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Category Archives: Credit

Monetary Madness Part II—Perpetual Bonds


The Cure of Economic Calamity: Looney Tune Economics [courtesy Google Images]

The Cure for Economic Calamity:
Looney Tune Economics
[courtesy Google Images]

As seen in the previous article, the total value of negative-interest rate bonds has jumped from nothing to $13 trillion in just two years.

Although governments issuing negative interest rates bonds don’t have to pay interest on those bonds, they still have to repay most of the principal.

What a bummer. Wouldn’t it be great if someone invented a government bond that not only didn’t have to pay interest (as with negative interest rate bonds) but also didn’t even have to repay the principal?

Well, folks, they appear to have done just that. They’re called “perpetual bonds”. They’re hot off the press, and the concept seems straight out of Looney Tunes.

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Last month, Gold-Eagle.com published an article entitled “Gold and the Perpetual Bonds Era”. The subject was “perpetual bonds”–a concept I’d heard of for the first time only about a week earlier.

Judging from what I’d already heard and the Gold-Eagle article, it’s apparent that “perpetual bonds” are—like “consumerism,” debt-based currency, sub-prime loans, fractional reserve banking, deficit financing, negative interest rates, market manipulation, and “helicopter money”—just another manifestation of the madness that’s inherent in the concept of fiat, debt-based currency—and of government’s desperation to do something, try anything, that might work to avoid or postpone a coming economic collapse.

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“Reset” Coming? What’s a “Reset”?


[courtesy Google Images]

[courtesy Google Images]

Greg Hunter (USAwatchdog.com) recently interviewed Rob Kirby (Kirby Analytics) in a 30-minute video. During the interview, Kirby predicted a coming economic and/or monetary “reset”.

According to Kirby,

“Today, we see China, Russia, India and others are moving to protect themselves from the systemic risk of the over-printed dollar. It’s become clear to many that the dollar’s world-reserve-currency status cannot last. It’s just a matter of time before the entire currency system will face a radical reset reflecting today’s reality.”

A “radical reset” is coming. Sounds kinda scary. But, what, exactly, is a “reset”?

Kirby continued:

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Liars’ Loans


People & Governments Only Lie For Good Reasons [courtesy Google Images]

People & Governments Only Lie For Good Reasons
[courtesy Google Images]

Inflation has been government’s primary monetary objective since the Civil War.  It’s merely a matter of self-interest.  Government went deeply into debt to fight the Civil War.  (Some say that debt actually, ultimately, but secretly, bankrupted the government.)  Clearly, the Civil War changed our government into a persistent debtor.  To this day, insofar as government must borrow to raise revenue, government will naturally favor inflation since it allows government to “repay” its debts with cheaper/inflated dollars.

The deeper government goes into debt, the more determined government should be to cause inflation.

If you want to stop or slow inflation, stop government borrowing. Enforce a pay-as-you-go fiscal system wherein government can only spend the revenue it has actually collected in taxes and can’t borrow more against future generations.

A pay-as-you-go fiscal system won’t, by itself, stop inflation.  But it will remove government’s incentive to inflate and thereby help slow or stop inflation.

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Posted by on April 6, 2016 in Banking, Credit, Debt, Inflation/Deflation, Lies, Values

 

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Economics: Mostly Math or Mostly Moral?


Institutionalized Injustice:  Fighting Over Unearned Wealth [courtesy Google Images]

Institutionalized Injustice: Fighting Over Unearned Wealth
[courtesy Google Images]

Financial Times:

 

“On Friday [Nov. 6, A.D. 2015] the Bank of Japan [BoJ] revised down its inflation and growth forecasts, and pushed back its expectation of hitting the 2 per cent inflation target to the end of next year. It seems likely, and indeed desirable, that the BoJ will be forced to expand its programme of quantitative easing [QE] before too long.”

QE is intended to cause more borrowing, more spending and more inflation in whichever country/economy that promotes it.  In the case of Japan, continued reliance on QE is strange since they’ve tried to use some version of QE for most of 25 years without much success.

Why does Japan continue to beat that dead horse?  Could it be because that’s the only horse they have?  Financial Times:

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Bill Holter Interviewed by Greg Hunter


Greg Hunter             Bill Holter

Greg Hunter . . . . . . . Bill Holter

So far as I know, Bill Holter is not a prophet.  He could be wrong. But he’s no dummy.  In the following interview, he offers fundamental facts that support the theory that the “stuff” will hit the fan before the end of October (and perhaps even before the end of September).  I agree that all of his facts are important and perhaps profound.  I think his timeline is plausible.

