27 September 2018

[Perrin Lovett] - Fake Money and Fake Debt Make Real Problems

Neither a borrower nor a lender be; For loan oft loses both itself and friend.”
- Polonius to Laertes, Hamlet, Act I, Scene III.

America has a debt problem. In a time of a booming economy mentioning that is out of vogue. Democrats aren’t talking about it. Republicans aren’t talking about it. President Trump isn’t talking about it. They know, they’re just staying quiet while they can.

The Federal Reserve knows. So do the talking heads at CNBC. If one listens very hard one will occasionally hear the faintest murmur from those quarters that something might be amiss.

During the good times, no-one wants to talk about bubbles no matter how big or bad they are. Peter Schiff is an exception. In a recent article for the New York Post by John Aidan Byrne, Schiff predicted the next depression (with a “D”).

“We won’t be able to call it a recession, it’s going to be worse than the Great Depression,” said economic commentator Peter Schiff, forecasting a major economic downturn as early as the tail end of the Trump presidency’s first term. “The US economy is in so much worse shape than it was a decade ago.”

We are, statistically, historically, overdue for a downturn. It’s not a matter of if as much a matter of when. So, “when?” While not as unpredictable as the Second Coming, this question is best answered with a hearty “sooner or later.” Some of us have been saying that for a while.
Back in June, I noted a warning, within an obfuscation, from the CBO about the debt carried by the feds. That was one of 150 or so articles I’ve penned on the debt over the years. The problem has been around and it’s not going away. In fact, read the business or politics section of any fish-wrapper, and you’ll see it gets worse by the month.

There’s the question of “how,” which now kind of misses the point. When a dragon moves into the neighborhood, burning and destroying, it’s not all that immediately important where he came from. What matters is stopping the rampage. People have discussed this for decades.

Back in 1993 Harry Figgie and Gerald Swanson wrote Bankruptcy 1995: The Coming Collapse of America and How to Stop It. A fine little book and one I recommend everyone read. But, 25 years later, it seems a little dated and impotent. It’s not. It’s just that the timing and the paradigm was a little off.

America was bankrupt in 1995. And yet here we are in the current year, bull market, MAGA, and all. It turns out that the debtor in this case, the US government, also happened to be the primary creditor and the bankruptcy court - all in one. The golden rule: he who has the gold makes the rules. In this instance, there’s no gold (part of the problem) but the rule-maker has plenty of guns and convincing, conniving arguments. But they won’t hold off reality forever.

The laws of economics are as immutable as those of physics. One can fly an airplane high, in plain defiance of gravity, but only for so long. What goes up MUST come down.

Part of the problem is the fact of the massive debt itself - federal debt (public, private, and off-book), state debt, local debt, corporate debt, private debt, my debt, your debt, international debt, derivatives debt. Twenty Trillion here, ten trillion there, and pretty soon you’re talking about real money. Except that it isn’t. The fake, baseless, literally-out-of-thin-air fiat is another issue. Slavery is another related problem.

In a nutshell, it works like this: The government and the central bankers craft money that never existed in the form of debt. They get the first benefit as there’s no cost associated with making something that isn’t real. The funny money “trickles down” through the economy, shedding imputed value as it goes. It finally comes to rest with the people, who are the only ones expected to contribute something of value to the cycle. Their actual blood, sweat, tears, time and effort are literally bought for nothing. This can play out so long as the teevee stays on and the beer flows. A hiccup and all bets are off.

Consulting with the old Debt Clock indicates multiple hiccups and worse are brewing.

US Debt Clock.

Remember that snapshot and associated information - it will be worse tomorrow and next month, next year.

The problems are worse than 750 or 1,000 words. Or 10,000. Or 150 articles. What’s the solution? It’s as plain as it would be painful. (There would be pain, in the short term; but there will be long-term pain regardless).

The solution is Repudiation. Cancel the debt. Admit it’s based on nothing, that it causes more harm than good, and then kill it. All of it. Then, and only then, can we expect an honest reset. There’s room to quibble over a return to the gold standard, a mixed standard, a commodities standard, or any other standard - so long as it’s a standard. It has to be done.

And, without getting into specifics, it could be done. The “legal” mechanisms are already in place and have been. It’s now a matter of waiting and of summoning the will to act. As a bonus, and to keep this beast from returning, debt - money loaned for interest - could be made illegal, like anything else. Jubilee!

Let’s make Billy Shakespeare proud. Let’s be friends and lose the loans.

Fellow Terry College of Business (UGA) grad Brother Perrin Lovett is a true renaissance gentleman & scholar. A recovering attorney, he's into guns & cigars, and the US Constitution. A published authorPrepper columnist & YouTube personality, and an acclaimed blogger, TPC is very proud to have our old friend on board as the C.F. Floyd Feature Writer of National Affairs