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Category Archives: Debt

What comes after the welfare state collapses?


WelfareState1ZeroHedge published an article entitled, “Now The Pain Begins: S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State.” The article dealt with Illinois’ growing financial problems.

Excerpts:

Today, in the span of a few hours, two credit-rating agencies (first S&P, then Moody’s) downgraded Illinois bonds to BB+ and Baa3, respectively—both just one notch above junk, the lowest rating ever given to a U.S. state. Both agencies cited Illinois’ long-running political stalemate over a state budget as showing no signs of ending.

S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deepen the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

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For Whom the Debt Tolls


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Pick Up Your Cross (courtesy Google Images)

Michael Snyder (Economic Collapse Blog) is an intelligent, prolific author of articles concerning the U.S. and global economies. He’s not optimistic. As you can tell from the name of his blog, he’s expecting an economic collapse. He recently published an article entitled “Global Debt Bomb Ready To Explode – $21,714 For Every Man, Woman And Child”.  That article got me thinking; agreeing in part, but also disagreeing—or at least quibbling. What follows are excerpts from that article and my comments:

 

According to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars. Other estimates put that figure closer to 200 trillion dollars.”

Note that some persons including the Congressional Budget Office (CBO) and economist Laurence Kotlikoff think that, including unfunded liabilities, the U.S. government’s real National Debt (claimed to be “just” $20 trillion) may actually be over $200 trillion. Thus, if the $20 trillion National Debt of the U.S. is understated by $180 trillion, then the global debt estimate of $152 trillion referenced by Michael Snyder should also be understated by (at least) $180 trillion. If so, the real, total global debt could be at least $330 trillion.

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Debt-Based Monetary System Demands Ever More Debt—Part IV—“Why”?


Thinker2

BUT WHYYYYY?!

In the first three “Parts” of this article (#1 More Debt, #2 Ponzi Schemes, & #3 Fractional Reserve Banking), I explored and advanced an hypothesis concerning America’s National Debt. I argued that our National Debt isn’t growing due to accident or governmental incompetence. Instead, I argued that that our seemingly uncontrollable National Debt (it nearly doubled under the Obama administration) grows out of a mathematical necessity that’s somehow caused by our Debt-Based Monetary System (DBMS).

In essence, I believe that our DBMS forces our National Debt to grow as a necessity and requirement. The the DBMS will die if it’s not constantly fed an growing stream of debt. If the DBMS dies, it will kill our debt-based economy.

More, I suspect that the debt must not only grow, but must grow “geometrically” or, at least, it must grow faster than the economy. If that’s true, it’s the the kiss of death for the DBMS and our debt-based economy.

Our DBMS (Debt-Based Monetary System) doesn’t simply make more debt possible, it makes more debt necessary. If we fail or refuse to go deeper into debt, our DBMS and economy will collapse into chaos.

If my hypothesis is roughly correct, it means that any promise by the Republican Party or President Trump to eliminate deficit spending and/or reduce the National Debt from $20 trillion to, say, $19 trillion—is not only false, but potentially dangerous. If they succeed in significantly reducing the National Debt, I believe that reduction could cause our debt-based economy to collapse.

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Debt-Based Monetary System Demands Ever More Debt—Part II—Ponzi Schemes?


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Is our Debt-Based Monetary System a Ponzi Scheme?  [Courtesy Google Images]

Recently, in Part I of this series, I promised that in Part II, I’d explain “why” the survival of our debt-based monetary system (DBMS) depends on the creation of ever more debt. I argued that our massive National Debt is not an accident or evidence of political malfeasance, but rather an intentional and necessary consequence of accepting our debt-based monetary system (DBMS). I argued that our DBMS can’t survive without going ever deeper into debt.

I compared “payments” (which are tangible, real assets like gold or silver coins) to “promises to pay” (which are intangible, paper debt-instruments like paper dollars). I warned that, given the choice between receiving a tangible “payment” and an intangible “promise to pay,” only a fool would take the paper “promises to pay”.

