-peer contracts. It can be used by cryptocurrencies or other applications. Also, Java-like script programs like the DAO can be programmed to executable byte code.

It appears that central banks are on the verge of adopting negative interest rates. One of the main problems to implement this strategy is the presence of cash. As has been pointed out earlier by the author there will be a tendency for individuals simply to horde cash in a negative rate environment in order to avoid what amounts to a tax. This is defined as the Zero Lower Bound (ZLB) problem by Haldane who is a member of the Bank of England’s Monetary Policy Committee.

By processing transactions through an open decentralized blockchain program there is the potential to eliminate cash. This technological tactic is intended to avoid the hoarding of money (capitalism without capital) and to promote spending--thus triggering inflation. However, what discourages hoarding of cryptocurrencies? It may have to be a tax (or its equivalent).

It seems one has to clarify the meaning of “decentralized” since “central” banks are experimenting with their own applications. It seems decentralized is used in the sense that the currency is virtual and can be anywhere or everywhere. 

One cannot avoid the conclusion that all is an experiment outside the realm of conventional monetary theory and practice. The elimination of gold and the attempt to eliminate paper currency is an experiment. The adoption of programs based on cryptocurrencies is an experiment. In fact, Buterin has admitted that the cryptocurrency application of the Ethereum is an experiment which may implode. The imposition of negative interest rates is an experiment. The impression of all this experimentation is that the mice (central bankers) are running people through the maze as was depicted in Hitchhikers Guide to the Galaxy. 

It may be appropriate to mention the “Ether” which is the basic unit of Ethereum. Originally, in Greek, it meant “pure air” or that breathed by the gods. It was difficult for scientists or philosophers to define it; although, it generally represented the fifth element. Issac Newton was perhaps the most famous scientist with a hidden agenda as an alchemist to consider the ether. Of course, one of the aims of alchemy was to turn lead into gold. He was unsuccessful in this daydream. His scientific endeavors had used the concept of “ether”, but advances were difficult, so his choice (loosely speaking) was either ether or logic. It seems he rejected ether and developed the laws of physics and calculus. 

Newton though is known for something else. He was Chancellor of the Exchequer. He used gold rather than ether to back the currency. As a result of a stable monetary system the British Empire thrived for 300 years.

The developer of the Ethereum platform is known. It was a nineteen year old Canadian by the name of Vitalik Buterin who had emigrated from Russia. Currently, he resides in Switzerland. He is learning Mandarin. Ming Chan is the Executive Director at the Ethereum foundation.

Basically, the program was crowdfunded—by the people, so to speak. It was the most successful crowdfunding program in history. But who really were these people? While the designer is known the people are not known—partially due to privacy issues. In addition, who purchased 25% of Buterin’s ETH (Ether) holding in April? Were the proceeds invested in Bitcoin? Furthermore, was the holding sold prior to June 17?

The symbol adopted by the Ethereum platform is a pyramid sitting on top of the base of another pyramid. While the poet hasn’t drawn this I’mage it is nevertheless familiar to him. The reason is that he was asked to correct a translation of a document. He needed clarification on the exact shape of the pyramid of Emperor Qin Shi Huang since the description baffled him. An expert was therefore consulted. It is an image similar to Ethereum’s. The original mound was 76 meters in height at Mt Li, Lintong. While excavations have not been made at the location it is believed by at least one expert that there is an inverse pyramid below it.    

Who is Qin Shi Huang? You know him because he ordered an army of terracotta warriors for the afterlife. He built the Great Wall with conscripted workers. He also buried alive 460 Confucian scholars and burned Confucian books—particularly the Book of Songs and Classics of History. His dynasty was overthrown in a peasant rebellion.

His name, Huangdi, was a derivation. It came from the Three Sovereigns and Five Emperors. However, he also appropriated it from the name of the Yellow Emperor who had united the tribes and whose cult was popular.

In terms of philosophy, he was a Legalist which justified strict central control. It meant Rule by Law rather than Rule of Law. He eliminated the Hundred Schools of Thought which incorporated Confucianism. No opposition was tolerated.

