Wednesday, July 27, 2011

We Are Busted

“We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.” (NY Times)

This is the new normal

Reenflating the bubble will only guarantee that we go through all this again. The massive use of credit created money out of thin air and pumped up an artificial economy that was sure to come crashing down. We were all irresponsible for spending money we didn’t have, and the bankers were irresponsible for keeping the liquor flowing even after the noisy debauch has swung wildly out of control.

Big banks win, everybody else loses

Follow the money. Everybody is selling something. International banking gets fat on sovereign debt, buying and selling it and making money on the exchange. International banks want governments to be in debt, but not dangerously so, which explains why they are for the US abolishing the debt ceiling, cheering on more government bailouts, and cautioning against austerity. They want to milk the cow, not slaughter it. Every new bailout of Greece or other irresponsible entities safeguards their investments and creates a new moneymaking opportunity for the bankers, at the expense of taxpayers.

What if everybody in the world just stood up and gave the banks a big FU? 

We are struggling to repay money that was never there in the first place. The banks did not literally give these broke nations money from their own personal stash, the banks created it out of thin air, with the help of central banks and their fictional funny money factories.

Of course, the markets shudder at such talk. Here’s the party line solution:
“What is required is a grand bargain on private, corporate and national debt, beginning with a general restructuring of debt. Short-term debt at extortionate interest rates needs to be converted into longer-term maturity with affordable interest payments. Default doesn't pay, as it causes losses to already under-capitalised banks and shuts governments out of international money markets. It also exacerbates the falling value of assets on which investment and consumption depend.” (The National)
No. Debt restructuring safeguards the rent streams for the banks by a long-term bleeding of the borrower, extracting even more interest over a longer period of time.

What’s required is a big reset where the entire world tells the banks to go screw themselves, we’re zeroing the accounts and starting over. Would international banking collapse? Probably, but a new system would emerge from the ashes. As for the threat that banks would never again loan to government, puhleeez! Does any sane person really think international finance houses would forgo the billions in annual interest payments?

I know I sound like I’m defending big government, but I’m not. I’m defending the ordinary folks who must bear these government-incurred burdens. It is we the people who ultimately must pay these grossly irresponsible debts, since government has no money of its own.

The Ravenous Beast Will Demand More Taxes Until We're Bled Dry

Even when this debt ceiling "crisis" is over, we're still in crisis. Spending will continue to be a blazing rocket, driving us all further in debt.
Scattered estimates of how much revenue the federal government "loses" allowing money to frivolously remain in the pockets of those that earned it are insufficient.

Even then, why be satisfied with mere hundreds of billions when the President is calling for bold action? Bring out the big guns and calculate the cost of not adopting the greatest tax ever invented, the Value Added Tax (VAT)! Wise Eurocrats know that the goose can be plucked naked with nary a squawk by slathering a tax on every stage of a product's life. VAT-less Washington is annually "losing" trillions!

And while we're thinking big enough to cover a fourteen trillion dollar hole, why limit calculations of "lost" tax revenue to income and transaction taxes? How much revenue is the government "losing" by not collecting a wealth tax? (Bill Frezza)
Those are just a few snippets of Bill Frezza's excellent article.  Go read the whole thing and you'll find yourself nodding your head in violent agreement.  His conclusion is brilliant, explaining what really scares the socialists of all parties in the District of Criminals:
If the chaos in Washington continues people might desperately return to the outmoded belief that our country functions best when we all think for ourselves, have the liberty to dispense our own money, and enjoy the freedom to pursue our own happiness. And we know what happened last time that radical idea caught on.
At some point we’ve got to stand up and declare that government is not worth more than 18 cents out of every dollar we earn.


Always On Watch said...

Even when this debt ceiling "crisis" is over, we're still in crisis. Spending will continue to be a blazing rocket, driving us all further in debt.

There is the uncomfortable truth.

And the tax hikes will come -- even if those tax hikes don't come this time around.

There is little on planet greedier than spendthrift government bureaucrats and spendthrift politicians. They see us peon taxpayers as duty bound to support the whims of the bureaucracy.

Ever since FDR, the federal government has mostly seen to it that the people become more and more dependent on the the "generosity" of Uncle Sam. Well, Uncle Sam's pockets are no longer deep.

This "double-dip recession" is the direct result of the masses of the unemployed and the underemployed. The tax base has shrunk -- and keeps shrinking.

jez said...

Another excellent post, I find the whole cycle of debt pretty mind-boggling to be honest. The more I think about it, the crazier it seems, which is worrying -- normally I find it's the opposite.

I have a lot of sympathy with your idea to tell the international banks to shove it. I don't feel much personal responsibility to service my country's debts, although I feel a lot better about it than I do about 3rd world citizens of corrupt governments, whose dictators squandered their loans, being taxed to make the repayments. I think they have to be the first candidates for debt forgiveness.

This ties in with the inflation conversation we had a while back. Loans are yet another inflationary pressure, since it makes the repayments lower in real terms.

"Every new bailout of Greece or other irresponsible entities safeguards their investments and creates a new moneymaking opportunity for the bankers, at the expense of taxpayers."

True, but also don't forget the vigorous market in naked credit default swaps, the holders of which have an interest in the debtor (eg. Greece) defaulting.

Silverfiddle said...

AOW: Your excellent point about revenue shrinking because people are not working is lost on liberal democrats.

Take the crushing debt and regulatory burden off the economy, free up the business owners to confidently invest their money without fear of third-world style confiscation, and we will have millions back to work and paying taxes, increasing the flow to government coffers

Silverfiddle said...

Jez: Fractional reserve banking is mind-boggling, and it's a scam.

Governments "own" the money, but via central banks and then national and international banks and investment houses end up endebted. Governments like it because they can buy more goodies until the crash, and banks like it because they make money off of sovereign irresponsibility.

It's a murderous merry-go-round.

Jack Camwell said...

I agree that there probably needs to be a change in the way money works these days, but my guess is that flipping the bird to the people that hold our money is probably not the most prudent approach.

Isn't part of being a conservative that one is supposed to advocate for gradual change over sudden change?

jez said...

The system is predicated on continual inflation, economic growth, population growth etc. on and on forever, but it really can't go on indefinitely. At some point, your big reset will become unavoidable.

Silverfiddle said...

Good points, Jack. You are correct, and I was in a hot-headed rage when I wrote this.

This missive springs from my atavistic Rothbardian anarcho-capitalist libertarianism.

When a people has been scammed, its no shame to grab the torches and pitchforks.

Ducky's here said...

AOW: Your excellent point about revenue shrinking because people are not working is lost on liberal democrats.

And what would you have them do? I keep asking because I know you want a balanced budget amendment that would remove any Keynesian stimulus. Doesn't leave much.

Tax cuts, that's the ticket. Of course supply side has done boom boom all over the room for the last decade but you don't learn.

Here's a hint: Free trade agreements are going to continue to drain jobs. The world has a huge labor surplus and the law of one price assures the jobs go to the cheapest labor.

Ducky's here said...

Since you bring up Rothbar who was so extreme that he advocated "free market" (LMAO) national and personal protection solutions are you enlisted or a mercenary?

Silverfiddle said...

Ducky: How many people do you agree with completely? Every last word and idea?

You're wasting my time with silly games.

I would like to see us try free markets for a change. Your centrally planned statist economies have failed.

conservativesonfire said...

Not if but when the collapse comes, it will be world wide. There will be a tendency for governments to confiscate gold and silver and means of production. This is what the New World Order folks advocate. I fear ti would require civil wars in all the major countries to prevent this from happening. Your idea is actualy the only sane solution.

Bump's Stump said...

Silver . . . Your blog is right on. A good picture of really bad circumstances.

About the only coming threat to our American way of life that you or your corespondents didn't address is the overall demographics that are already changing the world.

China is getting stronger but trying to limit their population. India is also growing but not trying as hard to limit their population growth.

Islam is promoting and generating big family population growth around the world. Ultimately their numbers will be the larger threat to free people everywhere.

The sky falls tomorrow.

Anonymous said...

Gloom! Doom!

End Times are a-comin.'

Does anyone besides me detect a scent reminiscent of Y2K in the air?

Life, itself, persists long after governments have failed and empires have turned to dust.

The sun will still rise in the east and set in the west.

The tides will continue to ebb and flow.

Children will continue to be born.

It may not be what it was when we were younger, but it will not end.

There is no end. Life is eternal -- and it is always worth living no matter what.

~ FreeThinke

Trestin said...

Silver you hit on something very important here. It is big international finance which benefits the most from socialism. There is a reason the have funded socialist countries, while promoting socialism in the West, it creates debt, and they grow rich off our debts.

Anonymous said...

Trestin, it's all about establishing the NEW WORLD ORDER.

The Progressives have been plotting the demise of US sovereignty and the establishment of One World Dictatorship run by Elite Oligarchs, since before the creation of the Federal Reserve and the initiation of the Income Tax.

Why does anyone think those dreadful entities were created? The intent all along has been to COLLAPSE the ECONOMY, so the Oligarchs could have a good excuse to take over -- always easier when people have been driven to the point of desperation.

I am convinced the Great Depression of the 1930's and the two world wars were deliberately perpetrated by the Federal Reserve in cahoots with powerful Progressives to ensure our ultimate defeat.

Wild idea?

You bet, but can you think of a more plausible explanation of why events have moved in the direction they have?

I set down dozens of quotes here supporting the idea I just stated the other day. I can't do it again, but if you google New World Order, lots of stuff comes up from all pints of view. It's NOT a joke or a crackpot theory.

We've been dominated by great wickedness for many decades.

~ FreeThinke

Jersey McJones said...

Ya' know guys, I know this will come as tremedous shock to you, but we can simply pay our bills. We can stop the borrowing from the banks. We can stop looting entitlement reveneues.

This all can be done, very simply and easily...


Jack Camwell said...

Jersey: Perhaps in a vacuum the solution is simple and easy, but when humans are involved in politics then nothing is simple and easy.

FreeThinke: Every generation thinks it's on the brink of Armageddon, and every generation ends up being disappointed on that count.

Anonymous said...


I think you missed the satire in my post.

The Lord is having too much fun watching us make asses of ourselves to let us end it all any time soon. And I think He still hopes we may come to our senses one day, and discover how simple and carefree life could be, if we made up our minds to obey Him.

But, of course, we'd have to know who He is before we could hope to do that. All that stuff about slaying bullocks and making burnt offerings and sin offerings and wave offerings using just the right procedure as outlined in Exodus and Leviticus is not going to help us much in that direction.

It goes far deeper than primitive outmoded tribal ritual.

I think the future could be bright for anyone who develops strong inner life. We ain't never going to hange the world to suit our idea of what's right. All we can do is change the way we look at it.

~ FeeeThinke

Anonymous said...

"we can simply pay our bills. We can stop the borrowing from the banks. We can stop looting entitlement reveneues.

This all can be done, very simply and easily...

You're right, Jersey. We certainly could, but we won't as long as we have Marxists in congress and the White House working hand-in-glove with international bankers and global industrialists who are dedicated to our destruction, so they can rush in and take possession of the ruins they have created and refashion them to fit into The New World Order.

~ FreeThinke

Most Rev. Gregori said...

How does any one really think we can pay down our national debt by raising the the amount of debt we can incur? Borrowing more money to pay the money we already owe doesn't make a damn bit of sense. Where the heck did our financial experts go to school? Oh, that's right they went to our public schools and then on to leftist dominated colleges and universities.

jez said...

Rev: it takes some effort to understand. I don't think there's any way for all the debt to be finally paid off once and for all. There isn't enough money in the world today to pay off all of today's debt, money has to be created. There are a few ways to create money, but almost all money in circulation was created by a bank issuing a loan. So basically, someone somewhere has to take on loans to create the needed new money.

The choice is between national debt and personal debt. You can't have no debt at all. Once we're resigned to that, I suppose national debt has some important advantages over personal debt.

The other alternative is Silverfiddle's big reset.

Finntann said...

You are responsible for your nation's debt, please send a check for $46,129.99 to Soupy Sales at PO Box...

Jersey "This all can be done, very simply and easily..."

Please, do go on...

I was thinking of a more GM'esque plan. You see first we create the New US Government.

Then we take all the assets and money and transfer them to the New US Government, leaving all the debt with the Old US Government.

The Old US Government gets down graded to a D, and the New US Government which has plenty of income and no debt gets rated AAA.

People who invested in Old US Bonds get stuck holding the bag, while people who want to invest will be falling all over themselves to get the AAA rated New US Bonds.

Hell, it worked for GM...why not the US Government?

Oh, and in the time I've been writing this your bill has increased to $46,130.06


Finntann said...

Jez, money isn't created by banks issuing loans, money is created by governments printing pretty slips of paper.

