A Whole New Ballgame

From SGTReport:

by Stefan B.
The very nature of currency changed in 1971. Before 1971, currency was backed by gold. Sure, the bankers were liars with a printing press gone mad, but someone, somewhere, could trade those dollars for gold. Those dollars were a receipt for gold. A warehouse slip, for gold. It makes perfect sense (to even a complete idiot) that you would not want to borrow (and spend) a lot of currency, if that currency were a receipt for gold. No sane person would ever borrow a lot of gold from somebody, and spend it foolishly, knowing that it would have to be re-earned, and paid back to the lender. However, since 1971, the currency has not been a receipt for gold. The currency has been only a receipt for debt issued by the treasury. Still, in the face of this reality, some people refuse to understand that since our currency is debt, and not gold, and it has been this way since 1971, that the only way to create new currency is to endlessly issue more and more debt. If this sounds like a ponzi scheme, that is because it is one.
I know that it is enough to make a sane person go cross-eyed, but you need to accept this basic reality if you are going to demand that the government treasury stop issuing new debt.
If there were less debt, there would be less currency. This is, by definition, deflation. Taken to its logical extreme, if there were no debt, there would be no currency.
Ben Bernanke is nick-named “Helicopter Ben” because he famously said that he would drop currency from helicopters before he allowed the economy to go into deflation.
Now, the best measure of a country’s economy is to look at that country’s gross domestic product (GDP).
Deflation is what happened in America during the Great Depression, from 1929 to 1933. However, during that part of the Great Depression, the currency was still a receipt for gold. Rather than the currency losing purchasing power, the economy (GDP) shrank. On the Debt-to-GDP chart below, you see an orange block representing the great depression. That “spike” at the very beginning of the orange block (1929 – 1933) is the economy (GDP) shrinking, while the federal debt level remained constant.
Deflation.
This time around, the currency is not a receipt for gold. The currency is a receipt for debt, and so deflation can actually destroy the currency.
Why?
Because, when currency is debt, a severe deflation, combined with massive federal debts, causes the GDP of a nation to shrink to a point where there is no possible mathematical way for the nation to meet its debt obligations. Indeed, the currency to pay it back does not even exist (this is all a massive ponzi scheme, remember?).
In simple terms, as the economy (GDP) deflates, the national debt does not shrink with it. The American government owes over $14 trillion dollars, and a lot of that debt is owed to foreigners, specifically China.
How exactly do you pay back more currency than was ever printed in the first place?
How is America going to repay $14 trillion if we experience deflation, and America’s GDP contracts to $5 trillion? Do you suppose that having a Debt-to-GDP of nearly 300% might just be a problem? The government’s own numbers predict this exact outcome. Just look at the chart.
So I ask you, what is a receipt for debt (again, it is not a receipt for gold anymore, but only a receipt for debt) actually worth, if the people who issued the receipt can not repay their debts? It is a fairly simple question. I would imagine that the receipt is worth exactly the paper it is written on.
Right now, America’s GDP and America’s debt are more or less equal (i.e. a roughly 100% Debt-to-GDP ratio). However, if you believe that our “economic recovery” is more baloney sandwich than steak dinner, then you already understand that our economy is doing poorly right now, and that our GDP is shrinking. We have a choice to make:
1. Take on more debt, create more currency, grow the GDP, and cause a hyperinflation by issuing QE_3 through QE_23, causing panic runs on the dollar.
or 2. Allow the economy to collapse into deflation, default on the debt, and watch the world economy completely disintegrate into defaults, stacked on top of law suits, stacked on top of panic bank runs, and ending in a panic run on the dollar.
This is how ponzi schemes end. Badly. Both options will be a disaster, but it is only in the second option that causes everyone with a mortgage to lose their home to foreclosure.
Now, there is also this other serious ethical problem here. Why is America’s GDP so big? When an American defense contractor creates a fancy $2 million satellite-guided missile, and the pentagon uses the fancy $2 million satellite-guided missile to blow an Afghan wedding party to smithereens, that action directly contributes $2 million to America’s GDP. The treasury issues the debt, and the Federal Reserve buys it, the government hands the freshly printed currency to Lockheed-Martin, GE, or some other defense contractor, and that contractor supplies the fancy $2 million satellite-guided missile to the pentagon. The pentagon tells the air-force to look for a large wedding party to bomb, and BAM-O! The GDP has grown by $2 million, and then we repeat the whole process in Iraq and Libya.
Why a wedding party? Well, simple, this kind of thing really pisses people off; not just brown people, either… I Imagine that anyone would feel pissed off if someone had bombed their wedding. The more pissed off they get, the more militant they become. The more militant they become, the more we can justify the need to borrow (print) the currency, to create the bombs, and blow up more wedding parties. As long as your GDP continues to grow, there will always be an excuse to borrow more currency into existence, and use it to manufacture more bombs, to blow up more wedding parties.
If you think about it, it is really something of a perpetual motion death machine. How do you think America got such a large military, and such a large debt, relative to every other nation on earth?
Ask youself what would happen to the American GDP if the American military came home today. In a fiat currency debt ponzi scheme, peace is not an option, economically speaking. It is bad for GDP. This is the world that you live in. America has the world’s largest GDP because America has the Pentagon, and an army private defense contractors willing to manufacture fancy $2 million satellite-guided missiles.
So if all this debt is being issued exclusively to run a vast world-wide military empire, the next obvious question is why does anyone want to buy American debt? Why do other countries agree to fund this nonsense?
First are foremost, if you are the leader of a foreign nation, and you do not do what you are supposed to do, you will likely die in a plane crash, and your replacement will do whatever it is that you would not agree to do.
Secondly, anyone wishing to purchase oil on the international market from OPEC, must do so in U.S. dollars. The Saudi Arabian royal family is a proverbial sack full of tyrannical shit-bags. So, after ending the gold standard in 1971, America made a deal with Saudi Arabia, as the largest oil producer in OPEC, and agreed to provide everything necessary to keep Saudi royal heads attached to Saudi royal necks, in exchange for OPEC agreeing to only sell oil in exchange for U.S. dollars. This reality creates an international demand for U.S. dollars, but only for so long as U.S. dollars are required in order to purchase oil from OPEC.
For now, the NWO-backed destabilization in the middle east has not spread to Saudi Arabia, yet. When it does, and the dollar-oil link is destroyed, nobody in the world will have a need for those dollars, or U.S. debt anymore. The rush for the exits will be biblical.
Best Regards,
Stefan B.
We are all in this mess together. ~SGTreport.com

