ROLLING BACK THE LANGUAGE OF ECONOMICS - Part 4 : DEBT

Debt is among the most common words used in the English language today. But what exactly is debt?

That is a harder question than you might imagine.

Most people think of debt as an amount of money that is owed to another person or company. However, over recent decades the new reality of debt has permeated all aspects of our lives through a complex process of financial wheeling and dealings.

Because governments around the world decided to move away from the 'gold standard', all currencies around the world are now 'fiat currencies'. That is to say that the notes in your wallets are no longer backed by a promise to pay the bearers in gold. Currencies have become detached from real assets like precious metals and allowed to fluctuate in perceived value as 'the market' dictates.

This means that ultimately, the value of money only carries a worth equivalent to the confidence that every participant has in the scheme at any particular time.

After the gold standard was abandoned, currencies were allowed to float freely and competitively against each other. Over time, this detachment has caused a psychological disconnection between the value of money and the value of real things. This detachment process has been exacerbated by the introduction of digital money transactions and time stretched credit options.

We all know how easy it is to buy something using a credit card or a bank transfer or paypal. The detachment process has made everyone buy and sell in a new way. The reality only reappears periodically when we get statements, or letters from our banks or overdraft repayment requests or defaults or bankruptcies or credit crunches or sovereign debt crises or world economic meltdowns.

You see, what we were convinced was money is actually now being realised for what it is. Debt. This new reality is true for every layer of the world economy. From the IMF right down to the peasant in Mozambique.

Because we have all participated in the scheme (actively or in some contrived secondary processes), we have all fallen into the same trap. The trap that enslaves us all.

From the federal reserve bankers that print new money (both digitally and on paper) to the idiot buying the latest Justin Bieber merchandise on eBay, we have all just been participating in some form of ponzi scheme based on fractional reserve banking and fractional reserve spending.

Since the 1930's when the gold standard was abandoned the financial processes that have brought us to where we are today, have created a financial system where nobody can begin to calculate how much money is out there (real and digital) or how much debt is out there.

It is estimated that about 99% of all money is actually really debt. That would also account for why prices have increased about 100 fold since 1930. In other words, we are no richer, only 100 times more in debt.

The tipping point is so close now. The curve can go in one of two directions. Either fiat currencies will collapse under their own weight of debt or a rapid consolidation of debt repatriation demands will cause an equal and opposite degree of hyperinflation.

Which way will it go?

It matters not. Either scenario will be a disaster.

ROLLING BACK THE LANGUAGE OF ECONOMICS - Part 3 : MONEY

Money or currency is one of the most misunderstood ideas.

It used to be that money had an intrinsic value. It contained a specific quantity of a rare earth metal like gold or silver. Even paper money carried a written promise such that the issuer could exchange that banknote for a prescribed amount of gold on demand. This was known as 'specie money'.

However, printed money now carries no such promise. Not since 1971 anyway. It is now known as a 'fiat currency'. That is to say, it has no intrinsic value and its worth can only be determined relativistically with a view to how much of it is in circulation and what demand there is for it.

All sovereign countries now use fiat money. It is printed and issued by 'central banks' like the US Federal reserve or the Bank Of England etc. Of course, these organisation sound very official and they also sound like they are owned by the governments of their host countries. However, nothing could be further from the truth.

They are private banks and they always have been.

The Bank of England was founded in 1694. Even though it was nationalised in 1946, it is still a privately owned company with Directors. This anomaly was formed in 1977 by creating a wholly owned subsidiary company called Bank of England Nominees Limited. This company was granted a special exemption by the Secretary of State for Trade such that it could trade without declaring who the Directors are and using the Official Secrets Act to protect their anonymity. This is wholly unique and a special case when considering the normal legal requirements of The Companies Act.

According to their website, the US Federal Reserve Bank is a government body. However, all of its shareholders (Directors) are private banks. None of its stock is owned by the US government.

These central banks have the ability to print money whenever they see fit. A private company creating money from thin air. They also provide money to their governments in order to make up their revenue shortfall or spending excesses. The government pays interest on these debts. This interests is guaranteed to compound and spiral with time.

The last time the USA balanced its books was in 1835.

A couple of quotes from the past that resonate profoundly today:

Paper money eventually returns to its true intrinsic value - ZERO ! (Voltaire 1694-1778).

If the American people ever allow private banks to control the issue of their currency, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered - (Thomas Jefferson 1743-1826)