Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Is Compounding Debt Mankind’s Kryptonite?

Economics / Global Debt Crisis Apr 10, 2011 - 10:28 AM GMT

By: Submissions

Economics

Best Financial Markets Analysis ArticleSilverDoctors writes: Throughout history, mankind has struggled to end the boom/bust economic cycle, and usher in a new age of economic prosperity.  The middle ages saw monarchy/ feudal/ serf systems.  Marx and Lenin believed economic prosperity could be achieved through socialism or communism- complete sharing of economic wealth and resources.  The modern Western world-influenced by the likes of Adam Smith, Keynes, and Friedman, has tried to achieve this through capitalism- the private ownership of goods with the incentive for personal profit.   The Chinese have developed a modern hybrid of capitalism and communism.  Hard money advocates believe fiat currency is the issue, and a return to sound money such as gold and silver will finally usher in the era of economic prosperity. 


Each of these economic systems has been used numerous times, and all have miserably failed at creating uninterrupted growth and prosperity.   The end result is always a concentration of wealth and capital among a small percentage of elite at the expense of the rest of the population.   This wealth and capital inequality fueled by debt continues to build until a tipping point is reached, and the economy collapses.  This endgame always develops in one of two scenarios. 
  1. Deflationary collapse- the debtors reach a point where they can no longer service their debt payments, and they default on their obligations.
  2. Hyper-inflationary collapse- the debtors lose confidence in the value of their currency, and rush to dump their currency holdings.  A positive-feedback loop is initiated, and the panic continuously intensifies until a complete collapse is reached.

    The system then resets and the process begins again.

    The reason no economic system ever developed by mankind has been able to eliminate these cycles can be summed up in two words: Debt, and Interest.
    Let’s look at a simple example of why debt and compounding interest result in an unsustainable increase in debt, which must eventually default or be inflated away.

    Suppose you lived 4600 years ago when the pyramids at Giza were being built, and you loaned Pharaoh  $1 at 1% interest to complete his tomb (for simplicity’s sake we’ll think in terms of dollars instead of the ancient Egyptian currency unit).  By 2011, the compounded debt would have reached 128,092,932,174,404,630,000.00. So after 4600 years, $1 at 1% interest compounds to a debt of 128 quintillion, 92 quadrillion, 932 trillion, 174 billion, 404 million, 6 hundred 30 thousand dollars.  The total value of every asset in the world is roughly $140 Trillion.
    In other words, in only 4600 years, $1 at 1% interest compounds to 91,500x the value of the entire earth. 
    Clearly, even at only 1%, compounding interest is unsustainable.  It does not matter if the currency is fiat, gold/silver, floating, or any other devisable currency. It does not matter if the economic model is capitalism, socialism, communism, fascism, or any other.  Compounding interest makes every currency and system unsustainable over the long term.


    Is debt and interest mankind’s kryptonite? Are we cursed to forever continue the wealth disparity, boom/bust credit cycles due to compounding interest? Is there no solution to prevent the inevitable collapse that compounding interest ensures?

    There is only one solution to the boom/ bust credit cycle: the economic system developed by our Creator.

    The Creator’s system? Gold and silver based money to be lent without interest, with a debt jubilee every 50 years.

    In Leviticus (Old Testament), our Creator describes the only stable and prosperous economic system ever known to mankind. 

    Silver (money) was not to be lent at interest

Every 50th year was commanded to be a Jubilee year, in which:

-All debts were to be forgiven
-All slaves were to be freed
-All farmland was to revert back to its original owner (or family)
-The land was to rest, no crops were to be planted or harvested

This marvelous economic model is the only system known to man in which debt and overconsumption will not build to the point of an unsustainable collapse.  The expectation of the coming Jubilee year forces constraint by lenders.  The Jubilee freedom and debt forgiveness prevents an unsustainable rise of debt.  It prevents an elite class of citizens from continually increasing their wealth, power, and influence over the rest of the population through the tool of debt and interest.  It automatically eliminates the “Vampire Squid” bankster class’ ability to control the economy through debt.   The Creator’s economic model achieves the goal of communism with the freedom of a laissez-faire system.  

While a return to a gold and silver standard would be a vast improvement from our current fiat monetary system, a pure hard money currency alone cannot end the boom/bust credit cycle and the associated debt collapse.  A return to our Creator’s perfect monetary system of hard money, no interest, and Jubilee debt forgiveness every 50th year could usher in a true golden era, and provide sustainable prosperity for the entire nation.

Compounding debt does not have to be mankind’s kryptonite.

SilverDoctors

SilverDoctors specializes in precious metals commentary and trading, found at
www.Silverdoctors.com

© 2011 Copyright SilverDoctors - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules