Money determines most of our lives but the one question no one asks is who gives money its value? 

The government?  No, otherwise money could not lose its value during hyperinflation as we have seen in Zimbabwe. 

Actually people like you and me give value to money.  As soon as we realise that it is we, not government or banks that give value to currency then the idea of going for a loan to the bank where they can charge you interest on money they create starts to look slightly ridiculous. 

When we start to understand we are the source of monetary value how does this change our perception of central banks like the NZ Reserve Bank printing ever larger quantities of money?  If we owned the money we used could we do a better job than the inflation/hyperinflation the over-issue of money usually brings?

 If you like the idea of having more control over the money you use consider joining other people in creating your own money.  750,000 Kiwis can now receive 10,000 RedPill free, no strings attached.  When all RedPill have been distributed we can start using it as gold-pegged money own by people with no central control.  Now there is a thought!

Hyperinflation does not just bring economic chaos.  Here is an account of the spring of 1922 in Germany:

The self-confidence of the country ebbed away along with its prosperity, and as it did so the moral degeneration of the nation and its institutions set in. Pessimism and restlessness grew as sense of security, community spirit and patriotism dwindled. Neither the hatred of French militarism in the abstract and of France in general, nor a growing desire for revenge, were enough to hold together what had been the most law-abiding people in Europe when the very fabric of that nation was crumbling along with its ethical values, and when the moral, material and social ravages of inflation were undermining and immeasurably worsening the condition of both.   

Adam Fergusson When Money Dies: The Nightmare of the Weimar Collapse p.45  Free pdf here: https://www.goldonomic.com/When%20Money%20Dies.pdf

The German people finally took the situation into their own hands by given Gold Loan Bonds stable value.  The same mechanism is at work today with RedPIll – NZ money for the real economy owned by Kiwis – stable, decentralised, free.

On 14th May Labour announced plans to spend an additional $163 billion by 2024. This will be new money printed by the Reserve Bank. That equals $33,000 for every Kiwi.  Do you think you will see your share?  One reason why not is called the Cantillon Effect after 18th century French banker and philosopher named Richard Cantillon. 

Cantillon noticed that those closest to new money receive a disproportionate share.  Because banks, government and large business are closer to the Reserve Bank than individuals they reap the greatest benefit from printing new money.

Cantillon developed his theory by noticing that, say the flow of gold to the Kind of Spain, made the King and his court rich but did not increase the wealth of the majority of the population.  As Matt Stoller comments:

In the 18th century, this meant that the closer you were to the king and the wealthy, the more you benefitted, and the further away you were, the more you were harmed. Money, in other words, is not neutral. This general observation, that money printing has distributional consequences that operate through the price system, is known as the “Cantillon Effect.”

The Cantillon Effect is one reason why the gap between the rich and poor continues to increase – the vast quantities of new money being printed by central banks primarily benefit those closest to the source.

One of the benefits of RedPill money is that it helps to redress this growing gap.  750,000 Kiwis can own 10,000 RedPill free, no strings attached simply by entering their wallet address into the RedPill website.  Because 25% of the Kiwi population are closest to this new money they are the ones that receive disproportionate benefit.  This is why I have called RedPill real money for the real economy. 

Here is the one graph every New Zealander should see.

In every country in every historical period the over-issue of money has led to hyperinflation.  In its latest report the NZ Reserve Bank has confirmed that since December it has more than doubled the money supply.  For years the bank’s assets have been around $30billion.  They are now $56 billion.

In response to COVID-19 we’ve introduced a range of initiatives to provide additional monetary stimulus and to support the smooth functioning of New Zealand’s financial markets. These initiatives have enlarged our balance sheet from its December (pre-COVID-19) level of $24.6 billion to $56.0 billion at the end of June. Of this increase $4.9 billion occurred during June.

However the story does not end there.  As the bank mentions in the next sentence:

Our balance sheet is likely to increase further from here.

Clearly this is not business as usual.  New Zealanders have become good preppers for earthquakes, tsunamis and viruses.  Should they now be prepping for hyperinflation?

Last week New Zealand’s alternative gold-pegged currency RedPill released  7 Hyperinflation Essentials that help business owners evaluate the risk.

If the Labour government’s May announcement of pumping another $163 billion into the economy transpires the Reserve Bank’s balance sheet will reach $187 billion by 2024.  For an economy the size of New Zealand this is a staggering sum.

By way of comparison the Reserve Bank estimates the total cost of rebuilding Christchurch after the 2011 earthquake at $40 billion.  Is it only a matter of time before the NZ dollar hyper inflates? 

