How Much Longer Can We Get Away With It?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Alas, fakery isn't actually a solution to fiscal/financial crisis...

This chart of "debt securities and loans"--i.e. total debt in the U.S. economy--is also a chart of the creation and distribution of new money, as the issuance of new debt is the mechanism in our financial system for creating (or "emitting" in economic jargon) new currency: when a bank issues a new home mortgage, for example, the loan amount is new currency created out of the magical air of fractional reserve banking.

Central banks also create new currency at will, and emitting newly created money is how they've bought $21 trillion in assets such as bonds, mortgages and stocks since 2009. Is there an easier way to push asset valuations higher than creating "money" out of thin air and using it to buy assets, regardless of the price? If there is an easier way, I haven't heard of it.

Which brings us to the question: how much longer can we get away with this travesty of a mockery of a sham? How much longer can we get away with creating "money" by issuing new debt/liabilities to grease the consumption of more goods and services and the purchases of epic bubble-valuation assets?

Since humans are still using Wetware 1.0 (a.k.a. human nature), we can constructively refer to the Roman Empire's experience with creating "money" with no intrinsic value. The reason why the Roman Empire (Western and Eastern) attracts such attention is 1) we have a fair amount of documentation for the period, something we don't have for other successful empires such as the Incas, and 2) we're fascinated by the decline and collapse of the Western Empire, a structure so vast and successful that collapse seemed impossible just a few decades before the final unraveling.

One of the books I'm currently enjoying is The Fate of Rome: Climate, Disease, and the End of an Empire, a new exploration of the impact of climate change and pandemics on the Roman Empire's final few centuries.

The key takeaway is that climate change undermined the production of grain while the arrival of previously unknown diseases via trade routes stretching from Rome to China, India and the interior of Africa decimated the productive populace. Add in the rise of well-organized "barbarians" and the political instability born of a self-serving, ossified elite and voila, you have an excellent recipe for crisis.

Crises tend to reduce tax collections and increase government/Imperial costs, and this creates a fiscal/financial crisis. The Romans didn't have a fiat currency that a central bank could create out of thin air, so they did the next best thing which was to replace their mostly-silver coinage with new base-metal coinage that had been washed in silver. That is, they debased/devalued their money, replacing coinage with an intrinsic value of silver with coinage with little to no intrinsic value.

They got away with this debasement/ devaluation for quite a few years, and so naturally they reckoned they could get away with it forever. But alas, debauching the currency is not a permanent solution to insolvency; it is a one-time trick that fools the market and populace for a time but soon enough people catch on and bad money drives out good money (Gresham's law) as people hoarded the old silver coins and tried to trade the worthless new coins for anything but more worthless "money."

In the present, we see this process at work in Venezuela, where the government has debauched the nation's currency, the bolivar, to the point that inflation (i.e. loss of purchasing power) is running around 7,000% annually.

So how long can we get away with creating "money" out of thin air and using it to pump up asset prices? The Roman leaders who in desperation debased the Empire's currency/coinage must have been chortling at the fast one they pulled on the Empire's merchants, markets, farmers and soldiers, and we must forgive their avid willingness to believe that they could get away with it essentially forever.

Alas, fakery isn't actually a solution to fiscal/financial crisis. At this moment in time, our "leadership" is basking in the hubris-soaked confidence that we can get away with it if not forever then for decades to come: we can borrow currency into existence in as many trillions as we desire, and inflation will remain dormant, consumption will remain robust and everyone will accept the debauched currency as having value.

Until they don't. This is typically a sudden and unexpected event, as this chart of the exchange rate of the bolivar to the US dollar shows: the slide from 10 bolivars to the USD to 25 bolivars to one USD was gradual, but the implosion to 200,000 bolivars to the USD was frighteningly rapid.

No doubt the Romans said, "it can't happen here"--but they were wrong.

*  *  *

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Comments

Labworks Fri, 03/16/2018 - 16:31 Permalink

Everything fake everything a fraud. Everything rigged everything staged. Everything a plan, everything a show everything preplanned. The god damn world is a lie, the psychopaths are printing money out of nothing and they want to control the god damn world.

commoncourtesy Labworks Sat, 03/17/2018 - 11:10 Permalink

 

THEIR game, THEIR rules (Statutory Acts, legislation, etc...).

The trick is to not play THEIR game.

Most governments and banks are private corporations.   

I really want to unlicense my property (my name, my body, my marriage, my child, my car, my home, my dog, my TV, my energy etc...) and lawfully lead a quiet life outside of THEIR system.

This is really difficult when they purposely obfuscate the remedy and unlawfully threaten your very existence.

The Bank of England says it is Nationalized. Technically that is correct, however in 1977, the Bank set up a wholly owned subsidiary called Bank of England Nominees Limited, (BOEN), a private limited company, with 2 of its 100 £1 shares issued. According to its Memorandum & Articles of Association, its objectives are:- “To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them….” Bank of England Nominees Limited was granted an exemption by Edmund Dell, Secretary of State for Trade, from the disclosure requirements under Section 27(9) of the Companies Act 1976 , because, “it was considered undesirable that the disclosure requirements should apply to certain categories of shareholders.” The Bank of England is also protected by its Royal Charter status, and the Official Secrets Act.

There are currently many groups in America who have lawfully ditched their USA CITIZENSHIP and become American nationals. They have also changed their status to secured creditors. I am struggling to find the same in the UK.

In reply to by Labworks

redd Fri, 03/16/2018 - 16:31 Permalink

coming from a country

where the people are 'allowed'
to possess single-shot flint-lock muzzle loaders from the 1700's

while the rulers
get the people to buy them laser guns, killer robots, attack drones, nukes, tanks, fully automatic machine guns

 

all while feeding them a daily dose of poison to there souls

Nothing Fri, 03/16/2018 - 16:33 Permalink

In my day, every high school kid knew this stuff and they knew how to write more interesting and inductive prose than this.  You have the temerity to expect to get paid for this?  Oh well, its fake money anyway, huh ....

Posa Fri, 03/16/2018 - 16:38 Permalink

As long as the physical assets of production and the labor supply is intact, we'll survive just fine. The financial facade can simply be written down and scrapped and we start over with a new dollar issuance based on real production... it's not the end of the world... it's the end of the Ponzi-scheme fiat dollar regime.

 

Unless , of course, the Predator Class goes berserk and starts a nuclear war to end it all for all of us.

ted41776 Fri, 03/16/2018 - 16:47 Permalink

let's just pretend that it's working, that's what all previous generations have done for decades. the only alternative is war, and that's no fun. so let's sing and dance because everything is awesome

serotonindumptruck ted41776 Fri, 03/16/2018 - 17:26 Permalink

Yes, but not just an average run-of-the-mill war.

Global thermonuclear war, along with the likely meltdown of the 447+ nuclear power plants located around the world.

After a year or two, the elite can emerge from their fallout bunkers and begin trading in irradiated seashells.

Strontium 89 will be worth more than Strontium 90, and Cesium 137 will be the new gold standard.

In reply to by ted41776

GRDguy Fri, 03/16/2018 - 17:29 Permalink

Financial sociopaths today just lie in order to steal so that they can make a killing without going to jail.  How's your defense against them? That's all that really matters. They've always existed.

Ink Pusher Fri, 03/16/2018 - 18:14 Permalink

'No doubt the Romans said, "it can't happen here"--but they were wrong.'

Who could imagine
That they would freak out in Washington, D.C.
D.C. D.C. D.C. D.C. D.C.
It can't happen here
Ba ba ba ba ba ba ba ba
It can't happen here
It can't happen here
Everybody's safe and it can't happen here
No freaks for us
It can't happen here
Everybody's clean and it can't happen here
No, no, it won't happen here
I'm telling you it can't
It won't happen here...

