Stealing Wealth – Central Banks Taste AAPL

Written By: The WealthCycles Staff

Over the years the classic Goldsmith’s Story of how a gold vault becomes an IOU print and loan center sure has changed quite a bit. Today, not only are the assets central banks obtain in order to increase the currency supply not golden, many are not even prudent investments.

At first, IOUs were issued to customers who wanted to use the Goldsmith’s vault for safekeeping. Eventually, as IOUs themselves circulated in the community as currency, Goldsmiths realized the IOU holders would request redemption into gold and silver only on occasion. This opened the door for them to issue loans based on gold that other people owned and pocket the interest as profit; an IOU could be printed by the Goldsmiths in exchange for a promise to repay from the customer.

Today neither redeemability of these paper notes is possible, nor is the present-day “money trust” only taking in promises to pay, such as bonds, they are “buying” ever more unconventional assets.

From the mid-1980s onward, bonds issued by governments—basically loans used to fund government spending—were viewed as good, low-risk assets. Governments have the power to collect taxes from citizens in order to repay the bonds. However, as these instruments have skyrocketed in price due to shaky confidence in the world economy, the amount of return to investors has shriveled. In real terms, defined as the return of an investment minus the depreciation of the purchasing power of currency, investors in bonds in effect have to pay in order to loan cash to many governments

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testiomials Bonds have skyrocketed in price due to shaky confidence in the world economy, the amount of return to investors has shriveled. In real terms, defined as the return of an investment minus the depreciation of the purchasing power of currency, investors in bonds in effect have to pay in order to loan cash to governments.”

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