He may have followed Daoist astrology since he was interested in the five elements. Incidentally, Daoist temples seem to have been spared in terms of banning or burning of books. He was born under the sign of water. This may explain why he took mercury pills and why a river of mercury ran through the underground of the tomb. Mercury was intended to confer immortality; although, it also hastened his death at the age of 39. The Qin Dynasty was short-lived, too.

The Ethereum platform is a virtual machine that uses the DAO. In the Foundation's words “A blockchain program is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.” Confidence in the DAO may have been particularly inspired by its religious overtones, faith and fervour of its appish followers.  

However, confidence was misplaced when the DAO was hacked on June 17th. Surprise! Surprise! Why is it a surprise since it had been reported that Buterin collaborated with hackers to design the DAO. It has also been said that the security flaw may have been known before it was hacked. No one knows who hacked the system, but one can say with confidence that it was a hacker. The hack of the DAO might have proven embarrassing to the central banks except for the fact that it seems to have been mysteriously underreported.

The DAO blockchain was launched on July 30, 2015. On June 17, 2016 it crashed. Next generation smart contracts did not last a year let alone a generation—even in computer terms. The price of Ether dropped from $21.60 to $15.

Which hackers might have had financial motive to bring down DAO? Perhaps they were hackers of Ethereum’s rival or Bitcoin. The date of June 17 may not have been a coincidence.

The Bank of Canada announced on June 15, 2016 that it was developing its own version of the Canadian dollar based on blockchain technology. It is called CAD-coin. Other Canadian banks including a consortium called RC3EV were to participate. It would run on The Jasper Distributive Ledger Settlement Program. A scheduled speech by Bank of Canada senior deputy governor was set for June 17.





                                        

                           See No Forest


 

I was in our financial capital of Toronto last Friday.  I visited a trader in his office. His office is located about a block away from where I completed the Canadian Securities Course, two year Canadian Investment Finance Course,  options course, Canadian commodities course and Philadelphia exchange currency course and about five blocks away from where I passed the Life Insurance exam. There was something happening that day that was rather amazing.  One of the traders mentioned the name Bre-X. Now I am familiar with that stock because in the dying moments of the company’s existence I bought 100 shares of the company for .10 each.  It was not an investment. I wanted the certificate to hang up on my wall. I paid the registrar $50 to deliver it to me. The certificate represents a rather historical and infamous event in Canadian finance.

 

On June 3rd the shares of another commodity company tumbled. These were the shares of Sino-Forest Inc. The traders did not pronounce it that way.  They said “See No Forest”. The company has its manufacturing in China, its head office in Hong Kong and raises money in the Canadian capital markets. I am familiar with Sino Forest since its registration in Canada through a reverse takeover. I was never a fan of reverse takeovers. Generally, companies get registration without having to go through the oversight and consideration that a full prospectus might require. In some cases, the acquired company has tax losses that are carried forward which could be used by the acquiring company as an offset.

 

The shares of Sino-Forest Inc. were in distress that day. So, too, were the notes of the company. Trading was in a frenzy.  The trader made fourteen trades in a short time on the stock before he had time to talk.

 

There was massive short selling by the American gangster rapper enthusiast Carson Block. A short seller will borrow the stock in order to short it and thus drive the price of the stock down. Short selling must be done on an up tick, but those rules have been diluted. A firm called Muddy Waters which has one employee was shorting the stock of Sino-Forest Inc. which has thousands of employees. The short seller said that the company was borrowing too much and then rolling over the debt as he borrowed the stock to short sell.

 

I don’t know who is right or wrong. I have never owned or shorted Sino-Forest Inc. However, I do believe that a cease trading order should have been called that day by the OSC or Ontario Securities Commission, so that both sides would have a fair chance to present their case. Also, I would like much better reporting by the various exchanges in short sales.  I don’t want to have to wait two weeks to know that a stock has been shorted and by that time they are out of the position. I want to know in real time the status of short sales.



 


               
                     
                     Cobalt Refinery of INCO Vale at Port Colborne
       

 

                            The PGM's are in our blood

 

I received an early education at the INCO refinery in my hometown of Port Colborne. It was here for three summers that I was a laborer.  Among other things I had to wash screens in an acidic bath. While I gained a good wage I lost about five pounds of sweat a day.  This is not an exaggeration since I weighed myself at the beginning and end of a shift. I had to take salt tablets, too. 

 

The primary metal refined at the refinery was nickel. At that time INCO had a monopoly on nickel. There were by-products of refining.  These included copper, cobalt and the PGM's from the collision of neutron stars. 

 

It was the PGM's that were of interest to me.  These were collected by special screens at the smokestacks. How valuable were the PGM's?

 

There were 3000 workers employed at the refinery.  The PGM's paid for the entire wages of the workforce at the nickel refinery.  My father's military background meant that he was chosen to protect the armored truck which went to Toronto.  The PGM's were then shipped to England.  

                                    

 

                                               


The  year is 1972.  This is part of a shipment of refined nickel loaded aboard ship in Montreal. It is bound for China. The nickel was refined at the Port Colborne Refinery. As a United Steelworker, I helped cut the sheets on the presses and then ship it out of No. 5 Warehouse. 

 

My entire family had been employed at the refinery.  My grandfather built the stack and also operated a pneumatic drill. My grandmother contributed to the war effort at the plant during World War II.  My father began as a summer laborer, became Warehouse Supervisor, was promoted to Health and Safety in both Port Colborne and Sudbury. He was a universal donor and gave his blood to hundreds. I worked at the refinery and then at Head Office in Toronto.  We breathed the air and handled the mattes.  The PGM's are in our blood.


                                        


 






                             


                     
               Festivities at Vale (INCO)



                              The One Hundredth Anniversary


I am writing this account rather quickly because it may not be of interest to my readers due to its personal and localized content, so you may want to skip it or read it quickly, too.  It is important though to me, my family and my hometown. No, it is not my one hundredth anniversary which I do not look forward to. Rather, it is the 100th anniversary of the Vale (INCO) operation in my hometown of Port Colborne.


I returned to my hometown for the celebration of this anniversary. For one hundred years metal has been refined in Port Colborne. It has been mainly nickel that was refined; although, today, the emphasis is on cobalt. Naturally, I also wanted to see old friends and co-workers who had been employed at the plant.


My grandfather helped build the large smokestack at the International Nickel Company (INCO) in Port Colborne in 1918 ie. just after WWI. He worked at the plant from roughly 1918 to 1948 or so. It is said that he developed Lou Gehrig disease from the constant use of a jackhammer, so he died in 1950 or just before I was born.  


During WWII my grandmother worked at the plant. The war effort needed nickel and therefore women were hired at the plant. She did the job of those men who  volunteered or were conscripted into the armed forces.


One of those volunteers was my father. He was seventeen when he enlisted as a volunteer. He served from 1940 to 1947. After he left the army he completed his high school diploma and a university degree at St. Michael's College, U of T.  This education was funded by the army. He joined INCO on a full-time basis He joined INCO on a full-time basis as a laborer on May 23rd, 1950.  In other words, he joined INCO a couple of years after my grandfather left it.


During that summer he decided that he liked to work at INCO. He had confidence in his ability to support a family.  As a result, he married on September 2nd, 1950. A month later he was promoted to Research Laboratory (Instrumentation).


He advanced in his career. By 1955 he was made Foreman of Instrumentation. In 1960, he was made Product Inspector. He then became Assistant Superintendent of the Shearing, Shipping and Yard in 1966. He rose to the level of Safety Supervisor at the Port Colborne plant in 1971. He was then transferred to  Copper Cliff where he became INCO Claims Administrator of the Ontario Division. Finally, he advanced to INCO Rehabilitation Co-ordinator of the Ontario Division in 1980 until 1985. 


At times, my father was called on to guard an armoured vehicle to takes precious metals to the airport so that they could be refined in England. They called on him because he had a firearms permit, knew how to use a gun from the war and was trusted. The precious metals such as gold, silver, osmium, platinum, palladium and rhenium that he guarded covered the entire wages of 2000 men plus 400 in the research station. The refinery of nickel was pure profit.


Everything was not exactly harmonious at the plant all the time. A particularly violent strike kept everyone from entering the plant. My dad was one of the few who was flown into the plant by helicopter to ensure that the processes and machinery could be used after the strike.


