The BIS announced that global debt has exceeded $100 trillion. This is up 40% since 2007 from $70 trillion back then. To put this number in perspective, it amounts to roughly 6 times the size of the U.S. economy. Do you find this odd? Odd that 6 U.S. economies have been “added” to the global system yet business still cannot get any traction so to speak? Please understand that while writing this piece I will not add in the $1.4 quadrillion (with a capital Q) of derivatives which is how all of this debt (and everything else) actually gets levered. The “debt” itself (and currencies) are the original Ponzi scheme. Derivatives are used to “juice” the Ponzi, prolong its life and hide any loose ends that show evidence of the financial system being a Ponzi on top of a Ponzi on top of a Ponzi…and so forth.
My initial thought is that the entire world is now spinning with a debt to GDP ratio of 100% or more, which, if history is any guide at all, is the level where “unpayable” becomes the description. The BIS also said that the world’s equity markets actually shrunk by $3 trillion during this time to $54 trillion over this timeframe. This is also an oddity because the newly piled on debt has not created additional equity either. Why would this be? In the past, if you increased systemic debt you would always see an increase in economic activity which should flow through and eventually create more equity. This has not happened, economic activity nor equity has grown since 2007.
I have an explanation for this that the Keynesian economists will not like, but it is the truth. I even wrote about this “phenomena” in late 2007. It is called “debt saturation.” Debt saturation is the level where adding more debt does not increase economic activity and the law of “diminishing returns” sets in. Debt saturation is the point in time where there are no more potential debtors left because they either cannot or do not want to go further into hoc. It is the level where $1 of new debt creates LESS than $1 of new activity.
Here we are 6-7 years later and it still has not really dawned on our “bus drivers” that this is the case. Maybe they won’t “get it” until the law of “negative returns” takes over? Actually they do get it but have no other choices. This is the point in time where adding $1 of new debt actually decreases economic activity. Theoretically possible but I don’t think probable in the real world as markets will blow up prior to or simultaneous with this point in time.
Let’s however look at this increase in debt from a different angle. One man’s debit is another man’s credit. Or more to the point, “One man’s liability is another man’s asset,” and herein is the problem. All of this additional “debt” has somewhere, somehow become an “asset” – an asset as in a bond that is owned and on the books of someone or some institution and represents “value.” Some of the debt is being carried to “fund” things like your retirement plan at work or in the Social Security “lock box.” Some of the debt was used to purchase real estate which you “count” as part of your net worth. This one needs a little explaining. You just saw your neighbor sell his house down the street for X amount of dollars so your house must be “worth” X amount of dollars also, right? Some of this debt went to buy cars (a depreciating asset) while other debt went to pay for college educations or even used to just maintain lifestyles. The problem with this is that your house isn’t really worth what you think it is and your lifestyle, while pretty cool right now, isn’t really worth as much and will not last once the credit valves gets shut off.
The greatest majority of increased debt however was used by governments to “roll over” and pay off past debt and yes, the BULK of this debt went into the banking system to “save” it. You see, much of the “too much debt” became bad debt in 2007 and 2008. Some of it was liquidated but much of it was not and now resides “inside” of the central banks. The banking system offloaded much of this old, bad debt and replaced it with “new, good debt” – or at least this is/was the theory.
I have said all along that no matter what the central banks thought, they could not make “bad debt good” and that the problem was not one of liquidity, it was one of solvency. The bad debt is still bad, however it now resides in a different place. The bad debt now resides in the deep, dark and secret shadows of central bank balance sheets where it doesn’t trade, is not “valued” at anything other than par and may not even be close to current on payments… but who cares? Who’s the wiser? This is a problem, a very big problem…but not until it “becomes one.” I say this because not only have the various sovereign treasuries bankrupted themselves, their central banks have also… we just haven’t been told yet. By keeping this bad debt “hidden” and in the shadows of central bank balance sheets it does not get “valued” with any type of real market price. The central banks are lying to us and to themselves as to what “value” truly is. They must by definition do this, otherwise confidence breaks and the game ends.
So what did this explosion in debt “buy” us? In the case of the Chinese it bought them infrastructure, new cities, stockpiles of raw materials and “deals” for raw materials. In the case of the West, it bought us time. Time to stay “on top.” Time to continue our charade. Time to put laws in place to make anything they do “legal” in response to the unrest that will surely come when reality arrives. This explosion in debt has only made the ratios that much worse. It has only made the weight of shouldering the debt that much heavier. It has also made the final chapter that much uglier. In plain English, the “grand experiment” of going all in did not work and only made a bad situation 40% worse than it already was.
I see no possible way that what comes our way can be explained away to the common guy in the street. When bank balances get bailed in and pension plans cut by 50% or more how do you explain this to someone who worked, saved and “played by the rules” their whole life?
There are in my opinion only 2 options and both include war.
Option A is some sort of VERY big “false flag” event followed by war.
Option B is skip the pretenses altogether and just go straight to war.
Mark my words, Joe and Jane Smith can only be made to forget their “losses” if they fear for their lives. Call me nuts or conspiratorial. I would suggest that reading history shows that when governments become desperate they always revert to options A or B. Do you really expect them to tell you flat out, “Tough luck. It was all a fraud and we stole your money…what are you going to do about it?” Fat chance!
Your retirement account is not a debt it is so called money you and your employer put in a so called savings account witch should be sound ! But the problem is your so called retirement account was/is mismanaged and used to gamble with ! the same goes with any where else you put your so called money if you cant touch it at ANY TIME you like you don’t OWN IT Read the dodd frank act/bill you will see in the fine print that when you deposit your so called money in banks and other accounts it is no longer your so called money ! it belongs to the bank !
“when you deposit your so called money in banks and other accounts it is no longer your so called money ! it belongs to the bank!” This would make your deposit a “debt of the bank” correct? And the government bonds in your retirement account? A debt? And the dollars in your pocket? A claim on something else…a debt? Your “retirement account” held at Merrill Lynch or some other broker that goes belly up? Where will you get settlement?…bankruptcy court alongside the other “creditors”. Do you get it? And no there will be no “jubilee” where all debts are washed away, this is wishful thinking.
Yes Bill I get It and in case you didn’t notice in WICKED DEBT FRAUD I say void all OUT OF THIN AIR DEBT ! Was the so called money you worked a lifetime to save CREATED OUT OF THINN AIR ? NO we don’t have a license to counterfeit like the banks do so you can call it a debt if you like ! and anyone with so called money in a bank should get it back but were dealing with fraudulent institutions ! And any fool that leaves there so called money in a bank or retirement account will get paid back in paper that will have far less value than when they deposited it ! So I ask you what’s better VOID ALL OUT OF THINN AIR DEBT and keep your house ,car, business, farm, ect. or let the banks steal it because they counterfeited the so called money they loaned you ? You see if we don’t void it the banks will own almost EVERYTHING ! And almost everyone will be tossed into the street penny less ! Do you get it ? And paying off the debt is NOT GOING TO HAPPEN ether ! and receiving your retirement in money with VALUE isn’t going to happen ! GET IT ?
Yes I get everything you are saying…but we do not live in Utopia and it will not happen in my opinion. Do you get it?
What you think the dollar wont go to zero like ALL OTHER fiat currency ? OR maybe the people will go along with 100% taxation ? witch still would not be enough !
Please read history Collin, in Weimar Germany their currency was nearly worthless and was replaced. The existing debt contracts were rewritten based on the new currency…there was NO JUBILEE. Please take the time to read the history of this and you will understand it better.
Bill help me “GET IT” what DO you think is going to “HAPPEN”
If I bought a farm using a bank loan (out of thin air money), I should refuse to pay the loan and get a free farm? And if I do that, won’t the authorities seize the property and evict me from it? How does one benefit from voiding thin air debt if they cannot keep the assets that underlie that debt?
Most people don’t realize the loan is impossible to repay and fraud when they take out the loan and UNDER LAW THAT VOIDS IT !
Bill you should look up the credit river decision ! It was a case in 1968 that voided the mortgage debt for fraud ! the judge was MURDERED six months later !
imagine that? Like I keep trying to tell you, we don’t live in Utopia.