Webster Tarpley

@ 2:28 “…the dollar is now in this constant process of decline. If we have a default — I would warn against this default — the bankruptcy or default of the United States would lead to catastrophe on a world scale, and ultimately to something like [...] The answer to this, there is no answer to this, between deflationary crash, which is even worse, and hyperinflation.”
@ 3:52 “…[it] pushes the system towards hyperinflation, and that seems to be where we’re headed right now. However, there’s now the other thing on the horizon, which is the default, and this is now political. This is a political cabal that wants to institute, in effect, the bankruptcy or default of the United States. Let’s look and see what would happen if the United States defaults. The secret is, that the economic life of this planet depends, to a large degree, on the government of the United States, and on national governments around the world, but it works through a system of private central banks. Privately owned central banks, like the Fed, and “zombie banks.” Bankrupt institutions, hedge fund hyenas, and so on. If you have a default by the US treasury, which has never occurred in world history, that will truly be the end of the world, from a number of points of view, for this system. It will mean, for example, that treasury bills, treasury bonds, treasury notes, will all go down in price. The existing ones go down in price, and the interest rates will go up. That will mean that every central bank in the world, every one of these private central banks will find that its reserves, held in treasury bills, treasury bonds, will be devalued, so every central bank will be in big trouble. Some of them will default. We have to think about the possibility of panic runs. Panic runs on the Bank of England. Panic runs on the Federal Reserve. Panic runs on the Bank for International Settlements, and the International Monetary Fund. Panic run can be any bank, right. If you have, for example, members of the IMF, or the BIS, they put in money, they get shares, they get voting rights. Suppose those entities are going bankrupt, and they turn around and say, “no, we want our money now. Give us our cash, because we’re facing absolute bankruptcy.” The other thing that it will do, is simply to collapse credit markets all around the world. In other words, if you do this though, you better have an alternative system, because what you’re going to wake up to is not the singing tomorrows of a free market paradise. You’re going to wake up to mass chaos, and the threat of depopulation. In other words, hundreds of millions of deaths possible; maybe even more.”

China has DUMPED 97% of U.S. Debt now! ONLY has 5 Billion of Treasury Now!

From Sherriequestioningall, FRIDAY, JUNE 3, 2011:


WOW I just got shocked when I read that China DUMPED 97% of their U.S. debt recently!  They had 210 Billion a year ago and now they only have 5 Billion of T-bills!

I assume the Fed purchased all of their t-bills, since all buyers of U.S. debt have been missing in action, except for the Fed printing the money to buy U.S. debt!

With this information public now, the U.S. dollar basically does not have a chance.  Others will be dropping their T-bills, if they haven't secretly already been doing so. 