And every pretty slip of paper they print devalues the old pretty slips of paper you've been holding onto.


Bastiatarian said...

>reminiscent of Y2K

I was thinking more along the lines of Harold Camping.

Bastiatarian said...

>We can stop looting entitlement reveneues.

Entitlements (known to grownups as "property stolen from people that earned it and given to people that have no actual or reasonable right to it") are expenditures. Expenditures drain revenue. Stop the drain and you remove the corresponding part of the debt.

Anonymous said...


The government may
Be as great as they say
But it wouldn't be missed
If it didn't exist.

Or WOULD it?

Oh how I'd love to have the chance to find out for sure one way or the other.

The early settlers and the pioneers governed themselves with minimal supervision, and look at the miracles they were able to accomplish, albeit under conditions of great hardship.

Think what we might be able to do, if we were truly LIBERATED and UNENCUMBERED from the chains of the blundering bloated bureaucracy that administers the dictates of the Nanny State.

Scares you to death, doesn't it?

Your "progressivism" hasn't advanced us one iota, Ducky. Instead, it has gotten us mired in a new form of FEUDALISM.

Despite the tremendous advances in Medicine, Science and Technology, we've been making giant leaps backward towards Old World tyranny for the past hundred years.

~ FreeThinke

Bunkerville said...

10 Banks Own 77 Percent Of All U.S. Banking Assets. Am I the only one wondering how this is going to turn out?

Anonymous said...

Harold Camping, eh?

I admit I had to look him up, but yes, that too, although I still think the furor over Y2K, which purported to be a technological crisis not a spiritual one, turned out to be little more than a fart in a bucket. I suspect this latest furor over the "debt ceiling" will turn out that way too.

After all, isn't everything generated by the government based conjuror's tricks of one kind or another? As they say, it's all blue smoke and mirrors. Everything Washington produces is an illusion. So what if people are economically crippled or rendered destitute by their illusory shenanigans?

The substance of our country lies only in the men who push the plows, milk the cows, harvest the crops, butcher the hogs, build the buildings, clean the windows, sweep the floors and polish up the handles of the big front doors -- and the women weave the cloth, sew the garments, cook the food, clean up the messes, nurse the babies and rock them gently to sleep, etc.

Government is totally divorced from reality. Isn't it a pity that anything capricious and air-headed as government can have such a deleterious effect on the producers and distributors of substance?

Do we need government? Oh sure, but I doubt if we need the kind we have right now, don't you?

~ FreeThinke

Bastiatarian said...

My reference to Camping was more toward the concept of the lunatic making unsubstantiated claims with ever-shifting dates for the end of the world, which is what we're getting from our Ignoramus in Chief.

Jersey McJones said...

Guys, does it ever occur to you that we could raise taxes???


Finntann said...

Jersey, does it ever occur to you that there should be a limit to the amount of money government gets? Or would you just keep raising them until there is nothing left to take?

FY 2011 income for the US Government is:


Which is roughly $15,000 for every man, woman, and child.

But in 2009 there were only 138,950,000 tax returns filed.

So... that would work out to be $32,098 per tax payer.

But according to the Associated Press, 47% of filers paid no federal income taxes at all in 2009

So really, that works out to only 73,643,500 taxpayers each paying $60,562.

So when it comes down to it, roll in the 14 Trillion in debt and each of us taxpayers should whip out our checkbooks and write a check to good ole Uncle Sam for $250,667

But despite the words (Warning: put your fingers in your ears and go la la la la la la la la la la la NOW) "all men are created equal"... we all know that you liberals don't believe that one bit, but prefer to subscribe to that good ole Marxist axiom:

From each according to his ability.

Or should that be from each according to his ability to pay.

You guys run a better racket than the Gambinos.

Parkinson's Law comes to mind:

The demand upon a resource tends to expand to match the supply of the resource.

Or in simple English:

Government will spend whatever it can beg, borrow, or steal.

I'll believe government is working in my best interest when I get a letter in the mail from them explaining how they took in a Trillion dollars more than they spent accompanied by a check for $13,578.93


Jersey McJones said...


Our borrowing more than accounts for our deficit and a large chunk of our debt.

We certainly could raise taxes. We've done it before, and it worked out just fine.

I wish "personal responsibility" actually meant something to you conservatives. An unprecedented number of Americans have become very, very wealthy in recent decades, and have been paying an unprecedented low tax rate. Shouldn't they help fix this mess THEY CREATED????

