Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Pakistan Booming House Prices Housing Market Mania Kabza Mafia Warning! - 29th Aug 16
Post Yellen = Market Confusion - 28th Aug 16
Theresa May Instructs Police, NHS Gp's, Public Sector To Stop Racial Discrimination in Service Delivery - 28th Aug 16
Ignore Yellen and Buy the Dip in Precious Metals - 27th Aug 16
SPX Downtrend Should be Underway - 27th Aug 16
Unraveling the Secular Economic Stagnation Story - 27th Aug 16
The Precious Metals Sector and the Fed. . . - 27th Aug 16
Stock Market - All Is Calm, All Is Not Right - 27th Aug 16
Gold Junior Stocks Q2 2016 Fundamentals - 26th Aug 16
Buy Gold’s August Dip? Gold’s Monthly Sweet Spot In September - 26th Aug 16
The IMF’s Internal Audit Reveals Its Incompetence and Massive Rule Breaking - 26th Aug 16
Commodities Are the Best Bargain Now—Here’s What to Buy - 26th Aug 16
Why I Left Canada and Became A Citizen of the Dominican Republic - 26th Aug 16
The GLD vs GOLD - 26th Aug 16
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy - 3 Secret Charts

Worldwide Debt Default is the Only Solution

Politics / Global Debt Crisis 2012 Jul 21, 2012 - 11:00 AM GMT

By: Jason_Hamlin

Politics

Diamond Rated - Best Financial Markets Analysis ArticleSovereign nations, state governments, Californian cities, small businesses, homeowners, middle-class families, recent graduates and all types of other individuals and entities around the world are facing the same growing problem… DEBT. While the European Union is in the spotlight at the moment, the debt crisis is arguably worse in the United States and reaches its nasty tentacles into just about every nook and cranny of modern society.


It is sucking the life out of economies, stagnating growth, leading to central bank debt monetization, which leads to inflation and higher food prices, job cuts, furlough days, rising unemployment, harsh austerity, record small business failure, record foreclosure rates, depression, stress and an overall sense of anxiety throughout most of humanity.

The only two solutions being debated for the Eurozone at present time are additional austerity measures/tax hikes or a massive new round of debt monetization and quantitative easing. But it does not take an economic expert to conclude that neither one of these courses charted above will resolve the crisis. They have confined the debate to these two options in the same manner that we are presented with the false left vs. right illusion of choice in our political elections.

It should seem obvious to anyone with a pulse that reducing government debt via inflationary policies is nothing more than theft from current holders of the currency (savers) or past purchasers of said debt. Intentionally devaluing the currency to pay back creditors with significantly less valuable money is really just a stealth form of default, without all the fanfare. The only real difference with this approach is that just about everyone in society suffers, rather than solely those that made the bad lending decisions.

It is another no-lose situation for the banks which get to privatize gains and socialize losses. How would you like to walk up to a blackjack table in Vegas, betting $10,000 per hand, keeping the money when you win and spreading the losses to the rest of the casino whenever you bust? This is ‘moral hazard gone wild’ and only leads to bigger bets, bigger losses and a continued attempt to stick the rest of society with the bill.

The other solution being proposed is to raise taxes while cutting spending (austerity). Of course the problem with this solution is that higher taxes and aggressive austerity hurt economic growth and crush small businesses, the engine of growth for economies.

Even if you want to argue for a more progressive taxation system, the problem remains that the money is being handed to an entirely corrupt, inefficient and incompetent government. We can expect more $16 muffins, $500 toilet seats, no-bid contracts, kickbacks, political favors and general misallocation of capital (hello corn-based ethanol or Solyndra). Not only this, but increasing the tax burden on businesses will lead even more companies to move their operations overseas, thus exasperating the unemployment problem and losing even more in tax revenues.

Cutting spending seems logical enough, but rest assured it will be cut in all of the wrong places for all of the wrong reasons. And even if spending were to be cut to the bone, the government would still be unable to balance their bloated budget, largely due to rising interest on existing debt and military spending that is larger than the next 10 nations combined, yet somehow sacrosanct.

I found it fascinating that Richard Duncan, author of “The New Depression,” was able to accurately diagnose the problem with our economic system and the potential severity of the crash, yet concluded that the solution was even more money printing, borrowing and government stimulus?!? Oy vey!

Some people argue that the crux of our problem is that debt, at its core, is mathematically impossible to repay. This is because all money is created out of debt and there is interest attached to all of that debt. Yet the additional cash required to pay back the interest on the debt DOES NOT EXIST in the system. At any given point, there is always going to be more debt owed back than there is money in existence.

If I lend you $100,000 and ask you to pay me back $120,000 over the next five years, you might be able to find that extra $20,000 to pay me back if you are industrious or clever enough. However, that additional $20,000 that you acquired in the market was also created out of debt and is owed back to someone with interest. Thus, all debt can never be repaid. For more on this concept, see here, here, here or here.

It is a good gig for the banks with the privilege of being able to create money out of thin air and lend it out at interest. With the certainty of defaults, the banks then move in to seize assets, resources, cheap labor, political influence or anything else they wish. This has been occurring since 1913 and is only now reaching a boiling point, as the money lenders are taking over the power of sovereign nations. It is a form of slavery, though cleverly hidden so as to prevent any widespread realization or revolt.

Conclusions

1) Raising taxes will not solve the problem. We could raise the tax rate to 100% and the government would still not be able to get out of debt.

2) Cutting spending (austerity) will not solve the problem. We could cut every non-essential government service and the government would still not be able to get out of debt.