If anyone still believes the dollar is king, then they have not been paying attention to all the yelling around the world about finding another reserve currency!  Also all the countries that have been making agreements between each other, to use their own currencies in trade.  I have posted many times in the past about countries dropping the dollar in trade.   The only thing still keeping it in the 70's on the index is the fact, oil is traded in dollars around the world!  But Iran and others have already started making moves to change that.  Why do you think we are in Libya right now?  It is all about oil and money, not people's freedoms!

Portion from article linked:

(CNSNews.com) - China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March. 

Empires Only Fall When They Have to Pay Their Bill

From Revelations.

By Rafe MAIR

When I read this I thought that surely one couldn’t characterize such cataclysmic events with a simple one liner but on reflection one can usually add that the financial catastrophe is ignored by those in charge proving again Mair’s Axiom I – you make a serious mistake assuming that people in charge know what the hell they’re doing.

In aftermath of the World War II, three large empires crashed, the British, the Dutch and the French.

Indonesia, occupied by Japan 1942-5, was the improbable legacy of Dutch explorers of the 16th Century; by 1945 the Netherlands had enough problems restoring their domestic economy. By 1949 Indonesia was free although it wasn’t until 1963 that Indonesian New Guinea became Indonesian.

The British Empire was tottering on the brink of collapse after World War I and when India and Pakistan were freed in 1947, the jewel of the imperial crown vanished. It must be said that the British (mostly but not always) made a virtue of necessity by leaving democracy and the “Rule of Law” behind.

The French were more tenacious and it wasn’t until the Battle of Dien Bien Phuin 1954 that the French realized that the colonials didn’t love them as much as they assumed. Its empire finally came to an end when after much bloodshed, Algeria was gracelessly given its freedom.

The common factors of these three collapses was economical – the colonizing nations could no longer maintain a rule by force. Even Churchill was forced to accept that it was ridiculous that Britain could, with a handful if troops, hold onto a faraway sub-continent.

George Santayana observed “Those who do not remember the past are condemned to repeat it”. He could well have had the collapse of empires in mind for Wilde might have added “and when they do start to fall, they go into a state of denial which substantially prolongs and exacerbates the agony”.

At the end of World War II two empires remained; the Soviet Union, heir to the vast Russian empire, and the United States which, as observed in a moment, invented a new kind of empire.

Ronald Reagan didn’t bring down the Soviet Union, bankruptcy did. When the “wall” came down with a thud in 1989, Soviet premier Mikhail Gorbachev faced the independence declarations of many Soviet “satellites” plus its so-called “autonomous republics”. To try to hold on the communist buffer states behind Churchill’s “Iron Curtain” and the dissident Soviet republics was not feasible – there was no money and an industrial sector that didn’t work. An excellent treatise on the state of the Soviet industry of that day can be found in The New Russians by Hedrick Smith meticulously examined the Soviet “system” conducted from 1988 to 1990. The Soviet didn’t lose its empire because it was not powerful enough militarily – Russia remains the 2nd most powerful country in the world – but because it was stony-assed broke.

The United States sees itself as a peaceful nation that abhors empires. During World War II President Franklin Roosevelt combined with the “chattering classes” deplored the British Empire and made it clear that American GIs were not in harm’s way to retain it. After all, wasn’t America the “arsenal of democracy?” America has “no territorial ambitions” it was piously stated. This hardly conforms to examination. Most of what is now the United States was conquered land from American Indians and 1/3 of Mexico.

But that was long ago – hasn’t the US seen the errors of its ways to become an idealistic democracy with a constitution to match?

Not at all. The Monroe Doctrine of 1821 declared that Europe (including Great Britain) should not become entangled in Latin American affairs and that the United States was prepared to go to war to protect the Western Hemisphere from European incursion.

This principle was honoured observed much more in the breach than in practice and led to invasions (Mexico, the Dominican Republic, Haiti, Cuba, the Philippines and others not to mention Iraq and Panama – twice – Afghanistan and tiny Grenada, never forgetting Viet Nam.)

But times have changed. The United States can invade and stay in the sense of controlling public policy without use of a single soldier. Canada is a good example, the UK perhaps a better one.

Canada, without a single enemy that can attack her, save the US, spends billions of dollars a year to add to American forces where the US requires them whether under the guise of NATO, the Security Council, or just to advance domestic politics.

If one indicia of nationhood is the ability to defend oneself just look at the nations around the world that protect their autonomy by the timely process of asking for and getting the US Navy to sail by. Gunboat diplomacy is alive and well.

As the “Oscar Wilde rule” has hit Washington, the US ability to maintain its empire, as happened in France, the UK and Russia, is rapidly waning – and it’s firmly in denial.

There has arisen a new form of empire based upon Churchill’s stunning speech in Zurich in 1946 calling for close economic ties between ancient foes France and Germany leading to a United States of Europe. (Little remembered is his recommendation that the UK stay out and strengthen English language nations).