My dad finished his career in Copper Cliff. He lived at the base of the large smokestack. He also lived over the mine which was thousands of feet below his house. Twice a day the house would rock from the explosions in the mine. He was head of all health and safety for INCO. It is my understanding that the big stack at Copper Cliff will be dismantled shortly. I had seen the small stack at the Port refinery destroyed decades earlier on a cold winter day.


I should mention my mother, too. In 1945, she finished first in her business class at high school. That meant that she got first choice to go for job interviews through the head of the department. They sent her to INCO for an interview as a secretary. When the interview was finished they promised to contact her.  In the meantime, she went for another interview at Maple Leaf Mills which was also in my hometown. They hired her on the spot with a pay of $18 a week. That is not a typo. INCO phoned back and offered her $25 dollars a week. However, she felt committed to the job at Maple Leaf Mills.


                          

              Removing nickel sheets from presses


My own experience at INCO began in 1972 when I was a summer student. At that time my dad was in charge of health and safety or should I say "hair cuts". I had long hair at that time and was told that it had to be cut or I wouldn't be hired. So, I had a haircut and returned. I was told it still wasn't short enough so I needed another haircut. I didn't meet the weight requirement either so I cut out pieces of lead and put them inside my boots. The doctor probably had seen this kind of trick before and remarked that I looked lighter than my weight as measured on the scale.


Basically, I did every labour job in the plant as a summer student for three years. I filled in for men as they went on vacation. I would report to the labour pool at the beginning of the shift and be sent to a new job everyday by the plant superintendent. This was a good learning experience for me and I became very versatile. On holidays I would receive triple pay if it were also on the midnight shift. No wonder that I could afford to own three sports cars at the same time; namely, a 1965 MGB Roadster, a 1967 MGB Roadster and a 1971 MG Midget.


These jobs entailed real work. I was also working to completely pay for my university education, too. It was nothing like work today where someone exercises his fingers on a keyboard. The work took place during the hot days of the summer and there was no air conditioning. There were large fans in many locations. At the end of the shift we would place our shirts on the fans to dry them off. We needed to take salt tablets because of the enormous amounts of sweat that were released. For example, I would measure myself on a scale in the morning and at the end of the shift I was five pounds lighter.


I participated in something that became a milestone at the refinery. I was in No. 6 building when the first shipment of nickel rounds went to the People's Republic of China in 1972 during Mao's Chairmanship. I packed those containers, sealed them, banded the shipment and then loaded it onto trucks. The shipment went out by ship on the Welland Canal which runs through Port Colborne. My roommate at Victoria College of the U of T in that year was Zhou who came from Beijing.


The hardest job that I ever did at the plant was in the cobalt presses. The temperature of the air reached 150 degrees fahrenheit. The presses were much hotter as we lifted out the slabs of cobalt. My safety glasses would steam over from the heat. It was also the most dangerous area of the plant. I would walk on a single board over the cobalt bath. There were no guardrails. In the bath a large mixer would revolve. I was told that if I fell in it would be instant death. Later, a worker did fall in when the board broke. He was terminated, so to speak, in molten metal. 


                  
                 
                  Port Colborne Vale cobalt presses


It was with all these memories that I revisited the cobalt presses in 2018 on the 100th anniversary. The cobalt plant had been modernized in 1982. The plant was nothing like I remembered. There were lots of guardrails everywhere. The ambient air temperature was just slightly higher than the outside air temperature.


                                       

                              Barrels of cobalt  


Cobalt is the name of the game today. It is a metal which is in high demand for batteries. In fact, the entire cobalt press is virtually one big cobalt dc battery. One container of cobalt which is about two feet high is valued at $18,000 dollars. The cobalt rounds are made slightly larger than the nickel rounds because they are the same color, but of exceedingly greater value. The daily dollar output of the whole refinery in terms of nickel, cobalt and precious metals is $10 million a day. That is done with less than 200 men and women. 
 

                   

                       Number 6 Shipping Building


We were also given a tour of Building No. 6. It was very quiet compared to what I remember. That is because the shearing machinery was not operating.  I remember one worker cutting off his finger on the shears. That was the building in which I learned shipping. I could operate all kinds of forklifts. Today, one needs a piece of paper to say that they can operate these devices. There are perhaps only three workers in the entire building in 2018. The shipping process is mechanized.


