a simple explanation of the global financial debt bubble

In the last ten years, as I have been writing about the historical extremes of the current global debt bubble, I have noticed the lack of perspective of the general public in regard to the current extremes. Let’s compare a few examples of history.

In the case of current times, people get loans based on their current income as well as their credit history. That is only extreme when we compare it to historical norms.

Solidarity lending involves collateral-free lo...

Solidarity lending involves collateral-free loans through solidarity groups and village organizations like this one in Bangladesh. Photo by Brett Matthews. (Photo credit: Wikipedia)

Normally, people would only get large loans (in contrast to short-term “pay-day loans”) if they had collateral. In other words, AFTER they own real estate free  and clear, then they could RISK their ownership with a “title loan” or equity loan, like people might do if they own an automobile free and clear. That is “normal” historically, like loans from pawn shops.

So, there is a limited amount of resources available- like if you had 100,000 of something and someone came to you and wanted to borrow a bunch of it from you, then you would want to know that they ALREADY OWNED something that was worth MUCH MORE than whatever they were borrowing from you and have them sign a contract that prevents them from selling it without you getting paid your debt. Think again about a title loan on a car. The lender gets listed on the certificate of title issued by the state. The state promises to use military force to protect the legal rights of the lender. (Note by the way that in some countries, one particular group of people may be allowed to lend at interest, while for all other people, it is illegal as in CRIMINAL to lend money at interest- at least for anyone without the permission or licensure of the ruling class!)


Cloverdale-Jewellry-Loans (Photo credit: Wikipedia)

In lending, court systems are important. The court systems are the military organization that enforces debts, like repossessions of cars and foreclosures and evictions from real estate. Courts also create currency systems through their military power.

Heraldic badges of the Canadian government

Heraldic badges of the Canadian government (Photo credit: Wikipedia)

This is another simple point that many people do not get. Courts dictate debts that the public owe to the courts. These are called taxes. The courts also dictate what form of payment is acceptable for payment of taxes. That is the foundation of public demand for government currency (to pay the tax debt claims that the governments invent and impose by military force on the masses).

So, many people are very focused on access to credit. That is typically a sign of how poor they are. If they had loads of cash, they would not care much about credit. They would not need it. They would not be desperate and anxious and frightened. They would not complain that politicians were threatening them. They would realize that all systems of invented tax claims are inherently threats and not complain about it, but accept it and adapt to it.

That reminds me of another traditional method of obtaining loans. Imagine that the US military lined up a lot of tanks on the border of Canada (or Iran) and then asked for a huge loan from the government of Canada (or Iran).

Queen Elizabeth II wearing the Sovereign's ins...

Queen Elizabeth II wearing the Sovereign’s insignia of the Order of Canada and the Order of Military Merit (Photo credit: Wikipedia)

That is also normal historically. People focusing on income-based borrowing is simply not normal.

The US military may ask for a tax treaty by which the Canadian government promises to give the US 1% or 10% of all revenues or whatever. Again, that is totally normal historically (not specifically in the history of the US and Canada, but like between various nations and tribal gangs across the last few thousand years).

When the US Treasury borrows money from someone (called the sale of a treasury bond), then ALL of the underwriters (taxpayers) are responsible for paying back that debt. The US court system is responsible for extracting that wealth from the public. Or, if the US military lines up tanks on the border of Iran or Canada and “offers” a “rescue loan package,” then every inhabitant of the “occupied colony” is targeted for repayment of the war reparations or loans or whatever name is used.

So, what is going on with the huge marketing campaign to get the masses of the US in to massive debt (for mortgages, etc)? Some people emphasize that a lot of the lending is coming from China. Because of the massive trade deficit which the US keeps growing with China, China has been lending the US money (including through the mortgage industry) to continue the rapid transfer of wealth from the US to China. Whether this is a sign of Chinese wisdom or just the military intimidation of the US is to me rather obvious (military intimidation).

However, when people are desperate, they may be very hysterical in their willingness to vilify the rope salesman for selling them the rope with which they hang themselves. If China is being bullied by the US in to lending money to the US middle classes, why? Because the court system itself will benefit from a massive wave of foreclosures. Further, if the federal government “rescues everyone” from a massive wave of foreclosures, they may do so by basically nationalizing real estate (confiscating it).

Forecasting exactly how things will go involves some amount of speculation. Noticing that the current historical extremes of income-based lending (rather than collateral-based lending) are historical extremes that can return quickly to historical norms involves very little speculation. In contrast, people who blindly presume that the current historical extremes will endure another decade or even a full year are the ones who may find that their speculations are extremely naive.

Why did the global financial bubble grow so much in the 20th century (at least for the US and Europe, etc?) The prices of fossil fuels, on the whole, plummeted from the 19th century until 1999 (with a brief rise in the 1970s when the US increased consumption of fossil fuels so fast that it began importing rather than just using up what was produced in the US). With the advance of industrial civilization due to fossil fuels (plus computer technology), the effectiveness of global military operations rose in efficiency so much that court systems of organized coercion globalized.

The various military leaders across the world began to organize a union. They formed organizations like the league of nations and the united nations. These organizations promote “peace” in the sense of a well-organized system of global coercion. Rather than competing gangs and systems of coercion, there is a single network of the operations of coercion which dominate the masses. Instead of ruling classes across the planet competing with each other, there is a single ruling class forming.

