Programmed Reality

Yesterday I got a 1964 dime in change.  The rarity of this occurrence is incalculable.  But how strange to think that it might also have something to do with the most profound event in our country's history.

Executive Order 11110.  Some say that it is what got President John F. Kennedy assassinated.  Others say it is a minor executive order of little significance.  I decided to take a break from investigating the nature of reality and research this little gem.

The transcript of the order appears below as well as a link to the more lengthy Executive Order 10289 which it amends.  Essentially, 10289 is a list of things that the Secretary of the Treasury is empowered to do without approval of the president.  In 1963, Kennedy added one thing to that list via EO 11110, namely the ability to issue Silver Certificates, which are U.S. Treasury Notes that can be redeemed for the equivalent in silver coins.

There is a great deal of confusion about many aspects of this story, such as what kind of notes could have been redeemed for silver, what 11110 actually said, what Kennedy's intentions were, etc.  Wikipedia entries on EO 11110, the Silver Certificate, United States Note, and Federal Reserve Note, are very inconsistent.  For example, the United States Note page says that "all ... types of circulating currency, silver certificates, Federal Reserve Notes, and United States Notes, were redeemable by individuals only for silver," whereas the Silver Certificate page implies that only those notes could have been redeemable in silver.  This is not a moot point because it is the difference between metal-backed currency and fiat currency, the evils of which has been prolifically documented (see for example G. Edward Griffin's excellent book, "The Creature from Jekyll Island").  It is really the core of the argument about Kennedy, 11110, and the conspiracy to assassinate him.  It is also, to me, fascinating that all of these currency types were floating around in circulation in 1963, the nuances of which were completely unknown to the general public in whose wallets they sat.  

Here is the fact, straight from the US Treasury: "Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything.  This has been the case since 1933. The notes have no value for themselves, but for what they will buy."  It appears that since the US abandoned the gold standard in 1933, the same is true of United States Notes.  Therefore, 11110 only has to do with Silver Certificates, despite some sites claims to the contrary.

As a coin collector as a kid, I was very aware that something major happened in 1964 with respect to silver and the US Mint.  As I was told at the time, the value of silver exceeded the face value of the corresponding coins (dimes, quarters, half dollars) for the first time in 1964.  Hence, beginning in 1965, coins would be minted using copper and zinc instead of silver.  Suddenly, all 1964 and earlier coins were being hoarded by coin collectors and non-collectors alike.  Of course, it wasn't that silver was suddenly more valuable - it was that inflation had finally taken its toll and reduced the value of the dollar enough to drop the value of coins below their meltdown values.  Big deal, right?  It was bound to happen?

What is the number one suspect for the root cause of the inflation that created this situation?  Fiat currency, or currency NOT backed by something of real value, like heavy metals such as gold or silver.  Popular conspiracy theory says that the private banks that represent the Federal Reserve are the ones who have profited every year from the inflation that reduces the savings of the rest of us, and are the biggest proponents of fiat currency, which Federal Reserve Notes are.  Popular conspiracy theory also says that JFK was assassinated by a cabal that represents the very establishment that includes those same big financial interests.  Is it a coincidence that he was killed in 1963, just a few weeks after signing Executive Order 11110 that gave the US Treasury the right to decide on their own to print non-fiat money in the form of silver certificates?  Is it a coincidence that 4 months later, redemption of silver certificates for silver was halted forever and that that was the end of coins and paper money of real value?  Jim Marrs put all of this together in his best seller "Crossfire."  According to him, "Kennedy apparently reasoned that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest. He moved in this area on June 4, 1963, by signing Executive Order 11110 which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System."

PublicEye.org says it is all a lot of nonsense, in an article by Edward Flaherty.  According to Flaherty, 11110 was only Kennedy delegating the right to the US Treasury to approve the issuance of silver certificates without the need for his approval as well.  He claims that "The purpose of the order was to facilitate the reduction of certificates in circulation, not to increase them."  Really?  How exactly does facilitating the issuance of silver certificates help reduce those in circulation?  You're suspect, Ed!  So, I was curious about Ed and found out that he appears to be a pro-Fed lackey and spends most of his time debunking non-economists.  What does he really know of Kennedy's intentions?  Then again, what do the conspiracy theorists know of Kennedy's intentions in issuing EO 11110?  Sadly, there isn't much available on Kennedy's real opinions of the Fed or his motives behind 11110.  There may be some hints, however.  In a news conference in June 7, 1962, Kennedy said "if I were anxious to get control of the Federal Reserve, the matter comes up in 1963.".  His Comptroller of the Currency for the United States Department of the Treasury, James Saxon, chartered a large number (369) of new national banks (competitors of the Federal Reserve System) and was known to be frequently at odds with the Fed.  Other than that, there is precious little of fact.  So, we are left somewhere in between the pro-conspiracy camp and the debunkers.  

Executive Order 11110 did indeed facilitate the issuance of silver certificates that were probably at odds with the policies of the Fed.  However, it was hardly an attempt to abolish the Fed, as some claim.  So, the shroud of mystery surrounding the JFK murder and the financial elite will not be broken by this late night blogger.  But, I did get a dime with a melt value of $1.38 out of the deal.

Transcript of Executive Order 11110:

------------------------
AMENDMENT OF EXECUTIVE ORDER NO. 10289 AS AMENDED, RELATING TO THE PERFORMANCE OF CERTAIN FUNCTIONS AFFECTING THE DEPARTMENT OF THE TREASURY.

By virtue of the authority vested in me by section 301 of title 3 of the United States Code, it is ordered as follows:

SECTION 1. Executive Order No. 10289 of September 19, 1951, as amended, is hereby further amended

- (a) By adding at the end of paragraph 1 thereof the following subparagraph (j):

(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12, 1933, as amended (31 U.S.C. 821 (b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption,

and (b) By revoking subparagraphs (b) and (c) of paragraph 2 thereof.

SECTION 2. The amendment made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue and may be enforced as if said amendments had not been made.

JOHN F. KENNEDY THE WHITE HOUSE, June 4, 1963
---------------------------

As Executive Order 11110 is an amendment to Executive Order 10289, interested readers may view that one here

Apologies to the physics, transhumanism, nanotech, and AI enthusiasts out there, but every once in a while I get the urge to blog about something completely unrelated to the main themes of this site.  Usually, it is to get something off my chest, or to make a prediction (e.g. see "Do the Math - Hillary Can't Win").  This time it is about another one of my passions - trading.

I read something posted by a reputable brokerage house the other day; an article warning investors of the dangers of trading leveraged ETFs.  I did a little research and found that all brokerage houses are sending similar warnings to their customers, likely due to clueless investors who lose their shirts trading things they don't understand and then whining to the SEC to make it stop.

ETFs are Exchange Traded Funds, similar to Mutual Funds in that they represent a collection of stocks, bonds, or other financial instruments, but different in that the can be traded on exchanges just like stocks.  There are all kinds of ETFs, ones that follow market indexes, ones that track currencies, commodities, bond markets, ones that follow different geographical regions, ones that go up when the market goes down (Bear ETFs), and so on.  Like Mutual Funds, there are also leveraged ETFs, or ETFs that move more than the underlying index moves.  For example, an ETF may be a S&P 2X fund, which means when the S&P Index moves 1% in one direction, the ETF will typically move 2%, or twice as much.  These are the risky ones, according to the SEC and brokers.  Why?  Because of something that I'm going to call "leakage." I haven't seen that word used yet, but it seems fitting and descriptive.

According to the analysis, lets say an underlying index goes from 100 to 105, or up 5%.  A 2X leveraged ETF based on that same index would therefore go up 10%.  So, if it was trading at 100, it would go up to 110.  Now, let's say that the index drops back to where it started from, from 105 to 100, for a drop of 4.762%.  According to the leverage model, the ETF should drop twice that amount or 9.524% from 110 down to 99.52.  So it seems that because of the up and down price action of the market, the leveraged ETF has actually "leaked" .48%.  Imagine a market that continuously fluctuates - then the ETF would slowly leak away its value.  Sounds scary, doesn't it, especially for those who realize how much the market fluctuates day to day.
So, out go all the warning notices.

