Uncle Donald deals with dodgy Duckets

Uncle Donald is the god-emperor of the duck universe. His currency, the Ducket, is like the Duckaroo and also pegged to the price of a duck. But his empire of ducks is vast and his ducks are fat and healthy. They breed so fast and he buys and sells so many of them that he has lost count of how many ducks he has long ago.

His wife is a Ukrainian psychic. His daughter is a best selling novelist and celebrated porn star. His sons hunt giant pandas with ninja stars. His estate has three post codes and his swimming pool has tides.

Uncle Donald has heard of my plight and has offered a solution. He will buy up all my Duckaroos from the mob at my gate and will not demand a duck for each banknote just yet.

Uncle Donald makes the deal. The Duckaroo holders are so impressed with the power of the mighty Ducket that they are willing to accept one big fat Ducket for two ailing Duckaroos.

The mob heads for the pub. Uncle Donald's prestige and his currency have saved the day and praised be the Lord.

However,

Now I am deeply in debt to Donald. He has bought 1000 ducks from me for the price of 500. He will give me time to come up with the ducks but at an interest rate of .1% or one duck each day.

Remember, I only have surviving 500 ducks from my flock of 1000. To get out of this mess I need to breed at least two ducks a day and at that rate it will take a year and a half providing there are no more surprises.

So now I am working for Uncle Donald and if all goes well I will be debt free in 500 days. If not I could be wallowing in duckshit for the rest of my days and for no reward while Uncle Donald will get at least 1500 ducks for the price of 500 without getting his famously tiny hands dirty.

So how did Uncle Donald pull off this deal?

Because unlike myself he has the ability to print Duckets at will without anyone questioning whether they are adequately collateralised which gives him extraordinary buying power and a huge discount on everything he buys.

No-one asks the leader of a duck superpower how many ducks he has because no-one dares to, leaving him free to print as many Duckets as he wants and buy whatever he pleases with them.

Did he bail me out with the goodness of his heart? No. He is just a predatory duck hunter. And with each raid such as this one his empire of ducks grows and more importantly so does his prestige. Combined these factors mean he can print more Duckets to conduct further raids to get bigger discounts - forever and a day.

But surely it's only those holding weaker currencies that are disadvantaged here – so we should happily stick with the Ducket – dodgy as it may be.

Well, no.

As the mob heads into town with pockets stuffed with Duckets the publican decides that this might be a good time to put up his prices and and grab an extra 5% of that good paper currency. The next day the other merchants do the same and soon their suppliers do too. Now the purchasing power of the Ducket has decreased by 5%. Uncle Donald will be fine – he just prints more Duckets and carries on raiding disadvantaged duck farms. The rest of the townsfolk just bear the loss and put it down to the greed of merchants and the state of the economy rather than what it is - the constant devaluation of the Ducket. Now the good folk must work harder, save more, invest more, and beg, borrow and steal to be able to afford goods and services with money that buys less every year. And Donald has all the ducks.

But enough of ducks.

This is a story about predatory globalism and inflationary paper currency. It is what libertarians, anarcho-capitalists, crypto-zombies, gold bugs and a good deal of actual economists like to bang on about even though no one is listening because they are too busy joining those they can't beat.

Ask the Turks, the Iranians and the Russians whose currencies are reeling from the onslaught of the US Dollar wielded as a weapon against their regimes. Their financial institutions and wealthy individuals have some options - they can buy precious metals or real estate or pork belly futures: but to save themselves from ruin and stay liquid they mostly buy the currency of the enemy, which just makes their enemy stronger.

While everyday people have only their earnings and imagine that the meagre interest the banks give them is enough to off-set the devaluing of their savings, the reality is that the interest earned is probably less than the bank fees.

According to Republican Congressman Alex Mooney, who is proposing that the US dollar should once again be collateralised by gold, the purchasing power of the dollar has decreased 30 percent in since 2000 and has lost 96 percent of its value since the gold standard was ended 1913. Under the Federal Reserve’s two percent inflation target, the dollar loses half of its purchasing power every generation, or 35 years. Check out this chart from the U.S. Bureau of Labor Statistics.

So if inflationary paper currencies are unfair to all but the global predators, would a truly global currency or a return to the gold standard fix this mess, or both?

Tune in next week when we look for a solution in crypto-currency - something I know slightly more about than ducks.