Posted on 11/02/2009 8:14:07 PM PST by blam
The Government Will Default On Its Debts
Economics / Great Depression II
Nov 02, 2009 - 08:01 AM
By: Gary_North
The governments of every major nation are going to default on their debts. There are two relevant questions: (1) How? (2) When?
Establishments around the world all deny this. They have gained power and wealth by means of the expansion of government. They have justified their success by insisting that the government-business alliance is the only way to establish economic growth and economic security for the masses. This claim rests on a more fundamental claim, namely, that an unhampered free market is destructive of economic stability and will inevitably lead to economic depression.
The Establishments are universally Keynesian. John Maynard Keynes' book, The General Theory of Employment, Interest, and Money, was published in 1936. It defended in theory what all Western governments had been doing in practice for at least five years, namely, running huge deficits. Keynes became as close to an academic high priest as any modern scholar ever has. He was the apostle of national government debt. His ideas today are more influential than they were at his death in 1946. We live in the age of Keynes.
I can think of only one major Establishment figure who has broken with the Establishment on the question of the great default: Peter G. Peterson, who was the chairman of the Council on Foreign Relations until 2007. He now runs the Peter G. Peterson Foundation, which focuses on the looming bankruptcy of the U.S. government. More than any other person of influence, he has warned of the bankruptcy of the Medicare/Social Security programs and their equivalents in the West.
Peterson a decade ago said that he had spoken with the major leaders of the West about the impossibility of funding these social programs. They all told him the same thing: "I will not be around at that time." In short, kick the can.
[snip]
And through it all, Pelosi will keep smiling—like the Joker.
what will happen if the world gov’ts default? I am a beginner at the high level financial stuff.
We were bankrupt long ago. Those that got us in this situation should be held for treason and strung up.
Easy.
We go to war. All out war. Then there afterward the spoils are divided among the victors, and then we start to recover. Worse case scenario mind you.
They have their safe havens somewhere. They are like the Nazis with their escape plans.
Haven’t trusted Gary North since Y2K.
“We were bankrupt long ago. Those that got us in this situation should be held for treason and strung up.”
- Well that would be Pelosi, Reid and Obama as the main catalysts which sped up this destructive reaction.
As for long ago, well I would pin that one on Carter. And to a lesser extent, Clinton and Barney Frank.
Funny how they all seem to be Democrats, eh?
Gah..is he still around?? Memo to me: read the author before the article.
And like the Nazis, they can run but they can't hide.
We are in the midst of that war already. It is a moral war, the death is that of those not born — I do not mean abortions, although abortions are part of it — I mean those families that never form and never fully form — the West has reached what seems a dead end.
A war of killing seems unnecessary. Why would there be one?
From the article:
The voters never learn. Congress never learns.
The coin of the political realm is the promise. Not money, not power: the promise. Politics sometimes looks like prostitution, with money at the center. This is an illusion. The voters do not come to Congress demanding money. They demand faithfulness. Congress is to the voters what a philanderer is to a mistress. He may shower her with presents, but the presents have meaning to her only because of the promise. "I plan to divorce my wife. It's just a matter of working out the details." She likes the presents, but she believes the promise: "You can trust me. We'll grow old together." She thinks the presents are forever.
He borrows the money to buy her the presents. When interest rates rise, she will find out just how reliable his promises have been.
This is the heart of modern democracy. Politicians promise undying faithfulness. Voters believe them.
So whose fault is it? Have we learned the lesson this time or should we do it again?,p>
*A war of killing seems unnecessary. Why would there be one?*
Was it necessary in 1914?
Was it necessary in 1939?
Whatever reasons one can ponder will be supplied. Just like the West strung Hitler along, so too do we string along the Muslims. After the nuclear Pearl Harbor, we’ll tear down and rebuilt the world order.
Later, rinse, repeat.
Wars cost money, lots of money. Not disputing your point, just ask yourself how it’s going to be funded.
Gary North? Nope. Pass.
Yep..That's how it's been for thousands of years. Nothing has changed. Get ready. It won't be pretty.
The US War against Islam seems more to parallel the War against the Indians — I’m not the first to notice that, Bibi Netanyahu’s Dad seems to have remarked on it.
Islam can’t raise armies in our era. Terror forces, not armies.
If and when China invades and wins against Viet Nam, I might reconsider.
I won’t participate. To hell with them.
Because EVIL is alive and well.
Past events tell us that when the currency fails nobody wants it any more if there is a better alternative. If you look at the 3rd world, when their local currencies are driven into the ground sellers want something else - US dollars currently, or Euros, or anything else that still has value. If the foreign currency is not available then barter becomes popular: "you give me one chicken and I will give you two tin pots."
This scenario will be probably applicable in case of global financial troubles. If leading world currencies are no longer accepted by sellers (due, for example, to abuse they suffer by reckless printing of money) then sellers won't take your dollars in exchange for their perfectly good oil, ore, products and services.
If we live to see that, then barter is practically the only answer. There is not enough physical gold on the planet to service the global trade. Then if the USA wants to buy a batch of tin pots from China, the seller will want in return also something tangible, something that has a reasonably stable value - like aluminum pots, or raw copper. If the USA doesn't have that, or anything else, then there is no sale. China will keep the products, and the US consumer will have to make his own pot, or repair an old one.
Barter will be undeniably bad for all developed nations because those nations largely export intangible things - promises, financial services, intellectual property. These products will be greatly devalued because, literally, you can't eat them, and only things that can be measured, counted and used will be accepted for barter. Those subprime real estate mortgages are a good example of promises; they were valued at $100 one day and as $0.01 another day - that's why they are worthless as money. A ton of nickel ore, on the other hand, is still as valuable today as a year ago; perhaps today it costs even more because natural resources are finite.
To summarize, if the global financial crash happens then the USA, as well as every other country on the planet, will have to go back to basics and start to produce stuff that other people want. Products of agriculture probably would be on top of that list, considering the climate. Industry, on the other hand, is probably beyond saving - do we even have technologists still alive who know how to build factories? Recent university graduates probably haven't even seen a modern electronic manufacturing plant unless they visited Asia.
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