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Apple’s iPhone, the New International Currency

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Photo Credit: Andrew Burton/Getty ImagesI’ve been paying my bills with iPhones. Not with apps or on bank sites—I’ve been using the Apple (AAPL) hardware as currency.

It started by accident in December, during a business trip to New York. I live in Rome, where domestic work comes cheap and technology is expensive. An unlocked, gold, 32-gigabyte iPhone 5s that costs about $815 with tax in the U.S. goes for €839 (about $1,130) in Italy, roughly a month’s wages for workers who do laundry, pick up kids from school, or provide care for the elderly. When one worker heard I was visiting the States, she asked me to pick her up an iPhone in lieu of the equivalent cash for work she’d done. Lining up inside the Apple Store on Fifth Avenue, I was surrounded by shoppers speaking languages from around the world. The salesman looked stunned when I said I wanted an unlocked iPhone. Just one?

A new shipment of unlocked 5s phones had just come in, he said, adding that the gold model I asked for was the most popular in Europe and the easiest to resell. To my right, a man with a credit card from a Saudi bank was trying to buy his third and fourth phones of the day. “Make it two,” I said. There was one more step: The salesman grabbed a landline from behind the counter to connect me with my bank’s antifraud department. Purchases from this store, he said, are red flags.

Do the math, and that’s no surprise. Exiting the store with my plastic Apple shopping bag secured by a rope drawstring, I no longer thought of the phones inside as appliances. They were more like gold bars.

Read more from this story HERE.

Cramer: Dollar is a Laughing Stock Worldwide (+video)

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Photo Credit: APCNBC’s Jim Cramer said the U.S. is “a laughing stock around the world, maybe worse than Italy in some ways when I look at benchmarks. We have obviously lost the faith of a lot of countries.”

“If there was a way to be able to take your money out of this country and put it in Germany … if I were Brazil, if I were Japan I would do it immediately,” he said Thursday on “Squawk Box.”

He went on to say that the slumping dollar index, which measures the greenback’s value against a basket of currencies, reflects the current sentiment of investors around the world. They are saying “lets go into gold, lets get out this dollar … lets not be in bonds in the United States, we’d rather be in any other currency because they basically have lost control,” he said.

Read more from this story HERE.

The Rotten Heart of Europe: Continent-Wide Collapse Imminent? (+video)

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Photo Credit: Irish Times

Europe’s failing currency union … has been in crisis for more than three years, and there is a frighteningly high probability that it will end in continent-wide financial collapse and depression.

Nobody was more against the creation of the euro than Bernard Connolly, a senior European Commission official when the single currency’s foundations were being laid. He saw such danger in abolishing national currencies that he wrote a book warning against doing so in 1995. He has now republished the book (which cost him his job) with a new introductory essay [watch his engaging interview with Rick Santelli here]:

It is a timely contribution from someone who can lay more claim than most to foreseeing the long-unfolding crisis. Back in 1995 he wrote: “Trying to lock countries like France and Germany together via their currencies turns domestic monetary questions into international political conflicts. It damages the economic and political well-being of every country involved.” This now appears remarkably prescient.

Connolly’s argument was based on two pillars. The first was that Europe’s elites had become so obsessed with integration that they ignored all the risks and dangers of currency union in order to further their project. To this political argument he added an economic one: that the euro would not work because any and all attempts by governments to interfere in how markets determine exchange rates are economically and politically damaging…

Connolly dismisses as a “propaganda slogan” the claim that the EU has prevented war in Europe and describes those who talk of “building Europe” as being akin to Bolsheviks in their ideological single-mindedness.

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Why the US Dollar is Going Extinct

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Is the Dollar Dying? Why US Currency Is in Danger

By Jeff Cox. The US dollar is shrinking as a percentage of the world’s currency supply, raising concerns that the greenback is about to see its long run as the world’s premier denomination come to an end.

When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business.

