What is Socialism?

Iraq Currency Watch started off by evaluating and analyzing the Iraqi dinar as an investment. From there we started to look at other currencies. That led to a study on how currencies work, and that led to a four-year study on global economics. We have been writing about economics since 2010. When ever you discuss and research these topics you will eventually compare economic models that nations have used in the past with current economic models. Today, Iraq Currency Watch covers false doctrines associated with global economics. These doctrines are used to push fraud and investment scams. With this background in mind I would like to cover and define the economic model of socialism and its impact on our society and culture today. In this next series we will define what true socialism is and uncover its past. It seems that this topic is misrepresented in universities around the world.

I was always baffled with the amount of supporters Bernie Sanders has. I could never understand why so many young people believed in the promises of socialism so passionately. Then I encountered some of these people and it became apparent that they don’t really know what socialism is. Their definition is skewed. Eventually, I had nieces and nephews that were enrolled at various universities. Soon after their first few classes they began preaching socialist concepts. They explained to me that we already have socialism and that it has been very successful. They claimed that the fire department is socialism. The police department is socialism. Government making public roads is socialism. In fact, these new socialists believe that almost every public government function is some form of socialism.

Today’s socialists have no understanding of real history or economics in general. They seem to have the misunderstanding that anything that has the word “social” in it is socialism. It would not surprise me if they believed social media is some new form of socialism. They believe that socialism in Europe has been extremely successful. They are so brained-washed that they even believe capitalism made most Americans poor while socialism made everyone in Europe rich. Don’t believe me, Look at their propaganda.

https://eand.co/how-capitalism-made-americans-poor-and-socialism-made-europeans-rich-6eb7b52353a

The article above claims that capitalism has made Americans poor while socialism has made Europeans rich. This author acts like the middle class is under great oppression in America today. Can this guy be more out of touch? He even ignores history in his ill-informed opinion on socialism and he redefines it into something entirely different. But this is a good example of what most Bernie Sanders followers believe today.

Today, liberals have changed the very meaning of socialism to be anything where a social good or service is provided by some form of government; be it local, state, or federal. To them that is socialism, but that modern definition coined by liberal think tanks to be inserted into talking points is not the standard socialism that many of us historically refer to. This would mean that every form of government is socialist, and that is certainly not the case. When I say “socialism” I am referring to Marxian Socialism. In this model, the path to socialism proceeds not through the establishment of model communities that set examples of harmonious cooperation to the world in a utopian society, but through the clash and struggle of social classes. This concept of socialism is defined according to the writings of Karl Marx and Frederick Engels.

In essence, socialism and capitalism are economic models that concern themselves primarily with what’s done with the surplus product created by profitable industries. Capitalism says that the profits belong to the owner of the business and it is up to them to determine pretty much every aspect of running their business. Socialism, either through state-control regulatory bodies or workers’ councils, carries out the will of the workers to equitably redistribute all the wealth created by state-controlled industries. All the wealth and production of industries is controlled by the state in this model.

With that in mind, the fire department does not generate a profit, the police do not participate in manufacturing goods, students do not receive wages for their “work” and libraries do not typically sell products in order to become wealthy. Collecting taxes to pay for public services and welfare programs is not the socialism Karl Marx is speaking of. This is not his true model and definition. Every modern country has roads, public schools, and police officers.  That does not make them inherently socialist. Ancient Rome even built public roads, public bath houses, and public aqueducts, but this doesn’t mean they invented socialism. How much net profit did the fire department make last year? How much production and gross revenue did the police department generate? We are talking about a Marxist economic model for government. How is it that liberals can’t differentiate between basic civic services and nationalizing private industries? The socialism I am talking about failed in many countries, and Venezuela is the latest example. Changing the meaning of socialism to “government social services” has confused many Bernie Sanders supporters. It really is a disservice to all the millions of people who died by the hand of Marxian Socialism.