IN THE JUSTICE COURT
STATE OF MINNESOTA
COUNTY OF SCOTT
TOWNSHIP OF CREDIT RIVER
JUSTICE MARTIN V. MAHONEY
First National Bank of Montgomery,
JUDGMENT AND DECREE
The above entitled action came on before the Court and a Jury of 12 on December 7, 1968 at 10:00 am. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel, R. Mellby. Defendant appeared on his own behalf.
A Jury of Talesmen were called, impaneled and sworn to try the issues in the Case. Lawrence V. Morgan was the only witness called for Plaintiff and Defendant testified as the only witness in his own behalf.
Plaintiff brought this as a Common Law action for the recovery of the possession of Lot 19 Fairview Beach, Scott County, Minn. Plaintiff claimed title to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in default at the time foreclosure proceedings were started.
Defendant appeared and answered that the Plaintiff created the money and credit upon its own books by bookkeeping entry as the consideration for the Note and Mortgage of May 8, 1964 and alleged failure of the consideration for the Mortgage Deed and alleged that the Sheriff’s sale passed no title to plaintiff.
The issues tried to the Jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the Note for almost 3 years.
Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private Bank, further that he knew of no United States Statute or Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the Consideration and that the Defendant was estopped from doing so.
At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant.
Now therefore, by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1787, the Constitution of United States and the Constitution and the laws of the State of Minnesota not inconsistent therewith ;
IT IS HEREBY ORDERED, ADJUDGED AND DECREED:
1.That the Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office.
2.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.
3.That the Sheriff’s sale of the above described premises held on June 26, 1967 is null and void, of no effect.
4.That the Plaintiff has no right title or interest in said premises or lien thereon as is above described.
5.That any provision in the Minnesota Constitution and any Minnesota Statute binding the jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has jurisdiction to render complete Justice in this Cause.
The following memorandum and any supplementary memorandum made and filed by this Court in support of this Judgment is hereby made a part hereof by reference.
BY THE COURT
Dated December 9, 1968
Justice MARTIN V. MAHONEY
Credit River Township
Scott County, Minnesota
Bill I guess it comes down to whether or not we will stand up for what’s right ! or bend over and take what ever YUOR MASTER government SAYS ! Rite Bill
You are “rite” Colin.
EXCUSE ME !YOUR MASTER GOVERNMENT WRIGHT Bill!
yes Colin, “wright”.
not a laughing matter.
“WICKED DEBT FRAUD” The one and ONLY answer to the debt problem is to declare it null and void because of FRAUD! It is fraud because it is mathematically impossible to repay ! It can not be repaid because the interest is never created on the loan and that is fraud ! And fraud voids all ! If we don’t void all out of thin air debt the bankers will own almost EVERYTHING ! And we will be homeless slaves ! They have a license to counterfeit ! Can I counterfeit the money to repay the loan ? Why not ? If we even attempt to repay a impossible debt (the national debt) all we do is show our ignorance ! The way to fix this mess is so simple a 3rd grader can figure it out ! We void the fraudulent debt! and everyone keeps ALL the items they have so called debt on ! And then we start to use a debt free currency and / or gold and silver ! And then we will have a robust economy like never before — OR WE LET THE BANKERS STEAL EVERYTHING !
