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Category Archives: Government Bankruptcy

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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Monetary Madness Part I—Negative Interest Rates


Negative Interest Rates-- Heading for Hell? [courtesy Google Images]

Negative Interest Rates–
Taking us towards Hell?
[courtesy Google Images]

The fundamental premise underlying negative-interest rate bonds is that lenders pay government borrowers for the “privilege” of lending to government. Based on this premise, governments receive loans at less than the face value of the bond. For example, if you loaned $100,000 to the government on a negative-interest loan, you might only receive, say, $98,000 when you redeemed that bond. You’d lose $2,000 for the privilege of lending to the government.

In all of world history, I doubt that there’s ever before been a time when lenders paid borrowers for the privilege of lending money.

The world is embracing negative-interest rate bonds for the first time. That fact is not evidence of economic creativity and financial innovation so much as evidence of desperation and the financial madness that lies at the heart of debt-based monetary and economic systems.

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A few facts about negative-yield bonds:

According to Bank of America Merrill Lynch, the global amount of government bonds having negative yields is now $13 trillion,.

Just two years ago, there were virtually zero negative-interest rate bonds. The subsequent, two-year rise to $13 trillion is unprecedented.

In February A.D. 2015, the total amount of negative-interest debt was $3.6 trillion.

By February A.D. 2016 that negative-interest debt had nearly doubled to $7 trillion.

In the five months since February, A.D. 2016, the amount of negative-yielding bonds nearly doubled again to $13 trillion.

The spread of negative-yielding bonds is unprecedented, fantastic and accelerating.

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“Helicopter Money”


Helicopter Money [courtesy Google Images]

Helicopter Money
[courtesy Google Images]

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

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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.

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

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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.

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Good News/Bad News for English Pensioners


[courtesy Google Images]

[courtesy Google Images]

24hgold.com reports in “UK’s Royal Mint will sell pension investors gold they can never see” that,

“The Royal Mint in England is to open up its gold vaults to UK pension investors. The Royal Mint will make some of its gold bars available to investors wanting to hold it in tax-efficient pension pots.

“For UK citizens, this is the first time that Royal Mint gold bullion has been authorised by HM [Her Majesty’s] Revenue & Customs . . . for holding in specific pensions.

“Investors are to be offered a choice of bullion, from Royal Mint Refinery 100-gram and 1-kilogram bars, to Signature Gold—a service that allows customers to purchase and own a share of a 400-ounce gold bar.”

Sounds pretty good. However, here comes the punch line:

“Pension investors purchasing gold bars through the Royal Mint will not be able to take delivery of their purchases as they will be placed in storage in ‘The Vault,’ the Royal Mint’s secure storage facility in Wales.”

And, according to the title of the article, pension investors won’t be able to even see the gold they’ve allegedly purchased.

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Government and the Federal Reserve—In the End, can there be Only One?


Highlander1You might remember Highlander—an A.D. 1986 film that starred Christopher Lambert and Sean Connery. The film described an ages-old battle between “immortal” warriors. Its tagline, “There can be only one”, meant that all of the various “immortals” were destined to fight and kill each other until only one “immortal” survived.

In this article, I’m exploring the hypothesis that our two institutional “immortals” (the Federal Reserve and U.S. government) are destined (like Highlander’s “immortals”) to fight each other until only one remains.

Conventional wisdom tells us that the Federal Reserve and U.S. government work hand-in-glove and without fundamental conflict. However, when you stop to think about it, it appears that the current relationship between these two institutions should be so fundamentally adversarial that, in the end, only one can survive.

 

Debtors love inflation since it allows them to repay their debts with “cheaper” dollars. Almost every American who’s bought a new home since WWII has been encouraged to take out a 20- or 30-year mortgage by the promise of being able to repay their debt with “cheaper” dollars. Inflation is the force that renders dollars “cheaper” and thereby encourages us to borrow and spend.

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Our Debt-Based Monetary System


The Rules of a Debt-Based Monetary System [courtesy Google Images]

The Rules for a Debt-Based Monetary System
[courtesy Google Images]

What follows is mostly speculation.

I’m going to explore several premises and, using my version of “logic,” build on those premises.

I’m not claiming that my premises are necessarily true. I’m not claiming that my “logic” is necessarily logical.

I am claiming that these premises and my “logic” lead to some hypothetical conclusions about our debt-based monetary system that are at least interesting and perhaps surprising.

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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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