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]
BUMP!
It's not that the subject is not worth discussing.
It's just that we need to fingd a more credible person than Gary North to lead the discussion.
This is the clearest explanation of how economic implosion >>>> war that I have read.
Thank you.
ping for later
PS - you post really interesting stuff.
There have been inflations - not "hyper", but doublings of the price level in a short span of a few years - caused by wars. But not the other way around. Ever. Except for that Weimer Republic thingy.... where people had to carry cash in wheelbarrows to buy groceries. I think after that, the not "hyperinflation" lead to the Third Reich thingy and then that guy Hitler did some stuff and a bunch of countries got involved.... not sure it was a "war-war" though.
In all fairness the reparations Germany owed after WWI contributed greatly to the hyper-inflation of the Weimer Republic. This lead to a distrust of the government and lead to the rise of the Nazis and Hitler's promises to right the wrongs against the Fatherland; WWII was the result.
So wars have helped cause hyperinflation... and hyperinflation has helpwed cause war.
Thanks.
There is no way something as big as the welfare state can collapse without violence, given that our society is armed to the teeth, made up of people who don't like each other much, and living in close proximity.
Weimer Germany? Almost every standard of history mentions the hyperinflation as one of the main levers that Hitler used to rise to power. Once elected war was inevitable.
Am I missing something?
If you believe this guys story why bother paying off all your debt? It will be erased in either hyper-inflation of bank failure. Far better to use whatever means you have to get a safe location, food and weapons. Those are the basics. No point in having food without guns, or maybe even food and guns if you are in the middle of somewhere horrible like LA. It’s not gonna help. You need to be rooted in a remote community where you know and trust your neighbors.
The hyperinflation in Germany occurred in 1922 to 1924. It was caused by French occupation of the Ruhr to exact reparation payments in kind when Germany claimed it could not pay them during the recession of 1922. The German government called for a general strike to resist the occupation and funded it with printed money. The inflation was over by the middle of the 20s, a new sound mark was introduced and accepted by the populace, and retained its value. There was no inflation in Germany between the mid 20s and the Nazi's rise to power in 1933.
Instead there was *deflation* and high unemployment. The conservative and centrist parties of the late 20s and early 30s were strongly anti inflationist and practiced rigorous deflationary policies to defend the exchange rate, ignoring their effect on unemployment. Far from inflationary finance causing the Nazi takeover, record unemployment caused by deflationary policies were one of its main drivers.
This fact is conveniently ignored by advocates of deflationary policies, high interest rates to maintain currency strength, a gold standard, etc. They are flat lying about the history to defend their preferred pet policies.
T-Bills are backed by Federal land?
Exactly what I was thinking. These are strange times and I’m not convinced that the best idea is to pay everything off. I am getting ready to buy a large safe. I really wish I had some land .
“Haven’t trusted Gary North since Y2K.”
Agreed. He makes his living from selling fear. Come to think of it, fear seems to be a most marketable commodity these days. It must be that it gives people something to think about other than their everyday, humdrum existence. I’m getting pretty tired of the latest panic of the week.
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