3) Inflating away the debt will not solve the problem in the long term. It will only kick the can down the road, exasperating the final crisis and making everyone pay for the poor decisions of a small group of lenders.

Solutions

So then, what is the solution to the debt crisis in Europe, the U.S. and around the globe?

The immediate default on all fiat debt. An old-fashioned debt jubilee of sorts.

I know this may seem like a radical proposal, but I believe it is the best option we have as a society and that there exists both a sound economic and moral argument for this course of action.

If we agree that the debt can never be repaid, which is a position held across the ideological spectrum by everyone from Ron Paul to Paul Krugman to the Zeitgeist Movement, then let’s get on with the default and start anew. The sooner that the debt liquidation occurs, the sooner that we are able to transition to a new, more sound and more sustainable monetary system. The longer this inevitable outcome is delayed, the longer we languish in this mode of low growth, high unemployment and extreme wealth disparity.

I won’t pretend that the transition is going to be swift or painless, but the vast majority of humanity stands to benefit from the default happening sooner rather than later. Only the banking power elite, politicians they support and those feeding at the trough have any interest in sustaining the current corrupt and inequitable system any longer.

If we want to end the sovereign debt crisis that is rapidly engulfing the planet, we need a worldwide strategic default on all fiat debt. This can be followed by the implementation of a new system, whether it be a debt-free monetary system or shift to something entirely different such as a resource-based economy.

While there are surely going to be serious challenges and unintended consequences, let’s focus on some of the benefits that may come from the cancellation of fiat debt…

Removing the suffocating debt burden would free up both sovereign nations and individuals to once again enjoy the fruits of their labor. That giant sucking sound of the non-productive money changers stealing from the rest of society would fizzle out and go silent.

The largest part of the national debt (over 40%) that is owed to the Federal Reserve would be immediately canceled, along with this privately-owned, immoral, parasitical and unconstitutional organization.

The next big piece of the pie is the debt owed to foreign nations such as China and Japan. These countries would also take a loss, a risk they assumed when investing in the debt of a bankrupt government. They will survive the hit, as they have already begun diversifying reserves into non-dollar assets.

Mortgages and bank-owned student debt would be canceled and the too-big-to-fail banks would go out of business. Excuse me if I fail to shed a tear. This would free up a considerable amount of discretionary spending for the citizenry, who would no longer have bloated monthly payments, excessive interest rates and “fiduciaries” working the opposite side of the trade.

With the canceling of debt, government funds would no longer be necessary to pay the interest on the debt, thus allowing for a significant reduction in tax rates. This would also result in more discretionary spending money in the pockets of the citizens and a friendlier environment for small businesses. These small businesses would then have more customers with more spending power, resulting in more job creation and economic growth.

The size and scope of government could be downsized drastically, as deficit spending would be eliminated and budgets would need to be balanced. The money owed to individuals (up to a certain point) via pension and mutual funds invested in Treasuries, would be compensated via such tax reductions.

The moral argument to the cancellation of debt is the other side of the equation. Given the fact that the debt was not created in good faith and that the banks well understand that their system was unsustainable, I see moral grounds for such action. A legal argument can also be made that most bank loan contracts are invalid, as the banks offered up no consideration. They merely made a few keystrokes into a computer and created the loan out of thin air, not from existing reserves or deposits. The upside to banks going out of business is that much of the intellectual capital of the nation could then be re-deployed to engineering, science and solving real-world technical problems, rather than figuring out how to steal money from unwitting pension funds.

So, the world’s citizens protesting in the streets are right to reject tax increases, austerity or bailouts as legitimate and viable solutions to the debt crisis. We are being asked to pay for the mistakes of others and hand over sovereignty to the international banks, the richest individuals in the world.

Dismiss the puppets and paid pundits on television encouraging such solutions and casting blame at the feet of the citizens. There has been an intentional effort to trap and ensnare as much of the world as possible in this black hole of a endless debt. Likewise, more debt is not the solution to the problem of too much debt. It is amazing that these words even have to be written, but when the public is fed the same line over and over about needing more money printing, it starts to become believable.

Of course, the NY Times and other establishment media will warn of the devastating effects of such a debt jubilee. But they are only serving their owners, who clearly stand to benefit from the continuation of the status quo.

The brilliance behind this proposed debt cancellation is that it strategically allocates losses to those that created the mess, have grown rich from it and can most handle the hit, while protecting and indeed returning wealth to the rest of society that has suffered under this unfair system of fiat money and crony capitalism. Justice?

This solution would, in essence, hand back Trillions in bailout money, tax breaks and other economic benefits that the banks have enjoyed at the expense of the taxpayers. We’ve already seen the impact of handing bailout money to the banks. I think it is safe to assume that the money would have a higher velocity and greater impact on economic activity if instead given to those that would actually spend it, rather than hoard it. With respect to the late President, we are still waiting for that great rain to come trickling down.

If we want to get serious about tackling the debt issue, the key driver in all of our economic problems, we have to move the debate beyond the narrow confines of tax increases, austerity and central bank liquidity injections. The only lasting solution is to cancel the debt now, deal with the ramifications and shift to a debt-free, non-fiat, non-fractional reserve monetary system with sound money or some reference to real-world assets.

The few who understand the system, will either be so interested in its profits, or so dependent on its favours that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests. – John Sherman…a protégée of the Rothschild family

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. You can try it for just $35/month by clicking here.

Copyright © 2012 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 2005-2016 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

Catching a Falling Financial Knife