Recently I published a forecast for the next decade. Always a dangerous thing to do since I have two balls and neither are crystal. That article elicited a lot of comments. One in particular I believe is worth fleshing out an answer to.
Although you generally do a great job of explaining cause and effect relationships, one thing I didn’t quite understand is why debt forgiveness will, in your view, be the biggest theft from the middle class. Some economists would argue that if that debt is in your own currency then it’s no big deal. Other than laughing at said economists, why do you think public debt forgiveness is a problem?
Interestingly the reader never questioned why we would get debt forgiveness. Many others have and still do so let’s cover why first then cover how this will be a theft second. My reasoning for why is quite simple. Understanding basic math and understanding human psychology would lead you to this conclusion but we don’t actually need either. The pointy shoes over at the IMF and World Economic Forum are not hiding their intentions.
These criminals are calling it “The World Debt Reset Program” with an “inclusive recovery”.
But they aren’t doing it alone.
Like a pushup bra on an octogenarian, these sad and miserable ideas have a lot of support behind them. They need it because – stand on their own – these ideas cannot. Firstly we can see that the willingness to simply add unconscionable dollops of debt to an already maxed out system rages on unabated.
What’s a trillion between friends heh?
The thing with borrowing unconscionable amounts of money is that…well you’re meant to pay it back. Lenders will recoil from lending if they believe the borrower has no intention of or may have an inability to pay back said borrowing. And this is why when aggregate borrowing exceeds aggregate saving (remember for every dollar borrowed theoretically there is a dollar of savings being deployed) then the cost of that capital borrowed rises until more savings are brought out to take advantage of the higher rates offered. Simultaneously, of course, the level of borrowing tapers because many borrowers can’t afford the higher cost of capital.
The issue today is that as governments have been borrowing with the enthusiasm of a Labrador puppy given a ball, they’ve needed to suppress real rates, because heaven forbid they’d have to pay market rates on balance sheets that look like they’ve taken a triple shot of viagra while snorting coke and mainlining MDMA. Real rates would initiate immediate cardiac arrest.
So here we are…with our ruling elite having wracked up debts that are by any measure – unpayable. The debt Rubicon has been crossed.
Here I turn to my friend the ever sharp Tim Price to explain further…
After four decades of ever-larger crises and bailouts, and lower interest rates (the 1987 mini-Crash; the 1998 collapse of Long-Term Capital Management; the dotcom bust of the early 2000s), we now seem to have reached the endgame. US interest rates, and indeed rates throughout the Western economies, can’t realistically go much lower. (Admittedly, at the time of writing, some 30% of all sovereign bond yields, along with several euro zone countries’ bank deposit rates, had turned negative. Like the White Queen in Alice through the Looking Glass, we must now all believe as many as six impossible things before breakfast.) Meanwhile the mountain of debt – borrowings by governments, corporations and households – has just kept on getting bigger. McKinsey estimate that since 2007, far from deleveraging, the world’s major economies have added $57 trillion to their combined debt loads – raising their debt to GDP ratios by some 17% in the process.A change in the weather – Tim Price (Price Value Partners) https://www.pricevaluepartners.com/a-change-in-the-weather/
This is why central banks are now the largest participants in the purchase of sovereign debt. There is no functioning bond market. It’s nonsense.
And so this manipulated and wholly laughable cost of capital has affected every asset class on earth. That’s what happens when you screw with the cost of capital. Some asset classes have benefitted and others have been adversely affected.
To make my point, take a look at high yield, otherwise known as “junk”. This, I’ll remind you, is the sort of stuff you buy if you’ve a penchant for BDSM and are one of those weirdos who looks at whips, chains and thinks…ooh goody excruciating pain – gimme some.
To be fair there are times to buy junk bonds and there are times not to. Which of those times are we in?
Again I turn to Tim for an answer.
The global bond market is currently worth well over $70 trillion. The chances are you have some exposure to that $70+ trillion of debt. If you don’t, your pension fund probably does. Now ask yourself a question. After an explicit policy of suppressing bond yields, and now that global interest rates are down to their lowest levels for 5000 years, do we think bonds are outrageously expensive, or merely hilariously mispriced? A follow-on question: given that the size of the world’s bond markets dwarfs that of the world’s stock markets, what do we think happens to stock prices if and when $70 trillion worth of bond investors decide to head for the exits at once? We are in the process of finding out.
Now what does all of this have to do with the coming theft?
Well see our “leaders” have well and truly backed themselves into a corner. They are at the proverbial end of the rope. What to do?
Enter digital currency. Not only can they use their own incompetence now collapsing around them to try to hoist themselves out of the mess but they can actually create greater control and inflict even more harm.
The theft however isn’t purely subtle in the form of negative interest rates, which punish savers, it is in cancelling their own debts.
Think I’m joking? They’re not even trying to hide it anymore. They are trial ballooning it to the public as I punch this out on my keyboard.
