Category Archives: Debt

This problem is 10,000 times bigger than the border wall, by Simon Black

The cost of the proposed border wall is a rounding error in terms of total government spending or the US national debt. From Simon Black at sovereignman.com:

We are in the midst of the longest government shutdown in history.

Don’t get me wrong, I like having the government shut down. As I’ve said before, I believe it is my moral duty to pay as little taxes as possible.

The government does some really stupid things with your tax dollars. I’d rather not pay for a $2 billion Obamacare website that doesn’t work, or to defend Congressmen against sexual assault allegations.

So, by starving the beast, I at least ensure they’re not squandering my money.

But I think it’s ridiculous that this government posturing is financially crippling the 800,000 government workers (and millions of contractors) who are now out of work – or being forced to work without pay.

To be fair, last night the president signed a law guaranteeing they would be paid for past work – a month into this fiasco. It’s a step in the right direction, as there’s a word for forcing people to work without pay – slavery.

That’s why I offered to pay the rent of any government workers hurt by the shutdown. I am using my tax savings to bail out some of these government workers the feds left high and dry.

But at its core, this whole shutdown comes down to a disagreement over $5 billion. That is how much money Trump wants to build the border wall between the US and Mexico. And Congress refuses to fund it.

Granted, that’s a lot of money to you and me. And it should be a lot of money to the government, too.

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As Germany and France Come Apart, So Too Will the EU, by Charles Hugh Smith

The rulers are talking consolidaton and ever-larger governments, but the people are headed the opposite direction. From Charles Hugh Smith at oftwominds.com:

When is a nation-state no longer a functional state? It’s an interesting question to ask of the European nation-states trapped in the devolving European Union. Longtime correspondent Mark G. recently posed seven indicators of dissolving national sovereignty; here’s his commentary:

“RE: The Ghosts of 1968 (February 14, 2018):

In France the “Ghosts of 1968” have become the Poltergeists of 2018. This looks like another real watershed in European and world history. Once again Parisian mobs have appeared and have collectively realized they now hold the real power. And their issues are all anti-EU (European Union) and anti-NWO. (New World Order)

I’m honing my German Collapse Scenario as more data flows in, as it is in ever-faster and larger quantities. ‘Germany’ will implode in parallel with the EU.

So-called ‘states’ with:

1. no effective military forces
2. no control of their own borders
3. no control of their currency and banks
4. a government with a ‘diverse’ population in which the majority either has no loyalty to Berlin (recent ‘refugee’ immigrants) or has dropped its loyalty (large parts of Bavaria and Baden-Wurttemberg), and which is also losing the allegiance of the many eastern European immigrants in Germany. These people are among the most energized opponents of the ‘refugee’ influx.
5. Fast rising anarchy and lawlessness by the recent ‘refugee’ immigrants, and which is well known to the population, as are the official orders to the police to minimize crime statistics reporting by not opening official cases.

and

6. A mass media believed by no one due to the bald lies it broadcasts 24/7 daily about numbers 1-5.

…will soon cease to exist. This is confirmed by:

7. The continuing spiral of the ruling post WWII political parties into their own political black holes. CDU/CSU on the right and SDP on the left have all lost their hold on the modern German population.

The biggest joke of all is that Theresa May is negotiating the terms of “Brexit” from the EU with a political corpse and not a viable polity.

Another round or lap is coming soon. Personally I think the only thing staving off another eurozone banking crisis is the absolute certainty that no imaginable German government can currently agree to the slightest external concession without risking an internal political collapse.

Thus all the various Eurozone elites involved are refraining from provoking such a crisis for calculated narrow reasons. This leaves it to a European mob in some capital to initiate it by confronting a national government with either internal political collapse or re-entering EU-wide monetary and fiscal conflict with the ECB/EU gang.

And yes, I’m sure you spotted the next part. Poland and Hungary acting on behalf of the Phoenix Rising Ersatz Austro-Hungarian Empire will twist the EU’s tail at that time as hard as they can for maximum regional advantage.”