However, Holter implies that, once the stuff really hits the fan, the whole credit system will collapse and  cause the food distribution system (which is almost entirely based on credit) to also and utterly collapse within another 48 hours.

All of that is possible but, without any evidence to support my opinion other than a “gut” intuition, I don’t think/feel that the coming collapse will be total and cause the economy to utterly collapse within 48 hours. I’m more inclined to believe that whenever the moment of real collapse begins, the US economy will move downward as if on a kid’s slide or as downward stair-steps that require six months or more to reach the “bottom”.  I believe the collapse will be painful, but not as sudden and catastrophic as the detonation of a bomb.

Other than that, I tend to agree with all of Holter’s arguments.  I wouldn’t bet on whether the trigger moment happens before the end of October (or even before the end of September) but I agree that it could.

So, here’s Bill Holter’s interview and it’s worth your time.

video     00:29:09

 

 

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IMF Colonized Korea, Part I


South Korean Flag [courtesy Google Images]

South Korean Flag
[courtesy Google Images]

I first wrote and published most the following article in A.D. 1998.  It’s too long to be presented as a single article in this forum, so I’ve divided it up into “Part I—Description” and “Part II—Evidence”.  This week, the Description; next week, the Evidence.

I’ve also edited the original article, added some comments, made a couple of corrections and changed some verb tenses to make the text more readable and “current”.  Nevertheless, despite these changes, 80% of this article was written 17 years ago.

Why should anyone want to read an article written 17 years ago?

First, because the article explains how overly-indebted South Korea “voluntarily” accepted colonization by the International Monetary Fund (IMF) rather than risk declaring a national bankruptcy.  The process is almost exquisitely wicked.

Second, this article should help people to better understand what’s recently happened to Greece.  In order to avoid declaring bankruptcy, the overly-indebted Greece agreed to a bailout deal with the European Union (EU) and the European Central Bank (ECB) that essentially reduced Greece from the status of a sovereign nation that joined the EU voluntarily, to the status of a colony that’s been conquered and is now owned and operated by the EU and ECB.

The most recent Greek bailout deal is so extreme, it’s been described by some as less than an “agreement” than an unconditional surrender—the capitulation of an overly-indebted nation who feared the pain of bankruptcy more than the bondage of debt.  (That’s exactly what also happened to South Korea in A.D. 1997.)

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Loss of Savings, Not Size of Debt, Causes Bank Panic


Bank Panic--A.D. 1907 [courtesy Google Images]

Bank Panic–A.D. 1907
[courtesy Google Images]

The Associated Press recently published an article entitled “The Latest:  Will Greek banks have all their money next week?”  That headline hints at the danger in fractional reserve banking.

As I understand it, in the US, the fractional reserve ratio is about 10:1 meaning that out of every ten dollars deposited into bank accounts, the bank holds one dollar in its vault to hand out to depositors and lends the other nine to borrowers.

The advantage and even necessity for fractional reserve banking is that it prevents currency from being hoarded in banks and shrinking the money supply needed to keep the economy growing.  Instead, fractional reserve banking allows 90% of the currency saved to be loaned back into the economy to circulate and stimulate economic activity.

The danger in fractional reserve banking is that if an emergency arises when only 10% of the deposits are actually kept in the bank vault, and more than 10% of US depositors want to simultaneously withdraw all of their currency from their bank accounts, then there’ll be a “bank run”.

If enough depositors join the bank run, the bank will be unable to provide the funds owed to depositors since 90% of their deposits have been loaned out to others.  Once the bank is shown to be unable to meet the depositors’ demands, the bank will be deemed to be insolvent and may be closed.

Although depositors might later be able to regain their deposits, for the immediate future, 90% of depositors will be unable to access any of their savings.  Without access to their bank deposits, bank customers may have no money to buy groceries, pay their mortgages, or get to work.  They’ll tend to panic.  The economy may tend to collapse.

Fractional reserve banking is both necessary to a modern economy and also dangerous.  If a nation’s depositors all try to withdraw their funds at once, they won’t be able to access their funds.  They’ll tend to panic, throw things, riot, light fires and shoot.

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