Papering over Paying the Piper

March 29th, 2012 → 9:06 pm @ // No Comments

Posted by SilverBombSquad

Monetizing the National Debt by rendering it insignificant through inflation.

America can never pay back its debt.

Unimaginable trillions of Dollars have been loaned into existence, created out of thin air to prop up the banks and the economy.  America’s national debt currently stands at 100% or more of GDP, with roughly half of that debt held by foreigners.  The days of exporting debt are over, now it’s time to default on it…one way or another.

Perhaps Vice-president Dick Cheney was right when he said that deficits don’t matter.  In a world where, at least for the moment, the debtor can literally print its own money, maybe it just really doesn’t matter…or does it.  The public, the corporate lap-dog media, even the complicit spenders in Washington all harrumph in agreement that that the National Debt is a terrible burden to place on our children, or if not ours, then some future generation of children.  In essence, they all agree that the debt is to be passed on to successor generations of children who will inherit the debt burden and grow up to shoulder their portion of the load as taxpayers.

Let this be the official formal invitation for everyone who still believes that the debt problem can be kicked further down the road to WAKE UP TO THE DEBT IMPLOSION AND FACE REALITY.  The comeuppance is now, not upon future generations, but upon this one.

In the very near future, the severe consequences of building the American empire on a bubble of debt may end all discussion of anything but daily necessity.  Those consequences are already past the point of just beginning to show.”The economy is in shambles,” is a phrase often heard these days, but it is in reality far worse than that.  If it were only that the economy was broken, it could be fixed.  It might have been if America still had an economy.  America’s economy has been gone for a while.  Globalization treaties and unfair regulation of domestic-based private enterprise have drawn the bulk of US manufacturing away to more cost-effective off-shore locales.  Much of the “smart money” has already left town as many of those who see the handwriting on the wall and had the wherewithal to do so have left the US, following opportunity elsewhere around the globe.

The US, as the world’s largest market, is now primarily a consumer society which has been enabled to buy the world’s goods and services based more and more on cheap Fed-driven consumer credit, and Fed-financed debit systems of outright dependency programs like welfare, food stamps, and even Social Security.  The sheer numbers of government-supported unfortunates who have already been devastated and forced to seek aid, such as the nearly 50 million households now receiving food stamps, is stark evidence that the financial collapse is fully in progress.

Precisely because the economy is on life-support, the Unemployment figures continue to soar.  Without the sleight-of-hand parlor trick of just not counting the unemployed, the real unemployment figures are much higher than the “official” reports, with some estimates as high as 25%.

The bleak outlook for the US economy has led some to quit trying to make anything happen for themselves and become the burden of others.  Most egregious are the cases of “players” of the system, such as welfare baby-mamas, who see more children as a way to increase their monthly food stamps and government “paycheck,” and fraudulent SSDI “mental” disability recipients, who in reality are often no more than substance dependent addicts or alcoholics who have learned that to claim mental illness is the fastest way to get a regular “disability” check.  Walmart, for example, is full of stuff fresh off the fleets of freighters, primarily from China, that government-dole-dependent “Nut Check” recipients buy with their SSDI money on a monthly basis.  Walmart stores are awash with government check moneyed shoppers around the first of every month.

There are many more signs that the crisis is well underway, such as in the still critically ill real estate market.  Real estate values have continued to plummet despite “Fannie Mae” and “Freddie Mac,” the bailed-out mortgage issuing branches of the government offering record low interest rates for fixed long-term mortgages.  The greatest percentage of mortgages is supplied by these two government agencies.  In conjunction with commercial banks and aggregate mortgage lenders the government bundled these low-cost loans as investments and sold the “toxic” mortgage paper as complex securities to retirement hedge funds and investment managers.  Millions of American savers, especially those who were expecting to retire on their mortgage-backed securities invested pensions got wiped out.

More home foreclosures are on the horizon as multitudes of buyers who found enticingly easy financing for homes, which they either never could, or can no longer afford, go underwater.  No matter how cheaply they bought, millions of homeowners will be foreclosed on in the next few years. This cycle can clearly be seen to have begun with the crash of 2008.

Drastically falling real estate prices, combined with foreclosure-caused loss of property tax, and unemployment, underemployment, or financial calamity, leading to inability to pay property taxes, have all combined.  The effect has been to strangle property tax base supported municipalities and cause county or even state governments to be stretched to the breaking point.  State and Local government which receive from the federal government financial emergency funding will only be adding to the National debt

The Too Big To Fail Banks which created the entire debacle, spinning up new instruments of fractional lending fraud, all got bailed out to the tune of $16.1 trillion.  That is, as long as they were playing for the team, which may not have been the case, for example, with un-bailed out Lehman Brothers which, it appears, was no longer invited to the party.

For those banks and companies around the world that were invited, the Fed printing presses went into overdrive.  It obviously wasn’t enough money though, because the need to repeat the process has been disclosed. At first it was what was just called Quantitative Easing or, simply QE.  That was before it was fully revealed that subsequent rounds of QE would require enumeration to distinguish them. Now we have had QE 2 and what some have called QE “Lite”, wherein the central bank theoretically reinvested the proceeds of its maturing holdings of mortgage-backed securities by pumping the funds into Treasury bonds, and all the while, we await the inevitable bonus round of money-printing of QE3.