The fracturing of Germany is conventionally viewed as somewhere between implausible and impossible, and the same can be said of France and Germany drifting apart and the EU dissolving: the mainstream is committed to presenting Germany, the German-French alliance, the euro and the EU as rock-solid.

Yet if we follow the logic and evidence presented in these seven points, we are forced to conclude that the fractures in France, Germany and the EU are widening by the day, and that the ceaseless propaganda spewed by the ruling elites isn’t mending the fractures or restoring the illusion of stability.

(Regarding the French yellow vest dissenters: the 80,000 mobilized security forces are intentionally seeking to incite violence to justify crushing the yellow vestdissenters with massive paramilitary force: French Democracy Dead or Alive?)

In the long run of history, the apparent solidity of 20 or 30 years can shatter very rapidly as populations under increasing financial and political stress default to much more enduring divisions and loyalties.

The Yellow Vests Get it Right, by Robert Gore

Financial nuclear warheads.

The mainstream media has degenerated irreparably. Here’s a reliable rule of thumb: if it’s important it’s not covered; if it’s covered it’s not important. Stories in the American mainstream press about Yellow Vest protests have been few. One aspect of the protests, transcendently important, has received scant coverage.

The Yellow Vest protestors have called for a coordinated run on French banks. Whether they realize it or not, they’re playing with nuclear warheads that could annihilate not just the French, but Europe’s and the entire world’s financial system. Because inextricably linked to the ends of contemporary governments―how much they can screw up the lives of those who must live under them—is the question of means―how do they fund their misrule? The short answer is taxes and debt.

Since 1971, when President Nixon 
“temporarily” suspended international convertibility of dollars for gold (it’s never been reinstated), the monetary basis of the global economy has been fiat debt. Neither government or central bank debt nor currencies are tethered to any real constraint, like precious metals (see “Real Money,” SLL). Thus, politicians and monetary officials can create as much debt as they want: debt by fiat.

Government and central bank debt is at the apex of the global debt pyramid. The next tier is commercial banks that have accounts at central banks. Those accounts are bank assets and central bank liabilities, or debts. Central banks expand their fiat liabilities to banks in exchange for banks’ fiat government debt, an exchange called debt monetization, which is a bit of a misnomer since no “Real Money” is involved. The “monetization” is the central bank’s fiat expansion of banks’ accounts with the central bank in exchange for fiat government debt, which expands banks’ assets available for loans to governments, businesses, and individuals.

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Placing the USA on a collapse continuum with Dmitry Orlov, by the Saker

Collapse, like Ernest Hemingway once said about bankruptcy, happens slowly at first, then quickly. From the Saker and Dmitry Orlov at thesaker.is:

The word ‘catastrophe‘ has several meanings, but in its original meaning in Greek the word means a “sudden downturn” (in Greek katastrophē ‘overturning, sudden turn,’ from kata- ‘down’ + strophē ‘turning’).  As for the word “superpower” it also has several possible definitions, but my preferred one is this oneSuperpower is a term used to describe a state with a dominant position, which is characterized by its extensive ability to exert influence or project power on a global scale. This is done through the combined-means of economic, military, technological and cultural strength, as well as diplomatic and soft power influence. Traditionally, superpowers are preeminent among the great powers” this one, “an extremely powerful nation, especially one capable of influencing international events and the acts and policies of less powerful nations” or this onean international governing body able to enforce its will upon the most powerful states“.

I have mentioned the very visible decline of the USA and its associated Empire in many of my articles already, so I won’t repeat it here other than to say that the “ability to exert influence and impose its will” is probably the best criteria to measure the magnitude of the fall of the USA since Trump came to power (the process was already started by Dubya and Obama, but it sure accelerated with The Donald).  But I do want to use a metaphor to revisit the concept of catastrophe.

