Guest Post: Bankrupt Nations Try To Stop The Future From Happening, Fail

Tyler Durden's picture

From Simon Black of Sovereign Man

Bankrupt Nations Try To Stop The Future From Happening, Fail

Debt is slavery… or at least indentured servitude of the worst kind. 
That looming mortgage, the high interest credit card debt, the
short-term car loan– these are the forces that keep people from breaking
free and taking action.

Ironically, debt begets more debt. According to FinAid, the average
US student loan debt for a four-year private university graduate is
nearly $36,000, and $24,000 for public. Throw in that first car loan and
maybe a mortgage, and suddenly you’re staring at hundreds of thousands
of dollars in demoralizing claims on your future income.

At this point, most people figure… ‘hey, I’m already in debt up to my
nose, might as well get in up to my eyeballs and buy a new plasma
screen on credit.’

Debt is an enormous psychological burden that influences life’s major
decisions. It’s why so many people stay committed to jobs that are
unfulfilling in cities they detest under conditions they find
disheartening. Nobody wants to rock the boat too much… take too many
risks and you could lose your job, and hence the ability to make those
monthly payments.

This familiar story has been playing out across the developed world
for years. This is not an ill, however, that exclusively affects
individuals and families. Even at the macro level, debt has the power to
subjugate entire nations to the whims of their creditors.

Enter the IMF.

In July 1944, world leaders gathered in Bretton Woods, New Hampshire
to be dictated terms of the new global financial system. The US dollar
was set as the global reserve currency, and the International Monetary
Fund was established to shower the world’s nations with the dollars they
needed to participate in this system.

Like most governmental and non-governmental organizations, however, the IMF eventually took on a life of its own.

(The CIA is a perfect example of this; formally established in
1947, the CIA was charged with… wait for it… being the ‘central’ agency
to coordinate US intelligence. It grew quickly into its own beast,
culminating in the creation of the post-9/11 National Intelligence
Directorate. It’s job? You guessed it: being the ‘central’ agency to
coordinate US intelligence.)

Over the years, the IMF became the roving economic police force of
the ruling class, coercing developing nations to take enormous loan
packages they had no hope of paying off.

As a result, the local IMF (or World Bank) representative in
developing countries became extremely powerful figures. Leaders in poor
countries were so terrified of loan default, the IMF was able to shape
policy and allocate national resources as the west saw fit.

Clearly the tables have turned.

By 2011, the IMF’s biggest customers have become ‘developed’ (i.e.
contracting) countries like Greece which are relying more and more on
the generosity of China. Now with the IMF’s former chief locked up in
disgrace for the foreseeable future, the race is on to see who will
replace him.

The new order of things is very clear. The western hierarchy of the
past is insolvent, and its capital has migrated south and east. Western
leaders refuse to acknowledge this reality and are clinging desperately
to antiquated institutions like the IMF in order to retain control of a
now defunct financial system.

Newsflash: the IMF is only relevant to western leaders who live in
the past. French Finance Minister Christine Lagarde’s official bid to
become the new IMF chief only shows how pathetic their intentions are.
It’s like someone trying to take command of the Titanic as she’s headed
toward the ocean floor.

China, the world’s second largest economy, is routinely relied upon
to bail out the west… yet it has a paltry 3.65% of the IMF’s voting
power. Europe, however, is arguably the most insolvent region on the
planet, though it insists on remaining at the helm. Ultimately, the
market doesn’t care and has been orienting itself towards the developed
world for years.

Little by little we are seeing signs of a revolution in the financial
system– grumblings from Zimbabwe about establishing an asset-backed
currency, new exchange-traded gold contracts in Asia, more bank wiring
routes that bypass New York City, and corporations in the developing
world issuing debt on the international market in local currency with
ease.

I’ve written extensively that China’s renminbi is being increasingly
considered a reserve currency to compete with the dollar and euro. Other
developing countries have already entered into swap agreements to
accumulate renminbi reserves, and even western companies are issuing
renminbi-denominated debt.

There are signs of more liberalized exchange controls all the time;
it’s possible for individuals and corporations to hold savings in
renminbi through a variety of ways… you can even walk into the New York
City Bank of China branch and open an account.

The latest move is American Express’s new renminbi-denominated
Travelers Cheques– a ‘cash equivalent’ issued by a non-Chinese financial
institution. This is a major step, and its implications are far, fare
more important than whichever white person is jonesing to head an
irrelevant organization of the past.

Western leaders simply don’t want to accept their loss of primacy;
they’ve become enslaved themselves, not only by the insurmountable
sovereign debts they’ve accumulated, but by their stubborn refusal to
acknowledge the simple reality of a new system they can’t stop and don’t
control.

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Joe Sixpack's picture

Crash JP Morgan (and the IMF), Buy Silver!

 

www.gold-silver.us/forum

Shell Game's picture

Excellent article on the silver playing field and on the possibility the silver market has been cornered again:

http://fofoa.blogspot.com/2011/05/costatas-silver-open-forum.html

There is only anecdotal evidence that JPM has actual silver short positions. Furthermore, it is information JPM themselves have divulged.  Are we to assume they are being honest and are not trying to mislead the public?  If JPM is lying about their shorts, are they trying to drive the public into silver and away from the real safe-haven of gold?  Caveat emptor, folks.  Don't forget to hedge this possibility with a good portion of physical gold..

 

Shell Game's picture

Ah yes, my itchy-bearded, OT friend. Up to your usual ways of parasitizing the top of the comments I see..  ;-)

Edit:  spot on re: Bubble Univesity

TruthInSunshine's picture

Prepare for game over for global economy (not because it's a U.N. Report or because it's being widely reported by Reuters, AP and every other major wire service, but because the velocity is there on a psychological level).

For anyone thinking the woes of the U.S. and Eurozone will be net accretive to the economic prosperity of the BRIC nations or any others, think again, too.

We're entering a global black hole:

http://www.reuters.com/article/2011/05/25/us-economy-un-idUSTRE74O6EI201...

cosmictrainwreck's picture

holy shit! we really are in trouble if even the fuckin' UN can see it. Ben, yer petticoats are showin'

nmewn's picture

Whaaa?...wait a minute...

"As a result, further (expected) losses of the >>>book value<<< of the vast foreign reserve holdings could trigger a crisis of confidence in the reserve currency, which would put the entire global financial system at risk," it said."

does this mean that something of value, that is attempted to be paid off with something of no value, is not an acceptable medium of exchange?

Huh.

tiger7905's picture

Don Coxe Basic Point May 2011 touches on why gold is definitely not a barbaric relic.

http://goldandsilverlinings.com/?p=1085

Fiat2Zero's picture

Fairly long and rambling article with some good points.

However, it's easy to get lost in the world of hocus pocus.

Gold and silver are money in most of the world, and have been since people have found them. In the developing countries this is second nature. High inflation is driving these populations reflexively into PMs as it has historically. Paper currency always goes to zero, historically, as we are witnessing a world wide race to the bottom.

Most people on ZH probably own both gold and silver.

Silver will trade at 10:1 GS ratio when the music stops, by 2015 (my wild guess).

Worrying too much about the near term manipulation will give you conniption fits. Organic investment demand is driving price action.

If you want a wild ride with higher profits - buy silver, the devils metal, if you can stomach the volatility.

Buy and hold as much physical as you can, because paper money will not repair itself (without gold and silver)

Shell Game's picture

Most people on ZH probably own both gold and silver.

A lot more new faces all the time, I wouldn't bet on that.  Also, the 'Crash JPM' army are zealots with a good cause for sure, but that kind of fanatisicm could be played upon.

Use of Weapons's picture

Could? There is no could about it.

If you believed something different, you wouldn't be sitting where you're sitting

http://video.google.com/googleplayer.swf?docId=-4827358238697503

Infamous Chomsky - Marr interview. Marr later went on to become the #1 political pundit for the BBC, which just goes to show.

Whilst we can suggest that Max Keiser genuinely believes what he says, RT (or rather, the real owners of) is using him, and by proxy, his mainstay US audience as political edge against Washington. Silver bugs should be aware of the politics being used, even if it is to agree with it. But don't think that it isn't really one set of TPTB vrs another. I'd also dig into a few of the more autre Fiat sites for their seeds as well... But that's tin foil hat territory.

 

Tin foil territory: Max is sponsored by Hugo Boss, you work it out.

Fiat2Zero's picture

Yes but believing that _all_ or even most silverbugs are fond of Max Keiser is a bit preposterous.

Many think he is a useful idiot.

If you are blindly following anyone, it'll probably end blindly.

However, just because the motives of Max Keiser may be impure, doesn't change the overall story for the investment demand of silver.

Follow the facts, ignore the dog and pony show.

Again, for _most_ of the world for _most_ of it's human history, gold and silver are/were money. The paper games being played out will eventually be futile. Don't get lost in the mirror world.

Chuck Walla's picture

I have wondered about the use of the current mania against us. It requires a devious and sinister mind to pull it off, but there seems to be no shortage there.  Soros is very capable of it for one.

