As the Greek bill payment day of March 20 approaches, many eyes will be on the passage of the Greek bailout package to see if that payment will be made, or if Greece will go through a disorderly default. A … Continue reading
A plan has been laid out to help Greece and the worldwide ponzi continue to print money and pile on debt, but by no means is the deal complete. Those who’s actions a deal is dependent on are: Private investors … Continue reading
As previously talked about in the Q & A, the world’s monetary system is a ponzi scheme. As in any ponzi, new entrants are needed in order to perpetuate the scheme and in the case of the monetary system, the … Continue reading
Japan has had a trade surplus since 1980, which is no longer the case. Japan is competing to be the straw that breaks the camel’s back, meaning the first large country to default and implode the global fiat ponzi. The … Continue reading
Greek debt deals have broken down and it appears that Greece is now on the path for an involuntary default. March 20 is the next debt payment of 14.5 billion euros, which Greece will unlikely be able to cover. An … Continue reading
Today, the US has passed the 100% mark of the debt to GDP ratio at just over $15T. Many consider crossing the 100% of debt / GDP to be the point of no return.
The point of no return for the US really happened many trillions of borrowed dollars ago as the US GDP is made up of a bunch of fluff. First of all, many things that don’t necessarily grow the economy are measured in GDP. For example, much of government spending is borrowed and is wasted, yet government spending is included in GDP. Second, the CPI measurement is used as a deflator to derive the GDP measurement. If CPI is off, then GDP will be off. CPI is being understated which is causing GDP to be overstated. Last but not least, many items should be counted in the debt that are not, such as all of the Fannie / Freddie / FHA / student loan debt that will likely never be repaid.
CrushTheStreet.com puts out another great video about the Fed debasing the dollar and how government tries to cure an economy that suffers from too much debt, regulation, and central planning with more debt, regulation, and central planning. The video also hits on the creation of a deflation boogeyman, the role of gold as money, the dire straights of the world fiat ponzi, and unrealistic forecasts of the economy touted by government and media.
The problem with deflation is shown if assets lose enough value to cause the banks to go bankrupt. If assets are allowed to deflate enough to break the banks, then everybody that has their money in a banking institution loses their money.
In addition, politicians, bankers, and government cronies lose control over the printing press. No longer will easy money be able to be doled out to special interest groups including connected businesses, entitlement recipients, and government employees. It’s much easier to get money out of a printing press than through taxation or borrowing (which is really future taxation).
At the point before the banks break, the bankers, politicians, and government cronies will have to decide if they will give up their control over the printing press, take the heat for not being able to fund entitlements and government jobs, and allow depositors to lose their bank deposits, or if they print enough money to cause inflation and save the banks. The correct choice is not to increase the rate of printing, but I believe that increasing the rate of printing will be the choice that is made.
Americans are suffering because artificially cheap money is destroying productivity. Mis-pricing money causes resources to flow into unproductive areas, creating malinvestments. Returning to market-priced money will expose the malinvestments and cause short-term pain, but will also cause a boom in productivity because resources will once again be allocated much more efficiently.
Postponing the pain by providing more artificially cheap money only causes more malinvestments and therefore even greater pain in the future. Bankers and politicians enjoy their control over the printing press and do not want to be blamed for the pain, which is why the pain will likely be delayed until so much artificially cheap money is created that the USD becomes worthless.
China, the largest foreign holder of US debt, must continue to buy US debt or the value of US debt will fall and rates will rise, causing the US to default. The Chinese are taking a step in the direction of moving away from stock piling Treasuries by creating a $300B Sovereign Wealth Fund.
According to the McKinsey Global Institute, the wealth of the world measures in a $200T. The largest chunk of the wealth is held by households which hold 43%, with the US and Western Europe holding about 1/4 of household wealth. Housing is the largest asset for many in the western world. Here at The Silver Journal, we believe that housing is set to fall 70%-80% in the US, which emphasizes the major transfer of wealth from the western world to the eastern world that is in process. Click the article to see the charts: