You are hereThey’re Not Chickens And They Won’t Be Roosting

They’re Not Chickens And They Won’t Be Roosting

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By EWMI - Posted on 30 June 2006

by Albert Persohn
Several years ago I walked in my house after a grueling day at work. It was hot and I was tired. As I dragged in past my son’s bedroom door he stepped out, put out his hand and said: “Have you got fifty bucks for me Fatboy?”. Hilarity ensued followed by the usual beatings and recriminations. (OK, no beatings just laughter). As we look again at the sunset of the Great Western Empire we need to be reminded that:
Several years ago I walked in my house after a grueling day at work. It was hot and I was tired. As I dragged in past my son’s bedroom door he stepped out, put out his hand and said: “Have you got fifty bucks for me Fatboy?”. Hilarity ensued followed by the usual beatings and recriminations. (OK, no beatings just laughter). As we look again at the sunset of the Great Western Empire we need to be reminded that:
This is not a criticism of the great American way of life but a warning to my friends

Lead in comments

All Fiat currencies eventually fail. All the world’s major currencies are strongly connected to the US dollar. My position here is that this venerable currency is ready to die. This will greatly affect us all. I cannot begin to stress the gravity of the situation facing us. We Preterists understand the rise and fall of empires. We also see the need for courageous people to rebuild a new and better civilization. The younger among us will number with them.

This article is part two in a series on the end of The Great Western Empire. Article three will be an examination of some of those wonderful acronyms. We will also contrast my conservative pessimistic position with a typical conservative optimistic one.

Since the posting of "Big Debt and Beads of Sweat" we have heard Greenspan say that the housing bubble is over. The reader may have missed the fact that while in office he denied there ever was a housing bubble. When the first of this series was written real estate spin doctors were able to keep the unwary and imperceptive public in the dark about housing inventories. That has changed. Everywhere we look we are reading about excessive inventories and pervasive overpricing of real estate. While the spin doctors are able to keep some mortagees entertained the painful truth is that price deflation is next.

It is surprising that many reasonably educated people seem unaware of how debt works. We are not simply talking about grabbing some bucks from a warm-hearted old man. This is not a free lunch. “Have you got fifty bucks for me fat boy” is never the kind of conversation that takes place with a creditor. Debt is a reasonable servant but a bad bad master. Maintaining debt as a servant requires focused restraint. At first it gives you what you wanted and seems to ask little in return. Then like a slot machine it begins to promise more … and more … and more.

To anticipate is more pleasurable than to have

Mr Spock

More pleasurable indeed. Once one has arrived at a certain point in one’s relationship with his creditor the pleasure of anticipation rules. Never satiated, Debt calls for more and more attention. The nagging reminders to feed it are lulled only while it seeks to lure you into a deeper more committed relationship. You empower it and it takes from you, then you empower it some more and it takes more.

At some time in this series of cycles your servant becomes your master.

At this phase in your relationship with debt it no longer tugs and whimpers for attention. It is no longer a cute nestling chick peeping for its next feed. It has control. It eats its nest. It seeks more than a small monthly donation from its subject (you). Its appetite has grown. Its voracious feeding habits drain you of energy. Your loved ones serve it too. Say your firstborn son would like to further his education. Who do you ask? Cap in hand you skulk up to the monster that at one time bought you your home but now drains the last of your energy.

“Mr Debt” you ask in a quivering tone “Can I have $20,000 to send Junior to college” sneering it answers you back. “Sure, just remember the things I got you, hehe, if you don’t feed me I’ll take them back and toss you out on the street.” You have already calculated the time and effort required to feed Debt to cover your sons’ education. “OK Mr. Debt, I know what it takes. I will work the extra hours and extend your control over the future appreciated value of my, I mean our, home” This stimulates another question to the beast. “Mr Debt, I was wondering about something” your pause is longer than normal, Debt stares menacingly at you, courage is summoned. “I was wondering why your appetite keeps increasing?” When you first picked up little puppy debt he only required 2.3 percent above the total he loaned you, he used a beautiful word to describe it. He said “I am INTERESTed in helping you, just pay some money to keep my INTEREST high” However as time has passed you seemed to lose INTEREST as he became more INTERESTed.

He will stop eating when you have fed him all he has given you plus that INTEREST. If you were to choose to stop feeding him prematurely his INTEREST would grow more and more. To your dismay as time passes his INTEREST in your affairs increases.

“I never wanted you to be so INTERESTed in my life!” you lament.

Puppy Debt who is now a fully-grown Debt-0-Saurus (the “0” is a zero) replies; “You knew what I could do when you took me in”

What Does This Have To Do With End Of The Greatest Empire Of All Time?

When you picked up Debt-0-Saurus he was just a bit smaller than your house. To be sure he was big but, well, everyone on the street had one so it was OK. Well before you did, the United States also acquired a Debt pet. It was bigger by far than yours. It too is no longer a pet. Today it eats faster than anything on the planet. How big is Gov-Mega-Debt-0-Saurus? Well, it is bigger than all the combined assets of many medium sized countries. What is it doing today? For the most part it is eating, but it is also feeding people, building infrastructure projects and fighting wars.

Wasteland

Now there is an added problem that we need to be mention. Gov-Mega-Debt-0-Saurus has two siblings; they are Corp-Mega-Debt-0-Saurus or combined corporate debt, and Priv-Mega-Debt-0-Saurus, which is combined private debt. Your personal Debt-0-Saurus is a member of the last family. These things are huge. They eat and eat and eat and destroy everything they are allowed to. Combined they are worth more than $40,000,000,000,000. The collective noun meaning a group of Mega-Debt-0-Saurie is a “wasteland” of Mega-Debt-0-Saurie. (Other examples of collective nouns are flock of geese, murder of crows and school of fish).

The Secretion

We must not neglect to mention the secretion. Like toads Debt-0-Saurie secret an endorphin that affects other species. Everything they produce is coated in it. When touched by humans the endorphin induces a euphoric state with two symptoms. The first symptom shields the human from considering the long-term consequences of dealing with Debt-0-Saurus. The second symptom causes humans to speak in, and be drawn to, meaningless acronyms. They run words together to produce new words, which convey a meaning amenable to further dealings with Debt-0-Saurie. Commonly used acronyms are CPI and GDP. These meaningless acronyms when used with positive percentages work together with Debt-0-Saurus secretions to draw humans ever deeper into wasteland territory.

What Are They Doing?

Where are they now and what are they doing? As mentioned, variety Gov is building infrastructure and feeding people, many of whom have been destroyed by variety Priv. Gov is also killing people in wars in other lands. Gov is working overtime to get oil, which is pretty much the only stuff that will feed it today. It is growing in size by $1,900,000,000 day. Variety Corp is building businesses many of which are generated by the activity of the mighty Gov and the less mighty Priv. Corp is also getting stuff from other lands for Gov and Priv to distribute. Variety Priv is getting stuff for guys like me. It is getting cars, houses, furniture, computers and USB coffee warmers. Many of the things Variety Corp collects come from China, India, Japan and South Korea. Those things are passed on to us via Variety Priv.

Something is Changing

The quality of food Gov, Corp and Priv require has lost several percent of its nutritional value. This means that Gov, Corp, and Priv have to work much harder to get the stuff and fight the wars than before. Those of us feeding Gov, Corp and Priv need to work harder to keep them from turning on us. It also means that China, Taiwan, Japan and South Korea are demanding more effort from Gov, Corp and Priv. Our three pets are not as welcome there as heartily as before. