Egon von Greyerz: There Is No Deus Ex Machina Left

Tyler Durden's picture

From Egon von Greyerz of Gold Switzerland

Deus Ex Machina

With most of the world’s major economies as well as the financial system bankrupt, there is only one solution that can save the world economy. Like in the Greek tragedies, Deus ex Machina is now the only way that the world can avoid a total economic collapse. This would involve God being lowered down onto the world stage and miraculously saving the plot.


DEUS EX MACHINA by Leo Lein – www.leolein.se

For those few who believe in this, may God bless them. But since this is a very unlikely solution most people will instead rely on governments and central banks to save us. But how can anyone possibly believe that totally incompetent and clueless politicians and central bankers could solve anything. They created the problem in the first place and are therefore totally unsuitable to play the role of Deus. The main objective of governments is to stay in power and thus to buy votes. Therefore they are incapable of taking the right decisions. And the opposition, aspiring to power is even less suitable since they will lie through their teeth and promise the earth in order to be elected. (We know that there are exceptions like Ron Paul, but the voters will most probably find his medicine too strong to swallow.)

What about central bankers, can’t they save us? Unfortunately any sensible person who becomes a central banker loses all his senses and becomes a prisoner of the political system.

Solution?

So if there is no Deus ex Machina and if governments or bankers can’t rescue the world, who can and what is the solution. Let us return to the wise von Mises to look at the options available now:

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS A RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION, OR LATER AS A FINAL OR TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED”

Ludwig von Mises

Mises is absolutely correct: “There is no means of avoiding a final collapse of a boom brought about by credit expansion”. Whatever politicians, bankers, economists or others experts say, there is no solution to this crisis. We have reached the end of the road and are now staring into the abyss.

The credit manufacturing system that started in 1913 when the Fed was founded, began its terminal phase in 1971 when Nixon abolished gold backing of the dollar. It has been clear to us for at least 20 years that the outcome was inevitable. It was never a question of “if” but only “when” it would happen. It is now clear to us that the false prosperity that the world has experienced by printing unlimited amounts of money will very soon come to an end. Thus the “if” and “when” conditions are now satisfied so the remaining question is HOW?

To try to answer this let’s return to Mises: “The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion ….”

To stop the money printing and credit creation would be the only sensible way of ending the failed quasi-capitalist, socialist experiment which is in the process of destroying the structure of the Western world. For almost 100 years we have lived on a system based on debt. This has created a false prosperity as well as false values. The transfer of capital from private enterprise to government by massive taxation is approaching 50% in many countries (see table). The average for 18 industrialised countries is almost 40%. This means that on average 40% of the productive economy is transferred to a non-producing entity (government) which wastes most of the money in the process of redistribution. But not only that, since the state has taken over up to 50% of the economy in these countries, the desire to work, to strive, to take risk and to invent has been taken away from a major part of the population.

For a great many people it is now totally natural to rely on the state for their needs rather than on themselves. And the state needs to borrow/print ever increasing amounts to perpetuate this economy based on an illusion. This situation is totally untenable. Since any additional money printing will only exacerbate the crisis and make the final collapse so much greater, the swiftest solution would be let the financial system implode now. We need to reset the world to a level which is sustainable. The consequences of this implosion would be a collapse of the financial system and a reset of debt to zero. Although this is unthinkable to any government or politician, it would be by far the quickest way to get the world back on its feet with no major debts, minimal government interference, and no central bank that can print money. It would be like a forest fire getting rid of all the dead wood. Out of that would rise masses of green shoots in the form of strong unchequered growth. The transition will of course be traumatic and the current generation will experience enormous hardship. But not voluntarily abandoning the money printing now will just delay the inevitable and the consequences will be dramatically greater and affect many future generations.

