Summary: Stephen Roach warns of a crash in the dollar by as much as 35%.<br> “Money is no longer scarce,” will lead to money no longer having value.<br> Scarcity and value go hand in hand & vice versa.<br> <br> Click Here For The Article Mentioned In The Program<br> <br> <br> The McAlvany Weekly Commentary<br> with David McAlvany and Kevin Orrick<br> Redefining Money, or, “If Wishes Were Horses…”<br> October 7, 2020<br> Kevin: Many of our listeners know that on Monday nights we meet, you smoke a cigar when you’re not training, and I drink a little bit of a Talisker, and we talk about things. One of the things that we’ve been puzzled by, Dave, is this amazing amount of money that’s been created, this sea of money, and we’re just wondering where velocity went, which is how many times a dollar changes hands. Velocity has been falling now for about a decade, really.<br> As we were talking about it, because we knew you had committed last week to talking about velocity, in particular, of money this week, it hit us both. We’re not talking about velocity of money. We’re talking about scarcity. Is there even scarcity anymore? Money used to be something that was scarce. That gave it value. Is there scarcity? And is that the direction we should look at today?<br> David: Yes, and scarcity is our subject. Does scarcity have value or is abundance to be preferred? The answer seems obvious. If a little is good, a lot must be better. So abundance is, I think, where we end up landing.<br> Kevin: Even how we measure money has changed over the last 100 years.<br> David: Yes, even our theories of money. The quantity theory of money is being left behind because it depended on an old definition of money. We’ve been redefining money for the past 100 years in different ways, in different iterations, beginning in 1922 at the conference of Genoa when we shifted to the Gold Exchange standard, a subtle difference. But then a hard shift in 1933 when we made gold illegal domestically, but still maintained legitimacy with our foreign creditors by keeping the exchangeability of gold with foreign creditors.<br> That followed up at Bretton Woods in 1944 when we defined the World Monetary System according to the U.S. dollar based on our massive gold reserve assets and a stable economy. And then, of course, more recently, when we left the Bretton Woods system and unhinged the dollar from any tangible backing in the 1970s. That final move allowed us to shift from a narrow definition of money to a very broad one, including credit, in the new definition of money.<br> Kevin: And that’s something you and I can’t do. To me, that’s the defining line. You and I can count what we have in our bank account as an asset. We really can’t count what we could go charge on our credit card as an asset. Yet what you’re talking about is, that’s how money works. If you think about debt, and we’re going to talk quite a bit about that today, I think of the old saying, “If wishes were horses, all beggars would ride.” Now, if you think about that, debt is a wish brought from the future into the present. And there’s still a cost.<br> David: So you redefine money and the benefits then accrue to those segments of the financial universe that are closest, both to the creation of money, as it was and as it is, and its flow. So now you have securities, you have money-like instruments, and credit, primarily, is what we’re talking about. And so who’s the primary beneficiary? Wall Street and your major financial firms have, really, since the 1970s and more rapidly since the 1990s, displaced even commercial banks as the handlers of money, as the creators of and the distributors of, this new form of money. So even as deposits and currency in circulation have become a smaller part of what today constitutes money, Wall Street has had a bit of a haven.<br> Kevin: So the question becomes, how then do you count velocity? If old money,
