Summary: Will vaccines be mandatory?<br> As credit replaces money, should velocity be redefined?<br> Covid 19: Health crisis or global economic crisis?<br> <br> <br> The McAlvany Weekly Commentary<br> with David McAlvany and Kevin Orrick<br> Will Covid Be The Excuse For A Cashless Society?<br> September 30, 2020<br> “At the end of the day, if you think about the MMT [Modern Monetary Theory] crowd, you have the ability to print. That’s one version of power. But the thing that’s required for you to not lose legitimacy is that you still maintain the power of coercion by taxes. But again, the more you control your audience and control the capital pool, the easier it is to maintain legitimacy, if you are in that MMT crowd.”<br> --David McAlvany<br> Kevin: Well, I had a new experience this weekend. I’ve done many zoom calls during this period of time, but I wasn’t actually part of a zoom conference until this weekend at Wealth Conference. And I thought, you know, since I can actually use a visual, I’m used to just talking on the phone, I thought I would do that. I took a $20 gold piece, one ounce, St. Gaudens back from 1908, and I held it up with a $20 bill, Dave. I said, originally this $20 bill was just simply a receipt for this $20 gold piece.<br> Then of course I had prepared fifteen $20 bills, and I counted it out right there on the screen. And I said, when I started in 1987 with Don McAlvany that’s what this $20 gold piece was worth – 15 of these receipts. And then I went on to say, now it’s close to 100 of these $20 bills. So it was interesting to me, I’ve never even done that visual. I’ve talked about it on the phone, but when you visually see that an ounce of gold stays the same, buys the same amount of bread that it did 100 years ago, but it takes one hundred $20 bills to do the same thing, it’s powerful.<br> David: When I’ve done something similar to that, my experience from that point forward has been a diminished interest in those paper receipts. I look at them with some degree of disdain and I have this compulsive desire to want to get rid of them as quickly as possible. And it could be on anything. I’d rather buy T-shirts.<br> Frankly, the smarter thing would probably be to buy gold or silver, but it doesn’t matter, I just look at it and I think, “This is a game and this game is being played on a clock, and if the time runs out, then it’s going to go from 1 to 15 to 100. To what’s the next multiple? Is it 200 or 1000? At a certain point, you realize that all we ever were playing with was confetti. And that’s the beauty of the old gold standard.<br> It’s fascinating, I’ve had this conversation with Richard Duncan offline about velocity of money, the change in the monetary system and why velocity is no longer important. And it’s a good conversation. It’s a healthy exercise.<br> Kevin: Right, because you’ve said if velocity increases, we’ve created an awful lot of money, so inflation has to hit.<br> David: And I want to hit this maybe next week, because we have the Z-1 report out. Doug Noland did a great job exploring some of that in last week’s Credit Bubble Bulletin, but I’m going to wait until next week to not only engage some of Doug’s comments, but also look at sort of Rich and my back and forth on that old equation, MV = PT [amount of money times velocity equals price times transactions].<br> Kevin: One of the things I like about Duncan is, he does raise my blood pressure because I don’t always agree with him, but MV equals PT has been a standard, and that’s being challenged by Richard.<br> David: Yes, so we agree that we have a new money and it is credit, so the old velocity doesn’t make sense anymore, and I’ll concede that to a certain degree. But I think if we’re saying we have a new M in the equation, we also have to look at a new V in the equation, which captures the growth in credit. And that’s why we will focus on the Z-1 report and say that velocity is...
