Rothbard: Government's Should Default On Their Debt

[punter]

Here US free market economist Murray Rothbard makes the case that since spendthrift Government's have run up public debts on behalf of future taxpayers, we have a moral obligation to default on it.

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In a free-market economy that respects property rights, the volume of private debt is self-policed by the necessity to repay the creditor, since no Papa Government is letting you off the hook. In addition, the interest rate a debtor must pay depends not only on the general rate of time preference but on the degree of risk he as a debtor poses to the creditor. A good credit risk will be a "prime borrower," who will pay relatively low interest; on the other hand, an improvident person or a transient who has been bankrupt before, will have to pay a much higher interest rate, commensurate with the degree of risk on the loan.

Most people, unfortunately, apply the same analysis to public debt as they do to private. If sanctity of contracts should rule in the world of private debt, shouldn't they be equally as sacrosanct in public debt? Shouldn't public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people. The reason is that the two forms of debt-transaction are totally different. If I borrow money from a mortgage bank, I have made a contract to transfer my money to a creditor at a future date; in a deep sense, he is the true owner of the money at that point, and if I don't pay I am robbing him of his just property. But when government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color.

For unlike the rest of us, government sells no productive good or service and therefore earns nothing. It can only get money by looting our resources through taxes, or through the hidden tax of legalized counterfeiting known as "inflation." There are some exceptions, of course, such as when the government sells stamps to collectors or carries our mail with gross inefficiency, but the overwhelming bulk of government revenues is acquired through taxation or its monetary equivalent.[...]

The public debt transaction, then, is very different from private debt. Instead of a low-time-preference creditor exchanging money for an IOU from a high-time-preference debtor, the government now receives money from creditors, both parties realizing that the money will be paid back not out of the pockets or the hides of the politicians and bureaucrats, but out of the looted wallets and purses of the hapless taxpayers, the subjects of the state. The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract.

Any melding of public debt into a private transaction must rest on the common but absurd notion that taxation is really "voluntary," and that whenever the government does anything, "we" are willingly doing it. This convenient myth was wittily and trenchantly disposed of by the great economist Joseph Schumpeter: "The theory which construes taxes on the analogy of club dues or of the purchases of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind."[...]

The annual government deficit, plus the annual interest payment that keeps rising as the total debt accumulates, increasingly channels scarce and precious private savings into wasteful government boondoggles, which "crowd out" productive investments. Establishment economists, including Reaganomists, cleverly fudge the issue by arbitrarily labeling virtually all government spending as "investments," making it sound as if everything is fine and dandy because savings are being productively "invested." In reality, however, government spending only qualifies as "investment" in an Orwellian sense; government actually spends on behalf of the "consumer goods" and desires of bureaucrats, politicians, and their dependent client groups. Government spending, therefore, rather than being "investment," is consumer spending of a peculiarly wasteful and unproductive sort, since it is indulged not by producers but by a parasitic class that is living off, and increasingly weakening, the productive private sector.[...]

Deficits and a mounting debt, therefore, are a growing and intolerable burden on the society and economy, both because they raise the tax burden and increasingly drain resources from the productive to the parasitic, counterproductive, "public" sector. Moreover, whenever deficits are financed by expanding bank credit – in other words, by creating new money – matters become still worse, since credit inflation creates permanent and rising price inflation as well as waves of boom-bust "business cycles."

It is for all these reasons that the Jeffersonians and Jacksonians (who, contrary to the myths of historians, were extraordinarily knowledgeable in economic and monetary theory) hated and reviled the public debt. Indeed, the national debt was paid off twice in American history, the first time by Thomas Jefferson and the second, and undoubtedly the last time, by Andrew Jackson.

Unfortunately, paying off a national debt that will soon reach $4 trillion would quickly bankrupt the entire country. Think about the consequences of imposing new taxes of $4 trillion in the United States next year! Another way, and almost as devastating, a way to pay off the public debt would be to print $4 trillion of new money – either in paper dollars or by creating new bank credit. This method would be extraordinarily inflationary, and prices would quickly skyrocket, ruining all groups whose earnings did not increase to the same extent, and destroying the value of the dollar. But in essence this is what happens in countries that hyper-inflate, as Germany did in 1923, and in countless countries since, particularly the Third World. If a country inflates the currency to pay off its debt, prices will rise so that the dollars or marks or pesos the creditor receives are worth a lot less than the dollars or pesos they originally lent out. When an American purchased a 10,000 mark German bond in 1914, it was worth several thousand dollars; those 10,000 marks by late 1923 would not have been worth more than a stick of bubble gum. Inflation, then, is an underhanded and terribly destructive way of indirectly repudiating the "public debt"; destructive because it ruins the currency unit, which individuals and businesses depend upon for calculating all their economic decisions.[...]