Anyone who has followed my articles will know my view that governments worldwide are totally incapable of stopping the money printing. This is their only means of staying in power and buying votes. But not only that, this is the only method they know. This has been their patent solution to all economic problems in the last decades. Not that this is new in history. Most empires have resorted to diluting the value of money by reducing the gold/silver content of coins or printing paper money. But as far as I know it has never before been done by so many countries simultaneously to such an extent.

Since there won’t be any voluntary abandonment of credit creation what will the likely outcome be? Again let’s use Mises words: “…… a final or total catastrophe of the currency system involved”. The problem this time is that we are not talking about one currency or one country. No, we are talking about most of the world’s major currencies. We have been used to measuring currencies and economies on a relative basis i.e. against each other. But this is a total fallacy since all major currencies have been in a race to the bottom for the last 100 years. Most currencies have lost between 97% and 99% against real money –GOLD – since 1913. And since 1999, most currencies have lost 80% or more against gold. So paper money has been a very poor measure of wealth in the last 100 years. Governments are creating credit and paper money and consequently through their fraudulent actions “stealing” from the people whilst at the same time increasing the people’s dependence on the state. And the people does not understand that the value of paper money is declining continuously. But gold reveals the deceitful destruction of paper money. This is why governments do not like gold and try to suppress the gold price.

Endless Money Printing – QE

And how will the currency system collapse? The answer to this question is very simple – through endless money printing. There will be no lasting austerity programmes in any country that can print money. Governments are incapable of sticking to austerity measures since in the end that is a guaranteed way of losing power. As power is the main purpose of all governments, they will use any method to retain it. Within the Eurozone, individual countries can of course not print money but the ECB and the IMF will take care of that. So whilst world leaders are procrastinating and bickering in G8, G20 and all other “summit” meetings, it is absolutely guaranteed that the final outcome will be one QE package after the next. Governments and central banks know that without limitless money printing there would be a deflationary collapse of the banking system and world economy.

The table below shows the financing requirements of the PIGS countries in the next few years. Just Italy and Spain will require €1 trillion in the next 4 years and of that 1/2 trillion Euros in 2012. Only printed money will take care of that.

For many years it has been absolutely crystal clear to some of us (sadly a very small minority) that many major sovereign nations are bankrupt as well as the world financial system. Banks are only surviving because they, with the blessing of governments, are allowed to value trillions of dollars of toxic and worthless assets at full value. And on top of that there are more than $1 quadrillion outstanding in derivatives. These are outside the banks’ balance sheets and there are virtually no reserves against them. The banks are netting the value down to virtually nothing and then applying a miniscule reserve against this net amount. First of all, the netting is only valid when the counterparty pays. When there is a counterparty failure, which is very likely in the coming financial collapse, gross remains gross and the $1 quadrillion remains $1 quadrillion. Secondly, a major part of the derivatives are worthless or not protecting the investors as we have seen with for example Freddie Mac, Fannie Mae, Lehmans and lately MF Global. MF Global had bought CDs to hedge their investment in Greek debt. But they hadn’t understood what they had bought and it turned out it offered no protection at all.

Hyperinflation

The “final or total catastrophe of the currency system” will occur as a result of the QE or unlimited money printing that will very soon start in the EU, USA, UK, Japan and many more countries. And this currency destruction will lead to hyperinflation as I have stated for many years. Throughout history, substantial government deficits leading to money creation or printing have always been the cause of hyperinflation. Because hyperinflation is always the result of a collapsing currency and not of excess demand.

To any thinking individual, it is totally incomprehensible that governments and central banks believe that an insolvent world can be saved by debt issued by bankrupt nations and then bought by the issuers themselves as there is no other buyer. This is the perfect recipe for self-destruction and “total catastrophe of the system.”

IMF, EU and other failed monstrosities

Time and time again, the world creates massive costly, bureaucratic and unaccountable structures that have idealistic and totally unrealistic objectives.

Take the IMF for example. This is what their mission statement states: “The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”

If financial stability, high employment, sustainable economic growth and reducing poverty are the objectives of the IMF, then they have failed on every single point. So here we have an organisation that receives/borrows money from mainly bankrupt states and then lends the money to countries that cannot or will not ever repay the funds. And in order to carry out this totally futile task, the IMF takes a major cut in between to finance its costly and failed operation. The world does not need monstrous and costly structures that totally fail in their mission. Thus, the IMF should be closed.

Turning to the EU, they state on their website: “The main objectives of the Union are now to promote peace, the Union’s values and the well-being of its peoples”. There are other stated objectives such as: “sustainable development, based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.”

The EU or the EEC as it was first called was created in the late 1950s. This was a prosperous period in the world economy based on real growth (not debt). As often is the case, politicians with illusions of grandeur create superstructures which only function in good times. The EU’s main objective of creating peace and well-being of the people is now being severely tested. If we for example asked Spanish youth (50% unemployed) about their well-being or Greek people or the Portuguese etc, we would get a tirade of abuse and complaints about the EU. Instead of “creating peace”, we are seeing major tension within the EU that could lead to serious conflicts. And as to “balanced economic growth and full employment”, this has all come to an end. The false prosperity, mainly based on debt, has also come to an end and the EU can only survive intact with the aid of endless money printing. But even that would only be a temporary reprieve. The EU is a failed experiment which is extremely costly and inefficient. The economic ruin of Ireland, Greece, Spain, Portugal, Italy, France etc would not have happened to the same extent without the EU. Like all artificial fiat currencies, the Euro was doomed to fail. Without the Euro, countries like for example Ireland, Spain or Greece would have recovered much faster.

Final or total catastrophe

So we are heading to the final stage or as Mises says a “final or total catastrophe of the currency system involved”. I don’t think that even Mises envisaged at the time that this could involve a major part of the world rather than just one country. This is why this catastrophe will be unprecedented in world history and have consequences that will affect the world economically, socially and geopolitically for a very long time.

Wealth Preservation – Gold

Since 2002 we have advised investors to put up to 50% of their assets into physical gold, stored outside the banking system. Gold has appreciated between 15% and 20% per annum since 2002 depending on the base currency. And most stock markets have declined 70-85% against gold in the last ten years. In spite of this most major investor groups (institutional, funds, asset managers or individuals) own no gold. Gold is money and reflects the total destruction of paper money. But most investors do not understand gold. Common arguments I hear is that “you can’t eat gold” or that “gold pays no return.” It seems that these investors prefer to eat paper money. And as to the argument that there is no yield on gold, who needs yield on an asset that has massively outperformed all major asset classes in the last 11 years. And if we look at 2011, gold has greatly outperformed stock markets in most major countries. Whilst stock markets are down between 1% and 24% in 2011, gold is up more than 20% against all major currencies. So in real terms (gold) all stock markets are doing very badly but still investors persist in riding these falling trends.

Stock markets will benefit temporarily from QE but it is still our view that they will fall another 90% against gold in the next few years.

The correction in the precious metals is now likely to be over and we should see the metals going to new highs in 2012. I had the pleasure of becoming acquainted with Alf Field at the recent Gold Symposium in Sydney where we were both speakers together with Eric Sprott, John Embry and Ben Davies amongst others. Alf is one of the few in the world, if not the only one, who knows how to apply the Elliott Wave principle successfully to gold. Alf’s next intermediate target is at least $4,500 and the ascent to this target could be rapid. That would probably mean a silver price of $150. These technical forecasts certainly confirm the fundamentals as outlined in this article.

The world is in a total mess and there is absolutely no solution to this unprecedented crisis. The hyperinflationary depression that we will experience in the next few years will totally destroy the majority of the credit based wealth that has been created in the last few decades.

In order to preserve wealth and keep capital intact, it is critical to keep a major part of investment assets in precious metals held outside the banking system. But for investors who continue to follow conventional wisdom, they will sadly find that their investment strategy was merely conventional and contained no wisdom.

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TheSilverJournal's picture

It's a worldwide fiat ponzi.

The United States Dollar (USD) is the world’s most important currency because the USD is the world’s reserve currency and most of the world’s central banks currency reserves consist of USDs. Oil, by far the world’s largest commodity, is traded almost exclusively in USDs. The USD gained world reserve currency status by claiming to be fully backed by gold and exporting USDs to the central banks of world. Central banks were allowed to trade in their USDs for gold at $35 per ounce until 1971, when Nixon severed the USDs link to gold in order to stop the US from running out of gold. Through the scam of counterfeiting gold, or printing more notes redeemable in gold than actual gold exists, value was stolen from the actual gold and that value was transferred to the counterfeit notes. When the counterfeit notes become worthless, much of the stolen value will be returned to actual gold. The Fed is in control of the greatest scam ever pulled and the scam is in the process of being revealed.

TheSilverJournal.com

LawsofPhysics's picture

Yes, so what is your prediction regarding that "scam", sorry "revaluation"?

TheSilverJournal's picture

When fiat collapses, likely sometime between the next six months and the next five years, the currencies of the world will be gone but all of the goods and resources of the world will still exist. Goods will then be purchasable with a different medium of exchange and if that medium of exchange is not entirely silver and gold, it will certainly move largely towards silver and gold having much more purchasing power than they have today. The enormous amount of purchasing power that gold is set to gain is evidenced by the size of the bond market which completely dwarfs the size of the gold market. At the  minimum, the purchasing power of an ounce of gold will be equal to the amount that $10,000 purchases today. When a large amount of purchasing power flows into the precious metals, the silver to gold ratio will compress. In this precious metals bull market, the silver to gold ratio is set to hit at least ten to one, meaning that one ounce of silver will have the purchasing power of at least the amount that $1,000 is able to purchase today.

LawsofPhysics's picture

I have a similar valuation, with gold/silver ratio being compressed even more, depending on what manufactering looks like.  We use silver a lot and in an "old-fashion" society, even more silver and copper.  Our current tecnological state certainly is not going to hold if all fiats go to zero.  Major supply line disruptions will happen overnight, so the immediate response will be massive devaluation followed by the realization that certain things still need to be delivered.  Same as it ever was, possession has always been nine tenths of the law.  In this scenario, it will be all that matters, even when the shooting stops.

TheSilverJournal's picture

Never before has the entire world been run completely on fiat and when the bubble pops, there's a good chance the rush out of fiat could happen fairly quickly. People do care about their wealth. All of that pressure out of fiat and into wealth preserving assets, specifically precious metals, could lead to mind boggling numbers which I mostly don't even bother talking about because my lower estimates are mind boggling enough to those unfamiliar with where money comes from.

At the max, I'd say it could compress to 4 to 1 and gold could hit a purchasing power that $50,000 buys today, which leaves silver at $12,500.

Popo's picture

In the words of House Stark:

 

Winter is coming.

Thomas's picture

i find myself using that a lot (along with "I see dead people.")

tarsubil's picture

So your 4 to 1 prediction is based on things being so frantic that they overshoot? I don't see how it could be less than 10 to 1. I like 25k and 2.5k myself.

TheSilverJournal's picture

10 to 1 seems like a pretty good equilibrium target seeing how little physical silver there is, how much silver is used up in industry, as well as the end of the great fiat expiriment. 4 to 1 would probably be an overshoot considering that there is 16 X more silver in the earth than gold and if it gets there, it probably won't stay there for long. Overshoots happen all of the time as markets are constantly trying to find equilibrium and when it swings too hard one way, it often swings back through equilibrium too hard the other way.

Hugh_Jorgan's picture

I'm sick of the analysis that says these ruling class are all incompetent. The key here is to realize that this IS NOT INCOMPETENCE, IT IS INTENTIONAL. I know it does not make for a happy bedtime story, but the global elites think that if they could just control everything, the world could be perfect (or at least better than what we have now). No, there is no one out there with power that cares about the well-being of you or your family, only you.

The crisis is being fomented on purpose to grease the skids for the slide into Global governance They have the destination all planned out, all they need to do is make the present place unpleasant enough to get us to want to move. Then they will guide us ever so gently into their frameworks, touting them as the panacea for all of the worlds ills.

The Globalists base their opinions and worldviews on revisionist history that glorifies Humanism, Marxism and central planning. They excuse their foibles the same way members of the church of Satan do; anyone that can be duped deserves it because they are not as smart as you, and there is nothing wrong with getting THINGS for ones-self even if you have to run over a few other people to get it.

 

KK Tipton's picture

+1000

Picture perfect post.

Side note, the "incompetent" ones spotted are just useful idiots. They are the plasuible deniability part made visible.
They are needed at times to advance the game.

Future scapegoats

Johnny B Good's picture

I guess it depends on how bad it will get.

If civilization prevails Gold might be the new currency.

But its not unlikely that at least for a few years in many parts of the world, including the US lead will be the currency.

Say 'Hello' to the 7.62 checkbook.

marathonman's picture

The destruction is intentional, but it's not because they think they can make the world a better place.  It's because they can make a lot of money by doing it.  If they turn us all into debt slaves working for them, why wouldn't they?  I mean when they're making money, they're making money.  Don't begrudge them making a few bucks...

KK Tipton's picture

Some are like that.

The new liberal communists actually believe they are doing "gods work". Their god is the environmental movement and many other "replacement religions"

Nobody has to be vile: The Philanthropic Enemy
http://www.lrb.co.uk/v28/n07/slavoj-zizek/nobody-has-to-be-vile

"Etienne Balibar, in La Crainte des masses (1997), distinguishes the two opposite but complementary modes of excessive violence in today’s capitalism: the objective (structural) violence that is inherent in the social conditions of global capitalism (the automatic creation of excluded and dispensable individuals, from the homeless to the unemployed), and the subjective violence of newly emerging ethnic and/or religious (in short: racist) fundamentalisms. They may fight subjective violence, but liberal communists are the agents of the structural violence that creates the conditions for explosions of subjective violence. The same Soros who gives millions to fund education has ruined the lives of thousands thanks to his financial speculations and in doing so created the conditions for the rise of the intolerance he denounces."

 

Thus Soros encourages globalism as the solution....to a problem he is creating himself.

Hugh_Jorgan's picture

Just make sure everyone recognizes that the government will never allow private citizens to redeem Gold or Silver at those prices. So if you have plans of paying off debt with your PM (especially Gold) you had better pick a place to unload it well before things go completely berserk. The physical market will separate from the paper ETF price peg at some point, I think this might be a good time to start thinking about cashing out your tidy profit. The big banks lose some ability to control of PM prices when that happens, so nearly anything could happen with the legal aspects of Gold ownership after that.

SilverRhino's picture

Just make sure everyone recognizes that the government will never allow private citizens to redeem Gold or Silver at those prices

If the government wont allow redemption another competing mob(government) will.  It's a matter of finding the proper buyer at the right time.

 

 

LawsofPhysics's picture

There you go.  Same for any assets at any given time really.

Heyoka Bianco's picture

So sorry to piss on your trite cliche, but raw power is ten tenths of the law. If you don't have the strength to hold it, current "possession" of anything means exactly dick.

That we learned the Golden Rule

What you can't buy you gotta steal

What you can't steal you better leave

TruthInSunshine's picture

Ludwig Von Mises > John Maynard Keynes

Sovereignty > NWO

Thomas Jefferson > Franklin '4 Term Packed - The SCOTUS' Roosevelt

Constitutional Government > Arbitrary & Transitory Passion of Legislators

Gold/Oil (or anything finite w/ value) > Infinite Fed Reserve Notes/Euros (aka ass wipes)

Tebow > The Bernank

NotApplicable's picture

Oh sure, everybody loves Tebow now...

Tsar Pointless's picture

...with the exception of us godless queers.

Two Towers AU AG's picture

Posting after a break of about 2 months.. tell me if I have missed anything since Oct.

Europe's last known position in Oct 2011 - Twas a Hobson's choice.. Europe print's and suffers hyperinflation or does not print and collapses into a depression spiral both the choice impact the global economy..

The situation of the DEF chairman- Our balls are pinned to the wall and Merkozy hold the hammer.. ouch the wait for the blow hurts more than the blow..

HAS ANYTHING CHANGED SINCE I LAST POSTED ON ZH.. :) :)

TYLER DURDEN FOR PRESIDENT.

TYLER DURDEN FOR PRESIDENT.

 

digitlman's picture

Dooooooooooooooooooo!

 

Raaaaaaaaaaaaaaaaaaaaay!

 

Egooooooooooooooon!!!

Hugh_Jorgan's picture

I'm guessing the detractors aren't quite getting this joke...

LawsofPhysics's picture

Well then, I guess I will go long security services to protect any remaining wealth.  Bring it!

Chris Jusset's picture

"The world is in a total mess and there is absolutely no solution to this unprecedented crisis."

 

IOW, we're doomed.

deepsouthdoug's picture

The world is in a total mess and there is absolutely no solution to this unprecedented crisis."

Tell us something we don't know.

NotApplicable's picture

Nah, there's a solution: WWIII.

You're only doomed if you're in the wrong place at the wrong time.

Got Shovel?

HardlyZero's picture

upside: plenty of shovel-ready jobs.

tarsubil's picture

Nah. IOW, buckle up (Au, Ag, and Pb), it is going to be a bumpy ride!

bigdumbnugly's picture

strange.

it appeared to me someone already has dropped a deus on the economy.

Piranhanoia's picture

soon enough the newly poor will be pissed at that god thing for not helping them and start shooting shit into the sky at it.

Do take cover, as they forget it must come down if gravity wins out over the god thing.

GOSPLAN HERO's picture

"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States." -- Sen. Barry Goldwater (Rep. AZ)

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford

 

 

NotApplicable's picture

"I'll take endless horror for $100T, Alex."

NotApplicable's picture

Hey, what's with the all caps on the Mises quote?

Are you trying to make him look like a madman? ;-)

GeneMarchbanks's picture

'In order to preserve wealth and keep capital intact, it is critical to keep a major part of investment assets in precious metals held outside the banking system.'

Still? That banking system needs a reset.

valley chick's picture

can they kick the can till Christmas?

valley chick's picture

damn...get a down arrow for asking a question.  Sorry I am new.

Calmyourself's picture

You could simply say hi and someone will kick you.. Get used to it, it's fight club, welcome.

GOSPLAN HERO's picture

"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it." -- Congressman Louis T. McFadden in 1932 (Rep. Pa)

Atomizer's picture

60 Minutes Flashback:

 

Pelley: Can you act quickly enough to prevent inflation from getting out of control?

Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.

Pelley: You have what degree of confidence in your ability to control this?

Bernanke: One hundred percent.

Bernanke: One myth that’s out there is that what we’re doing is printing money. We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way.

Debt-Is-Not-Money's picture

"Bernanke: One myth that’s out there is that what we’re doing is printing money. We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way."

Bernanke is right!

They are not printing money, the're printing DEBT! Debt and money are opposites.

The currency supply is not changing because the people aren't borrowing and the banks are't lending.

re: the M1 Multiplier- http://research.stlouisfed.org/fred2/series/MULT

 

TruthInSunshine's picture

I honestly don't know if you're being serious or not, but debt & money are precisely the same thing when you live within a fractional reserve banking economy, use fiat that is literally conjured from thin air and has zero inherent value (it has a value based on very complex psychological gaming, the success of which is highly variable, and can often be very transitory), and for each and every digitized unit of "money" conjured from thin air, said unit of "money" appears instantaneously as a "debt" on some balance sheet, somewhere.

Debt-Is-Not-Money's picture

Perhaps it's time to define terms.

Many use words like "money", "debt", "fiat", "liquidity"," intrinsic value", "fractional reserve banking", "store of value", etc. without ever providing definitions (kind of like the IRS circular references to define "income").

Money and Debt are the basis of all the others so we should begin with them:

The difference is simple- Debt is borrowed into circulation at interest.
Money is placed (spent) into circulation without interest owed.
So, the two are easily defined by one word- interest!
Both can be used as purchasing media.
Debt can only be retired through either a bankkruptcy or by paying it off with money. When either happens it is removed from circulation (x10 as the negative effect of fractional reserve banking takes over).
All of our currency (dollars) are borrowed into circulation at interest and therefore all of our dollars are debt.
Our coin (even though they are counterfeit made to look like silver but are not) are money as they are spent into circulation with no interest owed.

This was not always the case. When I was young, Federal Reserve Notes (FRN's, green seal), U.S. Treasury Notes (red seal), Silver Certificates and coin circulated together. FRN's were (are) debt, U.S. Notes and Silver Certificates were money. I don't recall anyone making the distinction even back then. All we now have for currency is FRN debt.

U.S. Treasury Notes (red seal) and Silver Certificates (both money) were removed from circulation many years ago, but our coin remains- the last reminder of real money- and an ever present danger (to the banksters) of their debt based currency- which they must get rid of it before we notice.

JR's picture

“It is the economic equivalent of a 90% tax on savers...equal to more than half of all individual income taxes…nearly three times as large as total corporate income taxes.”

This is the financial analysis of Dan Amerman in his stunning report on Bernanke's Great Savers Robbery that finances Bloomberg’s touted recovery.  Excerpts :

“There is a hidden and deeply unfair ‘tax’ that is costing US savers in excess of $500 billion per year.  Through forcing interest rates far below the rate of inflation, the government has effectively created a tax on savings that not only takes all real interest income, but quite deliberately confiscates wealth from tens of millions of savers every year - for the direct benefit of the government.

“As will be demonstrated with step by step, simple illustrations, the government is imposing the economic equivalent of a 90% income tax on savers.  The amount taken annually from savers is equal to more than half of all individual income taxes, and is nearly three times as large as total corporate income taxes.

The tax is not uniformly imposed, but instead targets older middle class savers in particular.  The effects include invalidating decades of financial planning, and potentially impoverishing millions of current and future retirees

But what people don't realize is that this steady impoverishment is entirely deliberate and that the federal government is the direct beneficiary.  The nation's citizens don't realize that they are being taxed, because no one calls it a tax or overtly passes a law imposing tax. -- The Governments Hidden $500 Billion Inflation Tax on Savings

http://www.marketoracle.co.uk/Article31937.html

trav7777's picture

what the fuck economy do you think is out there that can pay this coupon you think you're entitled to??

Are you people with your magic unicorn 5% rates insane?

News flash:  for YOU to get your entitled 5%, the BANK has to earn 6% somewhere else.

GCT's picture

You know Trav your one caustic ass at times.  But you are correct.

JR's picture

But, my boy, you are a socialist, hardly a friend of the saver or the truth. And to think you think the financial sector is not earning its "6% somewhere else." Both Keynes and Lenin said inflation can “destroy the Capitalist System” - the system they wanted destroyed and replaced by a government-controlled social system. As Clarence Carson, Ph.D., said in Basic Economics p.101—“There are many losers in this gain; those who have saved for old age may find their life savings wiped out, and so on.”

The problems we face today exist because the people who work for a living are outnumbered by those who vote for a living, i.e., the socialists.

When there's no safety left at any price, then even the socialists, YOU, will starve.