Greece’s Prime Minister warned that Greece will leave the EU and return to the old currency, the drachma, if it does not receive more money from the EU. In essence, Greek politicians want to steal from either all EU taxpayers or just Greek taxpayers. By returning to the drachma, Greek politicians can issue as much currency as they need or want, and the value of that new currency comes from anyone holding the currency. If you’re in Greece or the EU, consider other ways to store your wealth.

See related AP article.

Japan and China announced they will start using their own currencies for trade, decreasing their use of Federal Reserve dollars. This will reduce the demand for dollars and reduce its value.

Bloomberg: Yen-Yuan Trade Plan to Cut Dollar Dependence of China, Japan

A UK politician, justifiably upset about the banking fraud of some banks in Iceland, wants to prosecute all the people who live in Iceland. Here’s my response:

You can blame the policeman, but not arrest him. If Iceland’s politicians conspired with the criminal banks to defraud UK savers, then you can arrest and prosecute the politicians, along with the bank owners and responsible employees. If the politicians simply ignored the criminals, then you can only vote for others during the next election (or ideally disband the gov’t completely). It is the criminals who are responsible for the crimes, and in this case it was the banks who took on deposits and then lent them to people who likely would never repay. The UK should be going after the bank operators and that might mean an extradition request.

Don’t blame ALL the people who live in Iceland for the crimes of a bank owners. There’s a local bank in my town here in the USA. If they lose your deposits, don’t expect me to pay. And I won’t come after you if your local Huddersfield banks steal deposits.

For your next column, write about the need for people to investigate banks, especially ones in other countries, before depositing their money and the crucial need to separate government from banking so people don’t expect taxpayers to foot the bill for the crimes of banking officials — no one expects taxpayers to cover missing dry cleaning items or failed restaurants.

Read politician’s column.

Here’s my response to a journalist writing about Iceland adopting the Canadian currency:

Aluminum would be better as money than digits or pieces of paper. Fundamentally, money is a popular PRODUCT used as a medium of trade. It’s a PRODUCT with a primary use in society, and for that reason people accept it since they know others want it. No one uses digits or paper as a necklace for a night on the town, but they do use gold, and they use aluminum for many applications. Aluminum was never chosen as money because it’s quite heavy compared to its value.

The loonie and other national currencies such as the krona, pound, euro, us dollar, etc. are all worthless digits and paper forced upon the people by governments that use these fiat monies to tax people, by creating more of the digits, which steal value from all existing digits. Governments vary in how much they tax their subjects and Canada’s ruling party has been kinder than others.

Moving to the loonie from the krona would be a step up, though still a step in purgatory. A step into honesty would be moving to a product and if aluminum is the only option, so be it. People will use credit cards and electronic transfers to trade aluminum, making weight a non-issue in these times.

Here’s the column about moving to the Canadian currency.

Amazon’s Seller Service, that helps people store, pack and ship items, steeply raised its prices denominated in dollars. Some prices increased about 80 percent! No surprise since Federal Reserve doubled the money stock in 2008 and this will mean the value of each dollar will fall by one half, and this means merchants will double their prices (in dollars).

In the five years since we launched, we’ve made few adjustments to our fulfillment fees, despite rising costs to us and to other fulfillment and transportation providers. [emphasis added]

…we are announcing the following changes to the FBA fee structure to better reflect our costs…

• The fee for Media Units under $25.00 will change from $0.60 to $1.00.  [one dollar used to be worth 1.6 media units; now it's worth 1 media unit -- a 38% decrease in the value of the dollar]
• The fee for Non-Media Units under $25.00 will change from $0.75 to $1.00.  [23% decrease in dollar purchasing power

Expect more price changes (if you use dollars) since Federal Reserve issued 28% more dollars in 2001 (so far!).

Thru October, Federal Reserve and its member banks have created 28 percent more dollars. This comes on top of their 18 percent increase in 2010 and a 104 percent increase in 2008. Each increase will mean a similar decrease in the dollar’s value, from what it would have been without the increase.

The vertical gray bars represent US recessions. 2011 doesn’t have a gray bar. Either recessions do not directly impact the money stock or the US is still in a recession. Or maybe 2008′s 104 percent increase relates to the recession, while the 2011 increase occurred because fewer nations, money funds, and people were lending money to the U.S., so Federal Reserve created dollars and lent them to the U.S. government.

If you’re not getting those new dollars, then you’re providing them, since the value of the new dollars comes from the value of all existing dollars. Imagine if you were filling a cupcake tray that has 12 spots and you ran out of batter before filling the final three. You would take batter from the other nine. Fed Reserve and it’s main client, the US Federal Government, and its main clients, military contractors, are eating your cake.

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Download Fed Data with Gradient Table [XLS]

View original chart from St. Louis office of Federal Reserve

Food Time Line provides some food prices dating back to 1600. The more recent history shows Kellogg’s Corn Flakes cost 19 cents in 1955 and 379 cents in 2011, 20x as much. Since the cereal has not become more 20x more popular, and since it’s easier to produce corn now versus 50 years ago, the price change must be due to falling value of the money.

To frame the price change another way, 19 cents was worth 1.0 box of corn flakes in 1955 and now is worth 0.05 box of corn flakes, a 95 percent fall. If you inherited stock that lost 95 percent of its value, you would sell it. You can sell your cents (and dollars) as well. Convert them into another product, which will be your new “money” for savings, and when you need to buy some Corn Flakes or really a month or more of groceries, convert your money back into dollars and cents.

For example, if you converted 19 cents into corn “futures” (a modern-day financial product) or silver or gold, your corn futures would likely be worth about 379 cents, and you could still buy one box of cereal.

Visit Food Time Line.

Just learned about the graphs at Economagic during a search for dollar quantity (aka money supply) charts. Listed below are some of the possibly thousands of charts. On the site, hovering over the links produces chart images.

It’s nice to see they use the phrase “money stock” instead of the “money supply”, since “supply” implies more is better, while “stock” is neutral.

The site’s interest rates charts show how in 1990, the CD interest rate was about nine percent, and today about 2.5 percent, a loss to savers of about 6.5 percent per year, and a windfall for debtors.

Some economagic charts:

Aggregates

• M1: Currency, traveler’s checks, demand deposits, and other checkable deposits
• M2: M1 plus retail MMMFs, savings, and small time deposits

Components of M1

• Currency
• Nonbank traveler’s checks
• Demand deposits
• Other checkable deposits at commercial banks
• Other checkable deposits at thrift institutions
• Total other checkable deposits

Visit Economagic

A Forbes blog writer, Agustino Fontevecchia, notes the quantity of dollars (aka money supply)  influences the dollar price of gold.

Another interesting approach is to look at money supply and measures of the money stock.  Since September 2008, the U.S. monetary base has increased by more than 200% [tripled!], compared with a rise in the price of gold of about 70% [almost doubled].  “If the two had been directly related, gold should already have risen to around $2,800.” (Watch Like Gold But Can’t Handle The Volatility, Check Out The Miners).

Looking only at M2, the U.S. broad money aggregate, it has only risen 20% in that time period.  “The ratios of gold prices to US M2 and nominal GDP are already some way above their long-run averages,” reads the report.

More.