While the American currency still reigns supreme — it constitutes $3.72 trillion, or 62 percent, of the $6 trillion in allocated foreign exchange holdings by the world’s central banks — the Japanese yen, Swiss franc and what the IMF classifies as “other currencies” such as the Chinese yuan are gaining.

“Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown,” Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. “But it will be, and this defrocking may occur in as short a period as five to 10 years.”

Bove uses several metrics to make his point, focusing on the dollar as a percentage of total world money supply.That total has plunged from nearly 90 percent in 1952 to closer to 15 percent now. He also notes that the Chinese yuan, the yen and the euro each have a greater share of that total. Read more from this story HERE.

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The Dying Dollar and the Rise of a New Currency Order

By Anthony Migchels. For years now, the collapse of the dollar has been in the cards. Recent developments show mounting pressure on the dollar’s reserve currency status. With a major international deflation going on, the threat of inflation through money printing is unreal. However, should the dollar’s reserve currency status end, the repatriation of trillions of petro- and eurodollars could lead to a strongly inflationary scenario.

The roles of a reserve currency are to finance international trade and to function as a store of value for Governments. Until the second world war it used to be the British pound, but with the demise of the British Empire, the pound lost its international relevance and was overtaken by the dollar. This was formalized in the 1944 Bretton Woods system. All other currencies were fiat currencies, but pegged to the dollar, which in turn was pegged to Gold at 40 dollars an ounce and redeemable for international trading partners.

The Eurodollar
With the dollar as the reserve currency, the US had to export dollars. In the early years after the war especially for Europe, the famous Eurodollars. This sounds great: print money and buy whatever you like. But with the Gold window it was also risky: overprinting could mean excess dollars would be exchanged back to Gold, depleting US Gold reserves.

This was also a weakness that those annoyed with American Hegemony could exploit. In 1967 the leftist press mogul Jean-Jacques Servan-Schreiber penned a famous screed called ‘le défi Américain’ (the American challenge’), arguing Europe was being colonized economically by superior American competition.

France, at the time, was run by de Gaulle, who never was impressed with Anglo-American supremacy. He made a point of exchanging every dollar he could lay his hands on as a means to undermine it. Read more from this story HERE.

Arizona Lawmakers Pass Bill Making Silver, Gold Legal Tender

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Photo Credit: Reuters The Arizona Senate on Tuesday approved a measure to make gold and silver legal currency in the state, in a response to what backers said was a lack of confidence in the international monetary system.

The legislation cleared the Republican-controlled Senate by an 18-10 vote after being approved by the state House earlier this month. It now goes to Republican Governor Jan Brewer, who has not indicated if she will sign it into law or veto it.

The bill calls for Arizona to make gold and silver coins and bullion legal tender beginning in mid-2014, joining existing U.S. currency issued by the federal government.

If signed into law, Arizona would become the second state in the nation to establish these precious metals as legal tender. Utah approved such legislation in 2011.

More than a dozen states have considered similar legislation in recent years, according to the National Conference of State Legislatures.

Read more from this story HERE.

China-Australia Pact Could Lead to Dollar's Collapse

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Photo Credit: Zero Hedge

[T]he Australian [is] reporting that the land down under is set to say goodbye to the world’s “reserve currency” in its trade dealings with the world’s biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process “slashing costs for thousands of business” and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar’s reserve currency status until one day it no longer is.

That said, this latest development in global currency relations should come as no surprise to those who have followed our series on China’s slow but certain internationalization of its currency over the past two years…

And while previously the focus was on Chinese currency swap arrangements, the uniqueness of this weekend’s news is that it promotes outright convertibility of the Yuan: something China has long said would happen but many were skeptical it ever would. That is no longer the case, and with Australia setting the precedent, expect many more Asian countries (at first) to follow in Australia’s footsteps, because while the developed world is far more engaged in diluting its currency as a means to spur “growth”, Asian and developing world nations are still engage in real, actual trade, where China is rapidly and aggressively becoming the world’s hub…

Why is this so very critical? For the simple reason that the free lunch the US has enjoyed ever since the advent of the US dollar as world reserve currency, may be coming to an end as other, more aggressive alternatives – both fiat, and hard-asset based – to the USD appear. And since there is no such thing as a free lunch, all the deferred pain the US Treasury Department has been able to offset thanks to its global currency monopoly status will come crashing down the second the world starts getting doubts about the true nature of just who the real reserve currency will be in the future.

