Debt Rattle Sep 5 2014: We Live In A New World, But We Don’t Want To
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Arthur Rothstein ‘Fruit tramps’ living in tents, Yakima, Washington July 1936 Looking around us today, it would – or at least could – seem obvious tha
[See the full post at: Debt Rattle Sep 5 2014: We Live In A New World, But We Don’t Want To]I like you! Your no nonsense discussion of the way things really are is refreshing.
“The power of accurate observation is commonly called cynicism by those who have not got it.” G.B. Shaw
Re: “the illusion of growth can only be bought with debt” the idea keeps popping up after subterranean tunneling like ballistic crabgrass. This is mainstream gospel, yes, but is so pervasive it pops up amongst careful people too.
Stop thinking about money for a moment: there is a person who wants something, the equipment to make it, and a producer who turns the wheels. This is the situation we’re in now. There’s no money or no debt involved.
Q: if somebody wants something and somebody makes it for them, where would debt fit in?
A: it doesn’t. Debt is overhead. Even in a primitive case where the machinery needs to be created–and we’re a long way from that–debt doesn’t add anything. It’s still a promise to get paid for your work just like the original trade.So what is debt? If we have the buyer and we have the maker, and clearly they’re capable of making the product? A: It’s a TRANSFER. It takes a simple trade and TRANSFERS some of the goods AWAY from the buyer and TO the lender. That’s all.
Upshot? More debt = more transfer = more overhead = more friction = less work and less output. Less machinery can be build, fewer products can be purchased by the (initial) buyer pool. Therefore more debt NEVER helps an economy, because all those goods could have been created and consumed by the original workers anyway, without the debt that merely transfers the work of the creators to the lenders, shorting–or stealing from–the consumers, in the exact measure of the debt.
We have somewhere between $17,000B and $150,000B in national debt alone. All that money came from those same buyers, “consumers” in our system, who net-net are also the “producers” in that system, that was transferred to non-workers who as above definition, add nothing. That’s where the money came from and why the work-creators don’t have any, which is why the “economy”–that is, the actual motion of goods and services–is dead. As a rider, if the “economy” is dead—i.e. not producing goods—then even the lenders get poorer, fewer, less innovative goods, so it harms even themselves. Not that they care if, they can be richer than us even if they have to eat turnips and use an unheated outhouse as Lord-over-us.
There is an upside to this, which is that, since the debt is unnecessary and entirely composed of friction, erasing that debt won’t hurt anything, and in fact release the economy back to producing goods people want, and providing paychecks to buy them. The debt and/or debtors can be erased in an afternoon, and from time to time in history, has been.
All we have to do is say we’ll do it, and it’s done. Sound impossible?
That’s what our inevitable currency default is. We only need to reject the old debt and not re-add the lenders back into the system. Because the system doesn’t need them. Don’t pay; default; and start over. It’s going to happen anyway, might as well make the most of the benefits.
Diablo: What you are talking about is a jubilee. It was fairly common long ago but in the current insane environment it’s likely impossible.
Debt may not be necessary, but take it away and we better transfer away from oil really quick. Giving up our cars would be a start.
How is a mental construct like debt related to a real-world object like oil? It seems we either can get oil at a net energy gain or we can’t. That’s not debt-related.
Or is it? Debt-dependent physics? A lot of papers seem to imply it.
Free markets require Liberty.
Liberty requires sacrifice. Those ignorant of that, the vast majority, are not willing to understand it.
They will therefor trade Liberty for whatever their Statist captors offer them. Of course, the largess being transferred to them is their own, just redistributed from ” others” at first, then later taken from all, in an attempt to sustain the power structure.
As they storm the polls, granting consent to their very oppressors in every election, in exchange for bribes.
And when the game is up, after the currency is destroyed, the inevitable reset is War. The only form of redistribution that is “Patriotically Correct.”
Back when money was real, debt was denominated in reality. It had value, and a price. Today, with losses socialized, debts value is moot. It is denominated in bullshit. Therefor, it is of no value. There is no price to pay for profligacy. No sacrifice, as it were, for mis-allocation of resources.
But, most will continue to demand that their governments do something.
And they will get exactly what they deserve.
Blaming debt is blaming the symptom. The real trouble began when the ownership of, and value determining functions of, money, was transferred from the people to the State.
Humm? Could that be called Collectivism? The “collective” handing over it’s very livelihood to central planners?
Bottom line, again. No one is coming to save you. You are on your own. Stop wasting time encouraging the planners with your “votes” and begin looking inward for blames and answers.
The day after every election you are no longer a prospective member of the Red White and Blue Club. (Name the colors of your own mob rule democracy) You are flat out rejected. At that point you will have served your purpose, until called upon again in the next election cycle.