Xavier Doe's picture

Que?

Please elaborate.  Your comment is meaningless as it stands.

Temporalist's picture

It seems that RT wants any alarmist anti-US pundits on.  It's just an angle.  Max has on many reputable guests and he does not put words in their mouths.  Also he and Stacy report on mainstream media news so they are pointing out and highlighting what are to them major stories but are avoided or disregarded by the masses.

Hillary Clinton herself mentioned that foreign news sources such as RT and Al Jazeera are supplanting US outlets.  I don't think she meant it to be complimentary but rather a warning that the US propaganda machine needs to dial it up a few notches.

Manthong's picture

Yuan (yin) means silver in Chinese.

The Chinese characters (yin hang) for bank translate into "silver house".

http://mandarin.about.com/od/dailymandarin/a/yinhang.htm

Manthong's picture

Yo soy hijo de puta plata.

Manthong's picture

Also, the acronym for U.S. dollar is FRN.

That is Bernankese for “Fraudulent Rectal Napkin”.

asymptote's picture

Indeed. I have noticed that all of the documents that indicate 'who has the short' indicate that one of two HSBC or JPM holds  90% of the toal of the two, but we are never able to get he exact numbers on who it is. There is an equal statistical probability that HSBC is the massive short. 

In fact when I watch the COMEX movements vi Harvey's daily blog I se continued net outflows from HSBC, and inflows to JPM's new vault. There is a real possibility that HSBC is the holder of the short, and potentilly could be covering a problem in the LBMA. Also not that he LMBA stopped reporting a few years ago. We have no idea of what is going on over there now. I once suggested, that what we 'could' be seeing is JPM move away from HSBC? 

Perhaps a possibility.

One other thought I had after spending a few days reading over those two gian comment lists at the costata thread is that you can take two positions:

1) Gold and olny gold can be used to 'back' a currency as it allows a unilateral balance of trade transfer method.

2) If silver is also included, then realistically -anything- in the commodity space that has a few years of longevity can back a currency. This would eb a mess to administer. Peru backed by Silver, Vietnam backed by roughrice, Australia backed by Steel or Coal or Gold(from ore). 

To me, #2, while far messier to trade each others backing is probably more robust. A pure floating gold standard is likely to be subject to manipulation of a degree far greater than backing by 20 different commodities. Just look at Ft Knox. 

 

I'm hedged both ways, with a slight preference to gold. But even if FOFOA gets his fabled Reference Point Gold standard, in my heart I know it'll still be rife with scandal, fraud and manipulation. The system we have today didn't -make- the evil we see, sure it gave a good framework for abusive fraud. The biggest probelm we have today is the lack of will to exercise the laws we have to punish financial crimes. No system we can invent will stop the type of people we have today from attempting it again. The best we can hope for is to minimise the theft. 

 

Fiat2Zero's picture

C'mon, JPM owns SLV, HSBC owns GLD. There's a lot of irrelevant info compared to these gargantuan facts.

downwiththebanks's picture

And they own the CRIMEX, too, right?  Or is it the CME that JMP owns?

Fiat2Zero's picture

JPM has seats on the board of CME.  So yes, they are the ones doing the hikes.

The_Euro_Sucks's picture

It is possible that the flow of silver is cornered. It is quite obvious that the flow of gold is cornered for decades if not longer. Its obvious that the above ground supply of silver is not cornered. It is not hard to realise that the above ground supply of gold is cornered. I do agree one needs to hold both metals in physical form. 

ToNYC's picture

 

Great news! When they finally corner all the Gold, they can box it up or bury it and build a moat. Later on, they can sell it to churches to cover themselves as if there was anything more to spirit than to worship the Sun (Aton), the source of all life...and respecting the rights of others. Precious metal believers need to keep passing kindergarten final exams each year of their education.

 

Jasper M's picture

And how's that workin' out fer ya?

JPMorgan will crash on its own, and the IMF is a broken reed, no need/point in buying more physical Ag. I will keep selling my silver into any strength. 

 

I like most of this article, but I notice the author seems to (fashionably) reserve his economic skepticism for the West – as if China's current rise (itself a function of Western debt) was somehow assured continuity into that same future he discusses. 

legal eagle's picture

You make a great point. It is a stand alone point though. I agree that China has purposefully pagged the Reminbi low against the dollar b/c they saw it was making them rich and us poor. This is true above and beyond the debt they acquired. They have bankrupted the US like we bankrupted the USSR.