I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation.[...]

Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840s, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called "internal improvements"), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830s. Most of these securities were financed by British and Dutch investors.[...]

During the deflationary 1840s succeeding the panics, state governments faced repayment of their debt in dollars that were now more valuable than the ones they had borrowed. Many states, now largely in Democratic hands, met the crisis by repudiating these debts, either totally or partially by scaling down the amount in "readjustments." Specifically, of the 28 American states in the 1840s, 9 were in the glorious position of having no public debt, and 1 (Missouri's) was negligible; of the 18 remaining, 9 paid the interest on their public debt without interruption, while another 9 (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states.

Apart from the moral, or sanctity-of-contract argument against repudiation that we have already discussed, the standard economic argument is that such repudiation is disastrous, because who, in his right mind, would lend again to a repudiating government? But the effective counterargument has rarely been considered: why should more private capital be poured down government rat holes? It is precisely the drying up of future public credit that constitutes one of the main arguments for repudiation, for it means beneficially drying up a major channel for the wasteful destruction of the savings of the public. What we want is abundant savings and investment in private enterprises, and a lean, austere, low-budget, minimal government. The people and the economy can only wax fat and prosperous when their government is starved and puny.

http://www.lewrockwell.com/rothbard/rothbard190.html

Edited January 8, 2013 by punter

[Injin]

I dunno, really.

He's wrong about private debt being limited by the ability of people to repay, he's wrong about not paying stuff that has been promised in the future being a case of robbery and the national debt can be paid off by anyone who can type into a PC if they have a few seconds to add all the zeroes to the right account.

Lovely writing though.

[punter]

I dunno, really.

He's wrong about private debt being limited by the ability of people to repay, he's wrong about not paying stuff that has been promised in the future being a case of robbery and the national debt can be paid off by anyone who can type into a PC if they have a few seconds to add all the zeroes to the right account.

Lovely writing though.

Private debt is limited by the ability to make repayments, if you default on a mortgage the bankster takes the house. If you default on public debt, what does the bankster take?

It is robbery because taxpayers as yet unborn will be asked to pay the interest on this debt being run up by the politicians. The only sensible thing is to reject it and repudiate it. Therefore, Rothbard is right and as he points out it happened in 1840's America and it will have to happen again.

Edited January 8, 2013 by punter

[punter]

The irony is Greece is receiving tens of billions in bailouts and "aid" from other EU countries who are then imposing conditions on them to cut spending (good) and raise taxes (bad). The rises in tax are going to pay off the banksters.

They're essentially caught in a trap. The higher taxes mean they can kiss goodbye to any sort of economic growth but the bankster will get paid, until the next crisis.

Why don't they just repudiate the debt, leave the eurozone and only spend on services what comes in from tax revenue?

They should free themselves from the stupid system that they've locked themselves into.

Any Austrian economist will tell them to do that and there are many out there that can provide advice but they don't want to listen because they prefer to fleece the taxpayer on behalf of the banksters than actually get out of the mess they're in.

[Injin]

Private debt is limited by the ability to make repayments, if you default on a mortgage the bankster takes the house.

Provate debt is limited on one side by the bankers willingness to not collect or extend his terms. He can (for example) roll his debt over and over or reduce the interest rate, even make the interest rate negative for a time etc etc. There is also the other side of the coin - private debt is constrained by the ability of the banker to get his stuff back by some means. For example, the banker might have debt and potential lien on 99% of all the houses in the economy. His practical ability to call in all those debts at once? Zero. People will just en masse tell him to ****** off. (This is one reason why house prices aren't falling and benefits are proving so resilient, it's not possible practially and politically to hoik several million people out on their arses in a short span of time.)

If you default on public debt, what does the bankster take?

A bullet to the forehead.

It is robbery because taxpayers as yet unborn will be asked to pay the interest on this debt being run up by the politicians. The only sensible thing is to reject it and repudiate it. Therefore, Rothbard is right and as he points out it happened in 1840's America and it will have to happen again.

Nah, it'll be printed up. Paid in full. Nominally. The value won't be there, but no one can guarantee market value.

All government actions are fraud and force, but this analysis is just lily livered wandering around the edges. They threaten routinely you with prison for trivia, they kidnap and brainwash your kids, they start wars and financially back genocides but the injustice we should be really focusing on is missed debt repayment to bankers! ******s sake.

[Injin]

The irony is Greece is receiving tens of billions in bailouts and "aid" from other EU countries who are then imposing conditions on them to cut spending (good) and raise taxes (bad). The rises in tax are going to pay off the banksters.

They're essentially caught in a trap. The higher taxes mean they can kiss goodbye to any sort of economic growth but the bankster will get paid, until the next crisis.

Why don't they just repudiate the debt, leave the eurozone and only spend on services what comes in from tax revenue?

because if they try they wil be murdered in their sleep.

They should free themselves from the stupid system that they've locked themselves into.

Can't without superior firepower.

Any Austrian economist will tell them to do that and there are many out there that can provide advice but they don't want to listen because they prefer to fleece the taxpayer on behalf of the banksters than actually get out of the mess they're in.

he'd better be telling them from inside a bunker.

[punter]

Provate debt is limited on one side by the bankers willingness to not collect or extend his terms. He can (for example) roll his debt over and over or reduce the interest rate, even make the interest rate negative for a time etc etc. There is also the other side of the coin - private debt is constrained by the ability of the banker to get his stuff back by some means. For example, the banker might have debt and potential lien on 99% of all the houses in the economy. His practical ability to call in all those debts at once? Zero. People will just en masse tell him to ****** off. (This is one reason why house prices aren't falling and benefits are proving so resilient, it's not possible practially and politically to hoik several million people out on their arses in a short span of time.)

A bullet to the forehead.

Nah, it'll be printed up. Paid in full. Nominally. The value won't be there, but no one can guarantee market value.

All government actions are fraud and force, but this analysis is just lily livered wandering around the edges. They threaten routinely you with prison for trivia, they kidnap and brainwash your kids, they start wars and financially back genocides but the injustice we should be really focusing on is missed debt repayment to bankers! ******s sake.

99% of people won't be thrown out their homes because most borrowers are responsible and only take on what they can afford to repay, therefore it is limited by the frugality of the borrower and the lender extending the credit largely based on his ability to repay. A lender is not going to extend a large loan to someone who is unemployed for example.

Only governments are irresponsible borrowers and public creditors- along with the central bank - seem happy to go along with it.

If a banker decides to make the foolish transaction of extending an unsecured £50,000 loan to someone who is unemployed he should then be prepared to take the hit when the repayments dont happen so the public creditors should be able to take the hit when the interest payments on the public debt consume virtually the entire budget.

And as Rothbard points out if they print it up and pay it back then it will lead to massive inflation and debasement of the currency, that's what the Weimar Repubic did.

There is no way out but to repudiate it. Morally it is the right thing to do. Legally, it is difficult to get out of the contract but Parliament is sovereign and all that.

[punter]

because if they try they wil be murdered in their sleep.

Can't without superior firepower.

he'd better be telling them from inside a bunker.

You really think the bankers will take military action against Greece if they said we're not paying this debt back, sod off?

And us?

And the biggest debtor of all, America?

How they going to do that?

I think it's the other way around. You use the military - and the prison - to threaten them.

Edited January 8, 2013 by punter

[Injin]

You really think the bankers will take military action against Greece if they said we're not paying this debt back, sod off?

No,l i think the individual politicians will be killed. No need to invade a country if none of it's leaders will point out the obvious.

And us?

And the biggest debtor of all, America?

How they going to do that?

I think it's the other way around. You use the military - and the prison - to threaten them.

Comical.

It's just numbers on a screen, payable by a 5 year old with an email account. Why do you think no one mentions this rather obvious fact on CNN?

[Injin]

99% of people won't be thrown out their homes because most borrowers are responsible and only take on what they can afford to repay, therefore it is limited by the frugality of the borrower and the lender extending the credit largely based on his ability to repay. A lender is not going to extend a large loan to someone who is unemployed for example.

Well, leaving aside the fact that banks don't lend money, they extend credit, this is still bilge. The failure rate is always at least equal to the interest rate. (the purpose of interest rates is to cause failure to repay, after all.