Socialism Limits Freedom

Socialism by its very existence denies freedom to its citizens. One of the biggest problems with real Marxian Socialism is the loss of freedom. Political freedom, as defined by Milton Friedman, includes the freedom of speech, the freedom of religion, and the right to vote. Government ownership of the means of production means you loose private property rights. Copyrights, patents, and trademarks no longer apply. All assets can be redistributed by the government. This is why socialists put great faith in bigger government. While they make the argument that capitalism is greedy, they seem to ignore the fact that greed is found in socialism too. It’s not the corporations that are greedy in this model; it is the very governments that rule the people and have total control of industry that becomes greedy. As the state becomes more powerful personal freedoms are stripped away. Greed is found in communism as well. History is full of examples.

Freedom is the hallmark of the American market economy. Its underlying institutional foundations are individual rights, private property, and freedom of association and exchange in a political setting of limited government under the impartial rule of law. These are the things that are guaranteed by our constitution. This is what has been handed to us by our founding fathers because they understood oppression under British rule. It is the American constitution that limits the role of government. It is the very thing that guarantees real freedom.

When judges believe they should present decisions based on the original intent of our founding fathers our freedoms are preserved. Some Judges believe that the constitution is a living document and that it should be interpreted through the lens of our modern-day society. They only problem is this belief gives an abundance of power to supreme court judges to legislate from the bench and change the very document that guarantees  freedom for all. Liberal socialists know that the only way they can get socialism in America today is to change the constitution. They can’t vote it in and they can’t create laws to bring about socialist policies without being challenged by the court system. Their only hope is to fill the supreme court with judges that will introduce socialist policies through their rulings and uphold liberal laws that congress creates. This explains the hidden motives behind the brutal attacks to supreme court nominees from the liberals today.

Under socialism, one person’s freedom becomes another person’s obligation. past examples show that poverty actually increases in socialism because the middle class is pulled down to a lower class in this great struggle of classes. Because of this climate people tend to be confused about material abundance and cultural comfort in Western nations. Many socialists have forgotten that this is not man’s “natural state of affairs.” It is only the result of America’s unique constitution and institutions that have enabled prosperity to replace poverty. This is why many have come to the United States in search of a better life. The opportunity in America can be maintained and improved upon only to the extent that the very same ideas and institutions protect, nurture and foster a future better than today,

Yet, Karl Marx believed the only “free” man is one who does not have to work, save, and produce to have food, clothing, housing, education, and medical care, or any other everyday necessities required for life. That is precisely what FDR preached and Bernie Sanders regurgitates this nonsense now, “True individual freedom cannot exist without economic security and independence. Necessitous men are not free men. ” To have to work for what you want by definition makes you not free.”

To put it another way, any human activity that is an economical means to a desired end or goal is a manifestation of a lack of “real’ freedom. Anything lacking a life of playful enjoyment with all the related means and material possessions to that enjoyment being effortlessly available represents man as a slave to his circumstances. A socialist’s view of freedom is simply out of touch with reality. They limit the freedom of others while trying to implement their own twisted idea of liberty.

Stefan Molyneux

I thought Stefan Molyneux had an interesting point of view. He was once a socialist and now his beliefs changed. While I don’t agree with everything he says, he does have some valid points.

The Iraqi Dinar Devalued-No RV (Revalue)

You heard right. The rate just adjusted again. It is now trading at 1190 to one U.S. dollar. Sam i am predicted the rate would drop a while back on a conference call. So with that in mind an updated conference call just took place. Topics include how far the rate will drop and the future of the dinar. Here is the call in its entirety.

Of course, many of the dinar holders on YouTube did not like this news. We have been going at it pretty hard and heavy in the comment section. Some of the commenters came back and deleted their comments when they realized we were telling the truth. One of the people who has been leaving comments is a guy by the name of haissemweneht. When we were talking about the strength of the dollar he had this to say

“Remember when gasoline was worth 1 dollar per gallon? The value of the US Dollar is 14 – 16 percent less than a few years ago. Now gas is 3 dollars. I would say that the dollar is worthless.”

This is total GCR propaganda nonsense and this is what these guys do. They confuse economic terms and rant like idiots! The big mistake in this GCR talking point is the fact that they are taking a nominal inflation rate and judging the strength of the dollar by it to make the claim that the dollar has lost global value.  These are actually two different things blended together to look like one thing. They are comparing inflation rates with exchange rates and claiming the dollar is weak!

First, we are talking about the global value of one currency against another currency. Let me give you an example. When we were invested in the dinar it took 1166 dinar to get one U.S. dollar. Today it takes 1190 dinar to get one U.S. dollar. This means that the value of the dinar has gone down and the value of the dollar has gone up. In fact, if you research this you will discover that the dollar is a lot stronger globally than most people know!

We are not talking about national purchasing power. We are talking about exchange rates not Inflation rates! If we were talking about inflation then it would only be fair to compare the United States inflation rates with other inflation rates. Let’s take his gas example. Gas went over a dollar in the 1980’s. In 1986 Gas was about 1.18 a gallon. That was 32 years ago. Now let’s look at what gas cost in England 32 years ago and compare that price with today’s price in England. By this dumb logic we would conclude that the pound is completely unstable.

Every country has inflation. That is a side effect of a decent economy. When the economy goes bad you have deflation or worse, hyperinflation. All currencies lose purchasing power over time. Even the dinar loses purchasing power and it had hyperinflation during the 1990’s. He was comparing the inflation rate of the dollar with the exchange rate of the dinar. These are two different animals and it is a really bad argument. The dollar is strong compared to other currencies, not inflation rates.

This is the type of typical GCR nonsense used to sell precious metals and dinar gurus steal the same talking points. They need the dollar to tank in their presentations in a feeble attempt to make the dinar look like a good investment.

Just as a side note, look at the name of our commenter who was spreading this nonsense. The name haissemweneht is actually the new messiah spelled backwards! I don’t think I would trust anyone who has a name like that. Thanks to Nash for pointing that out!

The Bitcoin Phenomenon Part 2

In part 1 of “The Bitcoin Phenomenon” we covered all the background about this currency. We covered a brief history of cryptocurrencies, and we covered some problems associated with them. We also covered some of the risks. If you have not read part 1 then click here.

Make no mistake, people have made money by investing in bitcoin, people have made money by investing in other cryptocurrencies too. This is not like the dinar in the sense that only the dealers and the gurus are making money. There has not been anyone that has ever become wealthy by investing in the dinar. In fact, the word is out that the dinar was pretty much an investment scam.

This is not the case with bitcoin. If this cryptocurrency was a known scam, as some have claimed, then NASDAQ would not consider trading it, and the exchanges would leave it alone. One of the main reasons bitcoin has soared in price is that the exchanges are now trading bitcoin. The dinar and other third world currencies were sold based on hype about a fictional revalue. The networks of gurus were actually getting kickbacks from dealers to promote the hype, while at the same time appearing to be independent.

However, I do see something that disturbs me. There seems to be a lot of hype based on fiction with bitcoin as well. Because of the potential to make money, common sense has left many investors. Reasoning and understanding is left in the dust as people rush out to buy it. Some of the same patterns we have seen in the dinar world are starting to emerge with bitcoin. This cryptocurrency has acquired its very own set of gurus, and information is made up. Nothing is vetted or verified, and total fictional fabrications are made up to make the investment more attractive. This causes many people to over-leverage, and they are not aware of the risks.

This seems to be the same identical behavior that has happened with other cryptocurrencies too. This is part of the pump and dump process.

  • Step one; your group buys a cryptocurrency in massive quantities and drives the price up through demand.
  • Step two; make up lies and events to promote the currency. The reason for this is to present the appearance that the currency is going to go much higher. “Oh my, how high will it go?” This will attract many new investors. It’s like the shiny part found on a fishing lure.
  • Step three; once the new investors are in, dump your investment and get out.

Please allow me give you an example of the current bitcoin hype,

Central Banks Buying Cryptocurrency in 2018

The above article claims that the G7 central banks will buy bitcoin in 2018 due to the problems associated with all fiat currencies. Inflation seems to weaken fiat currencies because they have no intrinsic value, and bitcoin is immune to that. Because bitcoin is rising in value and is worth more than fiat currencies, the G7 central banks will buy bitcoin to use as a reserve for their currency. It will be used in SDR transactions, and placed in the basket of currencies. Because it is well-known that the definition of fiat means “no intrinsic value”, bitcoin will replace all currencies as reserves over the course of time. At least this seems to be what this article claims to me. Maybe I am wrong.

