Debt Rattle April 1 2016
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William Henry Jackson Jupiter & Lake Worth R.R., Florida 1896 • Asia Stocks Head for Biggest Drop in 7 Weeks Amid Broad Declines (BBG) • Hong Kong Ret
[See the full post at: Debt Rattle April 1 2016]England no longer making steel —
It’s nice to have coal, if you are going to make steel. Anthracite coal is especially good. And not just for the heat produced by burning it, but also the chemistry of the steel. Iron and carbon sort of go together.
Anyway, isn’t the UK past ‘peak coal’ by now?
It’s sort of an old-fashioned idea, but I’d think it would be easier to make steel, glass, concrete, etc. near to where the fuel and components are found.Does English steel make sense, really, with iron ore imported from Australia and coal from America?
(and then too, of course, there’s the little no-demand thingy ..)“reasonably large government deficits are very important for sustainable economic growth.”
Full stop. Would spending money you don’t have create growth? Sure. “Sustainable” growth? No. By definition, unless you talk about increasing deficits, exponentially increasing (due to interest rate) forever. And “Very important” for growth? Has everyone in the world forgotten that you can expand your economy on savings and productivity? I know it’s been 100 years, but it IS possible. So one sentence: wrong, wrong, and wrong.
“[Bitcoin] is not under the control of governments or central banks. Neither the political mafia nor the economics establishment have any say over how, when or if it is produced, nor over its market price. For people who believe that “GUBBMINT WILL STEAL YOUR MONEY”, Bitcoin is possibly even more secure than gold.”
Also wrong. If any single entity can get enough of the blockchain, they can view all transactions. If they have that much ownership, they can then also trade amongst themselves to rig the price, no differently and in fact easier than HFT’s do. How would they do that? Well, print digital money infinitely as a matter of national security until they bought +50% basically for free? Can anyone tell me why they wouldn’t immediately?
BitCoin also has critical liabilities compared to physical currencies: one, to use it, you need an entry record (as you transfer out of the bank system) and a purchase endpoint that interacts with a legitimate (we hope) business or bank. It can be shut off or taxed instantly at that point. There is no “underground” BitCoin in that regard. It also depends on a pretty good internet and electric. Although that doesn’t seem at risk right now, it didn’t seem so for Ukraine or Syria recently, or a 1st world country like Germany in 1938. Nevertheless, it was just about to be difficult to access indeed.
Point being: wrong, wrong, and wrong. Although gold may also be outlawed, confiscated, taxed, with the addition of a highly technical digital side, BitCoin is clearly more fragile and less reliable than a pet rock. Especially the HFT and visibility sides. If you use it, just be aware of what it is and what it isn’t; the story about it being private, fair, and non-government has some significant holes.
Take this under advisement. That being Zero Hedge is a disinformation machine. Some things are true, some things are not. (in my opinion ZH is an arm of the powers that be to engage in ‘modified limited hangout’ (look it up), to stir up alt economics fans in the direction of the right, and to disclose policy moves in a non official way)
At any rate who needs helicopters for helicopter money and to boot why have currency at all.
>>Full stop. Would spending money you don’t have create growth? Sure. “Sustainable” growth? No. By definition, unless you talk about increasing deficits, exponentially increasing (due to interest rate) forever. And “Very important” for growth? Has everyone in the world forgotten that you can expand your economy on savings and productivity? I know it’s been 100 years, but it IS possible. So one sentence: wrong, wrong, and wrong.<<
No, diablo, you can’t. This is the libertarian fallacy, and one big reason why the Debt-Money Monopolist controlled Rockefeller Foundation financed Mises’s libertarian ideas.
Let’s use a simple example and see if you can prove my claim wrong using actual numbers.
You are society and I am the Debt-Money Monopolist that lends you money.
I loan you $20 @ 5% interest per year. At the end of 1 year, you owe me $21 due to double entry bookkeeping adjustments that add $1 interest liability to your balance sheet and $1 interest asset to my balance sheet.
Please tell me how you can “grow” that $20 into more money by saving and investing (or any other means under the sun) if I hold onto my $1 interest and don’t lend more money into existence.