Only governments are irresponsible borrowers and public creditors- along with the central bank - seem happy to go along with it.

Again, no borrowing has occured, that isn't how the current system works. The state owns everything, so ofc it's happy to carry on pretending as long as it's bills are paid on time.

If a banker decides to make the foolish transaction of extending an unsecured £50,000 loan to someone who is unemployed he should then be prepared to take the hit when the repayments dont happen so the public creditors should be able to take the hit when the interest payments on the public debt consume virtually the entire budget.

How? The state (according to how the concept works) is both parties in the deal.

And as Rothbard points out if they print it up and pay it back then it will lead to massive inflation and debasement of the currency, that's what the Weimar Repubic did.

And so what? Bankers get paid what they are owed, the state continues - the population are ******ed but neither the state nor the bankers care.

There is no way out but to repudiate it. Morally it is the right thing to do. Legally, it is difficult to get out of the contract but Parliament is sovereign and all that.

They started printing in 1929. They printed through two world wars, umpteen recessions and the new season of barney the dinosaur. They aren't going to stop now just because of some moral argument.

You must understand the people who make up the government don't give a toss as long as they themselves are making out ok.

[Game_Over]

Well, leaving aside the fact that banks don't lend money, they extend credit, this is still bilge. The failure rate is always at least equal to the interest rate. (the purpose of interest rates is to cause failure to repay, after all.

Again, no borrowing has occured, that isn't how the current system works. The state owns everything, so ofc it's happy to carry on pretending as long as it's bills are paid on time.

How? The state (according to how the concept works) is both parties in the deal.

And so what? Bankers get paid what they are owed, the state continues - the population are ******ed but neither the state nor the bankers care.

They started printing in 1929. They printed through two world wars, umpteen recessions and the new season of barney the dinosaur. They aren't going to stop now just because of some moral argument.

You must understand the people who make up the government don't give a toss as long as they themselves are making out ok.

Glad to see that at least you are maintaining some sort of intellectual standard and refraining from using the term 'bankster'

Perhaps you could use your vast influence here to persuade people that every time they use the term 'bankster'

it just makes them look like a complete idiot

Cheers.

[Injin]

Glad to see that at least you are maintaining some sort of intellectual standard and refraining from using the term 'bankster'

It's kindof redundant, bankers are all engaged in fraud, there is no need to make a special designation for just some of them.

Perhaps you could use your vast influence here to persuade people that every time they use the term 'bankster'

it just makes them look like a complete idiot

Cheers.

I don't believe I have any influence, nor would I use it that way even if I did.

[(Blizzard)]

By the same argument, government has no right to commit unborn generations to a specific distribution of land.

Forcing future generations to pay interest to government bond holders and banksters is no different from forcing them to pay rent to landlords.

Edit: added 'banksters'

Edited January 8, 2013 by (Blizzard)

[punter]

Well, leaving aside the fact that banks don't lend money, they extend credit, this is still bilge. The failure rate is always at least equal to the interest rate. (the purpose of interest rates is to cause failure to repay, after all.

Again, no borrowing has occured, that isn't how the current system works. The state owns everything, so ofc it's happy to carry on pretending as long as it's bills are paid on time.

How? The state (according to how the concept works) is both parties in the deal.

And so what? Bankers get paid what they are owed, the state continues - the population are ******ed but neither the state nor the bankers care.

They started printing in 1929. They printed through two world wars, umpteen recessions and the new season of barney the dinosaur. They aren't going to stop now just because of some moral argument.

You must understand the people who make up the government don't give a toss as long as they themselves are making out ok.

i dont understand the point you're making. The state owns everything like what? The state doesn't own all its own debt, it issues bonds and investors buy them. True, the banksters are being coerced into buying ever more debt as foreign creditors lessen their own holdings.

You appear to be saying that a government can just print, print and print and there is no causation of this money printing, no bubbles like the housing market, no collapse of the banking institutions which we saw in 2008, no, the state can just print and there's no ill effects. We all some how get richer.

The U.S came off the gold standard in 1933 and shut the gold window under Nixon. That's when the debt levels started to expand rapidly and just because things haven't collapsed or we've not had another prolonged depression (I believe we're in one) doesn't mean it won't happen.

The moral argument is sound and when people realise what the government has done to their money, either through inflation, higher taxation or decreased living standards which are inevitable then it will become a more popular idea and as the time approaches that the government cannot pay all its bills - the day of reckoning if you will - and its entire budget is consumed by interest payments or nearly entirely consumed then the argument will likely be made and the chance of it happening that much greater. I do believe it's necessary and at some point will HAVE to be done, like it was done in 1840's America as Rothbard points out.

It's true that banksters and the politicians have been getting away with expanding credit and levels of debt for a long time and wasting that money on pet projects but it doesn't mean the collapse wont happen or the day of reckoning won't come. You seem to be under the illusion that it won't come and things will continue as they are, that there is no ill effect of all the money printing and that these effects won't be felt or noticed. I think you're dead wrong and it's very similar to the "house prices will rise forever" mantra that we saw throughout bubble mania.

[punter]

No,l i think the individual politicians will be killed. No need to invade a country if none of it's leaders will point out the obvious.

Comical.

It's just numbers on a screen, payable by a 5 year old with an email account. Why do you think no one mentions this rather obvious fact on CNN?

So you think the banksters will kill the politicians if they tried to renegotiate the terms of their debt, something that individuals do every day?

I think that's highly unlikely and I think it's the other way around if the banksters and creditors don't comply with the demands that are made when nearly the entire budget becomes consumed by interest payments and there's no money left for the fame social welfare programs.

And the national debt isn't just numbers on a screen which the Fed can just print up and pay off to the creditors of the US or indeed the UK, doing that will have dire inflationary effects on the currency as the Weimar Republic found out.

So you're ignoring history again.

[South Lorne]

...definitely from the school of Gordo Clown....

[Injin]

i dont understand the point you're making. The state owns everything like what? The state doesn't own all its own debt, it issues bonds and investors buy them. True, the banksters are being coerced into buying ever more debt as foreign creditors lessen their own holdings.

The state owns everything. It owns the people, the land, the debt, everything. (Within it's own borders, ofc) that's what statism is, the ownership of everything by the state.

You appear to be saying that a government can just print, print and print and there is no causation of this money printing, no bubbles like the housing market, no collapse of the banking institutions which we saw in 2008, no, the state can just print and there's no ill effects. We all some how get richer.

Not at all. it will completely ****** the economy. The people who run the government don't care as long as they personally are ok. Same goes for bankers.

The U.S came off the gold standard in 1933 and shut the gold window under Nixon. That's when the debt levels started to expand rapidly and just because things haven't collapsed or we've not had another prolonged depression (I believe we're in one) doesn't mean it won't happen.

I agree it will happen. You seem to think they give a shit about you or anyone else. They don't.

The moral argument is sound and when people realise what the government has done to their money, either through inflation, higher taxation or decreased living standards which are inevitable then it will become a more popular idea and as the time approaches that the government cannot pay all its bills - the day of reckoning if you will - and its entire budget is consumed by interest payments or nearly entirely consumed then the argument will likely be made and the chance of it happening that much greater. I do believe it's necessary and at some point will HAVE to be done, like it was done in 1840's America as Rothbard points out.

Balls. Governments of the world routinely massacre both their own and other peoples by the million and the general population still hasn't put two and two together morally. (for some decent reasons why this might be the case, see Stephan molyneuxs stuff.)

It's true that banksters and the politicians have been getting away with expanding credit and levels of debt for a long time and wasting that money on pet projects but it doesn't mean the collapse wont happen or the day of reckoning won't come. You seem to be under the illusion that it won't come and things will continue as they are, that there is no ill effect of all the money printing and that these effects won't be felt or noticed. I think you're dead wrong and it's very similar to the "house prices will rise forever" mantra that we saw throughout bubble mania.

The only way that paper money periods have ever ended is with the army on the streets and utter chaos economically and socially. No clue why you think this one will be different. They always print to oblivion. Every single time.

At no point did I say it will work. I just said it's what they will do and they don't give a shit about the harm it will cause.

[Injin]

So you think the banksters will kill the politicians if they tried to renegotiate the terms of their debt, something that individuals do every day?

Would you kill someone for a billion pounds?

I think that's highly unlikely and I think it's the other way around if the banksters and creditors don't comply with the demands that are made when nearly the entire budget becomes consumed by interest payments and there's no money left for the fame social welfare programs.

Then the poor people starve, politicians and bankers are fine. Why would they care?

And the national debt isn't just numbers on a screen which the Fed can just print up and pay off to the creditors of the US or indeed the UK, doing that will have dire inflationary effects on the currency as the Weimar Republic found out.