CNBC has produced an article with the same information, but then it says these are the claims made by the CEO of blockchain. Ah ha! Something does not sound right to me. The two currencies presented to be picked up by central banks according to this CEO are bitcoin and ethereum.

CNBC article

The Truth Is……

Let me explain a few things and give my analysis. First, “fiat” does not mean “no intrinsic value”. Fiat currency is currency that is used by a government because of decree or law. Outside of that decree or law it has no intrinsic value. When gold was used for money it had value outside of any law or decree, whereas our paper currency does not have value. The law that gives the U.S. dollar value is the Federal Reserve Act, and a series of laws were passed during the early 1930’s which modified the act, making it even stronger. These laws serve to protect the dollar against counterfeiting and declare that it is the official currency of the United States. When you pay your taxes it must be in dollars!

Dinar gurus constantly made the claim that the definition of “fiat” is ‘no intrinsic value”, as if to imply that the dollar really has no value and it was all based on faith, even in regard to the law of the land. This is where some of the GCR propaganda comes into play. I now see bitcoin gurus making the same arguments that we debunked when the dinar was popular! The reason for this is to hype bitcoin so investors can make more money.

Well I’ve got news for you. Bitcoin has no laws issued by governments to protect it. In fact, the value of bitcoin is also based solely on faith! It is also perceived! “Cryptocurrencies are, at the moment, treated universally as assets, and not as currencies for tax purposes. This means that if the price of bitcoin rises against the dollar and you cash in, then you are liable to pay capital-gains tax on the appreciation of the currency. If the value of the U.S. dollar rises 20% against the pound, then you are not liable to pay capital-gains tax on that appreciation!

Bitcoin started out as a currency independent of a central banking system. Without a central bank to regulate bitcoin there is no way to control the supply. In the past, the Federal Reserve has reduced the physical money supply in the USA as demand drops. When demand increases, more physical currency is put back into circulation. This action preserves the value of the dollar and it controls inflation. The Federal Reserve can also reduce the money supply to match a reduction in demand!

https://tradingeconomics.com/united-states/money-supply-m0

While bitcoin expands due to mining, there is no built-in contraction mechanism should demand drop. This is probably the main reason bitcoin has been so volatile in the past. This is why all cryptocurrencies are subject to pump and dump schemes. Cryptocurrencies will almost always have massive imbalances in supply and demand, because there is effectively an unlimited supply of them but a clear demand ceiling. The fatal issue for cryptocurrencies is that the supply can only go up! There is unlimited upside to the supply of all cryptocurrencies.

Even though an individual cryptocurrency may have a ceiling on supply, there are many of these currencies out there. If a new cryptocurrency is introduced in the future, and if it is believed to be superior to all existing cryptocurrencies, then you would likely see a massive move out of existing cryptocurrencies and into the new superior currency!

Furthermore, because you cannot reduce the supply of a cryptocurrency, that drop in demand would not be matched by a drop in supply! If demand goes down but supply does not, we will all see a drastic reduction in the value of that cryptocurrency. Its economics 101.

The ever-increasing supply of cryptocurrencies can be seen in the recent boom in so-called “initial coin offerings”. One of the main problems with bitcoin and other cryptocurrencies is that people still view them as investments rather than a means to exchange goods and services. New cryptocurrency startups will issue digital coins or tokens in exchange for real money. This real money is then used to fund projects. Billions have been raised using this method.

This ultimately means that cryptocurrencies fail in the two key areas of what makes a currency a currency! A currency has to be a widely used as a medium of exchange. Cryptocurrencies are never going to achieve that as long as they are used as an investment.

Second, you cannot use cryptocurrencies to settle tax liabilities. On average, around 34% of all economic activity is taxed. Governments are not likely to accept cryptocurrencies that they do not control to settle tax debts. You are therefore removing one of the main sources of demand for a currency. One of the key issues, whenever we talk about monetary economics, is that the money supply should never be considered in isolation of demand.

