Decker won't like this very much...

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http://www.gold-eagle.com/gold_digest_99/hein100799.html

Default NOW!!!

It seems unanimous: the economy is booming. Presidential candidates allude to it in condemning their opponents for not proposing more spending for education, or housing, or whatever pleases their current listeners. The pundits on the tube refer to it as if it were as inevitable as tomorrow's sunrise, or evolution, which is, in fact, just as well established as fact. They dazzle us with talk of a surplus, when there is no surplus, by any reasonable system of accounting.

But for those of us old enough to sit up unaided and look around, the picture is different. We see the disgraceful spectacle of American business leaders fawning over the monsters who rule China, for instance, to obtain a favorable foothold for doing business with that government. In our own communities we see established businesses faltering on the verge of extinction, early retirements, and one corporation swallowing up another---all practices which have become commonplace, but were, in times we can still recall, rather rare.

And we see banks lending funds as if desperate to make loans, which, we believe, they are. If the borrower is big enough, he will not be allowed to fail, because the bank--perhaps under another guise--will find a way to lend him still more money to keep his interest payments coming in regularly.

Why should this be difficult to see? After all, the nature of the system is that money (speaking loosely, of course) is loaned into existence, with a greater number expected in return than was created for the borrower. This means inevitable catastrophe unless more borrowers can be brought into the system. It's similar to the system which disgraced Ponzi, who naively attempted it without government sponsorship. We are justified in concluding that the inevitable catastrophe is impending when we see the alacrity with which the money-creators seek to indebt new borrowers in such exotic climes as China or Russia--or Mars, if it were possible.

The consequences are not only economic and financial. More and more governments (which are always good borrowers, especially since, being corrupt, their leaders are easily bribed) are finding their policies dictated by strangers representing the lending banks. Sooner or later, they will realize that national sovereignty is being sacrificed to the gods of credit, and, perhaps, some of them will resent it. The payoffs will ease their pain, no doubt, but sooner or later--I suspect sooner--one or two of them might decide that their legacies would be more attractive if they were remembered as the ones who threw off the foreign yoke. The way to do that is via default.

It's trite but true that if you owe the bank ten thousand, you worry; if you owe the bank ten billion, the bank worries. Third world dictators might well consider telling the international bankers to go fly a kite. Why should people starve in countries which produce ample food because the goons from the World Bank, or International Bank of Settlements, or International Monetary Fund, are directing that the food produced by sold, at cutthroat prices, to service the nation's debt to the bankers? What debt? What was borrowed that took more trouble to produce than a doodle? What can the bank do if the borrowing country says, "We've paid enough. Not a penny more?" Who would suffer the most from such a default, the defaulting government, or the bank? After all, the people of the country do not spend dollars; they spend the local scrip which can be printed up at needed. They will continue to be able to make their local purchases.

Undoubtedly the banks could make trouble for a defaulting government. If neighboring governments, however, equally indebted (i.e., enslaved) also announced their intention to default, the greater terror would undoubtedly be felt among the bankers, not the borrowers. What if countries all around the world adopted such a stratagem? How could the bankers answer the question "What did we borrow from you that required as much effort for you to produce as the output of our people who are starving and sweating to repay you?"

Around the world governments realize that the growing debt cannot be serviced much longer, despite the ingenious methods devised to attempt it. When the bubble finally bursts, the suffering will be severe and widespread. The pain of default might be minor by comparison, and infinitely more just. A rancher in, say, Costa Rica, might not get much more selling his beef to his neighbors, who have been consuming less of it than the average American household pet, than he is now getting from his government which needs it for debt service; but at least his neighbors, not foreigners or corrupt politicians, would be benefiting from his labors, and the government leader who brings this about will become a national hero.

The turn of the millennium is almost upon us. Who is going to call the shots? Will our masters use the Y2K confusion to pull the rug out from under the economy, thus justifying--for the gullible--the establishment of a new universal banking system and one-world currency? Or will some desperate politician use the opportunity to free his country and establish himself as a savior of his people?

Inevitably, the economic bubble will burst, if not as a Y2K scheduled event, then shortly thereafter. There is already a United Nations plan, to be announced in the near future, of a vast extension of that agency's authority into heretofore local affairs. A one-world currency is the logical way to finance this scheme, and would eliminate the problem of establishing some sort of acceptable exchange rates between fiat currencies--a task resembling setting the comparative values of unicorns and dragons.

We can, and probably will, do nothing, and continue to turn over increasing amounts of our production to the money creators in return for the use of their imaginary money. But wouldn't it be interesting if, around the world, starving people, through their leaders, woke up and demanded to know what had been provided for them that came close to equalling what was being taken from them?

St. Paul suggested that those who will not work, must starve. In our topsy turvey world, those who are working are starving, and those whose work is creating an imaginary money with no effort or risk are growing fat and powerful. Isn't it time to turn the table?

Dr. Paul Hein

7 October 1999

-- a (a@a.a), October 06, 1999

Answers

BRILLIANT!!! I will be the first to join the uprising.....Take this debt and shove it!

-- Im with ya! (Revolutionary@hardworker.com), October 06, 1999.

Thanks, a.

For those of you who liked this piece, read more of Dr. Hein's articles at

http://www.gold-eagle.com/research/heinndx.html

They are all entertaining and informative.

dave

-- dave (wootendave@hotmail.com), October 06, 1999.


"Third World countries" my hiney...I'm looking for the guy in this country with the cahoneys to say it, and I'll follow HIM! State's Rights are what was traded for "Fed Money", and I want 'em back!

-- space (mad@work.too), October 06, 1999.

I don't disagree with much you've written but I always ask the question, What would you do? Can you think of a better way to create money (real money) than Bretton woods? Productivity increases, the supply of dollars to exchange that productivity must also increase. Otherwise your left with a zero sum game of constant deflation.

-- (roark@not.now), October 06, 1999.

a,

Perhaps Decker would do you a favor and pretend to like this article. Then you might have second thoughts about it, perhaps enough to consider the side effects of the side effects etc of lots of defaults on loans, whether by governments or others. Events do have consequences, often unintended, but still real.

The article by Hein may be recent, but the basic idea of it is ancient, and it has not improved with age. :-)

Jerry

-- Jerry B (skeptic76@erols.com), October 06, 1999.



roark: The problem with the current system is not that it's imperfect but that it has been allowed to be abused. For the international bankers to devise a scheme whereby all of the average worker's wealth is poured into the corporations (401K) while all he really owns is debt (mortgages, car payments, college loans, etc) is unethical (not just amoral, Flint). This is all going to become very, very clear in the next few months when pensions, Social Security and the stock market tank while payments on debt are still expected to be serviced.

This is just MHO. Perhaps Ken can enlighten us with one of his warm and fuzzy pep talks.

-- a (a@a.a), October 06, 1999.


Jerry: Don't get me wrong; I'm not a Luddite and I don't share Milne's desire to see another revolution. However, I'm not going to ignore the events that are taking shape, either.

45 minutes ago, I bought a can of paint at Lowes builder's mart. They asked for my phone number. I said I didn't want to give it to them. The girl said I have to have one to complete the sale. I said Fine. 123-4567. The register would not accept it, as it recognized it as fictitious. She asked again. I asked for the manager. (at this point a lady behind me said "Shit..." and put down her items and walked off) The manager asked what was the problem. I said I don't want to give you my number. He said well OK you dont have to and entered a code to bypass the screen.

That's what I mean. I'm not going to stand idly by while our civil liberties and the values this country were founded on are eroded for the sake of some damn multinational corporation in cahoots with the bankers. Call me paranoid I guess.

-- a (a@a.a), October 06, 1999.


a,

I was picking on the idea that large scale loan defaults should be expected to have only, or mainly, beneficial effects.

As for paranoia, what's that expression? Just because we're paranoid doesn't mean they're not out to get us. :-)

I have not yet had the problem of the cash register rejecting a ficticious phone number. Some have even accepted 000-0000.

I'll have to visit a nearby Lowes soon and have a little fun.

Jerry

-- Jerry B (skeptic76@erols.com), October 06, 1999.


Roark -- a common misconception. Money supply does not have to decrease. Assuming production increases, wages and prices could DECREASE, but people would still be wealthier. People are so consumed with the AMOUNT of dollars, they forget what will a dollar PURCHASE?

Similarly, loans and savings could have NEGATIVE interest rates with no problem. The object of interest or savings is NOT to get a certain NUMBER of dollars back, but an amount of dollars back that WILL BUY MORE.

You may be roark, but I am "A is A"

-- A (A@AisA.com), October 06, 1999.


Damn, "a"! You cause trouble just about EVERYWHERE!!

-- King of Spain (madrid@aol.cum), October 06, 1999.


A is A. I don't follow. If you have an initial $100 and 100 people working for them doing 100 units of work, the 200 people are added and do 500 units of work the value of the money has increased. If you don't compensate for the additional productivity you have created deflation. 100 people $1 per person per unit. 300 people 33 cents per person per .66 units of work. How is that not deflationary? At some point you have someone building something with no gain.

-- (roark@not.now), October 06, 1999.

Roark and A is A, there is something you both should know. Y2K is John Galt. Welcome to Atlantis.

-- Cody Varian (cody@y2ksurvive.com), October 06, 1999.

Well like the guy said, "dictators in third world countries" What good would come of just handing dictators more money and saying "what the heck" to thier past stupidity?

Better to dangle debt forgiveness as a carrot in exchange for some proper behaviour.

Political reform, financial reform, legal reform.

Hain is no diplomat and knows how to take opportunity and mispercieve it.

Hey, I know clintons gang is into the one world stuff, but trust human nature to keep us apart. We are way to prone to discord and murphys law to complete this utopian dream of somehow attaining beehood. A global colony, running smoothly, the human bees manipulated by some ethical constructs? If we were destined to unite, there would be some examples in at least the religious world.

Instead, the first baptist doesnt get along with the second baptist. The best symptom that is available to show how we are, is the american media. The direction THEY are taking us is towards a future where our kids swear like sailors and have a stupid overly sexual focus. That power of that media is massive. The gaurd has seen the direction, murphys law is tapping it's fingers, the clock is ticking, that media, off on a bad direction, is heading for it's destruction. 14 billion years of evolution for this? I heard today on the radio how this preacher sends out 300,000 audio cassettes a year. We are all so wasteful it is staggering. And you know, people aren't very happy, and it is the best of times! We don't deserve to live like this, it is a temporary party, and it about to change. And good that it is, no matter how inconvienient.

-- billburke (bill52@rocketmail.com), October 06, 1999.


Roark is right.

The result has to be deflation. This would not be bad, except that it actually raises real interest rates. Borrowers lose, lenders win. Eventually fewer people and businesses want to borrow and you get slower growth or even a recession.

-- nothere nothere (notherethere@hotmail.com), October 07, 1999.


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