Now, think of all the things you could have been spending all that time and resource on instead?
Or, just wander off in the haze of Hope and accept that even Gulags offer some semblance of security. You don’t need to worry about the Tax Man.
Diablo,
Yes, this Jubilee should have been allowed to cleanse the system in the first place.
But Rule of Law was circumvented in spite of public protest, as a direct violation of Contract Law, if favor of redistribution of all losses directly to the public.
ie; A direct assault on the Constitution, the Law of the Land. Now that that cat is out of the bag, pretty much anything goes, here in the land of the Rule of Man. Or should I rephrase, the Rule of THE Man?
Caviat Emptor.
Diablo,
An anecdotal example of debt related to oil, in the mini-micro sense.
I bid a job that will require 100 gallons of diesel to complete. My fuel jobber gets anal and wants the money up front. I don’t have the money because I just bought a shopping cart of groceries 😉
So, I borrow $400 bucks to buy the fuel, at interest, to complete the project.
Multiply this by millions of operatives who rely on oil and credit to maintain cash flow.
I think the distinction lies in the difference between good productive credit and bad consumptive credit, maybe?
Like, Joe 6’er takes on $67,000 in debt, to buy a fancy truck with which to tow his jet skis to the lake, using his Visa card to fill all the tanks. Not much return on that. Not that I mind ol’ Joe doing that, just so he doesn’t come to me to pay for it. Because I use resources more frugally, for productive endeavor.
As a matter of business sense, my truck doesn’t go cruising on credit. It goes only on profitable “drives.”
Central banks now freely peg short-term interest rates (near zero!), manipulate market yields, monetize debt, target/spur higher stock and risk asset prices and essentially promise continuous and liquid securities markets. Importantly, central bankers have been conditioned to absolutely avoid disappointing the markets. Indeed, heads of central banks have one-upped corporate America in striving to “beat expectations.” There is no longer anything cautious or subtle with respect to monetary management. The goal is precisely the opposite. One might these days contemplate why it took central banking a few hundred years to figure this all out – to appreciate the myriad benefits of zero rates, debt monetization and perpetual bull markets.
I was, however, able to anticipate a very critical reality that remains fundamental to the ongoing global government finance Bubble: once the world’s central banks adopted unprecedented monetary inflation there would be no turning back. Target higher securities prices and then try to control runaway Bubble excess – in the face of ever-increasing global financial and economic fragility. Indeed, policymakers with their unlimited quantities of central bank Credit and government debt were playing with a much more combustible fire than what had previously culminated in “the worst financial crisis since the Great Depression.”
Do Whatever it Takes to Shock and Awe
https://www.prudentbear.com/2014/09/do-whatever-it-takes-to-shock-and-awe.html
Comment:
“Asset and commodity prices are in a bubble due to the central bankers. These prices are about 20 to 40 years ahead of themselves. When will we get some common sense from the central banks? Normalize interest rates and there will be a one-time reset of asset and commodity prices TO THE REAL PRICES.
This is not deflation, just a reset to the real values. Then the economy can move forward from there. What they are doing now is like trying to hold up an aircraft carrier a mile in the sky. The real solution is to let it come down and float naturally on the ocean as it was made to do. I wonder why it is so important to them to try these bizzare methods to hold on to the false gains in these prices. What’s wrong with real prices?”
There’s nothing wrong with real prices, except for the losses the banks would incur. The aircraft carrier is being held up by hot air supplied by the major central banks. They’re blowing for all they’re worth, and the more they blow, the rockier the carrier becomes. Look out below!
I love/hate the language of economists; *velocity of money*, *credit velocity*, the growth mantra. They complicate for obfuscation to protect their positions as head witch doctors. They claim science when it’s nothing more than the talk of charlatans. Granted, there are exceptions…
Debt is not good, ever! We’ve been sold a bill of goods by a bunch of liars.Sufficiency, has anybody ever heard of that mantra? It should have been the past and it damn sure better be the future; but it won’t.
There is something fundamentally wrong with us (specifically western humans) and we refuse to try and change our nature. And nothing else will suffice.Re;
Ken, Raleigh and Arnold,All right on.
What the Fed has done here is Nationalized the entire economic system, without even uttering the word. In routs past, the word was splashed in neon. And the stigma of the mistakes made still stands today.
Folks standing in food lines back in the day were quicker to lash out at the scapegoat, which was markets, and demand their “trusted” government go “git them evil Capitalists.” Where today, with the Internet Reformation, the real culprits, governments and their Central Banks, are readily identifiable. So said culprits must, and have, used stealth as policy.
Really, what was TARP, if not the first moves of a Coup d’état?
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