Category Archives: Deficit Spending

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


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.

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“Reset” Coming? What’s a “Reset”?

[courtesy Google Images]

[courtesy Google Images]

Greg Hunter ( 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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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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How The Federal Debt Limit Works

Federal Debt vs Receipts graph

Image via Wikipedia

Simplified. I love analogies.

video 00:03:09


Posted by on January 3, 2012 in Debt, Deficit Spending, Video, What Can't be Paid


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The War Between the Credit-worthy and the Credit-unworthy

Credit Card

Image by 401K via Flickr

•  By definition, the only legitimate way a debt-based currency gets into an economy is by lending it.  This lending doesn’t take place just once.  Primary lenders lend to secondary lenders who lend to tertiary lenders, etc..  I.e., the Federal Reserve System lends currency to the Federal Reserve Banks which lend that currency to private banks which lend it to their customers.  The chain of lenders and borrowers can be lengthy and complex.

It’s always possible for people at the bottom of the lender-borrower “pecking order” to acquire currency without actually borrowing it.  For example, they can work for it.  However, for those who have no credit in a debt-based monetary system, their access to currency will be so restricted that they’ll probably live in or near poverty.


•  The plight of the credit-unworthy illustrates a fundamental problem with any debt-based monetary system.  By definition, you can’t lend currency to the credit-unworthy and expect to be repaid.  For proof, witness the sub-prime mortgage debacle of the past decade.  Some seemingly smart people lent currency to the credit-unworthy and apparently expected to be repaid.  They fought economic reality and reality won.  The result was a credit collapse in A.D.2008 that nearly caused a global depression—and may yet do so.

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Why Do I Owe $46,000?


I received an email containing the following photo and question:


“The answer is that she must pay for her grandparent’s and great-grandparent’s addiction to government benefits.  The children will pay for the fiscal slovenliness and dependency of the Greediest Generation.  There is no free lunch.  Sooner or later someone is going to pay.  Debt is the children’s legacy.”

I agree in part and disagree in part.

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Credit as a Function of Morality

2010 Budget: Projected deficits and debt incre...

Image via Wikipedia

When it comes to moving money, there are only three fundamental mechanisms:  gift, debt and theft.

If Alfred voluntarily gives $1,000 to Donna without receiving Donna’s promise to repay, the transaction is a gift.

If Alfred gives $1,000 to Donna, and Donna reciprocates by providing Alfred with her promise to repay that $1,000 (perhaps with interest), that transaction is a debt.

If Donna takes $1,000 from Alfred without Alfred’s consent and without providing Alfred with Donna’s promise to repay, that’s theft.

Americans live in a “debt-based” economy.  There is no gold or silver coin (real money) in circulation.  As a result, our fiat currency is loaned into circulation and necessarily debt-based.

The essence of every debt is a promise to repay.  The essence of every nation’s debt-based monetary system is that nation’s ability to make good on their promises to repay their debts—and determination to do so.

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