There are three things going on, each one more than likely to cause (hyper)inflation by itself.
1. Who will pick up the tab for tens of trillions of debt?
And even more important: who will cover the losses of tens of millions of useless derivates? Ever heard the words: “toxic assets”? No matter what they call them: Auction rate securities; credit default swaps; collateral debt obligations; mortgage backed securities; or any other fictitious useless name only meant to confuse, its only paper on paper. It holds very little or no value.
“Normal” debt can be repaid; even the worst and biggest debt mountain in the history of mankind – that of today - as much as 200-300-400% or 500% of GDP can be repaid. And most of the debt is borrowed from other indebted fuck ups. Our governments either borrow from each other, or they give money to banks and then the governments borrow the same cash from the same banks in order to increase the debt. In the heart of it all is you (!): the taxpayer.
For a layman this is very confusing, and I haft to admit that I to sometimes get confused, but what you need to know is:
a) The entire system is built upon debt so if no-one borrows and spend the system defaults automatically.
b) By borrowing, spending, and printing money they keep GDP up. And this is a total fraud! GDP is totally fictitious, totally arbitrary, and so easy to manipulate that it should be completely ignored. But for media, pundits and The Powers That Be the scam of GDP is the magic trick used to sell idiocies worthy of the craziest of inmates of a 1920’s asylum built on Indian burial grounds.
c) “Normal” debt goes around in circles from banks to other banks, from banks to government, from government to banks, from banks to financial institutes, from financial institutes to governments and so on in an endless circle.
This far mainstream cornflake economists and other enemies of the people have it right, debt isn´t so bad (“Bad” here in comparison with other problems and problems in combination with debt.).
If only looking at the “real” public debt things aren´t as bad as to give us a reason to talk about financial Armageddon. But this isn´t the only problem and to the “real” debt we need to ad personal and corporate debt plus the debt that comes with “toxic assets”.
There are countless of names for “toxic assets”, I usually only call them “derivatives”, as a collective name. This isn´t really correct, but the result of all of these scams is the same so I don´t see any problem with giving all of it a unison name and title. You can call it crap, we´re-all-fucked assets or loony accounting if you want. It actually doesn’t matter.
Many cornflake economists will demand that you call these things with their correct name and/or argue that there are differences, but they are either lying or have no clue what they´re talking about. These debt-obligations or “derivatives” are all the same and should be bunched together.
What these ‘derivatives’ are is paper on paper, its debt upon debt, its borrowed money borrowed on borrowed money that in turn is borrowed upon mortgages.
Think of it like this: you borrow $100 from your friend and you give him an IOU (I owe you) in exchange. This friend then sells the IOU to his neighbor, the neighbor in turn reforms the IOU to a regular loan with interest to his friends. Those friends transform their loans into bets on commodities - essentially betting on the future value of oil, rice, steel and so forth. The entire system generates thousands of dollars, maybe even tens of thousands, all built upon the initial $100. This system sort of works as long as long as there is lots of money in the system that can change hands (which is one of the reasons bail-outs go to banks and financial institutes) and it works as long as people and banks involved don´t go bankrupt (which is the second reasons bail-outs go to banks and financial institutes).
No one knows how much of these derivatives there are, but a reasonable assumption is that the “value” is in the vicinity of $100 trillion dollars. But almost nothing of it actually exists in the real world. There’s NO VALUE.
So if we´re going into a Depression, or another recession for that matter, with such a debt-scam hanging over us; do you really think there´s a way out? Can we repay any of these fraudulent idiocy-piles of Derivatives?
There is only one way governments seemingly could repay both the “real” debt and these shameful made-belief derivatives; through the printing press!
2. That warm feeling of pee dripping down your leg
To a certain degree you need to excuse politicians and their henchmen. They live in a world where their entire existence is dependent on votes. If they don´t collect enough votes they will lose some or all of their power and, horrifically for electable frauds, they may even lose their seats and so their income.
Most professional politicians’ don´t know of anything else then to make up stories to keep their constituencies happy while they rob the same voters through taxation. In a truly capitalist world most politicians would be unemployed or work with the most degrading tasks imaginable. They are an utter useless bunch of misfits, and deep down they know it.
In this world of ‘getting votes or die’ they need to lie, they need to come up with false-flag attacks, they need to sleep with the enemy, they need to conjure up new problems that they themselves can fix, they need to trick, dupe, bamboozle and they need to hide, cover up and sweep things under the carpet. If they don´t, another politician that do will win the votes.
In essence; what you vote for is what you get.
And looking at it this way, which I often do, you are to blame, and whatever you get for it you deserve. So the millions of people soon to die from starvation, wars and socialist solutions, they die because you don´t understand, because you don´t read, because you don´t know how things work. And frankly, you don´t care that you´re ignoramus either. Yeah, have another beer; I think American Idol is on…
Anyway, in this world the ‘easy fix’ is the way to go.
Anytime a politician can think of a program, a tax, a law or anything of the sort that sound really great and can give them votes, that’s what they´ll do. This is also, coincidently, why so many of our benevolent leaders are advocates of socialism.
Socialism sounds really, really good. Feed the poor, help the young, more cash to the elderly, jobs for all, free education and cute kittens to everyone. Socialism comes with heart, with feelings, and the idea is sold with a pink shimmering sky. To a person rather watching TV and not caring so much, socialism is very easy to take to heart. No need to think, no need to argue or understand things, all you need to know is that the poor and the working class need more stuff and the ones that will pay for it are an elusive group called “the rich”.