I illustrated my argument about “promises to pay” by reminding readers of how many times they had made or received promises that had failed. My point was that promises are easily made and routinely broken.

So, I suppose it should come as no surprise that my promise to use this week’s article to explain the “why” behind the debt-based monetary scheme will also be broken. I began to write this second article with some background on “Ponzi Schemes” (which is how I and others frequently describe our DBMS).  But, when I looked into “Ponzi Schemes,” I discovered that maybe that’s not the most accurate way to describe our DBMS. I also realized that maybe I should try to discern and describe the nature of our DBMS before I got into the “why”.

Result? Here, in Part II of this series of articles we’re going to explore whether our DBMS is really a “Ponzi Scheme” or if it’s something else. Then, in Part III (coming soon) I’ll present my notions concerning the fundamental “why”.

I promise.

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What Can’t Be Paid, Won’t Be Paid


National Debt Creditors About to Lose their Assets [courtesy Google Image]

National Debt Creditors About to Lose their Assets
[courtesy Google Image]

I’ve argued for five years that the U.S. National Debt is too great to ever be repaid in full, or even by half.  My personal guesstimate is that at least 80%–and probably 90%–of the National Debt will inevitably be repudiated.  That repudiation will take the form of hyperinflation, express repudiation (“Sorry, boys–but we’re too broke to pay that debt.”), or perhaps even WWIII (a good war could wipe out virtually all memory and enforce-ability of the National Debt.).

Here’s a graphic that illustrates my argument.  If you take a few minutes to view the graphic, you’ll see the size of the U.S. National Debt is:

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1. Larger than the 500 largest public companies in America;

2. Larger than all assets managed by the world’s top seven money managers;

3.  25X larger than all global oil exports in 2015;

4. 155x larger than all gold mined globally in a year; and, my personal favorite:

5. Larger than all of the world’s physical currency, gold, silver, and bitcoin combined.
In other words, there’s not enough actual money and currency in the world to repay the U.S. National Debt.
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The Only Question


$20 TRILLION National Debt! [courtesy Google Images]

$20 TRILLION National Debt!
[courtesy Google Images]

On September 30th, A.D. 2016, the U.S. government closed out the 2016 fiscal year with an “official” National Debt of $19,573,444,713,936.79.

Makes me laugh.

Government can calculate the U.S. National Debt to the penny. How responsible!

And yet, government has no idea what happened to $6.5 trillion that was given to the Pentagon and subsequently disappeared.

In any case, the National Debt grew by $1,422,827,047,452.46 ($1.4 trillion) in fiscal 2016. That averaged out to over $100 billion in deficit spending per month.

That annual deficit spending increase has been a de facto $12,000 subsidy for every American household.

The fiscal 2016 deficit spending (debt) amounts to roughly 7.5% of the entire US economy. Without that 7.5% in debt-based “stimulation,” where do you suppose the economy would be right now?

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Promises, Promises


[courtesy Google Images]

[courtesy Google Images]

The Chicago Tribune recently published “A federal solution to Chicago’s public pension mess”. According to that article, Chicago’s pension debts promised to retired government employees, can’t be paid based on current funding. Therefore, the city’s government will raise taxes, cut benefits and force Chicagoans into an era of “austerity” similar to that which has been inflicted on the people of bankrupt Greece.

But even after an era of austerity, the pension debt still can’t and won’t be paid in full.

Chicago is a microcosm of the US and world economies. Pension plans throughout the U.S. and global economies are going to fail. Many retirees are heading for poverty.

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I’m not against unions, but I have no sympathy for the Chicago teachers and police officers’ unions. It may seem sad that they’re about retire without fat pensions, but they’re not innocent victims. They bribed crooked politicians to rob future generations (children, grandchildren, even the unborn) to provide pensions to government employees that were not only “overly-generous” but unearned.
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