It is time for the European Central Bank to cancel a large portion of the public debt it holds, say more than a hundred economists from across Europe, including Aurore Lalucq, Nicolas Dufrêne, Jézabel Couppey-Soubeyran, and Laurence Scialom.
They must be getting closer to launching this plan since they just dragged out that insufferable git Mario Draghi himself who recently published this in the FT. Feel free to read it in its entirety.
The coronavirus pandemic is a human tragedy of potentially biblical proportions. Many today are living in fear of their lives or mourning their loved ones. The actions being taken by governments to prevent our health systems from being overwhelmed are brave and necessary. They must be supported.
Mid last year I suggested that this fake pandemic and government implemented lockdowns would be used as an excuse to mend all ills such as cancelling debt, repudiating pensions, and myriad government liabilities that we already knew were untenable, and now we have Mario coming out of the gate setting us up for this.
If you’re surprised it’s only because you’ve been too busy on Netflix.
Draghi is of course full of nonsense. The tragedy is indeed of biblical proportions but it is a tragedy brought about 100% as a consequence of governments actions to what is mathematically a bad flu (mortality rate of between 0.03% and 0.05%). Yes the virus is real, yes it kills and if you’ve been an ardent lover of donuts or have some unfortunate ailments you’re at greater risk than Usain Bolt because he’s fit and healthy. But a pandemic this is most assuredly not.
Despite this not being a pandemic, everyone is expected to continue drinking the Kool-Aid, and call it one that justifies all these travesties.
I won’t get into the blathering nonsense Mario continues on with but I will point to these two specific points he makes.
It is already clear that the answer must involve a significant increase in public debt.
And this one.
Much higher public debt levels will become a permanent feature of our economies and will be accompanied by private debt cancellation.
And it is this point that should chill the veins of the hottest blooded reptilians among us. Why?
Because don’t for a minute believe they will cancel your (private) debts without taking your firstborn in payment, directly after extracting your kidneys leaving you in a bathtub of ice.
What might that firstborn look like? Why all your assets of course.
What will you get in return for giving up your assets?
The priority must not only be providing basic income for those who lose their jobs.
Universal Basic Income folks. Bread for the peasants.
Here I turn to Glenn Greenwald, one of the very few independent journalists left, who adeptly describes where we already have come and how much we’ve given up by accepting the technocrats terms.
“Economic inequality could become so severe, wealth concentrated in the hands of so few, that it would contaminate the political realm, where those vast wealth disparities would be replicated, rendering political rights and legal equality illusory. The combination of sustained lockdowns, massive state-mandated transfers of wealth to corporate elites in the name of legislative ‘COVID relief,’ and a radically increased dependence on online activities, has rendered corporate behemoths close to unchallengeable in terms of both economic and political power. None of this reflects free market capitalism, but rather crony capitalism, whereby the power of the state is used to crush small competitors, lavish corporate giants with ever more wealth and power, and turn millions into vassals whose best-case scenario is working multiple jobs at low hourly wages with no benefits, few rights, and even fewer options.”Glenn Greenwald
No, what will be more likely is a canceling of private debts and an “offering” to lease back those assets from the state while being provided the warm comforting blanket of milk, cookies and UBI.
All will be taken care of, no need to worry, just go back to your programmed MSM, dear sheeple.
The lockdowns are designed to destroy the middle class, because it is a broad middle class that holds a significant chunk of economic power. You will notice that the big silicon valley players have benefited massively from the lockdowns and have been ardent champions of “saving lives”. They are not saving lives, but simply capturing market share, and destroying the middle class. The lower socioeconomic class don’t own any assets, so they’ll see it as a win. The middle class, now crippled by lockdowns, and even more deeply indebted, will be partially relieved, and the wealthy, as well as those with a functioning brain, will immediately pack their bags, take their money (what’s left of it) and flee, because no longer will there be any doubt as to where things are headed.
So what to do? Well if we are even half right in the above, then the coming theft will come as a surprise to most. When it does, anything not locked down will flee. Where will it go to? Good question. Everything becomes relative. You’ll be making choices you never thought you’d ever have to make and you’ll be looking at the world with an entirely new set of eyes. I’d suggest looking now, because time is running out and these technocrats have already moved from the planning stage to the marketing stage.
This is going to accelerate both the commodity bull market that’s already begun as well as the extraordinary geopolitical shift of wealth from the West (Europe and North America) to the East (Russia, former CIS, China). Remember a repudiation of debt amounts to an acknowledgement of the issuers insolvency and while it would “solve” the existing problem it would absolutely be the final nail in the coffin for the future creditworthiness of said issuer.
Economist Daniel Lacalle makes a great point on the debt cancellation within the Eurozone.
And does so ignoring that the euro is the only global reserve currency with redenomination risk and that its credibility is maintained only because of the widespread confidence in the euro area’s commitment to repay its debts.
I sincerely wish this wasn’t the case, but then I’m reminded that hope isn’t a strategy, and I will at this point leave you with the immortal words of my favourite mullet wearers – Benjie.
Best of luck