Good luck with that. 🙂
People assume they comprehend the mechanics of the monetary system, but they really do not. The entire Debt-Money Monopolist Fascist Mega-Corporatocracy (DMMFMC) spews incessant mis/disinformation, but we still have to understand how it works. This zero-sum game “trap door” mechanism is almost never discussed and never discussed in the simple $20 example I created to help people better understand the mechanics.
Establishment libertarian thought is completely blind to this facet of debt-based money issuance… and so ingrained in their views that most are incapable of learning it even in this simple format. Either that, or they are controlled opposition like Steve Keen.
“In our time, the curse is monetary illiteracy, just as inability to read plain print was the curse of earlier centuries.”
~ Ezra PoundMLH
Back to the Future: The “modified, limited hang out,” c. 2013
and with regard to ZH, yes, overall it is a “confusing” site…I think we’re on the same side here. My point was, you can’t loan a thing you don’t have to *sustainably* grow. Because prima facie you’re promising to deliver a reward you don’t (yet) have. If you have debt-based money this will never, ever work. But it’s worse than that. Even if you have a commodity-based money you’re very, very likely to have it, because beyond even fractionally-reserve lending against a commodity standard, *promises* are the ultimate in inflating the money supply, and they’re not tied to a standard, a law, or a rule. Human optimism says “If you do this job, when it’s done, I’ll pay you from the profits.” How do you stop that inflation, promising more goods than there are to deliver, based on hopes for tomorrow? (I will point out that a commodity standard can create more of the commodity, like gold at 3% p.a., and also such standards inflate AND deflate around the standard, as the world did through the 19th century. So where would you get the 21st dollar? A guy in California dug it out of the ground. However in reality this still wouldn’t be a primary driver–paper derivatives of bullion would still inflate and deflate, be promised and default.)
Nevertheless, we can limit this nonsense to safer levels and put in firewalls for default. From a system backed with nothing (post-2001) to a fractional system that has standards and accounting (70s), to a commodity standard containing the paper on top (pre-WWI) to a system primarily, but not exclusively commodity-based (middle ages), all the way back to a goods-trading economy, each one more stable than the last, but none without flaw, for the fault is in ourselves.
But back to my point, if a credible figure promises to pay people tomorrow for hamburgers today, will they go out and make them? You bet they will. And later, when he doesn’t pay, the “malinvestment” of the artificial economy collapses, all the producers are angry, and all the extra burgers are wasted, and confidence is shattered as they try to recover from wasting time and money on doing something stupid. That’s why it’s not sustainable. It’s just that, unlike hamburgers, economic fraud of low interest rates and malinvestment takes far, far longer to discover and fail. Long enough that one generation parties, and the next generation dies.
This is why even with digital numbers, you can’t exponentially increase a money system at an increasing rate forever: at some point people realize it’s totally absurd for every infant to have $1m in debt when born, but if not a million, then a billion, a trillion, a quadrillion. It ends. Wimpy doesn’t pay. Because he can’t.
“…for the fault is in ourselves.”
This is the most important observation, the elementary particle. We are inherently defective and contradictory beings. The best we can do is to understand how this frailty manifests itself in cyclical changes through time and to proactively position ourselves within the evolving structure.>>I think we’re on the same side here. My point was, you can’t loan a thing you don’t have to *sustainably* grow.<<
Hi diablo, this is exactly true. Note that “growth” is arbitrarily defined as debt-based money growth, NOT the growth of actual physical production. If an economy sells 3 items for $10 one year and 2 items for $11 then next year, the “GDP growth” is reported as +10% even though the contraction in the physical world was 33%. Contrary to common thought, statistics don’t actually lie, liars misuse statistics and conceal the actual data and logic underlying the statistic so people won’t be able to discern what the statistic actually means.
Your are absolutely correct that exponential debt-growth is unsustainable, just like any other exponential function. The DMMs know this as well. A debt-based implosion of the economy is a feature, not a bug. That’s when they bust debtors and seize their assets using everyone’s beloved government agents to do the dirty work.
Check out “Power of the Purse” – I’m about halfway through and it is good so far. I can’t vouch for what comes next, though… it might be golden or rusty. I’ll comment after I’ve watched all 4.5 hours of it.