We will soon see if they have gotten beyond the Mutually Assured Destruction phase by hedging against their US Treasuries.

asymptote's picture

I wrote a long email to a friend on Friday about this very point. Specificaly on why Australia has done so well has nothing specifically to do with us being a 'great nation'. Australia is, like the chinese addicted to US monetary expansion. The chinese peg forces them to build things to soak up the inflation the peg created. To build things, the closest pile of dirt is Australia that gives them the resources needed to do so. The situation is unstable, as it relies on continued US debt growth and trade with China keeping the peg where it is as well as the AUD not rising so far it prices out commodities out of the market

Note the Baltic Dry Index and how Australia beat out Chile as being a major supplier in 2008 and you see a recipe for the next economy to reverse in to stagflation with it's commisurate real estate pop... and boy will this be a painful one. The sheep here feel invulnerable. All it take is the continued rise of the AUD, which is assured, or China breaking the peg, which it could well do on Qe3. 

max2205's picture

The new female IMF chief: "she walka like a girl but she talka like a man...Lola"

max2205's picture

The new female IMF chief: "she walka like a girl but she talka like a man...Lola"

max2205's picture

The new female IMF chief: "she walka like a girl but she talka like a man...Lola"

max2205's picture

The new female IMF chief: "she walka like a girl but she talka like a man...Lola"

TempFlashback's picture

Is the fifth time going to be the charm? Stay tuned...

Hook Line and Sphincter's picture

A charm? It might be as long as Lola keeps her pants on.

theMAXILOPEZpsycho's picture

Do the illuminati accept chicks these days??

Secondly, there are many cases of female rapists...I hear they often spike drinks with a mixture of zanex and viagra...

IdioTsincracY's picture

Debt is slavery .... right on!!!

Parents are indebted because of the great Real Estate ponzi scheme ...

the children are indebted because of College Loan scheme...

entire Countries and indebted because of the Natural Economics growth paradigm ...

Who the fuck is gaining from all of this???

Where is all the money going? .... follow the trail of the reverse-trickle-down flow ....

It's the fucking Oligarchy!!!

Everyone's got debt ... they're swimming in wealth extracted at the detriment of entire Nations ....

Do we need a new System? ... you bet .... but for that to happen we need to fuck them all!!!!

Cursive's picture

Yes, and I for one would prefer a return of the true "Greenback" issued by our very own UST, not the FRB.

Libertarian777's picture

Not sure why there seems to be such a backing behind 'Lincoln's greenback'.

 

With the Fed monetising US Treasry issued debt currently, the US dollar printed by the Bureau of Engraving and Printing is effectively that issued by the US Treasury.

Since most people already agree monetising debt is a bad thing, why would allowing the US Treasury to flat out print debt currency be any better? It would completely remove the minor roadblock they have with the FRB.

asymptote's picture

Australia's RBA was given independency from politics a few decades ago. Whilst I won't suggest it's a good model, as I detest Fractional Reserve lending on principal, it is probably an exmaple of the best of the worst. You will do better than you curently do, on that system, but you still have two problems as I see it:

1) If your government is allowed to issue bonds, it'll be fiscally imprudent and you will end up with high taxes. My highest tax band here is 47%, plus GST(Like vat), fuel excise, etc. I loose more han half of my wage to my governments desire to spend my money for me. The Private\Public central bank won't help you.

2) The environment the country exists in is a stabliser. If every other country in the world decides to dilute their currencies, then be ready to watch you economy get crushed as the exports continually have to lower costs to remain competitive externally. Sure, BHP can sell steel at market rates, but the business denominated in the local currency will suffer as it needs to operate within the realm of the stringer currency (as in paying wages). Remember, wages go up easily, and down with a lot of pain and cost (retrench, then rehire lower paid workers). 

 

The only soluton I see is a global reset, the people who will do it will be the ones who will benefit the most from the new system. 

BigDuke6's picture

'Global reset'  ... like the rapture?

Its got its fans.

Cursive's picture

@Libertarian777

With the Fed monetising US Treasry issued debt currently, the US dollar printed by the Bureau of Engraving and Printing is effectively that issued by the US Treasury.

Your analysis ignores the that the FRN is debt-backed money and productive capacity is drained from our economy by the rentiers (banksters).

Since most people already agree monetising debt is a bad thing, why would allowing the US Treasury to flat out print debt currency be any better?

Again, the return to the Greenback has abolutely nothing to do with debt.  That is what makes it great.  So, it a.) would not be monetising debt or b.) debt-based money/currency.

It would completely remove the minor roadblock they have with the FRB.

