“Governments cannot reduce their debt or
deficits and central banks cannot taper. Equally, they cannot
perpetually borrow exponentially more. This one last bubble cannot
end (but it must).”
I often refer to debt serfdom, the servitude
debt enforces on borrowers. The mechanism of this servitude is
interest, and today I turn to two knowledgeable
correspondents for explanations of the consequences of interest.
Correspondent D.L.J. explains how
debt/interest is the underlying engine of rising income/wealth
disparity:
Here
is a table
of the growth rate of the GDP.
If we use $16T as the approximate GDP and a
growth rate of, say, 3.5%, the total of goods and services would
increase one year to the next by about $500B.
Meanwhile,
referencing the Grandfather
national debt chart with the USDebtClock data, the annual
interest bill is $3 trillion ($2.7 trillion year-to-date).
In other words, those receiving interest are
getting 5-6 times more than the increase in gross economic activity.
Using your oft-referenced Pareto Principle,
about 80% of the population are net payers of interest while the
other 20% are net receivers of interest.
Also, keep in mind that one does not have to
have an outstanding loan to be a net payer of interest. As I
attempted to earlier convey, whenever one buys a product that any
part of its production was involving the cost of interest, the final
product price included that interest cost. The purchase of that
product had the interest cost paid by the purchaser.
Again using the Pareto concept, of the 20%
who receive net interest, it can be further divided 80/20 to imply
that 4% receive most (64%?) of the interest. This very fact
can explain why/how the system (as it stands) produces a widening
between the haves and the so-called ‘have nots’.
Longtime correspondent Harun I. explains
that the serfdom imposed by debt and interest is not merely financial
servitude–it is political serfdom as well:
As both of us have stated, you can create
all of the money you want, however, production of real things cannot
be accomplished with a keystroke.
Then there is the issue of liberty. Each
Federal Reserve Note is a liability of the Fed and gives the bearer
the right but not the obligation to purchase — whatever the Fed
deems appropriate. How much one can purchase keeps changing base on a
theory-driven experiment that has never worked. Since the Fed is
nothing more than an agent of the Central State, the ability to
control what the wages of its workers will purchase, is a dangerous
power for any government.
If a Federal Reserve Note is a liability of
the central bank, then what is the asset? The only possible answer is
the nations productivity. So, in essence, an agent of the government,
the central bank, most of which are privately owned (ownership is
cloaked in secrecy) owns the entire productive output of free and
democratic nation-states.
People who speak of liberty and democracy in
such a system only delude themselves.
Then there is the solution, default. That
only resolves the books, the liability of human needs remain.
Bankruptcy does not resolve the residue of social misery and
suffering left behind for the masses who became dependent on lofty
promises (debt). These promises (debts) were based on theories that
have reappeared throughout human history under different guises but
have never worked.
More debt will not resolve debt. The
individual’s liberty is nonexistent if he does not own his labor. A
people should consider carefully the viability (arithmetical
consequences) of borrowing, at interest, to consume their own
production. The asset of our labor cannot simultaneously be a
liability we owe to ourselves at interest.
Thank you, D.L.J. and Harun. What
is the alternative to the present system of debt serfdom and rising
inequality? Eliminate the Federal Reserve system and revert to the
national currency (the dollar) being issued by the U.S. Treasury in
sufficient quantity to facilitate the production and distribution of
goods and services.
Is this possible? Not in our Financialized,
Neofeudal-Neocolonial Rentier Economy; but as Harun noted in another
email, Governments cannot reduce their debt or deficits and
central banks cannot taper. Equally, they cannot perpetually borrow
exponentially more. This one last bubble cannot end (but it must).
What we are discussing is what will replace the
current system after it self-destructs.
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