RSS

Category Archives: Debt-based monetary system

Debt-Based Monetary System Demands Ever More Debt—Part I


Debt9

The National Debt was basically flat from A.D. 1900 through A.D. 1971. In A.D. 1971, President Nixon closed the “gold window” and the dollar became a pure fiat/debt-based currency.  Since A.D. 1971, the National Debt has persistently increased, without regard to which political party controls the government.  I strongly suspect that a debt-based monetary system cannot survive without government creating more debt.  Once the dollar was debt-based, the National Debt had to increase.

The Congressional Budget Office (CBO) recently released a 55-page report on the “long-term US budget outlook”. The report implied that the US government is on the road to fiscal chaos and possible collapse that could not be sustained beyond A.D. 2047.

I think the CBO is lying about the “long-term” budget outlook. Instead, I think we’ve only got a “short-term” to go before the debt hits the fan.

According to the report, the “official” National Debt ($20 trillion) currently stands at the highest level since shortly after World War II. (The report did not comment on estimates by others that, including unfunded liabilities, the real National Debt may be closer to $100 trillion or even $200 trillion.)  According to the report, if government maintains current policies and economic trends continue, the debt will likely double over the next 30 years, rising to about 150% of GDP.

I see the CBO’s predictions and “warnings” as bunk, bunk, and, uh, bunk.

Read the rest of this entry »

 

Tags: , ,

The “DEBT-based” Monetary System is a “RISK-based” Monetary System


Debt = Risk [courtesy Google Images]

Debt = Risk
[courtesy Google Images]

FORBES magazine recently published an article entitled “The Fed’s Monetary Monkeying Is Ruining Your Retirement And The Economy”. As often happens, excerpts from that article got me thinking. For example:

.

• “Is there any way that NIRP (“Negative Interest Rate Policy”) make sense?

“ Maybe.

Central banks think NIRP will get people to take more risk.”

.

What’s the Fed mean when it encourages people to take more risk? Drive without fastening their seat belts? Cancel their home owner’s insurance policy?

No. The Fed’s encouragement to take more risk is like telling a man to play Russian Roulette. However, in the context of this analogy, each “bullet” is an item of significant debt.

Read the rest of this entry »

 

When the Debt Hits the Fan


[courtesy Google Images]

[courtesy Google Images]

Business Insider published an article entitled “Americans have $12.29 trillion of debt”. That article reported:

.

“Americans are still adding debt.

Household debt—which includes things as varied as mortgages and credit cards—increased to $12.29 trillion in the second quarter of 2016, an increase of $35 billion, or 0.3%, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit.

“The biggest increases came from auto debt and credit-card debt, which ticked up by $32 billion and $17 billion.

Mortgages, the largest section of household debt, actually decreased in the second quarter, according to the New York Fed. The decrease in mortgage debt seems to be driven by more people paying down their balances, as new mortgage debt continued to tick up.

Student-loan debt decreased by $2 billion, to $1.259 trillion . . . .”

.

According to Bloomberg, total U.S. corporate debt is about $30 trillion. The “official” U.S. national debt is about $20 trillion. Added together, that means the total U.S. household, corporate and government debt is at least $62 trillion.

Read the rest of this entry »

 
 

Tags: , ,

Promises, Promises


What Can't Be Paid, Won't be Paid [courtesy Google Images]

What Can’t Be Paid,
Won’t be Paid
[courtesy Google Images]

Last month (July), AFP published an article entitled “Japan PM unveils $266 bn stimulus plan to boost economy”. According to that article,

.

Japan’s government and central bank have come under increasing pressure to do more for the economy.

“Therefore, [in July] Japan’s government announced a stimulus package worth more than 28 trillion yen ($266 billion) in its latest attempt to fire up the lukewarm economy . . . .”

.

By itself, $266 billion in government stimulus doesn’t strike me as significant. Back around 2008-2009, the U.S. government injected $800 billion into the U.S. economy under QE1. Later, under QE3, the government injected $80 billion per month (almost $1 trillion per year) into the economy. These injections may have postponed a U.S. economic depression, but they didn’t generate much of an economic recovery.

Given that Japan is the world’s third largest economy, I don’t expect $266 billion (just one-third of the $800 billion injected during the U.S. QE1) to have much more effect on Japan’s economy than QE1 had on the U.S. economy.

This implies that Prime Minister Abe’s proposed “stimulus package” is more of a gesture to “do something” rather than a real economic remedy for the stagnating Japanese economy.

Read the rest of this entry »

 

Tags: , , ,

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.

.

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.

Read the rest of this entry »

 

Tags: , ,

Teeter-Totter Relationship Between U.S.$ and Foreign Currencies


USDX [courtesy Google Images]

USDX
[courtesy Google Images]

The “Group of 20” (G20) includes the world’s 20 biggest industrial and emerging economies. G20 finance ministers and central bank chiefs met in China on Saturday and Sunday (July 23-24, A.D. 2016).

According to the AFP (“US Warns Against Devaluation Ahead of G20 Finance Meeting”), on the Thursday before this G20 meeting:

..

US Treasury Secretary Jacob Lew said that top economies should refrain from competitive currency devaluations–a message likely directed at China.

According to Secretary Lew, “The global outlook . . . underscores our focus on the commitment made at the last G20 in Shanghai to consult closely with one another on [currency] exchange rate policy, and to refrain from competitive devaluation.”

.

First, the term “competitive currency devaluations” is misleading insofar as “competitive” signals something civil like a genteel, after-dinner game of Whist in the parlor. In fact, these “competitive currency devaluations” are almost as potentially serious and lethal as nuclear war.

(More, it’s conceivable that China’s “competitive currency devaluations” just might be enough to trigger naval conflict between China and the U.S. or even Japan in the South China Sea.)

Read the rest of this entry »

 

Tags: , , , ,

“Helicopter Money”


Helicopter Money [courtesy Google Images]

Helicopter Money
[courtesy Google Images]

Control of the economy is based on two sets of powers:

.

1) The Federal Reserve wields the monetary powers which include control over interest rate and over the supply of currency.

2) The U.S. government wields the fiscal powers which include raising or lowering taxes, raising or lowering borrowing, and increasing or decreasing government spending on benefits, subsidies and wars.

.

For the past year, we’ve heard the Federal Reserve say repeatedly that:

.

1) The Federal Reserve has exhausted its monetary powers and is no longer capable of using previous, “conventional” monetary strategies like QE (Quantitative Easing; printing and injecting more currency into the economy) and ZIRP (near-Zero Interest Rate Policy) to stimulate the economy back to a “recovery”.

I believe the Federal Reserve’s claims that it’s currently helpless to do much more to “stimulate” the economy with monetary policy are true.

If the Fed’s not fibbing, then only the U.S. government remains to engineer an economic “recovery” by means of its fiscal policy. However,

2) The U.S. government is unwilling or unable use its fiscal powers to raise taxes and/or borrow more currency to provide enough additional “stimulation” to cause an economic recovery.

Read the rest of this entry »

 

Tags: , , , , ,