The debt crisis in Europe (and, to a lesser extent, in the US and Japan) represents a massive transfer of resource control from the masses to the ruling class.  Governments will “be forced” to raise taxes, which will rocket the demand for cash (to pay taxes) and crush the already weakening financial bubble. People who have been speculating that credit will be easier and easier to access will shift from complacency and occasional complaints about politics to terror and panic.

The Centre Block on Parliament Hill, containin...

The Centre Block on Parliament Hill, containing the houses of the Canadian parliament (Photo credit: Wikipedia)

EXACTLY how society will return toward a collateral-based pattern of lending is not really that important of a question to me. Will the masses be allowed to continue private ownership of collateral at all? For how long? How will the masses resist the military dominance of the global ruling class? Given that the masses seem completely hypnotized by the propaganda mythology of the ruling class (publicized through socialist institutions like public schooling),  will the masses even resist at all? For now, the masses continue to chase debt (and credit) in a mad rush for bankruptcy that marks the crowning achievement of the marketing profession: “Borrow! Consume!”

Stock market of Brussels

Stock market of Brussels (Photo credit: Wikipedia)

English: Supreme Court of Canada building, Ott...

English: Supreme Court of Canada building, Ottawa, Ontario, Canada (Photo credit: Wikipedia)

The religion of consumerism is not intended to last forever. It is just a means to an end. The holy temples of Rome (Egypt, Babylon, etc) became the courthouses and government agencies of the West (and even the stock market building in Brussels looks like a Roman baking temple).

As the global debt bubble deflates, the masses will wake up to the foundation of all currency systems: military force (which create public demand for currency through the tax extortion systems of the ruling military class). For now, have you noticed that the myth that a relatively unimportant substance like gold or silver is the basis of human systems of social domination is soaring in popularity (due to massive marketing campaigns)?


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3 Responses to “a simple explanation of the global financial debt bubble”

  1. Donny Wise Says:

    Reblogged this on TheWiseMe.com /donny-wise.com.

  2. truth60 Says:

    Socialists, i.e. “Liberals” are going to be very surprised when their plans to wreck the capitalist beast and “free the masses” doesn’t work out quite the way they thought it would. They don’t call ’em “Useless idiots” for nothing.

  3. jrfibonacci Says:

    Truth60 put a reply on donny’s re-blog, referencing how easy it is to see that one cannot spend more than one has. Here is my reply:

    “Truth60,” maybe you are just being light-hearted and attempting to be “chummy.” However, your comment also appears arrogant (and, as is often the case with arrogance, naively dismissive and disrespectful- which may occasionally be fitting, but often simply seems immature and annoying).

    So, in case you were serious, obviously, people can “spend” credit because people can extend credit. I can promise money (to an employee or supplier) that I have not actually collected yet. They can agree to give me time or resources “on credit.”

    Further, when dealing with organizations like a government, when a government lacks resources, we can expect them to collect resources by force to pay their debts. They can invade some other place or make up some new tax claims to extort from their involuntary underwriters (taxpayers).

    But in the realm of tangible economics (not financial contracts of credit, but like gallons pf gasoline or printer ink cartridges), yes, of course no one can use more than they can access. No more ink means no more printing. No more fuel means no more burning. However, no more cash does not ALWAYS mean no more lending/borrowing (spending).

    The debt bubble is not about Keynesian policies. The debt bubble is about free-market agreements for future performance (extensions of credit).

    Further, a lot of reactionary “Austrian Economics” enthusiasts are what you might call “useful idiots.” They may talk about governments as if they are an anamoly that can be simply ignored. To an anarchist (or a conservative economist), governments are voluntary associations of groups of people who use coercion to extort wealth from others as well as use violence to simply redistribute economic resources from others to themselves, whether through taxation or imperialist colonization or seizure. Gangs and mafias are governing entities. Churches that threaten people with damnation or ritual human sacrifice in Inquisitions and then demand tithes and the purchase of indulgences are the foundation of all modern governments. Any sane anthropologist should recognize that the “separation of church and state” is a holy myth of certain governing rulers, as referenced in their sacred scriptures.

    There is no “real” intrinsic barrier between Keynesian and Austrian economics. It is just another false dichotomy so popular with the Fabians and their ilk.

    If “Austrian Economists” cannot predict and explain the existence of governing institutions (such as the Vatican or other theocratic dynasties) as well as explain the fluctuating trends of their Keynesian policies, then the so-called science of Austrian Economics lacks scientific merit. Anthropologists can convincingly explain the existence of economic trends, governing institutions, court systems, commercial contracts, and legal systems to enforce contracts with violence and coercion. If Austrian Economists cannot establish themselves as having at least that much credibility and relevance, then maybe they should go back to their myths about how gold is the basis of all “good” currency systems. Ludwig von Mises would not say something so idiotic (“usefully idiotic”), as he knew that many primitive currency systems used other “sacred objects” besides gold long prior to certain governing institutions establishing a monopoly on gold-mining operations and then declaring that gold coins would be the only way to pay the invented tax extortion claims that the high priesthood of military imperialists dictated that the masses owed to them.

    Salt is an entirely valid foundation for a currency system. Gold is entirely valid. So WAS diamonds, at least until it became unrealistic for DeBeers to artificially reduce supply of ALL diamonds worldwide. They can still use supply controls to rocket the perceived scarcity (value) of large diamonds, but industrial-size diamonds can be too easily synthesized for diamonds to be the sacred object used as the dictated “currency” at the foundation of a ritualized court system of extortion.

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