>>But back to my point, if a credible figure promises to pay people tomorrow for hamburgers today, will they go out and make them? You bet they will. And later, when he doesn’t pay, the “malinvestment” of the artificial economy collapses, all the producers are angry, and all the extra burgers are wasted, and confidence is shattered as they try to recover from wasting time and money on doing something stupid. That’s why it’s not sustainable. It’s just that, unlike hamburgers, economic fraud of low interest rates and malinvestment takes far, far longer to discover and fail. Long enough that one generation parties, and the next generation dies.<<
It is actually worse than that. Yes, debt-based money bubbles create malinvestment, but they are an effect, not a cause. The reason that this system is unsustainable is much more fundamental than malinvestment. You could invest perfectly and this system would still fail. Debt-money systems are prima facie fraud. They are literally a weapon of warfare used to subjugate a people through the use of deception.
The real reason for failure (from an ordinary person’s standpoint, this system works GREAT for the Debt-Money Monopolists!) is two-fold. Going back to the $20 example, you only have $20 and you owe me $21 and I control the $1 you need to pay me back, THEREFORE, YOU’VE ALREADY “FAILED” BEFORE YOU EVEN STARTED. You can invest that $20 perfectly, but you can’t earn what doesn’t exist.
The second mechanism is the one the DMM has in play. The following is the real reason that inflation must be targeted or else the system implodes. I don’t want to steal just your $20 collateral, so, I “inflate” by creating another $20. Now you can earn that $1 from the new $20 and pay back your debts, but the new borrower has $19 and owes $21 after one year – the amount owed grows, too. This is exponential growth in debt and, as I said, all exponential function either 1. fail or 2. end up in infinity, and the latter doesn’t happen.
When the exponential debt-growth fails, the entire system collapses right into the hands of the Debt-Money Monopolists because you (all the debtors, including governments!) don’t have enough money to pay back your debts. All the net monetary wealth of the DMMFM-C (Debt-Money Monopolist Fascist Mega-Corporatocracy) IS EVERYONE ELSE’S INEXTINGUISHABLE DEBT, AND INEXTINGUISHABLE DEBT WILL BE BUSTED AND COLLATERAL ASSETS SEIZED. Say “goodbye” to all those “UN Heritage” sites once the Banksters call in the debts and society is impoverished and can’t pay.
>> Wimpy doesn’t pay. Because he can’t.<<
But that debt has collateral which will be seized by the criminal TBTF&Jail DMMFM-C cabal.
How to Be a Crook
>>“…for the fault is in ourselves.”
This is the most important observation, the elementary particle. We are inherently defective and contradictory beings. The best we can do is to understand how this frailty manifests itself in cyclical changes through time and to proactively position ourselves within the evolving structure.<<seychelles, but what is the fault? You’ve identified the source of the fault, but what is the fault itself that needs to be corrected?
Can it be summed up thusly, from top (DMM arch villain) to bottom (Joe and Jane 6-pack), “Individuals do not care about others equal to how they care about themselves.”
BTW, that insight didn’t originate with me – I’m just parroting it because I believe it to be correct.
“We’re going to see a lot of ‘hidden’ protectionism going forward. Globalization is now turning against individual nations.”
Isn’t it about time that globalization was kicked to the curb? Aren’t “individual nations” what the establishment has been trying to obliterate? It seems that someone else (usually unelected bodies like the World Trade Organization, the U.N., Bank for International Settlements, central banks, the up-and-coming trade treaties, etc.) gets to dictate what an individual nation has to do. And when people finally have enough of this crap and rise up, they’re called protectionists, racists, fascists, unintelligent. Or the people are told, “But at least you have a democracy and you get to vote for your candidate,” but the establishment neglect to mention that they, not you, gets to select the candidate. How’s that for democracy?
China already has tariff protection, and yet they get to ship product into the U.S. with little to no trade protection. That’s why the system has worked the way it has. Increased profits when the multinationals ship product back into the U.S. AND tax relief. Great system. Think I’ll try that, then I’ll post from jail.
Nice racket if you can get it.
“Individuals do not care about others equal to how they care about themselves.”