All money supply needs to be considered against money demand. If you do not have the ability to use cryptocurrencies for the largest single transaction in the economy then it will never be used as a major medium of exchange.

The Jiaozi was a banknote that was used around the 11th century. They first appeared in the Sichuan capital of Chengdu, China. Many numismatists (currency collectors) regard it as the first paper money in history. The banknote came from the Chinese Song Dynasty (960–1279 AD). It was highly successful at first because the kingdom of Sichuan insisted that people pay their taxes using this paper currency. Because of this requirement there was an enormous demand. For a while the paper currency kept its value.

There were no economists in the kingdom of Sichuan. Unfortunately they just kept printing the stuff. They were in serious trouble when the money supply exceeded demand. This is why governments won’t accept bitcoin to pay taxes. It removes demand for the currency they control.

Another key feature of a currency is that it acts as a store of value. This means you can put your money into it and be reasonably sure that in normal circumstances its value will not fluctuate on a massive scale. Cryptocurrencies cannot do that. Bitcoin has had many hyperinflation episodes. In a few cases it has dropped as much as 80 percent in value. In some cases its ability to purchase goods has dropped more than 25% in the course of just one week. That is not a stable store of value.

The G7 countries (Also known as The Group of 7) is a group made up of Canada, Germany, Japan, France, Italy, the United States and the United Kingdom. These countries have the 7 largest advanced economies in the world. These economies represent more than 62% of the global net wealth with an approximate value of $280 trillion. It is highly unlikely that these countries will use a cryptocurrency that has a track record of being 18 times more volatile than the US dollar! Furthermore, if these central banks ever accept bitcoin it will remove demand for the currencies these countries already use and control.

Will the International Monetary Fund allow bitcoin to be used along with SDRs to settle debts when the value of bitcoin changes so rapidly? That is highly unlikely! Let us recognize these assertions for what they really are. This is hype to make these cryptocurrencies appear to be an investment without high risk!

I think that in the end it would be ironic if central banks controlled a cryptocurrency like bitcoin through buying all of it as an asset. They would control a currency that was never designed for them to control.

The Wealth of Iraq

In dinarland we often hear gurus talking about the vast wealth of Iraq as the reason we can expect an unprecedented revaluation of their currency.  Iraq has a reported 143 billion barrels of proven recoverable oil in their reserves, which would amount to over $7 trillion dollars worth of oil.  While that’s an impressive amount, I think we need to put it in context.  You see, their neighbor to the east – Iran – has 158 billion barrels in their reserves.  Canada has 170 billion barrels in their reserves.  Saudi Arabia has 266 billion barrels in theirs, and Venezuela leads the world with over 300 billion in theirs.

Now, let’s take a look at their currencies.

The Iranian rial is valued at $.00003, down from $.000033 in 2015 and $.00004 in 2013, despite all of the hype generated by dinar/dong/Zim/rial pumpers in recent years.  Okay, maybe their reputation as a renegade radical Islamic state has kept the rial’s value down, so let’s look at the others.

Canada’s dollar (the loonie)  is currently valued at $.79, up from $.76 two years ago but down from about $.96 four years ago.

The Saudi riyal is valued at $.266, just like it was two years ago and just like it was four years ago, because it’s a pegged currency on a managed float just like the IQD.

And then there’s the Venezuelan bolivar, currently valued at $.10 after the country has fallen into an economic crisis.  Four years ago the bolivar’s value was $.16 and five years ago it was at $.23.

So we can see from these numbers that oil reserves don’t determine the wealth of a country or the value of its currency.  Why would the US, with only 35 billion barrels in their reserves, have a higher standard of living and a more valuable currency than the others?  Because the country has a diverse economy, an educated populace, a strong military, a stable government, and an arrangement with almost every oil producing nation to sell their oil for USD.  Many countries use the dollar along with their currency, or they use the dollar exclusively and don’t even have a currency of their own.  Countries want US products and US services, and they need US dollars to get them.  When Iraq has all of the qualities with its economy that the US has with its, maybe their currency will have a value near that of the USD.  Maybe by the end of the century that will happen, but by that time the IQD and the people who own it will be long gone.

 

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