It looks like hyperinflation is taking hold in Turkey. 

https://www.zerohedge.com/markets/turkey-hit-bank-runs-currency-panic-locals-sell-their-cars-and-houses-buy-gold-while-lira

Takeaways for New Zealanders may include:

• Turks are fleeing to hard assets, gold in particular.  This is typical when a currency begins to free fall.
• The government is urging people to stay with the local currency – of course because it is people’s loss of confidence in the currency and government that is causing the loss of value.
• Turks prefer gold over US dollars – not surprising given the huge money printing in the US this year.
• Once a currency starts to hyper inflate it all happens very fast.
  

One of the comments to the article makes the point that Turks are leaving themselves vulnerable by leaving their gold with a bank.   New Zealanders need to remember that banks can seize the assets of their depositors if they get into trouble (Bail-in).  Bank runs as hyper-inflation takes hold are part of the course as people try to get their failing currency out of the bank and into hard assets as fast as possible.

The key to managing hyperinflation is stable money.  This enables you to earn and shop.  In 1922 the German people took matters into their own hands by keeping Gold Loan Bonds at stable value even though the mark was hyper inflating into nothingness.  The same approach is being taken with RedPill.  The 750,000 Kiwis who are able to own RedPill are also able to maintain its peg to the value of gold.  RedPIll is stable, gold pegged money for New Zealand owned by Kiwis who choose to make their preparations now.

Along with recession from lockdown a tidal wave of money printing by central banks here and abroad raises questions about the risk of hyperinflation in New Zealand.  To help business owners evaluate this RedPill today  releases its 7 Hyperinflation Essentials. 

“The 7 Essentials gives the key facts about hyperinflation on a single page.  They provide a context for NZ businesses to evaluate the risks they face,” says Branton Kenton-Dau who oversees the free distribution of RedPill money to 750,000 Kiwis.

For example business owners may be surprised to learn how fast hyperinflation can take place.  Currencies have repeatedly become worthless in a matter of months.  Alasdair Macleod, Head of Research at Goldmoney has forecast the USD hyper inflating by the end of the year.  Does the speed of hyperinflation make his prediction more plausible?  Or is Modern Monetary Theory (MMT) right and the Reserve bank can print as much money as it likes with no consequences?

The 7 Essentials suggests the critical factor enabling businesses to operate in a hyper inflationary environment is finding a stable means of exchange. This enables customers to keep shopping while staff and suppliers can be paid.  In 1922 Germany people finally took matters into their own hands by giving stability to Gold Loan Bonds even though they had no more backing than the hyper inflating mark.

New Zealand is currently the only country in the world where a gold-pegged alternative currency is being developed that could provide monetary stability if fiat money becomes worthless.  RedPill offers a free Zoom presentation for businesses wanting to learn more.

Last month Alasdair Macleod, Head of Research at Goldmoney.com suggested the USD could hyperinflate by the end of the year.  What are the big picture indications that he may be right and what does this mean for New Zealand?

What happens in the United States has direct consequences for NZ and the rest of the world because 61% of all bank reserves are denominated in US dollar. 

The Federal Reserve continues its policy of monetary expansion.  Since its inception in 1914 the Federal Reserve has never been able to reduce its balance sheet for more than a few months.  In every historical period and on every continent the over issue of money has led to hyperinflation.

The recent fall of the USD against a basket of fiat currencies may be a further sign of the dollar’s declining value. 

This loss of value can most clearly been seen when compared to gold, the long term stable measure of value.

Last week we learned that U.S. GDP was down 32.9 percent on an annualized basis last quarter.  That officially makes last quarter the worst quarter in U.S. history.

More than 54 million Americans, one third of the workforce, have filed new claims for unemployment benefits during the last 19 weeks.

Walmart Inc. is joining the ranks of Macy’s and L Brands in eliminating hundreds of corporate jobs in order to cut costs.

Are the same drivers present in New Zealand?

The NZ government continues to believe COVID-19 poses a threat to the country.  This could lead to further economic disruption.

The Reserve Bank is pursuing its own policy of monetary expansion with plans to expand money supply by $163 billion over the next 5 years.  This will raise national debt to 53% of GDP.

Like the USD the NZD continues to depreciate relative to gold.

Food for thought?  The essence of any contingency planning is to anticipate what MAY happen and take appropriate action.  If you own a NZ business RedPill now has resources that can help in making those preparations. 

“By failing to prepare, you are preparing to fail.”
― Benjamin Franklin