The most interesting part of the tour for me was when I was leafing through some old INCO Triangles which were on display. I entered into conversation with a chemist. I asked him if he was ever abroad with Vale; for example, to Indonesia or Guatemala. He laughed at the question because he said that he is abroad. He comes to Canada from England after the refinery there was shutdown.


I told him of my experience at INCO headquarters. He knew where it was on the 43rd and 44th floor of the Bank of Montreal building in Toronto. I worked there for a year as mail boy. However, I was a mail boy to all the executives from the CEO who was J. Edwin Carter down to the various Vice-Presidents. It was I who had to deliver the cheque to the landlord for over a million dollars in rent. It is I who did the banking for the CEO who made more in one day than I made in a year. It was I who delivered the bonds from a Japanese company that were given as gifts or pay-offs for business. It was I who had to deliver the lay-off notices to the press and head of the Steel Workers Union regarding the layoff of three thousand men. That was hard for me because I had been a member of the union as a worker at the refinery. I knew how it would impact the workers among whom I had been one. I quit. 


Yet, the benefit program of INCO had been excellent. I learned of the matching gift program. I could make a donation to an educational institution and that donation would be matched by the company. Even though I was just a mail boy I contribued $1000 to Victoria College which was to become Victoria University of the University of Toronto.


INCO would also pay for my education and textbook. Therefore, I took a night course at the Sheppard campus of Sheridan College. The course was in Management Informaton Systems and I achieved an A grade. 


I also asked the chemist if he was familiar with MRT or Magnetic Resonance Technology. He was not. Therefore, I told him of the process developed by Ucore Rare Metals and IBC Advanced Technologies. There was no need to use hydrochloric acid and the same result could be achieved in separation of nickel and cobalt to achieve 99% purity. He was most interested though in its application with regard to the recycling of palladium.


I also participated in INCO in a way that none of my family had done. At age fifteen before I worked at INCO and before the legal age of owning stocks at age sixteen I owned 50 shares of common stock. It paid a dividend of 5% while I waited for a capital gain through my university years. Later, when I worked at head office the mail boy was buying stock on the INCO plan which meant that I didn't have to pay commission and dividends were reinvested in common stock on a commission free basis.


Most of you will at some time in your lives be invited to a school reunion. Our high school was actually built in 1918 with the building of the refinery. You may or may not attend such a reunion. However, it is something else to attend an anniversary at a workplace where you and your whole family have worked. It is also something else to return to the refinery where you worked as a student some forty-six years ago. How Green was My Valley before the environment was degraded as the movie title relates to coal mining. It could also be applied to nickel mining and refining. The refinery is now operated by Vale. It is more relevant than ever since it refines cobalt to power driverless cars. The refinery begins its next one hundred years.


D.卡尔顿 罗西
D. Carlton Rossi


2018年10月17








                     


                                                           Deflation

If millions of Chinese shout about the high price of pork then the Party listens. It imports pork from Canada. It doesn't want dissatisfaction or turmoil during Spring Festival or the largest yearly migration in history. However, if a single Chinese were to whisper the word "deflation" it is heard much more loudly by the Party than a million cries.

The reason is that the Chinese miracle in terms of the growth of the economy was based on inflation. The inflation was fueled by borrowing. However, the current inflation of food prices is another matter. There may have been a cover-up by the government in terms of the swine flu crisis. The effects in terms of food prices may have been exacerbated with the imposition of tariffs by the Americans resulting in artificial inflation of food prices because of both supply and demand.

However, the increase of food prices is only like the tip of the iceberg. There are structural aspects to the Chinese economy which are under great stress. To alleviate that stress to the Chinese economy the government initiated One Belt One Road. That has temporarily masked the underlying weakness of the state-run economy. The main impediment to growth though is increased borrowing costs resulting in debts. It is those debts that must be paid and if not willingly then unwillingly through deflation and deleveraging as in Japan and later as in the United States. The party is over for China.

This situation reminds the author about climate change. At first, it was denied. Then, it was said that man-made activity doesn't influence climate change which is another kind of denial. Today, they say the temperature is cold so how can that be a sign of warming. The Chinese and its government have been the greatest deniers of climate change as they have promoted manufacturing at all costs. Well, the global warming deniers are talking about weather and not climate. Scientists can prove though through facts that the global temperature is increasing. This temperature increase will have dire consequences to the planet.

