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Diamonds and gold do last forever, but fiat currency — and even 007 — don’t.  Sean Connery played the original James Bond role on the silver screen from 1962 to 1983.  The launch of the James Bond film series during those 21 years were very successful box office hits, which led to 007 becoming the third greatest hero in cinema history.

Numerous actors have taken on the role of 007 ever since, just as all fiat currencies since the Romans have ended in devaluation or collapse, then been replaced by another actor.  Rome had the denarius. China had “flying money.” France had the livres, assignats, and then francs in the 20th century.  Weimar Germany had the mark in one of the greatest periods of hyperinflation that ever existed.  By the end of 1923, one USD was worth 4 trillion marks.  Here’s a 50 trillion mark and a chart of their quantitative easing policy…

The 20th century is littered with examples, including Argentina, Finland, Greece, Hungary, Italy, Mexico, Norway, Russia, Thailand, and Yugoslavia.  In the 21st century, there’s Turkey and Zimbabwe.  Here’s 100 trillion Zimbabwean dollars…

Venezuela is currently in the midst of economic collapse, along with hyperinflation.  Here’s Venezuela’s current rate of inflation and stock market valuation…

I bring up those examples of currency devaluation and hyperinflation to remind us that history has not ended.  The USD is still considered the world’s reserve currency, but things have not gone too well lately…

Let’s revisit 2008 with a peek into a meeting that took place at the Federal Reserve Bank of New York the weekend prior to the collapse of Lehman Brothers.  I was there working in NYC.  Not in the room, but in a capacity where I was aware of what was taking place.  One scene of the docudrama “Last Days of Lehman Brothers” sums up the problem we still face.  We’ve only kicked the can “a little while longer” down the road.  Listen carefully to the dialogue in the 5:15 to 13:20 timestamp…

Here’s our current Treasury Secretary, Steven Mnuchin, on Bloomberg TV yesterday discussing the U.S. debt ceiling, Federal Reserve, USD, and 100-year bonds…

Would you now invest in a United States 100-year Treasury bond?  Really?!  You’d be making a huge bet that there won’t be any inflation over the next century.  Are you going to argue that the Treasury can just inflate away the value of the debt?  To be a buyer at this time, you’re either pessimistic on the economic outlook, optimistic about the prospects of inflation, or have no idea what you’re doing.  The issue with a pessimistic view is whether or not there will be any valuable USD-denominated currency to pay you in 100 years.  If so, and if history is any guide, it will be worthless.

By the way, Argentina just issued 100-year bonds denominated in USD..

“If you’ve never invested in bonds before, the most important thing to remember is that bond prices and interest rates have an inverse relationship.  So if interest rates go up tomorrow, the value of the bond that you buy today will decline.  And if interest rates keep going up over the coming years (and century), this Argentina 100-year bond will becomes worth less and less.  How likely are rising interest rates?  Well, considering that interest rates are currently near the lowest level they’ve been in the 5,000 year recorded history of our species, falling bond prices are practically guaranteed.  This means that the price investors paid yesterday is more than likely the highest that the bond will ever be valued at… ever.  So basically investors paid a record high price to buy junk debt from a country with a history of default in a currency backed by the largest debtor that has ever existed in the history of the world. What could possibly go wrong?” – SovereignMan

“One simple rule to follow: Determine what is best for the government and know that is what the powers are working to make happen.  Inflation is what is best for a government with enormous debt.” — Ayn Rand

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