I was in about the third grade when the news was talking about the national debt and I asked my dad who do we owe money to and who could possibly be richer than the United States? and where did they get the money? And then my dad took a gulp off his beer and said we owe it to our self ! I said that’s the dumbest thing I ever heard of ! that’s like me borrowing from my right pocket and setting fire to the interest and putting the rest in my left pocket ! This was about 1972 ! But Dad was wrong! We owe it to international Bankers running the biggest Ponzi scheme on earth called The Federal reserve system! And yes it really is this simple ! The bankers have a shoe in on ALL loans they make ! All they have to do is stop lending and then start foreclosing on ALL debts!-meaning they now own everything that has a debt by having a license to counterfeit ! So we” 1″ keep getting fleeced by continuing to pay this fraudulent scheme ! OR” 2 “we declare ALL out of thin air debt NULL AND VOID because of FRAUD ! And we keep everything we have so called debt on! MOST people don’t get this part Every car, boat, house, machine, tool, farm,ect. has already been paid for by the fraudulent paper! So no one looses ! WE sure as hell cant give it to the banksters! (let them steal it) AND IT DOESENT MATTER IF YOU WANT TO REDUCE THE DEBT 99% ITS STILL UNPAYABLE! So when we void the FRAUD This will be the ultimate FRESH start for everyone ! Share this if you want THE solution to the WORLDS problems! If not everything will continue to get worse until we have HONEST DEBT FREE MONEY /and GOLD AND SILVER ! And there is plenty of gold and silver! just Divide the paper money (FRN) by the gold /silver and you have the value of them! NO MATTER WHAT IT COMES TO per OZ ! Then we would be happy to work for SAY A ONE OZ. SILVER COIN A day ! Because a one OZ. silver coin ( REAL MONEY ) will buy what $100 – $200 did before the reset! THINK ABOUT IT! This is what Scripture calls the jubilee ! “WICKED” Debt And the amount and size of the debt has nothing to do with it being mathematically impossible to pay This fraud is so “WICKED” that even a $10 loan is a Ponzi scheme here’s how it works ! I’m the new banks first customer ( CHUMP ) I borrow $10 @ 1% interest I now owe the bank $10.10 but ALL the money in the world is $10 the .10 cents doesn’t exist so some one else has to borrow some so called money and I have to find a way to get .10 cents from them so I can repay my loan ! Now say they borrowed $10 also now I somehow get .10 cents from them to pay my loan back ! But now he is short .20 cents to pay his loan ! so now you can see how a $100,000. house that will cost you $ 265,000 to pay off because you have to pay $165,000 in interest is a GIGANTIC PONZI SCHEME ! Now multiply that by millions of people in the U.S. and you can see how It turned into the monster debt we see today ! And for the loans that do get repaid multiple people have to default on there loans for you to pay off your loan ! NOW you can understand why we have a rapidly growing homeless problem ! Now that is a WICKED debt money system that we must declare Void !
While your idea to “declare the debt void” may a good idea, as Bill says, it’s “wishful thinking.” What I believe will eventually make the debt void is the dollar being worthless. In the end this will happen, and then while the debt may still be there those holding it will be holding nothing of value.
I suppose they will then create a new currency… Who knows what tricks they have in store?
I’m afraid you are correct about war. We would already be at war if Putin hadn’t backed down Obama regarding Syria.
When war starts we will likely see gasoline rationing cards. A Volkswagaon will become very expensive.
During WWII tires were extremely hard to get as well as other things.
The middle class is getting ready to slide into the poor class and most of them don’t even know it.
This time – WWII rationing will be the “Lap of Luxury” in comparison.
God Help Us All.
Bill, and Andrew too, I always appreciate your articles and the spirit they are written in.
Debt is a critical part of humankind’s current enslavement, and I agree Bill we’ve blown past the point where the world can tolerate no more.
Jubilee would be the right answer but will not happen. Global financial collapse, War (world or civil), or both. That is what I see. Since the Western PTB want to rule the world and aren’t going to go quietly into the night, then War seems inevitable.
I agree with it all and thanks TORN.
No country that has a debt to GDP ratio above 90% has been able to pay back it’s debt. Ever.
this is correct Joe B.
Not sure but I think England is an exception to that, paying off its WWII debt. But our debt is structural, not one that can be turned off when a war ends. We are done, the only question is the timing and how it will play out. In the short-term, everything is relative and Japan and China and Europe have major problems of their own.
Such a war will have to be a big one, to distract the people enough. This leaves Russia and/or China, the problem is that a war against one of the two will lead to war against both. This will be a war we cannot win. China will dump US bonds and this will tank the bond, equity markets and the dollar. Before a shot is fired the west have lost.
The other problem is that such a war will become a nuclear one in the end, with everyone becoming losers. More important the very rich will be the biggest losers and that I cant foresee. I believe they will trash the economy in such a way that the very rich stay in power with most of their assets intact.
Yes Ron they will “kick the table over”…the only way to win is not to play the game.
What do you think of reports of Ukraine’s gold being sent to the US fed? Maybe Germany will get another 5 of its tons back this year. LOL
I wrote a piece on this for today Doug and hopefully you will “Laugh out Loud”.