QE3 has actually already begun, but it is not being called QE3.  The January 2012 report from the Fed describes its goal to devalue the dollar by 33% over the next 20 years. Direct devaluation, even at a slow pace of 1.5% to 2% per year, has the same effect as flooding the monetary supply, and thereby inflating the currency.  Added to this is the increasing clamor from Banks for negative yield debt instruments, and for liquidity-providing Fixed Rate Notes.  It has become a politics-as-usual shell game to hide the truth that there are only two options.

The first option is for the triumvirate of the Federal Reserve, the US Treasury, and the mega-banks to do nothing.  If this course is followed, the liquidity crisis will continue to build to the point of revealing national insolvency.  The central banks will systematically begin to fold en masse, at which point the world economy degenerates into a deflationary depression.

The second and only real option is to keep printing in one form or another all the way up to the point of hyper-inflationary boil-over.  Again, this can take the form of actually printing the cash for Bernanke’s helicopter-drop economy, or forced through devaluation of the Dollar, or in the creation of new Treasury products such as negative yield bonds which would force bond purchasers to actually have to pay in order to put their money into Treasury “securities.”

While we have witnessed stunning denials from Fed Official that sustained rounds of monetization would be implemented, we  have the equally stunning demands from the banker controlled Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association also known by some as the Big Banking Super-committee That Runs The Whole World which released a letter intended to direct the Secretary of the Treasury calling for the issuance of distracting, but nevertheless equally inflationary negative yield T-bills.

They cycle has been clearly demonstrated. When merely paying the interest, or the “service” of the debt, is more than the combined individual income tax revenues of all US taxpayers, and the size of the debt is beyond the liberal limits already allowed by law, then the presses are fired up again and more money is “created” to borrow from in order to pay off the interest on what has already been borrowed.  The bank cartel mouthpieces will again threaten financial ground zero if the debt ceiling is not raised…again.  Lawmakers already afraid of getting plastered by the shut-down-the-government tar brush will gladly vote to hike the debt ceiling up to the stratosphere if need be…or even higher… if need be.

The U.S. Congress and the Federal Reserve along with all western central banks and governments appear to be un-deterred by the fact that a debt crisis cannot be solved with borrowing, bailouts and currency creation.  Like trying to keep a home heated with only an open gasoline fire, the more you feed the flames, the bigger the risk of conflagration becomes.  With only an “accelerant”, which is useful only to get the real coals burning, but no long term plan for fuel, the risk is in burning down the house before anyone gets warm.  The problem is not a liquidity crisis, the problem is a solvency crisis.

The next domino is the steady devaluation of the paper-backed paper through inflation invoked by the hyperbolic cash injections.

The net result is of course the clandestine default on the debt through debasement. Add to this the aggravating factors of announcements of plans for protracted currency devaluation, and the TBTF banker-demanded issuance of negative-yield Treasury debt instruments, and what results is the recipe for a hidden default accomplished with neither any visible fireworks nor audible pyrotechnical blast.

It could be like a lighter-than-air, noble gas-filled birthday balloon preserved for too long as a keepsake of a good time had by all.  The balloon slowly sinks, until one day it is found to be drooping under its own weight, and following a painfully slow fizzle, finally losing its turgidity.

On the other hand, the default could yet be devastating, like the instantaneous destruction of a pin popping a balloon. This is especially true if it becomes evident that the Dollar is worth more dead, than alive.  A series of runs against the Dollar by US debt holders hoping to recoup at least part of their losses may trigger a slew of Credit Default Swap events, as the temptation may become irresistible to just burn down the house and collect the insurance.

Myriad “experts” have made fear-placating and nervousness-abating statements touting economic recovery.  Based upon cheery employment figures (which are really fictitious, manipulated figures), and the Housing Statistics (which do not represent unseasonal weather affects, or take into account glut of un-bought, government owned REO or Real Estate Owned properties), and the deceptively un-eventful Euro-scene (if the fact that Athens is undergoing a “stealth” default is ignored), the pundits proclaim that the crisis was all just a harmless nightmare.  They give soothing assurances that it is safe to go back to sleep and let the scary images fade into the memory hole.  They coddle any doubts with firm guarantees about the “full faith and credit” that has it all backed up.

In absence of a catastrophic event, the monetization will continue and all debt may be technically repaid, and it will prove catastrophic for the US Dollar in its position as the world’s leading reserve currency..  All investors (foreign governments included) who have loaned to the US will be paid off, but with Dollars that are so depreciated that being repaid is the financial equivalent of being on the receiving end of a Bronx cheer.

In the twisted world of intertwined economies and centralized international banking, what the lender calls debt is understood by the borrower as money. The default of a borrower creates a cascade effect as the loaned funds were likewise created through borrowing, until the default rises to the top of the debt pile where it is off-loaded onto the backs of the taxpayers.  The central banks and the sphere of corporations that thrive around them enjoy private gain until it ultimately leads to public debt.

The monetary system as we know it is in the end stage of a terminal disease and its days are numbered.  The great cascade default on impossible-to-repay national debts has already begun, and has triggered payment of credit default swaps as financially interdependent nations are unable even to service the interest payments of their sovereign debt.  The increase of the respective money supplies by the western central banks will finally cease as a point of diminished returns is reached and no amount of added “loans” as denominated in the sputtering paper fiat currencies will be of any further value.

The game has changed. There are new players to contend with. The western empire is in the slow-motion process of losing control of the ball, and upcoming matches will be played on the other team’s playing field.


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