The FRN seems to have been something less than a very small pothole rather than a minor roadblock.  Also, perhaps if the FRB were removed, most Americans would have a more straight foward understanding of government finance.  The level of complexity added by the banksters via the Creature from Jekyll Island has obfuscated the problem for most Americans.

Libertarian777's picture

all the articles i've read concerning the 'Greenback' still don't 'jive' with me.

I'm more for a 'competitive' market based money system (i.e. people individually decide what they wish to transact in; maybe facebook credits become the de facto standard).

A greenback would still be fiat (defined as legal tender) by the government.

What stops the US treasury from just issuing infinite streams of greenbacks? To fund the budget?

If we say well they are accepted by the US government as payment for tax debt, then it still basing the note on the 'faith' of the US Treasury (to tax US citizens).

Or if a greenback is not a US Treasury issued IOU, what then is it? What stops the Treasury from just printing infinite greenbacks? If it is just a 'note', unbacked by debt, then why would I accept it? I wouldn't. Except by 'fiat' (mandate). I would sooner accept someone's coat check ticket, as I could give that in for a coat, whereas a greenback I could exchange for... nothing.

 

I thought the sole role of the government was to certify the weight and fineness of the coins issued (i.e. a silver coin contains exactly x number of oz of .999 silver; gold coin is 22kt etc), and NOT to issue 'money'. (You should be able to take your raw gold/silver to the US Treasury and for a small fee, have them coin it into certified weights). That is the only 'faith' you'd need in the government (that they measured correctly).

Will Treasury issued greenbacks be certified to be of a certain linen vintage?

I understand that having a Treasury issued greenback will skip the middleman banker who gets zero % FRB funding to loan out to main street at 5%, but still don't see how it is NOT fiat.

WakeyWakey's picture

If the Greenback is introduced again, it's success depends on the level of debt with which it starts again. If it is sustainable, say 30% of GDP, and strict rules that it can never go higher than 40% of GDP then there should be no reason why it shouldn't work. 

It is still backed by debt, only it is interest free debt so no payments to the banksters and they get to re-use all their tax reciepts.

Which brings us to the next thing. The G20 governments should outlaw offshore tax havens. It is the filthy stinking rich who avoid paying taxes, leaving that little inconvenience to the poor and is the sole reason why Greece is in the situation it is in, but adds massively to the debt of all nations.

Ofcourse it will take a revolution to bring all this about as it is the filthy stinking rich who are running things in their own interest at the moment. Until they are replaced, nothing will ever change.

Cursive's picture

@Libertarian777

but still don't see how it is NOT fiat.

Total agreement and that is the main point of the greenback.  It is pure fiat.  You could do worse than fiat and that is to print debt-based money like the FRN.  I agree with your main points and I would favor a dual or multiple money system as a means of keeping each system honest.  Let consumers decide which currency is the best.

nmewn's picture

Its time to turn the tables over.

The crux of the matter is simply this, the Federal Reserve Bank is holding a lot of debt (bonds) that the taxpayer cannot and will not ever pay back.

Which is an odd circumstance for them when you think about it because they have never had any taxing authority to collect the debt owed.

None.

That is held by the consent of the people through their elected representatives.

What will we do? ;-)

Greenhead's picture

You have to remember that the Fed gives the Treasury most of its profits.  Interest on T's has to be paid by taxpayers, which is funneled to the Fed as they now hold the notes.  It is then funneled back to the Treasury dept and spent on this and that.  The big interest due bill is a slick way to demand higher taxes from the productive class.  "Look, look, we have this compounding mountain of interest due, we need more revenues... Guess we need higher taxes, etc."

nmewn's picture

"You have to remember that the Fed gives the Treasury most of its profits.  Interest on T's has to be paid by taxpayers, which is funneled to the Fed as they now hold the notes."

Understood.

Not being a Princeton economist, I would have to say its going to be awful hard to make any payments on compounding debt obligations (rolling over to even zero interest) with the fact that wage earners comprise only half of the total population of this country. as a whole, and still half of them are exempted from any tax obligation whatsoever due to tax credits or some other form of tax avoidance to the Treasury.

Its a ledger entry in my estimation, nothing more.

Hell, if I could wave a magic wand and make fiat appear from nowhere all my problems would be solved as well ;-)

Quixotic_Not's picture

nmewn,

In 1933 FDR pulled off a currency revaluation that screwed everyone, but the FED.

What if O-Blah-blah annouces, oh say Feb. 2013, that 'MeriKa is gonna have a banking holiday, and the U$D is repudiated as a failed currency scheme?

What is $15 trillion when refactored @ 1/100?

Of course, the FED will find a way to dump the counterfeit paper before then, but to whom?