If you place an object in the middle of a table and then push it right to the edge, you will exert some amount of energy we can call “E1”.  Then, if the edge of the table is smooth and you just push the object over the edge, you exercise a much smaller amount of energy we can call “E2”.  And, in most cases (if the table is big enough), you will also find that E1 is much bigger than E2 yet E2, coming after E1 took place, triggered a much more dramatic event: instead of smoothly gliding over the table top, the object suddenly falls down and shatters.  That sudden fall can also be called a “catastrophe”.  This is also something which happens in history, take the example of the Soviet Union.

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Political Nightmares Multiply for Europe Ahead of Davos, by Tom Luongo

The globalist-inspired European integration dream is crumbling. From Tom Luongo at tomluongo.me:

Europe’s dreams of integration are slipping away as the people wake up from the nightmare erected for them.

As we approach Act IX of the Yellow Vest protests in France and the threats of creating bank runs we get the news that both Presidents Trump and Macron will not be attending the convocation of globalists known as the World Economic Forum at Davos.

Trump’s not attending because it’s clear he’s no longer a member of The Davos Crowd and Macron isn’t because any public appearance by him will double the number of people donning high visibility safety gear and taking to the streets.

It almost feels like we’ve reached Peak Davos, with these announcements. But, clearly neither of these men are invited because in the minds of The Davos Crowd they no longer figure in their long-term plans.

Macron not attending is also a sign his government will be sacrificed on the altar of the Yellow Vests in the near future.

The Yellow Vest protests will have to be dealt with in a substantive manner that goes far beyond a few temporary injunctions against higher taxes. They are now vandalizing another symbol of middle class oppression in France, speed cameras.

All of the governments of Europe are broke. And the speed camera is simply another in a long line of instances of them trying to squeeze blood from the now impoverished and shrinking middle class.

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Here’s Where the Next Crisis Starts, by James Rickards

Junk bonds are certainly a plausible candidate for where the next financial crisis begins. From James Rickards at dailyreckoning.com:

The case for a pending financial collapse is well grounded. Financial crises occur on a regular basis including 1987, 1994, 1998, 2000, 2007-08. That averages out to about once every five years for the past thirty years. There has not been a financial crisis for ten years so the world is overdue. It’s also the case that each crisis is bigger than the one before and requires more intervention by the central banks.

The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means a market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever because the entire system is larger than before. Due to central bank intervention, total global debt has increased by about $150 trillion over the past 15 years. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

Each credit and liquidity crisis starts out differently and ends up the same. Each crisis begins with distress in a particular overborrowed sector and then spreads from sector to sector until the whole world is screaming, “I want my money back!”

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The Tragedy Of The Euro, by Alasdair Macleod

The euro’s failure at inception wasn’t a certainty, but now it is. From Alasdair Macleod at goldmoney.com:

After two decades, the euro’s minders look set to drive the Eurozone into deep trouble. December was the last month of the ECB’s monthly purchases of government debt. A softening global economy will increase government deficits unexpectedly. The consequence will be a new cycle of sharply rising bond yields for the weakest Eurozone members, and systemically destabilising losses in the bond portfolios owned by Eurozone banks

The blame-game

It’s the twentieth anniversary of the euro’s existence, and far from being celebrated it is being blamed for many, if not all of the Eurozone’s ills.

However, the euro cannot be blamed for the monetary and policy failures of the ECB, national central banks and politicians. It is just a fiat currency, like all the others, only with a different provenance. All fiat currencies owe their function as a medium of exchange from the faith its users have in it. But unlike other currencies in their respective jurisdictions, the euro has become a talisman for monetary and economic failures in the European Union.

Recognise that, and we have a chance of understanding why the Eurozone has its troubles and why there are mounting risks of a new Eurozone systemic crisis. These troubles will not be resolved by replacing the euro with one of its founding components, or, indeed, a whole new fiat-money construct. It is here to stay, because it is not in the users’ interest to ditch it.

As is so often the case, the motivation for blaming the euro for some or all the Eurozone’s troubles is to shift responsibility from the real culprits, which are the institutions that created and manage it. This article briefly summarises the key points in the history of the euro project and notes how the mistakes of the past are being repeated without the safety-net of the ECB’s asset purchases.

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