~Frank Zappa 

It Can't Happen Here / Freak Out -1966
 

DuneCreature Fri, 03/16/2018 - 19:07 Permalink

How much longer are WE going to let (((Them))) get away with playing us?

(?)}|~~~)))  Death Pool Betting - Are The Illuminati Playing A Big Game With Our Lives, Fortunes And Fates?  (((~~~|{(?)

Too Woo Woo for ya?

Too 'out there' for you ZeroHedgers?

Well, predicting the future is what investment is all about, isn't it?

What if our Globalist buddies and swell bankster pals had a way to make the future play out anyway they wanted it to.

What if there was a super powerful computer system controlling everything that happened all over the world? .... If you had a tap to its output on your own personal computer terminal the first thing you would be is rich. Wealthy. .... Filthy fucking, so much you don't have any idea of your own net worth, rotten, stinking, fabulously, capital R - Rich. .... ((((THAT RICH))))!

Planet owning rich.

So now that you and a tight group of terminal owning friends and cohorts have that little detail sewn up what tickles your fancy(s)?

Shall we play a game?

What If? .. What The Fuck? ... Hell, Why Not? ... And I do mean HELL.

Call me too broke and or crazy to even pay attention anymore but I can't argue with what these guys are proposing. ... AND I can see a bunch of super rich fucks using us all for target practice. .... Hell, I've just finished a series of posts that outline how the US government via the FBI, CIA, and the DHS are using American citizens as clay pigeons and our kids as pawns (and maybe sitting ducks) to strip our means of self-defense out from under us. .... I know the 'assholes in charge that be' are raining chemicals and very unhealthy heavy metals all over us daily

It certainly looks like the doctors and Big Pharma a pumping the kids full of Vaxxes of very dubious utility at best and autistic causing agents at worst.

Our asshole leaders, EVERY LAST FUCKING ONE OF THEM, ignore the US Constitution, lie, cheat, steal and blow off any of our many objections.

Sooooooo, yes, I can see a bunch of evil greedy assholes playing the game of hunting humans and perhaps killing thousands of people for chuckles, shits and grins. .. Wagering on death and destruction.

Not only THAT but I'm pretty sure these same assholes drink fresh rich red human baby blood at every dinner party they throw for each other.

I have seen a LOT of evidence that this computer system does exist and on ZeroHedge here in the comments I've been calling it AI AL.

Never play a game with or bet against a super computer.

Well, there you have it. ... Lots of speculation, circumstantial evidence, connecting the dots and wild, pull it out of my ass, guesses on my part. .......... But I wager I and the gentlemen in the above video are on the mark or damn close to it. .. The evil fucks are playing a game with our collective fates using an all seeing super computer to set the rules and keep score. ..... The assholes.

Like I have said many times in the past; I call it attempted murder.

Live Hard, Find An AI AL Level One Terminal And You Have Found One Super Uber Rich Baby-Eating Evil Game Playing Asswipe, Die Free

~ DC v8.8

InnVestuhrr Fri, 03/16/2018 - 21:26 Permalink

"How much longer can we get away with creating money by issuing new debt/liabilities ?"

Many more decades.

It depends on what happens to USA regime from outside and inside as triggering events to destabilize the economy, similar to what happened to Romans.

Let it Go Sat, 03/17/2018 - 06:43 Permalink

A rising deficit that has yet to yield dire consequences has given the American people a false sense of security. It is also clear that running up debt is far easier than paying it off. As things stand America continues to rack up a deficit each year of nearly $2,500 for every man woman and child in the country, such deficits were unheard of in the past unless it was during a major war.

The fact is with the artificially low-interest rates of today many people seem to have little desire to cut spending. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy to wildly run up debt as if there is no tomorrow. More on this topic, and some ugly numbers, in the article below.

 http://Is The Growing National Debt No Longer.A Major Issue? html

everything1 Sun, 03/18/2018 - 17:01 Permalink

Longer than we think, and with negative interest rates right around the corner, then we just keep on going.

Debt doesn't matter anymore, servicing debt does.