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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Bill Buckler
January 18, 2012
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In any nation with a political and economic establishment (and all modern nations have them), the preferred option of those in charge of "running the country" is not to have the people think at all. Since that goal is as ephemeral as the alchemists' long-running attempts to turn lead into Gold, a fall back position must be established. That fall back position is to saturate the media with variations on the theme of what the establishment wants you to think about. In the US, there are many examples of this method of writing in the establishment press but few are as representative as Mr Paul Krugman, the Nobel prize winning economist who writes for - among other media outlets - the New York Times.

Mr Krugman's version of a cheery "HAPPY NEW YEAR!" message for 2012 was published in the Times on January 1, 2012. The title of his piece was: "Nobody Understands Debt". We can think of many more efficacious cures for a morning after hangover brought on by partying too enthusiastically on the previous night, but this one at least would have brought a belly laugh out of the most suffering.

Barring the obvious - the fact that if "nobody" understands debt, neither does Mr Krugman - the essence of the article is contained in the following quote: "First, families have to pay back their debts. Governments don't - all they need to do is ensure that debt grows more slowly than their tax base" (Emphasis by The Privateer). But Mr Krugman doesn't stop there: "Second - and this is the point almost nobody seems to get - an over- borrowed family owes money to someone else; US debt is, to a large extent, money we owe to ourselves." Amazing isn't it? This ancient canard is still being trotted out in the guise of serious economic analysis. Yet what choice does any front man for the US establishment - especially an "economist" - have? After all, this has been the justification for government deficit spending since the total debt of the US Treasury was about $US 22.5 Billion in 1933.

Perpetual debt is absolutely essential to any establishment. As long as it can be maintained - and preferably continually increased - they have the taxpayers right where they want them. The creditors - those who own the government debt paper - will stop at nothing to ensure that the principal is sacrosanct and the interest payments keep coming. The debtors - those who ensure the debt by being part of the tax base to use Mr Krugman's words - are in a state of perpetual indentured servitude to the government.

That arrangement is the essence of the "mainstream" - and woe betide anyone who challenges it.

Debt And The "Tax Base":

In 1933, the year that FDR took office for his first term, the ENTIRE debt of the US Treasury was $US 22.5 Billion. We repeat, this was the Treasury's ENTIRE debt, there were no unfunded liabilities in 1933, they were created during the course of FDR's four administrations. In 1933, the population of the US was 126 million. Today, it is 313 million. Assuming that a roughly equivalent proportion of the entire population paid taxes then and now, the US establishment's "tax base" has increased by about 150 percent over those 80 years. The increase in Treasury funded debt is about 6760 percent. On the raw numbers here, any claim that government debt has grown more slowly than the tax base is ridiculous.

Of course, there are mitigating circumstances and (to use a favourite expression of "economists") exogenous factors at play too. For one thing, taxes today are higher and more people pay them. For another thing, the common denominator of the debt - the US Dollar - buys a LOT less now than it did in 1933. But even with those factors built in, the contrast between the tax base and the debt is IMMENSE.

It is impossible to run up debts of any kind (government debts included) without building two factors into the "mainstream" of political debate. One is that government debt is "different" and doesn't matter. The other is that the amount of what is called "money" in the system can be infinitely expanded without any ill effects. The tattered remnants of these two economic articles of faith are the last bastion of the US (and every other global) establishment. To challenge them is apostasy. To threaten them is treason.

How Obvious Does It Have To Get?:

In what follows here, the example used is the US. This is not to imply that the same conditions are not to a greater or lesser extent a global phenomenon. They are - for the very simple reason that the world uses credit-based money and that governments everywhere hold their people in thrall to the "public debt" which is the underpinning of this credit-based money.

In the US, we have a situation in which nearly 50 million people are dependent on food stamps while the majority of the population is reliant on government for their day- to-day living expenses. On the other side of the coin, there are a handful of people who blithely go about losing $US Billions every year through the financial institutions they control while their annual "compensation" is a not inconsiderable fraction of the losses they preside over. We have a banking system - in both the US and Europe - where the money created out of thin air (through fractional reserve practices) which used to be to lent to individuals and businesses is now being created to buy the debt of government.

The amount of that debt continues to increase everywhere - even in nations (like Japan) in which the "tax base" is shrinking as their populations age and their birthrates fall. Everywhere, the idea of a government actually reducing let alone paying off its debt is deemed grossly irresponsible because of the "recession" which would be the inevitable outcome. US ratings agencies downgrade European sovereign debt on "concerns" that the nation in question might not be able to pay off their debt while blithely ignoring the fact that this same debt is the ONLY foundation available to the credit-based monetary system.

As the "guardians" of the system, the central banks prattle about their indispensable role in maintaining "monetary stability". To maintain this monetary stability, they decree non-existent interest rates, create ever larger mountains of new "money" to keep companies, banks and governments "solvent" and go to any length to prevent the paper "assets" involved from being genuinely priced in any form of MARKET.

There are only two minor problems with the entire system. The first is that a perpetual credit expansion is clearly and obviously unsustainable as anyone who bothers to give it even a cursory examination can see. The second problem is stated by (Herbert) Stein's Law: "If something cannot go on forever, it will stop."

The Year Of The "Black Swan"?:

Investopedia defines a "black swan event" as: "An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict." In that context, it is helpful to recall that the title of Sinclair Lewis' book published in 1935 was - It Can't Happen Here.

The statement that an event deviates beyond what is "normally expected" immediately generates the question - "expected by whom?" Every major financial event stretching back to the dawn of the Global Financial Crisis (GFC) in 2006-2007 goes beyond what was normally expected. The caretakers of the global economy have been unanimous throughout the GFC in their claims that nobody expected or predicted what would take place. The truth is, of course, that MANY people did both. But none of them were in the establishment or the "mainstream" at the time of their predictions and few of them have achieved such status since. The housing crash and inter-bank lending freeze was the easiest thing in the world to foresee. So was the inevitable onset of the "sovereign debt crisis" which followed. What was a bit more difficult was to articulate the precise reasons why such an outcome was inevitable. This newsletter has undertaken that task. So have many other individuals and publications, the vast majority of them on the internet. But in the US political sphere, there is only ONE person who has and continues to attempt to cut through the self- imposed mental blindness of most of the victims of the GFC. That person is Ron Paul, the "unelectable" candidate who will only gain the Republican nomination this year if the pap being churned out by the "mainstream" is recognized as the nonsense which it is. If you are still considering making a new year's resolution for 2012, try this one. Repeat after us - "If it makes no sense - IT'S NONSENSE!" And so is most of what is "normally expected" by the mainstream in any nation.

 

.Ó 2009 – The Privateer

http://www.the-privateer.com

capt@the-privateer.com

(reproduced with permission)

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