But no ‘easy fix’ is as fantastic as inflation!
With inflation you get more stacks of money! Thousands, tens of thousands, millions (!) of newly, freshly printed notes in piles. Surely all of that cash comes with a piece of heaven because suddenly loans can be paid off, you can increase public salaries, and as a bonus taxation increases without the need for another tax legislation. For the elitist sphere there is even an additional bonus; they get the cash first i.e. inflation don´t hit them as hard as it will hit regular Joes’.
Inflation benefits the elite and is essentially a way of making the rich richer and the poor poorer.
In the long run inflation will increase all the problems it was meant to solve. If they print money to save banks, then the banks will only build another house of cards. If they print money to reduce unemployment prices will go up and increase the costs for the employer which means more bankruptcies and so more unemployed. And, worst of all, if they print to save defaulting systems, as the derivatives-scam mentioned above, all they do is inflate the bubble which in turn leads to an even bigger bang when it all crashes.
But you cannot disregard the psychological effect more cash has on people and societies. This is what the entire premise is built on; a psychological effect. And the effect is…
…more money is spent!
Financial institutes, banks and governments that get the inflationary cash first will spend some or all of it. This means that prices on stocks and commodities will go up. Stock markets seem to be in a recovery! House prices don´t fall as much or may even go up. All of it sends out a signal that we´re going forward, that the crisis is over. They may also use some of that cash to increase salaries or hand out bonuses that certain people will use to buy more stuff. All in all “value”, “prices” and (OF COURSE!!) GDP will go up.
The magic of inflation have come to the rescue!
In the next step and during the height of this scam they will encourage the populace to…
…take another mortgage on their house and shop ‘til they drop!
Loans aren´t bad, they are great, you can buy another car, or another TV, and don´t you need more stuff? Cameras, phones, shoes, perfume, trips, champagne, wine, your own midget for tossing at parties, a new set of plates, hookers, hamburgers, beer and stuff, lots, and lots and lots of stuff! Buy now! Borrow, spend, it’s all good.
As long as they can keep borrowing, and keep you borrowing at the same time as they print money and at the same time as they tap into, or totally empty, future obligations such as pensions or Medicare our masters of despair can play Santa’s’. The problem arises when we get to the end of the line where debt ceilings are reached and the vault of future obligations is totally empty. Belgium, for example, has 400% of GDP in future debt (not showing up in most statistics) since they don´t have any money left for pensioners. They took that money and then they borrowed upon it several times, so not only is the initial cash gone, they´ve also borrowed upon that cash that don´t exist! The same can be said for France, Italy, UK and the U.S. Pretty much every country out there have done the same.
Today, however, they cannot do this anymore. Most, or rather all countries have reached the limit. The only thing left is the printing press and it’s such a fantastic thing…
3. No one wants to be the last out on the field
When you inflate the money supply you can, initially, use some of that cash to pay off debt. It takes a little while before the scam is detected by markets and the people. A brief moment whereas, especially if you´re first, they can use freshly printed piles of notes to pay off loan givers.
Everyone high up knows that printing money out of thin air creates inflation, even if they don´t want you to know about it. But if they can do it first they can, temporarily, trick other governments, banks and countries (their loan givers) that the money is good. In normal times this isn´t so bad since they have an endless supply of treasuries (you!) to pay for it. And if you aren´t enough they can always mortgage your kids and grandkids. Taxes always come in.
But what if it’s not normal times? What if the Debt Mountains are so huge and all that can be done has been done?
This is when ‘first to the printing press’ really matters!
He who prints first seemingly loses the least!
Soon, very soon, the cartel they have will crumble. You see when our benevolent leaders went out on their epic adventure of Quantitative Easing (QE) – which is another way of saying: “Print money” - and bail-outs they all did it at the same time. It was so important that they all did so, because if not the scam would show as certain currencies will drop in value against other currencies. If all of them print and borrow and spend it sort of looks as if the status que remains. The relationship between currencies holds at about the same level as before. In essence they wanted to hide inflation and the real effects.
Seldom have our benevolent leaders been so cooperative with each other. All of them dropped rates, all of them printed billions, all of them borrowed billions, all of them spent billions. Injecting cash everywhere, inflating stock markets, keeping prices up. This was the biggest robbery of all time, and almost none of you out there understand it.
But here’s the thing; it didn´t work.
They didn´t fix the fundamental problems and they didn´t address the regulations, laws and taxes at fault. The entire system that was about to topple over into a depression is still there, now partly painted over and hidden under the rug. But still there.
All they really did was increase inflation and in-debt us further, but without fixing what was wrong.
In a situation where things are about to crash again, they cannot do the same thing. They will most likely try, or at least pretend to try again. But behind the curtain I can assure you that they are looking for a way out and the only way seemingly available is to press those buttons before anyone else does…
More than likely all of these scenarios will come into play and so inflation will go over into HyperInflation. If you thought war, an overzealous government and the European Union was bad, you´ve seen nothing yet. Hyperinflation is the worst thing imaginable, and on a global scale it will end life as we know it. You can buy gold and silver and run to the hills, but truth to be told; you, me, all of us, are truly, utterly, and magnificently fucked beyond comprehension.
IF this scenario plays out, as I believe it will, our worst nightmares will come true.
I for one cannot wait; this is going to be the entertainment of a lifetime!