muses of the moment

May 13, 2010

Martenson’s overview of the current crisis

Chris Martenson has an excellent overview of the current economic crisis, debt, gold, and when to sell gold.

Click here. This is a big-picture look at this situation that groovygirl completely agrees with.

The euro zone bailout, unlike its US counterpart, does not create vast quantities of new money out of thin air (as did the MBS purchase program by the Fed) but instead seeks to ‘solve’ a debt problem by creating new debt.  Many people have come to the conclusion that this solves nothing and, worse, it exposes for all to see the Ponzi-like character of the modern debt-based money system. (groovygirl: our current debt-based system has turned “ponzi” because it has expanded too much for the profit from real production (or lack of) to ever create enough to pay back the whole debt.)

The dirty little secret of banking is that they have no interest in seeing the loans they make get paid back. All they want is the interest payments to be made.  (groovygirl: cashflow keeps the Ponzi scheme going, a breakdown in cashflow exposes the Ponzi scheme.) As long as the interest payments are being made, it doesn’t really matter how large the outstanding loan balance is. That just gets rolled over.

And this:

The twin pillars of Keynesianism, official deficits and monetary inflation, are being tried on both sides of the pond but they are not working as they have in the past.  Debt saturation has sapped the ability of either policy to work and, because of this lack of traction, you can be sure that additional financial crises lurk in the shadows ready to pounce.

The odd part in this story to me are how few people, especially finance professionals that should know better, seem to really understand and accept the idea that the game has fundamentally changed.

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