The Chinese and its government look at increases in the price of food with emphasis on pork. They look at prices over the last year. That is proof of inflation. That is true as far as they can see. However, inflation of food prices is only an indicator of part of the economy. The rise in apartment prices is slowing in many Chinese cities. It is apparent that the real GNP is not only slowing but is not as high as has been reported in official statistics. The Hong Kong economy is in recession. Those are all nascent signs of deflation rather than inflation. It is time to pay the piper as the party is over. The slowing of the Chinese economy is the best news to reduce greenhouse gases. It deflates the hot air balloon of global warming.


D.卡尔顿 罗西

D. Carlton Rossi

2019年11月11日













Price Deflation in Asia


Murray Gunn

July 15, 2019



Whilst declining producer prices, or "factory-gate deflation" as it is sometimes called, can be a sign of a slowing economy, it doesn't have to be. The chart below shows that Chinese and Japanese producer prices have experienced a number of periods of producer price deflation over the past 22 years. During the Chinese producer price deflation of 2001 to 2002 for instance, Chinese GDP growth was accelerating. In fact, one could argue, as Philipp Bagus does in his book "In Defense of Deflation," that it should be natural for prices to fall in a growing economy. In simple terms, more stuff is being produced relative to demand and that should lead to downward pressure on prices. In reality, producer prices in particular are at the mercy of fluctuations in global commodity markets such as oil.


https://www.deflation.com/en/Articles/Price-Deflation-in-Asia





                     


China’s Industrial Profit Widens Drop on Economy, Deflation

Bloomberg News



October 26, 2019


Profits at Chinese industrial enterprises continued to contract as the economy slows and factory deflation deepens.

Industrial profits dropped 5.3% in September, according to the National Bureau of Statistics on Sunday.

While industrial production picked up in September, growing deflationary pressure continued to weigh on corporate profits and their debt servicing ability. Companies’ earning power will likely remain depressed in the coming month amid weak demand.

“The larger slide in September was due to a faster decline in industrial product prices and a slower growth in sales,” the bureau said in a statement released with the data.


https://www.bloomberg.com/news/articles/2019-10-27/china-s-industrial-profit-widens-drop-on-economy-deflation





                        



China's Factory Deflation Worsens

Bob Stokes


October 15, 2019



Premiere Li Keqiang of China said his nation's economy is facing downward pressure and difficulties, according to China Central Television (Oct. 14).

This chart shows the year-over-year change in Chinese Industrial Production. The August figure declined to 4.4%, which is below the extreme during the prior bear market. The last time there was a lower reading was in March 2002, more than 17 years ago.


https://www.deflation.com/en/News/Chinas-Factory-Deflation-Worsens








China “Faces The Worst Of Both Worlds” As PPI Deflation Arrives While Food Inflation Soars


August 9, 2019


However, it was the first drop in the PPI since 2016 that spooked traders, and first sent Chinese bond yields lower, and shortly thereafter, the Shanghai Composite, amid renewed fears that China is facing a hard landing, and who knows – maybe well before the 2020 US presidential election: “That underscores that rates traders are much more worried about the economy’s downturn than rising CPI.”

Indeed, as Evans-Pritchard ever so diplomatically put it, with accelerating consumer prices and the return of factory-gate deflation, “the upshot is that China faces the worse of both worlds.”


https://rawconservativeopinions.com/2019/08/09/china-faces-the-worst-of-both-worlds-as-ppi-deflation-arrives-while-food-inflation-soars/









              


Money Is Losing Its Meaning


By throwing trillions of dollars at the coronavirus problem, governments risk undermining trust in currencies.

By Jared Dillian

April 15, 2020


The dollar has no real intrinsic value, backed only by the full faith and credit of the U.S. government.


You have been distracted by the lure of a bright and shiny object with respect to free cash through unlimited quantitative easing.
If money has no intrinsic value it is worthless. If you measure yourself only in terms of how much money you have or make then what are you worth?


https://sundawu.ca/Currencies.html































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