Category Archives: Promises

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.

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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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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Pension Panic

City of Detroit

Mel Brooks' Blazing Saddles:  "One more step . . . and the nigger gets it!"

Mel Brooks’ Blazing Saddles: “One more step . . . and the nigger gets it!”

On July 18, Detroit’s $18.5 billion bankruptcy became the largest U.S. bankruptcy ever. (OK, maybe not “ever”–but at least, “so far”.)

The Detroit Free Press (“Detroit: Snapshot of a City in Trouble”) described the bankruptcy as marred by “legal wrangling . . . that will involve more than 100,000 creditors, which include the Police and Fire Retirement System and the General Retirement System and its 20,000 retirees.”

Detroit’s emergency financial manager Kenneth Orr offered government retirees some temporary relief, promising:

“We have made a decision that for the balance of this year, the next six months, we’re not touching pension or health care.  So all pensioners, all employees you should understand: It’s status quo for the next six months.”

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Schiff, Napolitano: Don’t Save in Fiat Dollars

Portrait of Peter Schiff taken from the beginn...

Image via Wikipedia

Insofar as most people think at all, most people think that our government’s deficit financing (borrowing) will leave today’s debt to future generations.  We try not to think about it because it makes us feel a little bad about leaving our debts to our kids and grandkids.  But on the other hand, we’ve done so much for the little bastards and bitches that they deserve to pay our debts–right?  Better that “somebody” (even our own kids) be forced to pay our debts than we pay for them, ourselves.

After all, we’re Americans.  We are therefore entitled to “shop til we drop” on credit–and when our credit cards are maxed out, we’re entitled to get newer credit cards.   True–“somebody” may someday have to pay our debts, but so long as that “somebody” isn’t you and me, to hell with ’em.

Peter Schiff [photo, right] disagrees with the idea that we’ll leave our debts for future generations.  Schiff argues that today’s governmental borrowing will not be passed on as debt for future generations, but will instead cause immediate and significant increases in inflation that will dramatically afflict this generation.  Inflation will essentially “tax” this generation by robbing all who save their wealth in the form of fiat dollars and/or dollar-denominated debt instruments.

By means of inflation, this generation (not the next one) will be called on to “pay” for much of the current debt.

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Ethical Questions and Pension Wars


The gov-co is bankrupt.  Cost-cutting measures are being implemented:

August 9th NYTimes (“Pentagon Plans Steps to Reduce Budget and Jobs”):

“Defense Secretary Robert M. Gates said he would close a military command, restrict the use of outside contractors and reduce the number of generals and admirals across the armed forces as part of a broad effort to rein in Pentagon spending. . . . Pentagon officials could not recall a time when a major command was shut down and vanished off the books.”

Financial circumstances must be truly desperate.

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Promises, Promises (and Arguments)

The following case touches on issues of PROMISES (unilateral contracts?) and ARGUMENT and offers a surprising amount of insight in a relatively few pages: 100205 USA v Reagan ARGUMENT


Posted by on February 8, 2010 in Argument, Contracts, Promises