So you're ignoring history again.

The consequences don't accrue to the people who devalue the currency, except right at the very end of the cycle. They print, everyone else pays.

[Traktion]

By the same argument, government has no right to commit unborn generations to a specific distribution of land.

Forcing future generations to pay interest to government bond holders and banksters is no different from forcing them to pay rent to landlords.

Edit: added 'banksters'

Is that just for Game_Over?

The government has no right to anything, without explicit agreement from the individuals involved (hand waving about invisible 'social contracts' doesn't cut it).

[Bloo Loo]

@ Injin.

Private debt IS limited by the ability to repay.

However, when the bankers decision to collect the default is affected by the free issue of taxpayers money, issued against the looting of resources from taxpayers, that mechanism breaks down.

Defaulting on the Public debt would cease these private lending bail outs and the mechanism would return.

Thats the point Rothbard was making....money printing upsets the whole system.

[erranta]

The state owns everything. It owns the people, the land, the debt, everything. (Within it's own borders, ofc) that's what statism is, the ownership of everything by the state.

Not at all. it will completely ****** the economy. The people who run the government don't care as long as they personally are ok. Same goes for bankers.

I agree it will happen. You seem to think they give a shit about you or anyone else. They don't.

Balls. Governments of the world routinely massacre both their own and other peoples by the million and the general population still hasn't put two and two together morally. (for some decent reasons why this might be the case, see Stephan molyneuxs stuff.)

The only way that paper money periods have ever ended is with the army on the streets and utter chaos economically and socially. No clue why you think this one will be different. They always print to oblivion. Every single time.

At no point did I say it will work. I just said it's what they will do and they don't give a shit about the harm it will cause.

Yep

When Kennedy tried to reverse the Evil going on - they slaughtered him

(He was from an echelon illuminati/Elite USA family strain too)

[Bloo Loo]

Yep

When Kennedy tried to reverse the Evil going on - they slaughtered him

(He was from an echelon illuminati/Elite USA family strain too)

8ollox...Obama cried about the Children killed by the loon.

[wonderpup]

Private debt IS limited by the ability to repay.

No- it's limited by the supply of suckers who can be persuaded to purchase the financial products derived from that debt. This is why we end up with huge stacks of debt far in excess of the ability of the original borrower to ever repay;

Helga is the proprietor of a bar.

She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

Helga keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans).

Word gets around about Helga’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Helga’s bar. Soon she has the largest sales volume for any bar in town.

By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Helga’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Helga’s borrowing limit.

He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.These “securities” then are bundled and traded on international securities markets.

Naive investors don’t really understand that the securities being sold to them as “AA” “Secured Bonds” really are debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Helga’s bar.

He so informs Helga.

Helga then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Helga cannot fulfil her loan obligations she is forced into bankruptcy.

The bar closes and Helga’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Helga’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Helga’s bar.

Given enough layers of complexity the ability to pay is a mere footnote in the legend, easily overlooked in the rush for easy money.

Edited January 9, 2013 by wonderpup

[erranta]

8ollox...Obama cried about the Children killed by the loon.

Kennedy already had Gold coins minted up to take the yanks back into a Gold standard

The zionista controllers of New York / Washington decided they were having none of it.

"Finally, in 1965, we sent combat troops to prop-up South Vietnam."

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They poison all our crop-land as we speak

http://www.occupymon...RoundUp/dioxin/

Apart from the Da Nang cleanup, the United States has declined to acknowledge liability for the illnesses and other health effects Agent Orange has inflicted on the Vietnamese since the war ended. Proving that a particular person's illness is caused by dioxin can be difficult.

But the United States has accepted that dioxin is toxic—American veterans who served in Vietnam during the Agent Orange period are entitled to medical treatment, without having to prove a specific link between an illness and exposure. No such benefits extend to the Vietnamese civilians who live amidst Agent Orange's pervasive residue.

Vietnam - a test run for population reductions?

Edited January 9, 2013 by erranta

[Bloo Loo]

No- it's limited by the supply of suckers who can be persuaded to purchase the financial products derived from that debt. This is why we end up with huge stacks of debt far in excess of the ability of the original borrower to ever repay;

Given enough layers of complexity the ability to pay is a mere footnote in the legend, easily overlooked in the rush for easy money.

I think your example perfectly illustrates A..malinvestment and B...a control on private lending with the ability to pay.