SovereignLife Freedom Blog

What would you say to your best friend, if he or she insisted on solving their burgeoning credit card debt problem by getting yet another credit card? Surely you would warn them of the consequences of their actions and that paying off “old” debt with “new” debt can hardly be a long-term solution.

Yes, we all know that. But apparently our politicians don’t.

David Galland strips away the blather of media pundits and career politicians and reveals the Five Things You Need to Know About The Economy

Justin Raimondo looks a the “debt ceiling” issue and sees calls for it to be raised as simply continuance of the warfare state – as the debt could be seriously reduced by bringing US troops home and for the US to cease being the “policeman” of the world.

The Debt Ceiling and the Warfare State

Just as George Orwell predicted in his timeless novel 1984, words can be turned upside down and used to create illusions and falsehoods.

One example that quickly comes to mind is the word “inflation”. When you read media reports on rising inflation they are always talking about prices rising. This is further reinforced by reference to the CPI, the consumer price index, which measures rising prices.

But rising prices are a symptom of inflation, not a cause. And the very word “inflation” is misleading to start with. In this way the truth of the situation is being hidden by the use of a misleading word.

So what’s the best word that describes what is really going on when prices rise? I would suggest currency debasement. For that’s what inflation really is – it’s the progressive debasement (falling value) of currency. And because the currency is losing value, the cost of things (prices) is increasing.

If we were to use the word “currency debasement” to replace “inflation” then the root cause would be plain for everyone to see. Just ask the question, “Who is responsible for debasing the currency?” The state of course, or its proxy the central bank.

Just as seeing rising prices as the problem, without looking at the root cause, so looking at rising prices gives a distorted view of the real value of things.

So if we can’t trust prices when quoted in currency, how should we quote them?

In gold.

If you look at the prices of everything in grams of gold, rather than number of dollars, then you get an entirely different picture as to the real price of things – including the real value of competing currencies, the real value of the share market, and the real value of commodities.

To understand how this works, and see some startling examples, have a read of this fascinating article by Charles Vollum:

Its Weight in Gold: The Real Prices of Things

Jeff Clark of Big Gold asks a world-class panel of economists, authors, and investment advisors – including such people as Jim Rogers, Bill Bonner and Peter Schiff – what they expect for the future, in this fascinating article:

Investment Legends: “Dollar Collapse Inevitable”

Doug Casey looks at the real reasons for the last “Great Depression” and what brought America out of it – and rather than seeing history “repeating” itself, he sees the current developing economic situation as “rhyming” with the past.

Escaping The Great Depression – And Extending The Greater Depression

It’s obvious that individuals can become insolvent. So can companies. We know that very large companies and banks can become insolvent, unless bailed out by a larger financial entity. And we now know that even nations can become insolvent – if they live beyond their means and bond investors pull the plug.

But what happens to the lenders of last resort – the central banks – can they become insolvent?

Terry Coxon takes a close look at this distinct possibility in his essay: The Long Swim – How The Fed Could Become Insolvent

The eurozone is coming apart at the seams – and faced with either a debt union or the break-up of the eurozone itself, its leaders are like possums frozen in a car’s headlights.

Ambrose Evans-Pritchard lays out the dire situation in: The eurozone is in bad need of an undertaker

That’s Bill Bonner’s prognosis in: US Dollar Fights The Euro in a Battle With No Victor

One thing this global sovereign debt crisis is causing is that people are taking notice of economics and monetary policy – something that most were woefully ignorant of before.

But if you had to explain this sovereign debt crisis while standing on one leg, and in a way that was understandable to the masses, then I’d suggest the following:

Since the abandonment of the gold standard, which effectively meant governments could only spend what they had, we have seen the rise in socialism. By “socialism” I mean the democratic engine of income redistribution and the provision of benefits for which there was no money – in order to buy votes.

Governments only have three ways to pay for things:

1. From taxes of various kinds

2. From borrowing

3. From the printing of money (inflation)

It’s obvious that in this competitive world, there is an upper limit to taxation – before the proles wake up to their slave status. Printing money has always caused disasters. So that has left borrowing money.

Where does this borrowed money come from? It comes from the issuance of government bonds. Governments sell bonds to raise money to pay for things in order to get voted back in to power. And as long as the economy is growing, governments have convinced themselves that the market is always able to take up their bond issuance – at reasonable market rates of interest.

In this way governments have got into hock to the bond holders. And bond holders have made money off lending to governments – in a sort of “devil’s pact”.

What’s happening now is that governments, in there perennial attempt to buy votes with borrowed money, have got in over their heads – and in order to borrow more money (to pay off existing debt when it becomes due) are having to pay higher and higher interest rates.

This only makes the problem worse, as rising interest rates on government debt escalate their inability to service such debt.

So the problem can be expressed thus:

Voters have irresponsibly voted for politicians who have promised them the moon (socialism). Now those same politicians face a conundrum – how to continue borrowing when the cost of such is going up – and the ability to service the growing debt requires more and more of the nation’s annual budget?

It’s getting to the stage where the debt is becoming unrepayable. And any attempts to repay such debt by austerity measures are only going to cause the democratic “rabble” (the ones who voted for the largesse in the first place) to start rioting in the streets.

The solution?

A debt holiday – the cancelation of debts. Followed by the abolition of fiat debt money, in favour of a high-tech gold standard. Why? Because the only way out of this mess is to wash the debt out of the system and start over with a debt-free money system – one which does NOT allow politicians to borrow and promise the moon.

The side-benefits would be plentiful – including stopping most wars, stopping socialism in its tracks, and putting politics back where it belongs – in the town hall setting, where we can really keep tabs on these hucksters!

Far from providing a long term solution to America’s economic woes, the Fed – under its Chairman, Ben Bernanke – is setting out to derail the US economy completely.

Bud Conrad lays it all out in his article: Bernanke is Making The Crisis Worse