But something doesn't seem right to me.

First of all, for every buyer, there is a seller.  For every position in the market, there is an opposite position.  So, if a long position on a leveraged ETF slowly leaks away its value, where does that money go?  (And no, it doesn't automatically transfer into the accounts of the cigar smoking Illuminati.)  Does that mean that shorting leveraged ETFs will slowly make money, like a money  tree?  Or like grey goo slowly gobbling up the earth (I threw that in so that nanotechies find this article when it gets indexed in Google).  No, doesn't make sense.

When you think about it, any financial instrument that is leveraged, such as a stock with a "Beta" greater than 1, would succumb to this process.  In fact, leveraged ETFs are often composed of stocks with Beta > 1.  If I remember right from linear algebra, a process can be broken down into a superposition of processes.  In other words, if an ETF leaks, so must the high-Beta stocks on which it is based.  But again, this makes no sense at all.  If I own 100 shares of stocks and it fluctuates wildly, the only two ways I could get leakage is if my number of shares leak (which of course they don't - you buy 100, you always have 100), or the value of the company leaks (which of course it doesn't).  

So, I'm sorry financial wizards, but while it is nice to warn the masses about the dangers of leveraged trading, your arguments don't hold water on the ETF issue.  If anyone can explain to me where the leakage goes, I'll gladly post the rebuttal and/or remove my post.

OK, I know, this has nothing to do with programmed reality, nanotech, transhumanism, AI, philsophy, and the rest of the topics we discuss on this site.  But nobody else is saying it and it has to be said.  Mathematically, HILLARY CAN'T WIN!

But somehow, all the pompous political pundits are pontificating that the tide is turning in the Democratic race. 

Check out this one from CNN: Analysis: Did Clinton's latest victory come in time?

Or this one:  Why can’t Barack Obama close the deal?

I just don't get it.

It was predicted that Hillary would beat Obama in Pennsylvania by 10%.  She beat him by 10%.  Exactly.  No upset, no big win.  Let's do the math...

Disregarding the Florida and Michigan mess and the flip-flop potential of superdelegates (which can go either way), of the remaining primaries and caucuses, there are 408 delegates left.

Barack is currently beating Hillary by 133 delegates.

That means, for her to win, she has to pull 271 of the remaining delegates to his 137 - almost twice the number.  What are the odds that with Obama being 9 percentage points ahead in the national poll, that Hillary will instead beat him 2 to 1 in the rest of the races?  Mathematically, it has to be near zero.  Someone, please tell me where I did my math wrong and I will gladly pull this post off the blog.

Then again, mathematically, Al Gore won the 2000 election, so I guess anything is possible. 

A recent article on popularmechanics.com got me thinking about military robotics and the future of war.  Although the story remains vague, these iRobot SWORDS units were apparently taken off the battlefield due to unanticipated actions.  “The gun started moving when it was not intended to move,” according to the Army’s Program Executive Officer for Ground Forces, Kevin Fahey.

War is an unfortunate consequence of having humanity's social evolution severely outstripped by our technological evolution.  And the idea of having robots fight our battles certainly has its pros and cons.  On the one hand, fewer lives would be lost on the side of the deployers of the robots.  On the other hand, how fair is it to throw flesh and blood humans in the ring with terminators?  I would not be surprised to see an amendment to the Geneva convention regarding robotic warfare at some point in the near future.

Of course, robots are only the next stage in the application of technology to warfare.  Mines, predator drones, WMDs, laser-targeting bombs, and "Star Wars"-like anti-missile defenses have all been steps taken to remove the human risk progressively further from the battlefield.  Have nations can simply beat up on Have-not nations at will. 

Then, of course, will come the day, when all combatants are fighting remotely.  In the future, will wars be run by teens (because their contract rate is less than adults) trained on "Missile Command" type video games, where the side with the best technology, best gamers, and biggest budget wins by wearing down the opponent's arsenal of robots and munitions.  I guess the Haves will always have the edge.