Oh my such a cynical view! But the self IS the ultimate identity group. The faultS…I did not introduce “fault” into the blog BTW…are TNTC but include greed, unfairness, shortsightedness, dishonesty, racism, lack of introspection and lack of discipline. These are consequential to our genetically-determined basis for “cognition”, which induces maladaptive thoughts and behaviors as refuges from madness.seychelles – as in we think too much and love too little? Too much ego, and too little consciousness? And if things were reversed, we’d be thinking that “all men are my brothers”, we’d become enlightened? Is that what you mean?
Raleigh
Maybe too much consciousness and too little truth-and-understanding modulated subconsciousness. “All men are my brothers” is utopian dreaming except at the level of “we are all made from the same clay.” Toynbee emphasizes that “long-term” successful societies have been supported by conceptual pillars of love and ethics, which I believe are the essential ingredients of a “meaningful” life.hi seychelles, I argue that it is reality, regardless of what word is used to describe the discerner of that reality.
Clearly, the Debt-Money Monopolists don’t treat the millions they impoverish and starve to death equal to themselves. I think most people on this site can get that point.
I argue that ordinary people are smitten with the same problem. When people like me expose the human predator Debt-Money Monopolist class and the exact mechanism they use to systematically asset strip entire societies with mathematical precision, they don’t take action. Most won’t even do the middle school math and admit it is correct – and that rate appears to vary directly with level of education… the more people are schooled, the less able they are to admit an establishment organization is a fraud. How could a person who cares about others be so callous as to let an entity far worse than Ted Bundy run around on the loose without even bothering to warn people? Nobody that actually cared for other people could do that. Which is my point. It is cynical. It is also observably true. Sure, there are exceptions, but they are really, *really*, **really** frustrated people – and for good reason.@The Trivium4 You state: I loan you $20 @ 5% interest per year. At the end of 1 year, you owe me $21 due to double entry bookkeeping adjustments that add $1 interest liability to your balance sheet and $1 interest asset to my balance sheet.
Please tell me how you can “grow” that $20 into more money by saving and investing (or any other means under the sun) if I hold onto my $1 interest and don’t lend more money into existence.Simple answers but lets use a greater sum of money such a $15,000. a consumer would the buy a car so they could travel to a job which they can now work and produce an income. this is a return on investment of the loan. This can also be used for getting an education using a loan, though this can certainly be abused. Worked produced is value and is stored as money. Even depositing it into a savings account with fractional reserve allows it to be be partially loaned out again. If one assumed that the money was totally wasted or burned then this would be an obvious disaster. However, money loaned is used to purchase labor, goods and services which again produces value, all of which is used to pay back the interest and capital.
Hi Babble, this is a very important point. Remember, I’ve simplified the system so as to bring out a key point. There is a fundamentally flawed assumption in your scenario. If I, as the Debt-Money MONOPOLIST, only create $15,000, where oh where does the money come from that would be available to pay wages? It doesn’t exist – and that’s the point. So, no, you can’t work to pay off your debts because there is no money in which to earn BECAUSE I CONTROL THE ISSUANCE OF DEBT-BASED MONEY INTO SOCIETY.
THAT is the point I’m making here.
Check your premises and validate them… don’t uncritically assume them.Now, lets take a scenario where I create $20 billion – that’s enough to create a pretty big economy for a significant number of people. Using the same 5% interest rate, society has $20 billion, I have $1 billion, and society owes me $21 billion.
Society has $20 billion and society owes me $21 billion. In this more realistic scenario (the same flaw is in place, though, from the perspective of ordinary people), I will only bankrupt and asset strip A PERCENTAGE OF THE POPULATION AT ANY ONE TIME, not the whole thing. Those who are able to pay their debts within the broader system will make it impossible for others to pay their debts… say $15 billion is paid back as soon as it is issued (keep the math simple, the principle is the same if paid back later, though)… then the remaining $5 billion outstanding still owes the $1 billion in interest… with access to only the $5 billion they owe because I control the $1 billion in interest required to make their debt extinguishable.The takeaway is that jobs don’t create money. Labor doesn’t create money. Businesses don’t create money (outside the Debt-Money Monopolist controlled banking system). No, the DMM creates money through their corporate fronts and then business and labor ALL FIGHT FOR THE MONEY THAT DMM DECIDED TO PUT INTO THE SYSTEM – AND NO MORE.
They who control a society’s monetary system are the de facto rulers of said society.
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