I mean, really. Exactly what kind of greedy, lowly, evil scumbag doesn't pay their fair share when they've benefitted sooooooooo much from their country's irresponsible benificence to them????


Matt said...

"If the chaos in Washington continues people might desperately return to the outmoded belief that our country functions best when we all think for ourselves, have the liberty to dispense our own money, and enjoy the freedom to pursue our own happiness. And we know what happened last time that radical idea caught on."

We can only hope.

Silverfiddle said...

Jersey: Finn just broke the math down for you and you didn't flinch.

Do you have $60,000 that you can turn over to the government as your "fair share?" I don't.

Wake up and smell the coffee, or at least be honest enough to acknowledge the mathematical facts.

Ducky's here said...

I can pay cash.

Bastiatarian said...

>We certainly could raise taxes. We've done it before, and it worked out just fine.

Yes, thieves certainly could steal more money from people. They've done it before, and it worked out just fine...except for the people having their property stolen from them, of course.

jez said...

Finntann, I think you're wrong: banks do have the power to create money, that's what fractional reserve lending is all about. As Silverfiddle says "use of credit created money out of thin air".

Governments can also create money through quantitative easing, but it doesn't have a whole lot to do with printing cash, most of the money is electronic and cash is printed only to meet demand for paper currency.

jez said...

FT: Y2K wasn't nothing, it was a problem that was recognised and fixed in advance.

Anonymous said...

Y2K wasn't nothing, it was a problem that was recognised and fixed in advance.

That ain't the way I heared it. But even so, the cause of our fiscal woes have been "recognized" too long long ago, but those of us who knew how to prevent them from occurring were hooted off the podium, because people didn't want to hear the truth.

I suspect that somehow we'll muddle through, as we always seem to do, but we ought to do much better than that.

Those who can't discipline themselves usually find themselves subject to the rule of arbitrary tyrants who rush in to fill the void left by the lack of good common sense.

~ FreeThinke

Finntann said...

JMJ Said: "mean, really. Exactly what kind of greedy, lowly, evil scumbag doesn't pay their fair share when they've benefitted sooooooooo much from their country's irresponsible benificence to them????"

The irresponsible welfare cheats you want me to fund?

Yes, I know, that was harsh.

Jersey, your compassion is admirable but you can't see past the end of your nose.

Like it or not, here's the way it works in reality:

I make widgets

You raise the tax on widgets

I raise the price of widgets

Poor people subseqently lose a greater percentage of their income on each purchase of widgets.

You raise the tax on widgets some more.

Unable to increase the price further and unable to compete with widgets made in China, I let two or three marginal employees go.

Your social program costs increase, and you raise the tax on widgets more.

I make smaller widgets and sell them at the same price.

Market share declines, I readjust my business plan, lay off two or three more employees, and start using cheaper materials.

Your social program costs go up, so you raise the tax on widgets some more.

I say F*** It, lay off the rest of my employees, some of my management, and with a small team, sell off my American assets and reinvest in a new factory in Costa Rica, my employee overhead costs go down by 75%, I'm competitive again, and you can go screw yourself.

Now, widgets are no longer made in America, but you still need them. You have no choice but to import them, you can tax the crap out of them, but since you can't single just me out, we'll just raise the price.

You've lost on all counts, increased costs, decreased revenue, increased unemployment.

People and Industry are not a bottomless pot of gold you can raid over and over again, well you can, but you wind up with Eastern Europe circa 1990.


Anonymous said...

That's a classic, Finntann. Never heard it explained more clearly or succinctly.

If you don't mind, I'm going to use it in other correspondence, unless you object.

~ FreeThinke

Finntann said...

No objections, just give me intellectual credit ;)

Bastiatarian said...

Of course, one of the fundamental things that Jersey (and other rainbows-and-unicorns types) don't comprehend, is that the wealthy fat-cat corporate owners are already doing far more than paying their "fair" share by making it possible for all of their employees, suppliers, retailers, and everybody else in the process from raw materials to purchase point to work and obtain income. And all of that possible through voluntary exchange. Who'da thunk it? (Oh yeah, anybody that has even a fundamental grasp on economics and human psychology.)

Bastiatarian said...


Only the most ignorant of morons thinks that it was "rich" people in general and not the federal government that created, and more than that, prolonged, the current economic mess.