Category Archives: Promise-based monetary system

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, 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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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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“Multiplied Reserve Banking” & a “Promise-Based Monetary System”

Conventional View of Fractional Reserve Banking [courtesy Google Images]

Conventional View of Fractional Reserve Banking
[courtesy Google Images]

This article advances an hypothesis that’s both new and unclear–at least, to me.  The article is overly long (3,700 words) because I’m not only trying to explain my hypothesis to you, I’m also trying to explain it to myself. 

In the process, I use numbers in this article, but those numbers aren’t intended to accurately reflect reality—they’re only intended to illustrate principles relevant to my hypothesis.

I’m not claiming that this hypothesis is true. In fact, it might be seriously flawed or even absurd.  I’m only claiming that it might be interesting and even roughly correct.


Most people don’t understand that we live in a financial world characterized by:

1)  “fractional reserve banking”; and,

2)  a “debt-based monetary system”.

Neither of those two concepts are well-understood by most people.  The term “fractional reserve banking” might be vaguely recognized by most people, but seldom understood.  The term “debt-based monetary system” hasn’t even been heard of by most people and isn’t understood by even one in a thousand.

Insofar as we recognize either term, we tend to regard them as two distinctly different, and unrelated concepts.

But I begin to see that those two concepts are no more unrelated than the two sides of a coin.  In fact, I begin to suspect that neither characteristic could exist without the other and that, together, they comprise the backbone for the current financial system of the US, the world, and perhaps even the New World Order.

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