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Europe's Depression, Japan's Disaster, And The World's Debt Prison

Tyler Durden's picture


Originally posted at Der Spiegel,

Prison of Debt Paralyzes West

By Cordt Schnibben

Be it the United States or the European Union, most Western countries are so highly indebted today that the markets have a greater say in their policies than the people. Why are democratic countries so pathetic when it comes to managing their money sustainably?

In the midst of this confusing crisis, which has already lasted more than five years, former German Chancellor Helmut Schmidt addressed the question of who had "gotten almost the entire world into so much trouble." The longer the search for answers lasted, the more disconcerting the questions arising from the answers became. Is it possible that we are not experiencing a crisis, but rather a transformation of our economic system that feels like an unending crisis, and that waiting for it to end is hopeless? Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world? Is it possible that financial markets will never become servants of the markets for goods again? Is it possible that Western countries can no longer get rid of their debt, because democracies can't manage money? And is it possible that even Helmut Schmidt ought to be saying to himself: I too am responsible for getting the world into a fix?

The most romantic Hollywood movie about the financial crisis isn't "Wall Street" or "Margin Call," but the 1995 film "Die Hard: With a Vengeance." In the film, an officer with the East German intelligence agency, the Stasi, steals the gold reserves of the Western world from the basement of the Federal Reserve Bank of New York and supposedly sinks them into the Hudson River. Bruce Willis hunts down the culprit and rescues the 550,000 bars of gold, which, until the early 1970s, were essentially the foundation on which confidence in all the currencies of the Western world was built.

Creating Money out of Thin Air

Until 1971, gold was the benchmark of the US dollar, with one ounce of pure gold corresponding to $35, and the dollar was the fixed benchmark of all Western currencies. But when the United States began to need more and more dollars for the Vietnam War, and the global economy grew so quickly that using gold as a benchmark became a constraint, countries abandoned the system of fixed exchange rates. A new phase of the global economy began, and two processes were set in motion: the liberation of the financial markets from limited money supplies, which was mostly beneficial; and the liberation of countries from limited revenues, which was mostly detrimental. This money bubble continued to inflate for four decades, as central banks were able to create money out of thin air, banks were able to provide seemingly unlimited credit, and consumers and governments were able to go into debt without restraint.

This continued until the biggest credit bubble in history began to burst: first in the United States, because banks had bundled the mortgages of millions of Americans, whose only asset was a house bought on credit, into worthless securities; then around the globe, because banks had foisted these securities onto customers in many countries; and, finally, when these banks began to totter, debt-ridden countries turned private debt into public debt until they too began to totter, and could only borrow money from banks at even higher interest rates than before.

At the moment, the world has only one approach to getting out of this labyrinth of debt: incurring trillions of even more debt.

What does all of this have to do with Bruce Willis and Helmut Schmidt? Willis rescued the world's gold and, with it, the illusion of the good, old world. Schmidt, as Germany's finance minister in the 1970s, set the debt spiral in motion and fueled the illusion in Germany that countries could go into debt, and that this was good for everyone.

When Schmidt's predecessor, Karl Schiller, resigned from the government in protest over 4 billion deutsche marks in new debt, he said: "I am not willing to support a policy that creates the impression, to outsiders, that the government pursues the motto: After us comes the deluge."

Schmidt incurred 10 billion deutsche marks in new debt. Inspired by crisis economist John Maynard Keynes, the German government believed that economic stimulus programs would stimulate growth, but only under the condition that the debt was to be brought down again in better times.

This economic policy was known in Germany as "global regulation." As finance minister, and later as chancellor, Schmidt took advantage of the oil crisis to drive up the government deficit with economic stimulus programs. When Schmidt stepped down in 1982, annual government spending tripled in comparison to spending in 1970, reaching the equivalent of €126 billion ($161 billion), and the public debt increased fivefold, to €313 billion. By today, the combined debt of federal, state and local governments has climbed to more than €2 trillion.

A Human Debt Gene?

From today's perspective -- leaving aside all the effusive rhetoric about Europe -- the introduction of the euro is nothing but the continuation of debt mania with more audacious methods. The euro countries took advantage of the favorable interest rates offered by the common currency to get into even more debt.

Can all of this be blamed on some sort of human debt gene? Is it wastefulness, stupidity or an error in the system? There are two views on how the government should use its budgets to influence the economy:

  • the theory of demand, established by Keynes, advocates creating debt-financed government demand, which in turn generates private demand and produces government revenues. In other words, building a road provides construction workers with wages. They pay taxes, and they also use their wages to buy furniture, which in turn provides furniture makers with income, and so on.
  • The other view, supply-side economics, is based on the assumption that economic growth is determined by the underlying conditions for companies, whose investment activity depends on high earnings, low wages and low taxes. According to this theory, the government encourages growth through lower tax rates. In the last few decades, the frequent transitions of power in Western countries between politicians who support supply-side economics (conservatives, libertarians and now some center-left social democrats) and those who advocate Keynesian economics (social democrats) has driven up government debt. When some politicians came into power, they reduced government revenues, and when they were replaced by those of the opposite persuasion, spending went up. Some did both.

When the debts of companies and private households are added to the public debt, the sum of all debt has grown at twice the rate of economic output since 1985, and it is now three times the size of the gross world product. The developed economies apparently need credit-financed demand to continue to grow, and they need consumers, companies and governments that go into debt and put off the financing of their demand until some time in the future. Of its own accord, this economic system produces the compulsion to drive up the debt of public and private households.

Governments delegate power and creative force to the markets, in the hope of reaping growth and employment, thereby expanding the financial latitude of policymakers. Government budgets that were built on debt continued to create the illusion of power, until the markets exerted their power through interest.

Interest spending is now the third-largest item in Germany's federal budget, and one in three German municipalities is no longer able to amortize its debt on its own steam. In the United States, the national debt has grown in the last four years from $10 trillion to more than $16 trillion, as more and more municipalities file for bankruptcy. In Greece, Spain and Italy, the bond markets now indirectly affect pensions, positions provided for in budgets and wages.

A country isn't a business, even though there are politicians who like to treat their voters as if they were employees. Politics is the art of mediating between the political and economic markets, convincing parliaments and citizens that economic policy promotes their prosperity and the common good, and convincing markets and investors that nations cannot be managed in as profit-oriented a way as companies.

After four years of financial crisis, this balance between democracy and the market has been destroyed. On the one hand, governments' massive intervention to rescue the banks and markets has only exacerbated the fundamental problem of legitimization that haunts governments in a democracy. The usual accusation is that the rich are protected while the poor are bled dry. Rarely has it been as roundly confirmed as during the first phase of the financial crisis, when homeowners deeply in debt lost the roof over their heads, while banks, which had gambled with their mortgages, remained in business thanks to taxpayer money.

In the second phase of the crisis, after countries were forced to borrow additional trillions to stabilize the financial markets, the governments' dependency on the financial markets grew to such an extent that the conflict between the market and democracy is now being fought in the open: on the streets of Athens and Madrid, on German TV talk shows, at summit meetings and in election campaigns. The floodlights of democracy are now directed at the financial markets, which are really nothing but a silent web of billions of transactions a day. Every twitch is analyzed, feared, cheered or condemned, and the actions of politicians are judged by whether they benefit or harm the markets.

The attempt by countries to bolster the faltering financial system has in fact increased their dependency on the financial markets to such an extent that their policies are now shaped by two sovereigns: the people and creditors. Creditors and investors demand debt reduction and the prospect of growth, while the people, who want work and prosperity, are noticing that their politicians are now paying more attention to creditors. The power of the street is no match for the power of interest. As a result, the financial crisis has turned into a crisis of democracy, one that can become much more existential than any financial crisis.


An Unequal Battle

The one sovereign stalks the other, while the pressure of the markets contends with the pressure of the street. In Europe, in particular, this has become an unequal battle. Since Jan. 14, 2009, when Standard & Poor's downgraded Greek government bonds, the markets have determined the direction and pace of European integration. They want bigger and bigger bailout funds, they want to safeguard their claims, they want a European Central Bank that buys up government bonds indefinitely, they want slashed government budgets, they want labor market reforms like the ones in Germany, they want wage cuts such as those in Germany and, at the same time, they want these incapacitated countries mired in recession to offer the prospect of healthy growth.

And this is happening in a Europe in which the sovereign nations don't truly know how much Europe they really want. The people who govern Europe don't know either, which puts them at the mercy of the markets. They have no common model for Europe, and they suspend the most basic democratic ground rules to remain capable of acting. They have to use tricks and bend agreements to prevent the euro from breaking apart.

The gulf between those who govern and those who are governed, a problem in any democracy, is complicated in Europe by the mistrust between Europeans and bodies that seek to tame the crisis in their name.

The actions of governments also generate mistrust. The German government, in particular, has more confidence in the markets than in the governments of Europe's crisis-ridden countries, and it finds the power of interest rates more convincing than promises of reform. Mistrust also stems from the relationship between governments and their voters, so much so that it's become common to delay important decisions until after elections and to keep them out of campaigns. There isn't much confidence in the economic judgment of the people. If lawmakers can hardly understand which bailout funds they are voting for, how many billions they are pushing in which direction, how great the risk of inflation is, what terms like target, derivative, leverage and securitization mean, how much can citizens be expected to comprehend? A citizen who hopes to understand the underlying problems of the euro crisis would, at the very least, have to read the business sections of major German newspapers like the Süddeutsche Zeitung or the Frankfurter Allgemeine Zeitung every day. Watching one talk show a week isn't enough.

Even Good Debt Needs to Be Serviced

The democratic decision-making process reaches its limits in this fundamental crisis, but even in the decades when debt was being accumulated, it was clear that democracies have a troubled relationship with money.

There was always justification for new debt. The catchphrases included things like more jobs, better education and social equality, and the next election was always around the corner. Debt was justified at the communal level to expand bus service or build playgrounds, at the state level to hire more teachers or build bypasses and, at the federal level, to buy tanks and fund economic stimulus programs.

There is good debt and bad debt, but even good debt needs to be serviced constantly. A closer look at which countries acquire and pay off debt, and to what degree, reveals unsettling correlations: The more often governments change and the more pluralistic they are, the faster the debt increases and the more difficult it becomes to pay if off. The more democracy, the looser the money. The only place money gets even looser is in dictatorships.

To hold an administration responsible for the debts of its predecessors, there are debt limits in democracies. In Helmut Schmidt's day, for example, there was a provision in the German constitution stipulating that total debt could not exceed total investment. In Europe, the provisions of the Maastricht Treaty, which is aimed at ensuring the stability of the common currency, limit the amount of debt a government can accumulate to no more than 60 percent of gross domestic product.

Debt Limits Have Never Worked

So far, such debt limits have never worked in any country. Under new laws in Germany, the federal government, starting in 2016, will only be allowed to incur new debt amounting to 0.35 percent of GDP. The euro countries have agreed to a similar rule, but it can only take effect if all national parliaments agree.

In some countries, there are already sparks of resistance against the limitation of new debt. The Italian government refuses to implement austerity measures demanded by the ECB and to approve a clause stipulating automatic spending cuts. After mass protests, the Portuguese government reversed cuts that had already been announced. Spain will fall short of an agreed deficit target of 6.3 percent, with its deficit actually predicted to come in at 7.4 percent. Euro-zone countries are in fact not allowed to incur new debt of more than 3 percent of GDP.

What makes those hoping to clean up budgets in the crisis-ridden countries skeptical is the downward spiral triggered by such drastic budget cuts, structural reforms and wage reductions. Private and public demand is sinking while the economy shrinks, leading to higher unemployment, less government revenue and higher debt. In Spain, after four austerity packages, the unemployment rate has increased from 8 percent in early 2007 to 25.8 percent today, while the country's debt ratio has doubled. In Portugal, unemployment has gone up by close to 100 percent in four years, with the debt ratio increasing from 72 to 114 percent. In Greece, after budget cuts amounting to more than 10 percent of the country's total economic output, unemployment has almost tripled and the debt ratio has risen from 113 to 160 percent.

These horrific numbers are not just driving people into the streets, but are also creating conflicts between politicians and economists. There it is again, the old dispute between the supporters of supply-side and Keynesian economics. Only when budgets have been balanced, taxes are low and wages are brought down can growth return, says the one side; those who cut public and private demand so radically are driving countries into recession and driving debts up instead of down, says the other. Average growth in Europe has declined continuously and was only 1.4 percent in 2011, while the economy is expected to shrink this year.

For many debt-ridden countries, growth is one of four possibilities to reduce debt. Balancing budgets through cuts and tax increases is another. The third option is a debt haircut, which means declaring bankruptcy and no longer servicing at least a portion of debts. The fourth path is inflation, that is, allowing the debt to melt away on the quiet at the expense of savers and consumers. But three to four percent inflation can hardly be justified politically in Germany, although the prospects are better in the United States and other countries. For this reason, and in response to German pressure, European countries are now trying out tough austerity programs.


A European Depression and a Pending Japanese Disaster

Because governments are in disagreement, bodies are taking their place that are turning into ersatz governments: the central banks.

The ECB's decision to buy up unlimited amounts of the sovereign debt of European countries is a replacement for political solutions for which there are currently no majorities in the governments and parliaments of euro-zone countries. The decision by the American Federal Reserve Bank to inject hundreds of billions of dollars into the markets again to stimulate economic growth results for the inability of Democrats and Republicans to agree on a compromise between limiting debt and economic stimulus programs. Printing money -- or betting hundreds of billions once again -- is the last desperate response on both sides of the Atlantic.

What began four years ago with the bursting of a credit bubble in the mortgage market is being combated with more and more new debt in the trillions, thereby inflating the next, even bigger credit bubble.

The fresh trillions circle the world in the search for yield, but only a small part of the money flows into the real economy, where investments in new production plants produce lower returns. Instead, the trillions slosh back and forth, from one financial market to another, from the foreign currency market to the commodities market, and from the gold market to the stock market and back again.

Because these trillions are not reaching the real economy, the risk of inflation is currently smaller than Germany's central bank, the Bundesbank, and its president would have us believe. But every saver and everyone with a life insurance policy pays for the central bank's low interest-rate policy with low interest rates. When central banks keep interest rates close to zero for long periods of time, which they have done for years, they disadvantage ordinary savers and favor major investors, gamblers and banks, which can borrow at low rates and invest the money elsewhere at a profit.

Blaming the Banks

Who and what has gotten the world into such trouble, and how can it extricate itself again? Not surprisingly, former Chancellor Schmidt blames investment bankers, the managers and bankers who flooded the world with worthless securities and long speculated on the sovereign debt of crisis-ridden countries, and who hedged their risks, which were much too high, with far too little capital and therefore had to be rescued with taxpayer money. Banks are still the focus of all problems in the financial markets. They still have to be supplied with money, and they still pose a threat to the system.

And those who allowed them to become so powerful are all those politicians and governments that gave the financial markets so much freedom, often socialized the risks, incurred too much government debt, and allowed the municipalities, states and countries to become so irresponsible. "The market" is not some group of experts, nor is it the last resort of collective reason. It is an orgy of irrationality, arbitrariness, waste and egoism. "Democracy" is not some event involving citizens, or some celebration of altruism and far-sightedness, but rather the attempt to bundle diverging interests into decisions in a way that's as peaceful as possible.

Together, the market and democracy are what we like to call "the system." The system has driven and enticed bankers and politicians to get the world into trouble, or least one could argue that if they too weren't part of the system. And we could sweep it away if we had a better one.

Instead, we are left with an undisguised view of the system. One of the side effects of the crisis is that all ideological shells have been incinerated. Truths about the rationality of markets and the symbiosis of market and democracy have gone up in flames.

The Problems of Modern Capitalism

The European depression is only prelude, with the Japanese disaster waiting in the wings. The country's debt-to-GDP ratio is 230 percent, and the government is dependent on the opposition approving the issue of new government bonds. Lurking behind it all is the American abyss, the debt drama of the next few months, the showdown and duel between Democrats and Republicans over which party can blame the other one for a national bankruptcy.

And then, finally, we have a clear view of the three biggest problems in finance-driven, democratically constituted capitalism:

  • First, how can a debt-ridden economy grow if a large part of demand in the past was based on debt, which is now to be reduced?
  • The second major problem of modern capitalism is this: How can the unleashed financial markets be reined in again, and how should the G-20 countries come up with joint rules for major banks, which are their financiers and creditors, and for markets, which punish and reward these countries through interest? How much freedom do financial markets need to serve the global economy as a lubricant, and what limits do they need so that banks, shadow banks and hedge funds do not become a threat to the system?
  • Third, how do governments mediate between the power of the two sovereigns, how do they reestablish the primacy of citizens over creditors, and how does democracy function in debt-ridden countries? How can politicians react without burdening countries with more debt, and how can they reduce that debt? In fact, how can they even govern anymore in this prison of debt? In the past, future revenues were mortgaged, in municipalities, states and the federal government. This now makes it difficult to structure the present and the future. Today only about 20 percent of the federal budget is truly politically available, as compared with 40 percent when Schmidt was still in office.

It is always only at first glance that the world is stuck in a debt crisis, a financial crisis and a euro crisis. In fact, it is in the midst of a massive transformation process, a deep-seated change to our critical and debt-ridden system, which is suited to making us poor and destroying our prosperity, social security and democracy, and in the midst of an upheaval taking place behind the backs of those in charge.

A great bet is underway, a poker game with stakes in the trillions, between those who are buying time with central bank money and believe that they can continue as before, and the others, who are afraid of the biggest credit bubble in history and are searching for ways out of capitalism based on borrowed money.

Translated from the German by Christopher Sultan


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Sun, 11/18/2012 - 14:49 | 2993954 no taste
no taste's picture

You know what goes here, but it is Sunday, so time to relax!

Sun, 11/18/2012 - 14:55 | 2993971 JamesBond
JamesBond's picture


Sun, 11/18/2012 - 15:19 | 2994020 Walter_Sobchak
Walter_Sobchak's picture

after the money bubble pops, then the human bubble pops

Sun, 11/18/2012 - 15:59 | 2994156 Zer0head
Zer0head's picture

I took this tweet very personally 

FU Paul Ryan


You dirty sick fucks-in the fucking name of education ???Cat Tortured and Killed for Profit at University of Wisconsin

Sun, 11/18/2012 - 16:32 | 2994216 CPL
CPL's picture

Sock puppet software.




Reis is the former president of the U.S. subsidiary of i2, a U.K. maker of software that law enforcement and intelligence agencies use to identify links between suspects. Publicly traded ChoicePoint acquired i2 in January 2005 for $90 million.


Research firm Frost & Sullivan last year estimated sales of that type of software would reach $415 million by 2012



Mark Arehart

Ntrepid Corporation


Bot Maker of this Annoyance on the web.

Contact your brokerages and sell all your equity in them

Then get into a short position.

Cubic Corporation - NYSE:CUB


Cubic Corporation is a US Military/Defence contractor, with subsidiaries including Cubic Defense Applications Inc, and Cubic Cyber Solutions, Inc. As revealed in tax filings from 2010, Cubic also wholly owns cyber security firms Abraxas and Ntrepid. The latter provides Persona Management services to the U.S. and unspecified "multinational forces" in conjunction with CENTCOM information operations program Operation Earnest Voice, as provided for in a 2010 contract.


Amongst the Security Services offered by the firm we learn that "Cubic subsidiaries are working individually and in concert to develop a wide range of security solutions" that include: "C4ISR data links for homeland security intelligence, surveillance and reconnaissance missions;" a Cubic Virtual Analysis Center which promises to deliver "superior situational awareness to decision makers in government, industry and nonprofit organizations," human behavior pattern analysis, and other areas lusted after by securocrats.


Sun, 11/18/2012 - 17:05 | 2994313 Dapper Dan
Dapper Dan's picture

Thanks for the links CPL,


I C U R N 4 md,   please keep us n 4 md

Sun, 11/18/2012 - 19:34 | 2994520 CPL
CPL's picture

kk  woteweknead2due.  Break the back of their piggy bank.  Christmas is canceled and here's a fucking pink slip.  That's the end goal now.

Sun, 11/18/2012 - 19:26 | 2994578 TWSceptic
TWSceptic's picture

Cat Tortured and Killed for Profit at University of Wisconsin


Why do they mention profit? There's no profit, this stupid project was (and still is) sponsored by governement. They continue it just to keep their government funded jobs...

Sun, 11/18/2012 - 20:13 | 2994686 Michaelwiseguy
Michaelwiseguy's picture

Oklahomans Prepare for New Law That Will Make Guns a Common Sight

A new law takes effect on Thursday in Oklahoma — anyone licensed to carry a concealed firearm can choose to carry a weapon out in the open, in a belt or shoulder holster, loaded or unloaded. Five minutes after midnight Thursday, Mr. Hull and his friends — supporters of the Oklahoma Open Carry Association, a gun rights group — will mark the occasion by wearing their unconcealed handguns while dining at Beverly’s, a 24-hour restaurant.

Sun, 11/18/2012 - 15:19 | 2994012 LouisDega
LouisDega's picture

Let me guess.. FUB? or is it GGOSB?

Sun, 11/18/2012 - 14:50 | 2993955 Deathrips
Deathrips's picture

Bunker Bitchez!

Silver ....

Sun, 11/18/2012 - 15:39 | 2994082 Peter Pan
Peter Pan's picture

So many trillions and yet so little money.

Excellent piece.

The reality is that putting the debt to one side, the world has a logistical to satisfy unlimited and competing demands and expectations with limited resources which are exacerbated by demographic and political mud slides. I call them mud slides because it"s almost impossible to gain traction in mud. Your wheels pin and you only dig yourself in deeper.

I still believe that the wealth stashed in tax havens and which is estimated at 20 to 30 trillion will have to be written off, expectations of people who rely on the largesse of government will have to be curtailed and nations will have to realise that there are better ways to spend war budgets.

Sun, 11/18/2012 - 16:15 | 2994142 Urban Redneck
Urban Redneck's picture

Simon says: here's a logistical problem-

14 dumptrucks isn't enough to retrieve Germany's measly 500 tons of fake gold held by the Bank of England, much less what is claim to have been "stored" on behalf of the Bundesbank at the NY Fed

14^2 dumptucks would not even be enough trucks to remove all the "gold" from the NY Fed

300 dumptrucks (or 600 heavy armored cars) might do it, or was the whole subtext of that Die Hard flick, that there were only 14 dumptrucks of gold at the NY Fed, as opposed to the 7,000+ tons claimed?

(assuming a triaxial dump truck has a capacity of 25 tons, one could haul away 350 tons of gold in 14 of them)

Sun, 11/18/2012 - 16:48 | 2994263 Sean7k
Sean7k's picture

This piece has the "appearance" of an excellent article, it has all the right arguments and statements of blame without targeting any particular persons. 

The problems start at the beginning: the only choices are between Keynsian demand and supply side economics? Really? What, did the Austrian school disappear? Has the concept of sound money been wiped from memory? Has commodity based money been outlawed?

If you agree with their assumptions, assumptions that validate the central banking fiat currency scheme that creates ever increasing amounts of debt beyond the ability of economies to repay, then maybe it's a good piece. 

Democracy is a mere facade for the rampant fascism that has incresed in proportion to the levels of debt, militarism and regulation that has channeled national welalth and labor into the hands of a few gifted elites. 

In the end, this article throws up its' hands in frustration with the present global political economic paradigm, without ever attempting to identify its' transgressor's. I call bullshit. There is ONE ENTITY that is responsible for the monetary systems of the individual nations the world over. ONE ENTITY that dictates and controls these policies regardless of political system or leader. 

That ONE ENTITY is the Central Banking system. It is aided and abetted by Keynsian economic totalitarianism. It is protected by the savagery of the military industrial complex. Politicians are mere paid puppets. The media, willing lapdogs whom work to sell this typical propaganda. 

We are smarter than this. It is not complex. Governments never belong in economic systems. Bankers should never control currency nor interest rates and finally,laws beyond those that protect private property and civil rights are the tools of repression and slavery. 

Real money is never called a note. It has no counterparty risk. You own it. Start there, how tough is that?

Sun, 11/18/2012 - 17:17 | 2994336 Peter Pan
Peter Pan's picture

Sean 7K,

WELL SAID and well written.


Sun, 11/18/2012 - 22:09 | 2994883 prains
prains's picture

money and all economic systems of money growth are based on an energy source such as;_ slavery_ wind_ steam_ coal_ nuclear_ oil_ debt slavery etc. notice as the prevailing energy source diminishes state controlled militarism increases throughout history. I would say central banks are NOT THE MASTER but are the instrument of controlling the outcome for those that control the central banks.

Sun, 11/18/2012 - 22:41 | 2994935 Sean7k
Sean7k's picture

Actually, no. For most of history, societies developed around agriculture and then the specialization that resulted in greater variety and structure for each society. Miltarism was used to gain control of resources, usually grains. 

Money developed from the need to pay armies and collect taxes. (see "5000 years of debt"). 

The relationship between money and energy is a fairly recent occurrence centered on oil and having central currencies. 

If the MASTER controls the CENTRAL BANK, how is that a distinction?

Sun, 11/18/2012 - 17:27 | 2994353 LeBalance
LeBalance's picture

Thanks Sean7k,

I read the first paragraph (2 sentences) and my extreme horseshit detector went off.

So I paged down to find the eviscerating comment that laid it all bare and yours is it.  (or the first one just now).

The first sentence talks about how the "market" forces have more say in monetary policy than the people.

The "market" ??  Really?  Which market has the US at ZIRP?  Japan?

What "market" is buying all the issued debt?

So the article is horseshit from its first painted thought.

Sun, 11/18/2012 - 17:46 | 2994391 AUD
AUD's picture

It's just yet more guff trying to work the quantity theory of money into something logical.

An impossible task as the quantity argument is bogus. Quality determines value.

Sun, 11/18/2012 - 18:18 | 2994464 gould's fisker
gould's fisker's picture

"Real money is never called a note. It has no counterparty risk. You own it. Start there, how tough is that?"


Sun, 11/18/2012 - 18:58 | 2994559 Marco
Marco's picture

It's not tough, but people are greedy for interest ... and so gold certificates were born (of the free market).

Sun, 11/18/2012 - 22:02 | 2994844 cranky-old-geezer
cranky-old-geezer's picture



If you agree with their assumptions, assumptions that validate the central banking fiat currency scheme that creates ever increasing amounts of debt beyond the ability of economies to repay, then maybe it's a good piece.

Intentionally incurring debt beyond one's ability to repay is theft.  You never intend paying it back. 

But the money loaned to you is created out of thin air you say (in your defense). 

Doesn't matter, it has value, you can buy stuff with it.  Ok, let's say you're not borrowing money, you're borrowing wealth.  Wealth you never intend paying back.  Or let's say what it really is, you're borrowing bank notes you never intend paying back.

We don't have money anymore, we have bank notes.  People use those bank notes as if they were money.  Law says those bank notes are legal tender, making them as good as money in a trade sense, so who cares what they actually are?

People worry about massive amounts of government debt piling up.  The "fiscal cliff" and all that.

The massive amount of government debt piling up doesn't matter, central banks are gonna print all they need to print to keep funding it.

How is that a "debt prison"?  Doesn't sound like anyone is being restricted in any way.  Governments don't have to worry about being restricted in their borrowing, nor taken over nor shut down nor anything like that.  So no, it's not any kind of "prison".

Massive debt isn't the problem.  Massive printing to fund that debt is the problem.  It dilutes the value of the currency (bank notes).

Why do articles like this never mention what the real problem is?  No, there's no "day of debt reckoning" on the horizon, no debt collapse on the horizon.  But there is currency collapse on the horizon, following a period of hyperinflation of course.  That's the real problem.

Let's assume for a moment government borrowing from the Fed is the only way the money supply is expanding.  Government borrowing is expanding the money supply $1.5 trillion a year.  If the in-circulation money supply is $10 trillion, then government borrowing is expanding it 15% a year.

Is that inflation or hyperinflation?

But we know government borrowing isn't the only way the money supply is expanding.  Bennie has cranked up "QEternity" now, buying $85 billion of MBS every month, with printed money of course.   That's another trillion added to the money supply each year, $2.5 trillion now, 25% expansion of the money supply.

Is that inflation or hyperinflation?


Sun, 11/18/2012 - 22:53 | 2994950 Sean7k
Sean7k's picture

How can it be theft, if you never created it, but rather, a representative did it in your place and then made you responsible for it? A representative controlled by the agency funding the debt?

It has value because of legal tender laws that REQUIRE acceptance. Eliminate legal tender laws and FRN's might have little to no value.

How is that a debt prison? You are aware of the effects of dollar inflation? Retirement funds dependent on interest? The consequences of ever increasing taxes and fees? 

Every time you print more notes, you create new debt that increases the interest paid on the debt, requiring more notes to satisfy the debt. How can the debt be inconsequential?


The difference between inflation and hyperinflation is technically one of degrees (see the "definitions" section below).

Unlike regular inflation, where this process is protracted and not generally noticeable except perhaps by studying past market prices, hyperinflation sees a rapid and continuing increase in the supply of money[2], and the cost of goods



Sun, 11/18/2012 - 19:23 | 2994592 Dugald
Dugald's picture

War the largest Default Button in history.....who be the first to push..............

Sun, 11/18/2012 - 14:51 | 2993957 cossack55
cossack55's picture

That is some seriously heavy shit for a Sunday afternnon.

Sun, 11/18/2012 - 17:19 | 2994340 Peter Pan
Peter Pan's picture

The shit we are carrying as a result of idiot government and bankers is even heavier. Plus we have to carry it around all week long.

Sun, 11/18/2012 - 14:52 | 2993960 Hulk
Hulk's picture

Got Gold??? Bitchez...

Sun, 11/18/2012 - 17:20 | 2994344 Peter Pan
Peter Pan's picture

Are you asking me or the FED?

Sun, 11/18/2012 - 17:39 | 2994379 Hulk
Hulk's picture

The FED are bastards, we be the Bitchez...

Sun, 11/18/2012 - 18:16 | 2994462 Cheesy Bastard
Cheesy Bastard's picture

Some of us be both.

Sun, 11/18/2012 - 18:58 | 2994557 Hulk
Hulk's picture

That being the case, we shall keep an eye on you!

Sun, 11/18/2012 - 15:10 | 2993996 CrashX
CrashX's picture

God bless the Baby Boomers!!!

Sun, 11/18/2012 - 15:42 | 2994073 lynnybee
lynnybee's picture

' God bless the Baby Boomers!!! '  yes, god bless us boomers for paying for our parents social security & for our own when Alan Greenspan doubled the social security taxes taken out of our paychecks (Social Security Reform Act, 1983).    Bless us all, i know my parents had a great retirement, earning interest on bank C.D.s & collecting Social Security payments !    & the kicker is that policy makers  had 50 years to plan for this event , the retirement of the baby boomers.     what i wouldn't give to earn interest on my money in a bank C.D. like my own parents did.    this system is a huge scam.   

Sun, 11/18/2012 - 15:43 | 2994101 NOTfromSanFrancisco
NOTfromSanFrancisco's picture


Yes indeed!... God bless our Social Security Redistribution Plan!...

Sun, 11/18/2012 - 15:54 | 2994137 CrashX
CrashX's picture

Extremely large and still in charge, last time I checked :)
Free love in the 60s, Rocked it out through the 70s, Yuppied it up in the 80s, Dot-conned us in the 90s, Bailed yourselves out in the 2000s - what's next?
Well other than more shitty reality shows or retro crap to entertain ya until the few "responsible" Boomers live out the misery they left for the rest of us in their ObamaCare nursing villages - alongside the vast majority of the ridiculously irresponsible Boomers :)
Truly awesome legacy!!!

Sun, 11/18/2012 - 17:23 | 2994181 Ballin D
Ballin D's picture

Boomers didnt pay for both their parents' and their own social security.  They paid for their parents' alone.  Infact, nobody has paid for the baby boomers' social security (until the last year) as they are 48-66 years old.

The system is a scam and that has been known for decades.  The boomers have had the influence to steer political policy and elections by their shear numbers and have done nothing and now it is too late.

Sun, 11/18/2012 - 20:27 | 2994720 QQQBall
QQQBall's picture


You had 50 years too. Keep waiting for gubbermint to fix it...


Sun, 11/18/2012 - 20:48 | 2994750 Snoopy the Economist
Snoopy the Economist's picture

Yes, bless the boomers for their ever increasing buyin of the debt the fed sells. It's a good thing the boomers bought mcmansions, suvs, vacations, big screen tvs and any other crap they could not afford and threw it on the plastic or cashed out the home equity.


The fed LOVES the boomers.

Sun, 11/18/2012 - 15:10 | 2993997 Seasmoke
Seasmoke's picture

debt = slavery

Sun, 11/18/2012 - 15:48 | 2994115 BraveSirRobin
BraveSirRobin's picture

debt & taxes = slavery

I feel like we are all working for the man and being forced to buy stuff at the company store.

Sun, 11/18/2012 - 19:02 | 2994562 Marco
Marco's picture

If you're not born rich you're born into debt ... sound money won't change that.

Sun, 11/18/2012 - 19:43 | 2994625 brettd
brettd's picture

If you spend less than you make, you buld wealth.

Sun, 11/18/2012 - 20:20 | 2994704 Supernova Born
Supernova Born's picture

Build wealth in FRN? Sort of of like finding an enormous cache of S&H Green Stamps or Confederate currency.

Sun, 11/18/2012 - 22:10 | 2994884 cranky-old-geezer
cranky-old-geezer's picture



Build wealth in FRN?

Swap those FRNs for PMs.   Now you're building wealth.

Sun, 11/18/2012 - 15:10 | 2994000 Tinky
Tinky's picture

Even if such an article were to be published in an American newspaper, I'm afraid that most readers would skim the first two paragraphs and flip to either the sports or entertainment section.

Sun, 11/18/2012 - 15:33 | 2994063 illyia
illyia's picture

Hence, we are reading it here...

Sun, 11/18/2012 - 15:11 | 2994004 css1971
css1971's picture

It's written as if the author doesn't know that the monetary systems are based on debt and this is all entirely inevitable.

Sun, 11/18/2012 - 15:13 | 2994007 Rustysilver
Rustysilver's picture

Prognosticating by Germans. This time it will be accurate.

Sun, 11/18/2012 - 15:14 | 2994011 vainamoinen
vainamoinen's picture

I and my family continue to prepare. Thanks ZH for content like this. Preparation is impossible without some form of rational input from a believable media source and you ust can't find stuff like this on an ongoing basis anywhere else - - -

Again, Thx ZH!!!

Sun, 11/18/2012 - 15:15 | 2994013 Klazy Plick
Klazy Plick's picture

I'm not worried.  Our current situation is merely a graduate economics thesis simulation on a 4th dimensional supercomputer.  This is Simworld.  Unfortunately this program sequence is designed as a failure analysis.  We have assumed crash positions, and haven't taken off yet.  This has been a drill.

Sun, 11/18/2012 - 15:24 | 2994023 j-dub
j-dub's picture

"Europe's Depression, Japan's Disaster, And The World's Debt Prison"
Punditized, it's "Three GDP Events Happening Right Now"

Paid hacks couldn't be more bullish if they were charging through the streets of Pamplona.

Sun, 11/18/2012 - 15:20 | 2994024 resurger
resurger's picture

Thanks for the read : +5

"A great bet is underway, a poker game with stakes in the trillions, between those who are buying time with central bank money and believe that they can continue as before, and the others, who are afraid of the biggest credit bubble in history and are searching for ways out of capitalism based on borrowed money."

Great Quote...

Also to mention the BBC Trader on previous ZH article:

"This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late!"


Sun, 11/18/2012 - 15:24 | 2994026 Aurora Ex Machina
Aurora Ex Machina's picture

Sunday night story time.

I was recently cleaning out boxes for a move; in one I found an old late 60's Penguin edition of a Buckminster Fuller book. I flicked through to see which predictions had been correct, and which of the great man thought's on the of the state of the world had come true, and where the doom and gloom panned out. The back blurb dramatically stated:

"Our world population has hit three and a half thousand millions..."

It stopped me a little. No use of billions. Quaint that humanity was currently clocking up 7 thousand millions and still pottering along, but then I pondered a little more.

Now ~ back in the late 60's, everyone was still arguing over whether to use American or British billions, so I can see the attempt at accuracy (rah! Empire!). I could also see how the figure "a thousand millions" would be more inspiring of anxiety than a number less than ten. It also struck me that for a reader in the 1960's, billions would be an entirely foreign concept. A quick check on national debts at the time supported this view: in 1976, the IMF £2.3 billion rescue was considered awe inspiring numbers.


And now, we throw around billions, trillions and even our first quadrillion with little more thought than we would discuss the price of fish, when the average salary is still under $50k. Champion! Just Champion!


“The waitress brought me another drink. She wanted to light my hurricane lamp again. I wouldn't let her.
"Can you see anything in the dark, with your sunglasses on?" she asked me.
"The big show is inside my head," I said.”

Sun, 11/18/2012 - 15:56 | 2994146 WmMcK
WmMcK's picture

Long BuckyBalls, geodesic domes and everything dymaxion.

Sun, 11/18/2012 - 17:21 | 2994345 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Since 2000 the world's central banks have borrowed an additional 10,000 billion in new debt.

How's that for you

Sun, 11/18/2012 - 17:30 | 2994354 Aurora Ex Machina
Aurora Ex Machina's picture

I can't let you do that Dave...


(And the figure is 24.6 trillion, simply on Soverign Debt, just as a head's up. This doesn't include banks. Which is a lot more than 10,000 billion)

Sun, 11/18/2012 - 15:27 | 2994038 flyonmywall
flyonmywall's picture

Central banks will be the new institutionalized SS, while central bankers will be the new Hitlers of the 21st century. History may not repeat, but it will rhyme sarcastically.


Sun, 11/18/2012 - 18:54 | 2994548 falak pema
falak pema's picture

monetary fascism serving inverted totalitarianism. Neo feudal tiny oligarchy owning 99% of world assets. 

Sun, 11/18/2012 - 15:27 | 2994041 GenXer
GenXer's picture

Good article

Sun, 11/18/2012 - 15:29 | 2994045 Hulk
Hulk's picture

Time for a reread of the scariest presentation ever, from zh on may 31

Old Raoul Pal stated that we had 6 months left to trade the market, then all hell would break loose.

Time to raise those DU shields Bitchez!!!

Sun, 11/18/2012 - 15:32 | 2994054 lindaamick
lindaamick's picture

The global financial system is nothing more than a bunch of scheme-makers imposing schemes that rob the value of labors' output giving it to the scheme-makers.

One of the most brillant aspects of the current scheme was to convince laborers that they could participate in and be rewarded for "investing" part of their labor value into the schemes thereby becoming convinced that they could participate in scheme-making.

As long as the majority of people investing in the schemes continue to believe in the schemes, thinking they are part of the scheme-maker class, the longer the scam and theft from labors' value will go on enriching the scheme-makers. 

What a brilliant coup. 


Sun, 11/18/2012 - 15:55 | 2994120 BLOTTO
BLOTTO's picture

Its worse than that...

They schemed us on every major front of our doesnt just start/end with the financials.


Either its all a scheme or none at all - but not just one, i.e., financials or food or politics, etc...


Imo, its all a scheme on every major front...destroy families, destroy financials, destroy genders, destroy our health, destroy nations...

And re-introduce a new world order.


Sun, 11/18/2012 - 15:56 | 2994144 Walter_Sobchak
Walter_Sobchak's picture

the wandering cosmopolitan strikes again

Sun, 11/18/2012 - 18:38 | 2994522 bunnyswanson
bunnyswanson's picture

Protocols of the Learned Elders of Zion


Economic Rationalism (Thatcherism) and Other Platonic Forms

On this the Protocols says, "The goyim have lost the habit of thinking unless prompted by the suggestions of our specialists" (Protocol 3). "these specialists of ours have been drawing to fit them for rule the information they need from our political plans from the lessons of history, from observations made of the events of every moment as it passes.

The goyim are not guided by practical use of unprejudiced historical observation, but by theoretical routine without any critical regard for consequent results. We need not, therefore, take any account of them - let them amuse themselves until the hour strikes, or live on hopes of new forms of enterprising pastime, or on the memories of all they have enjoyed. For them let that play the principal part which we have persuaded them to accept as the dictates of science (theory). It is with this object in view that we are constantly, by means of our press, arousing a blind confidence in these theories.

The intellectuals of the goyim will puff themselves up with their knowledge and without any logical verification of them will put into effect all the information available from science, which our agentur specialists have cunningly pieced together for the purpose of educating their minds in the direction we want" (Protocol 2, bold emphasis added). "In order that the true meaning of things may not strike the GOYIM before the proper time we shall mask it under an alleged ardent desire to serve the working classes and the great principles of political economy about which our economic theories are carrying on an energetic propaganda" (Protocol 6).


There will be a universal economic crisis. Stock exchanges will shut down. Industry will be brought to a standstill. We shall throw the mobs of workers on the streets simultaneously in all European countries and they will loot and kill. Hatred will be magnified by the economic crisis. We will use cruelty wisely, knowing how to pacificy all unrest and shut off freedom in all institutions.

Secret “subterranean” (underground) methods will be used by us to create this crisis. The gold is all in our hands. Brute force turns mobs into bloodthirsty beasts. When they have drunk their fill of blood, they can easily be riveted into their chains. We will be safe because we will take protective steps.

We shall erase the word “freedom” when we come into our Kingdom. The word “freedom” brings out the communities of men to fight.


It's a movie script.

Sun, 11/18/2012 - 15:33 | 2994058 q99x2
q99x2's picture

Oh well plenty of opportunity during the crash. Blue skies for upward mobility right around the corner.

Sun, 11/18/2012 - 16:51 | 2994274 northerngirl
northerngirl's picture

Yes, but only if you holding gold and silver.  Anyone holding Fiat, or any other kind of paper not so good.

Sun, 11/18/2012 - 15:40 | 2994090 NOTfromSanFrancisco
NOTfromSanFrancisco's picture



You only habe a debt prison because of the boundries that are established. Eliminate the boundries and you eliminate the prison. Hence, eliminate the debt ceiling and, VOILLA (I love that word!), no more prison. Why couldn't someone have thought of that earlier... Oh, my bad... He did...


Sun, 11/18/2012 - 16:54 | 2994277 TNTARG
TNTARG's picture

Voilà. I think isn't gonna work.

Sun, 11/18/2012 - 15:42 | 2994098 disabledvet
disabledvet's picture

"apparently" debt demand must increase? REALLY? demand MUST ALWAYS increase...not "apparently." And indeed it does...VIA INFLATION AND WAR. there is nothing wrong with being long copper pennies here folks. not that wooden nickels aren't bad...but the United States can create a 1776 gold standard AT WILL right now....which should make people wonder "why the inflation in the first place?" and the answer of course is because of the in THE JEW. "You pay" is THEIR WAY...for THEIR WARS. you all respond however you see fit...i say "long kiln dried 2x4's"...upside the head if necessary. "there's more where that came from" as they say. That's Lowes, Home Depot, Lumber Liquidators, Grossmans and the MULTITUDE of privately owned lumber yards throughout the USA. at some point you will start seeing value in the full size pick up truck market as well...but in my view that depends on MOTIVE technology (solar powered direct drive battery tech'ed bifuel GOVERNMENT standard) cuz believe me "there are a lot of after market options" since steel is collapsing in price and is 100 percent recyclable. we shall see how the "war plan" is executed on...and i think shortly. "terrifying the people of Gaza" is still not running the place. If i'm an Israeli i need a place to hide...and that means LAND.

Sun, 11/18/2012 - 15:49 | 2994116 dolph9
dolph9's picture

The thing you have to understand about the world is that everybody has turned into crybabies.

The politicians are crybabies, they don't want to make tough decisions about spending.

The rich are crybabies, they don't want to lose a cent of their billions.

The poor are crybabies, asking the government for help because "I've got children to feed"

The old are crybabies, they don't want to go gracefully, but instead want endless subsidized drugs and procedures.


And the world will learn that there are consequences to being crybabies.  When there are no more responsible adults left, the world burns.

Sun, 11/18/2012 - 17:55 | 2994415 Kreditanstalt
Kreditanstalt's picture

It's the "something for nothing" Free Shit Army...and, yes, it's EVERYWHERE.

Sun, 11/18/2012 - 18:59 | 2994560 bunnyswanson
bunnyswanson's picture

The number of voters who turned out for the 2008 election speaks volumes.  Getting a politician into power who promised to bring justice was a success, or it would have been if the politician wasn't a liar.


When you have nothing to take what you can.  Investing in the poor class is how to get rid of them, not starving them to death.

Sun, 11/18/2012 - 15:49 | 2994119 HellZero
HellZero's picture

Totter..... Interesting translation

Sun, 11/18/2012 - 15:49 | 2994123 Stuck on Zero
Stuck on Zero's picture

The focus of this treatise is on debt.  I would enlarge the evolution and behavior of large institutions.  Whether a government, a department, a corporation, or non-profit all organizations pass through certain stages as they age.

Stage 1: Adoption of good guiding principles

Stage 2: Growth and expansion following the guiding principles

Stage 3: Slow drift from guiding principles and major growth of apparatus

Stage 4: Growth to a huge apparatus that mouths the principles but does the opposite

Stage 5: Movement to hedonism and corruption with no principles

Stage 6: Nihilism and destruction.

At what stage is Western Civilization?

Sun, 11/18/2012 - 16:43 | 2994246 Caviar Emptor
Caviar Emptor's picture

Debt cycles follow the course of the human condition: Ambition and dreams lead to hard work and eventually success. Success leads to a lowering of fear and a rise in risk-taking. Which sets up a positive feedback of more risk-taking and more success. Which works until it doesn't. Unfortunately when the house of cards collapses it takes a whole bunch of people and inter-related businesses with it, because everyone tries to tie in and glom on to success. 

Sun, 11/18/2012 - 18:49 | 2994542 Stuck on Zero
Stuck on Zero's picture

I think it's simpler than that.  Large institutions attract sociapathic individuals who have enormous drive and ambition and no talent whatsoever except for getting to the top.  They are apt to do anything ... not just incur debt.  It only takes a determined 1% to destroy any system.  It is up to us to devise a system for preventing them from doing it.  If not, we're doomed to Darwinian rule forever.


Sun, 11/18/2012 - 15:53 | 2994132 tony bonn
tony bonn's picture

liquidate the bad debt!!!!!!! it is cancer

Mon, 11/19/2012 - 14:56 | 2996424 Kobe Beef
Kobe Beef's picture

...and then liquidate the bankers, or they will metastasize somewhere else.

Sun, 11/18/2012 - 16:01 | 2994157 Nobody For President
Nobody For President's picture

This is no drill, soldier - this is the real deal. You have prepared, you have stacked your gold, silver, brass and lead. Now fasten your seatbelt, and prepare for liftoff. 


This is an excellent macro view summary of how we got to the present unpleasant place that will not end well. Thanks again ZH.

Sun, 11/18/2012 - 16:49 | 2994222 Caviar Emptor
Caviar Emptor's picture

And then there's reality: 

Banks push to keep bailout-era lifeline


The financial industry is hoping to avoid its own “fiscal cliff” at the end of the year when a guarantee program for bank accounts is set to expire.


The Transaction Account Guarantee (TAG) program, which was created during the financial crisis, provides government guarantees to non-interest bearing bank accounts used by small businesses and municipalities. The program serves as a backstop for accounts worth more than $1.4 trillion.



So much for "Free Markets", "Pure Capitalism" and "Supply-Side".

As the article states: Banks are still the focus of all problems in the financial markets. They still have to be supplied with money, and they still pose a threat to the system.

Mon, 11/19/2012 - 00:36 | 2995114 bilejones
bilejones's picture

Yeah, if you are thinking of a re-fi, waiting till Jan might take advantage of the inevitable flood of money into treasuries.

Sun, 11/18/2012 - 16:48 | 2994257 Caviar Emptor
Caviar Emptor's picture

Japan update:


Cesium in trout 110 times over limit


A mountain trout caught in the Niida River in Fukushima Prefecture contained 11,400 becquerels of radioactive cesium per kilogram, more than 110 times above the government limit for food products, a survey by the Environment Ministry showed. 


Sun, 11/18/2012 - 19:29 | 2994603 Mentaliusanything
Mentaliusanything's picture

You should worry more about the sea weed which wraps around the salmon sushi.

Take you gieger counter to the counter when ordering.

Mon, 11/19/2012 - 00:56 | 2995157 Ginsengbull
Ginsengbull's picture

Was that a native trout, or stocked from a hatchery?


Hatchery trout are succeptable to bioaccumulation. They concentrate whatever poisons are present in their food, which is mostly fish protein, so the cesium from the nuke plants may have climbed up the mountains through the man made part of the food chain.

Sun, 11/18/2012 - 16:57 | 2994291 monad
Sun, 11/18/2012 - 16:58 | 2994294 ZeroPoint
ZeroPoint's picture

As George H. Bush said: "The American way of life is non-negotiable." We shall see.....

Sun, 11/18/2012 - 17:15 | 2994332 Caviar Emptor
Caviar Emptor's picture

Freedom's in the state of mind 

Sun, 11/18/2012 - 21:03 | 2994768 Supernova Born
Supernova Born's picture


Just like FRNs at some point.

Sun, 11/18/2012 - 17:42 | 2994351 Bag Of Meat
Bag Of Meat's picture

No one can fight against an invisible enemy called "market" . Markets don't exist, there's just a dozen of people creating the correct incentives for the rest to obey. WHO ARE THEY? They must have names.


"Because these trillions are not reaching the real economy, the risk of inflation is currently smaller than Germany's central bank, the Bundesbank, and its president would have us believe."

O RLY? What happens when all these infinite trillions end up in commodities? Oil goes up---> Inflation.

Sun, 11/18/2012 - 17:51 | 2994399 Kreditanstalt
Kreditanstalt's picture

"...searching for ways out of capitalism..."???

That last sentence shows that they still really don't understand the nature of the problem.

We desperately NEED some real capitalism here.

Sun, 11/18/2012 - 20:43 | 2994743 Ginsengbull
Ginsengbull's picture

Globalism is the bane of capitalism, because there's always some impoverished people willing to work for food.

Sun, 11/18/2012 - 18:06 | 2994437 xamax
xamax's picture


Sun, 11/18/2012 - 18:26 | 2994486 Incubus
Incubus's picture

lol.  Tim Osman, Mossad, and the CIA destroyed America and all it took was a few airliners.

Talk about ROI. 

And you have flag-waving dumbasses thinking they were ever fighting for freedom.


But let's keep the war machine going fighting people who have been fighting for thousands of years.  We sure got a whole lot out of freedom out of the deal so far.

Sun, 11/18/2012 - 18:30 | 2994499 malek
malek's picture

Wow, I wouldn't have thought I'd live to see a writer in a better German publication criticizing former Chancellor Helmut Schmidt, and very rightfully so!

However the overall conclusion misses the point a bit:
There is no better system than free markets, and the solution is to get back closer to really free markets - and in the case of too much debt that means orderly bankruptcy. So for big entities: doing it; for smaller (hi ex-students!): allowing it.

Sun, 11/18/2012 - 18:43 | 2994535 Winston Churchill
Winston Churchill's picture

PS Not to worry.

Sun, 11/18/2012 - 18:53 | 2994549 bilejones
bilejones's picture

" the liberation of the financial markets from limited money supplies, which was mostly beneficial"


Who is this clown?


Money is necessarily limited.

Sun, 11/18/2012 - 18:54 | 2994550 bilejones
bilejones's picture

" the liberation of the financial markets from limited money supplies, which was mostly beneficial"


Who is this clown?


Money is necessarily limited.

Sun, 11/18/2012 - 19:29 | 2994604 razorthin
razorthin's picture

Exactly.  Red herring alert.

Sun, 11/18/2012 - 19:04 | 2994566 beatus12
beatus12's picture

Much of what is ahead can basically be said in one

example Hungary. This is the future reality for parts

of the world. Nuff said, let's get on with the solutions

we don't have time to waste.



Sun, 11/18/2012 - 19:48 | 2994637 luna_man
luna_man's picture



It's too late to think about escape now!...CRIMINALS!!

Sun, 11/18/2012 - 20:08 | 2994671 Amagnonx
Amagnonx's picture

I am constantly concerned that the thesis is correct, that in fact there will be no collapse.  That this system of perpetual debt will be allowed to continue without default, forcing billions of people into slave labor - there is no better outcome for the controllers, and they have been managing it for the last few years.


Can default or inflation be forced into existence by the markets, or are the players in the markets following their own incentives to not produce those results - resulting in a slow motion collapse that never quite occurs. 


I do wonder if such an outcome is even possible, but if it is possible, then I think this is the result that the controllers will be pursuing.

Sun, 11/18/2012 - 22:13 | 2994888 Calmyourself
Calmyourself's picture

This is the outcome I have been having nightmares about for years.  The dumbing down of the population is complete the bread and circuses are an encircling ring blocking out awareness.  For folks like us not content to be soma pacified debt slaves there are camps.  This is the end game, the bankers and politicians will never allow hyperdeflation or inflation while they can design a slave world with so many willing participants.  Look around at your neighbors and extended families and tell me I'm wrong.

Sun, 11/18/2012 - 20:20 | 2994706 Trichy
Trichy's picture

I think the author started out with the wrong question
" Why are democratic countries so pathetic when it comes to managing their money sustainably?"
Democracy = power of the people

People want money
People do not want to repay debt (if can be avoided or they think they ve been tricked/forced into debt)

Put out a democratic vote about wether to pay debts (assumed by governments on behalf of bankers) or default, in ANY country in the world and see what thePower of the People has to say.
There is no democracy only illusions thereof!

Sun, 11/18/2012 - 20:37 | 2994733 Slightly Insane
Slightly Insane's picture

Dear author, you are still living in three dimensions.  The "debt" is created out of thin air.  The money you spend ... also out of thin air.  Guess what, the system is designed so that you pour 40% - 60% of those fiat scripts that you earn ... back into the system.  You are a "debt slave" ..... and for what?  Nothing is real anymore except that you are living in a Ponzi scheme, where; if you identify the fraudsters .... you are either locked up, labeled crazy and dismissed.  Truth has it that the game is in the later stages and that it will soon be on to the "last stage".  Do you comprehend?  "Compus mentus?"

Mon, 11/19/2012 - 03:47 | 2995289 are we there yet
are we there yet's picture

In a currency or general world market crash, the food importing countries of the Middle East will be desperate. Egypt and most Arab arid countries are massively dependent on food imports from the west.

Mon, 11/19/2012 - 04:15 | 2995319 poldark
poldark's picture

I believe all too big to fail banks should be nationalised and eventually broken up and sold off.

The best option seems to be inflating the debt away. Not a good option admittedly but the best.

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