Churchill’s motive was clear – Britain had had quite enough of fighting European quarrels going back to Louis XIV and he saw a European financial union as a way to keep European nations from fighting one another and dragging Britain in.

One might weakly say “so far, so good” but in fact the EU has become a huge Ponzi scheme. Many incoming nations have either brought with them, or acquired soon after, weak economies which momentarily prospered with new EU funds but soon needed huge cash bail-outs leaving the few prosperous countries, notably Germany, as reluctant bankers of last resort depending upon expansion to lighten their load.

In 2020 Oscar Wilde (wherever he may be residing and there are differing opinions on that) he will no doubt observe “By 2015 the empires of Britain, France, Russia America, and the European Union were collapsing to become satellites of the Empire of China which has economic bases on every continent and to which the proud old empires are fiscally in thrall”.

Plus ça change, plus c'est la même chose.

Elite European Schools: how the eurocrats' kids get the gravy and you pay for it

From Mail Online - Euroseptic: 

By Mary Ellen Synon in Brussels (my emphasis)

Thanks to ‘JDF’ for taking the time to post a comment – and for asking about the elite European Schools for the sons and daughters of eurocrats, which I mentioned in the previous post about the luxurious lives of the European Commission staff. This will fill you in a bit:
The schools are located in the most fashionable neighbourhoods of Brussels, Frankfurt,       Luxembourg and other cities across the Continent where there are significant numbers of eurocrats, and at Culham in Oxfordshire (which is being wound-down as a European School and turned into an academy).
The schools offer an aggressively ‘European’ education from nursery level through secondary level, meant to produce children who are – and this is their founding mission statement -- ‘in mind Europeans, schooled and ready to complete and consolidate the work of their fathers before them, to bring into being a united and thriving Europe.’
In fact, these superior multi-lingual international schools are producing a caste of taxpayer-funded euro-elite who will grow up with connections and networking skills denied to other children.  The picture above, from the schools' website, is of the European School in the fashionable Brussels suburb of Uccle. Draw your own conclusions.
One ‘old boys’ organisation for the European Schools actually has bragged that its objectives are to ‘create contacts’ and ‘expand a worldwide network’ across Europe and around the world, based on ‘a past history in the European School.’ And, No, your kids can’t join the network – even though your taxes pay for the schools.
The 14 ‘European Schools’ run on a £237m annual budget. These elite multilingual academies were founded in 1953 to give guaranteed free places worth up to £13,000 a year to the sons and daughters of already highly-privileged, low-taxed EU officials.
You will not be surprised to hear that British taxpayers are being forced to spend more than £25m a year in subsidies for these exclusive free schools for the children of the European Union elite.
Selection of the nearly 22,780 pupils is based entirely on their parents’ connections in the EU. Children hoping to go to one of the schools are divided into divisions based on family status.
The most privileged class is called Category I. A child is Category I if one of his parents is on the staff of an EU institution or is a national expert seconded by an EU institution or is an official attached to one of the Permanent Representations to the EU. (These are the national embassies which negotiate in Brussels at European Council level.)
Because all Category I children are guaranteed a place, the four schools in Brussels are already at full capacity and a fifth taxpayer-funded school is being planned to meet the demand. Well over 90 percent of the children at the Brussels European Schools are the Category I sons and daughters of top eurocrats. For local Belgians, entrance to the school is a privilege which their children can never enjoy. Yet the European Commission insists the schools are ‘public’ – in the American sense -- like any other state school in any EU member state, and not private.
Category II children have parents who work for one of the international organisations such as Nato which pay fees to the European Schools. Category III children have parents who have no connection with the EU but are willing to pay up to £13,000 a year to secure a place. Category III children have no hope of admission until demand by higher-category children has been met.
Britain pays a disproportionately high amount of the cost of these exclusive schools, because of the insistence by the schools that only native English-speaking teachers be used to instruct the European children in English language classes. The UK Government must meet the cost of paying 247 British teachers and management staff who have been seconded from British schools, even though they are working abroad and teaching foreign children.
When I talked to Stephen Booth of Open Europe about this some months ago, he said: ‘It is completely unreasonable to expect British taxpayers to foot the bill to educate privately EU officials’ children. Why should the sons and daughters of well-paid EU bureaucrats be granted privileges that the majority of UK taxpayers cannot afford for their own children?’
Nigel Farage, MEP and leader of UKIP said: ‘The schools of highly paid Eurocrats have the very best facilities while the average child in Britain has to do with much less. Our money should not be wasted on the free education and salubrious facilities of well-paid untaxed bureaucrats. The EU is a racket run for the benefit of the pencil-pushers.’
And for the benefit of their sons and daughters -- not your sons and daughters.