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G20 Summit To Focus On ‘Currency War’ Threat To Economy

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Photo Credit: naitokzJapan’s aggressive attempts to spur on its struggling economy were set to escape censure from the G20 nations today as bickering in Moscow kept alive fears of a “currency war”.

Finance ministers at the G20 gathering are understood to have pulled back from explicit criticism of Japan, whose prime minister Shinzo Abe has embarked on a huge programme of monetary and fiscal stimulus to jump start the world’s third largest economy out of its third recession in five years.

The currency market was thrown into turmoil this week after the G7 – the United States, Japan, Germany, Britain, France, Canada and Italy – issued a joint statement warning against using domestic policy to target currencies.

But the show of unity was immediately shattered by off-the-record briefings against Japan, which needs a weaker yen to help fuel its export-driven economy.

European Central Bank president Mario Draghi yesterday labelled the behind-the-scenes briefing as “inappropriate, fruitless and self-defeating”.IMF chief Christine Lagarde and Russia’s deputy finance minister Sergei Storchak also denied the ex- istence of currency wars, labelling recent swings in the yen as “market reaction to exclusively internal decision making”.

Read more from this story HERE.

Virginia Advances Bill Pushing For State To Establish Its Own Currency (+video)

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Virginia is one step closer to breaking ties with the country’s monetary system.

A proposal to study whether the state should adopt its own currency is gaining traction in the state legislature from a number of lawmakers as well as conservative economists. The state House voted 65-32 earlier this week to approve the measure, and it will now go to the Senate.

While it’s unlikely that Virginia will be printing its own money any time soon, the move sheds light on the growing distrust surrounding the nation’s central bank. Four other states are considering similar proposals. In 2011, Utah passed a law that recognizes gold and silver coins issued by the federal government as tender and requires a study on adopting other forms of legal currency.

Virginia Republican Del. Robert Marshall told FoxNews.com Tuesday that his bill calls for creation of a 10-member commission that would determine the “need, means and schedule for establishing a metallic-based monetary unit.” Essentially, he wants to spend $20,000 on a study that could call for the state to return to a gold standard.

The gold standard is a system under which a country ties the value of its currency to gold, setting a fixed price at which gold can be bought or sold by the government.

“We’re not going to be printing money with Dave Matthews or Jeff Davis on the front of it,” Marshall said, referring to two famous Virginians.

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Boehner refuses to go along with Romney’s plan to confront Chinese currency manipulation

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The top Republican in the U.S. Congress highlighted a policy rift Thursday with his party’s presidential hopeful when he reiterated his opposition to using legislation to press China to revalue its currency.

Staking out a position in contrast to the hawkish views of Mitt Romney, House of Representatives Speaker John Boehner, who has opposed repeated efforts in recent years to pass laws that would put tariffs on Chinese goods unless it allowed the yuan to appreciate, told reporters he still felt the same way.

“There’s a way to deal with this problem and a way not to deal with it. Congress passing a law outlining stringent requirements for dealing with the Chinese and the value of the currency, I think is inappropriate,” Boehner said.

Earlier this week, Lanhee Chen, the Romney campaign policy director, issued a blistering statement in which she said President Barack Obama, a Democrat, had “lost all credibility on China and trade” for among many things, failing to label China a currency manipulator despite his 2008 campaign pledge to do so.

“What message does it send the Chinese when President Obama refuses to even formally acknowledge that they are in fact manipulating their currency?” Chen wrote.

Read more from this story HERE.

Photo credit: jimmiehomeschoolmom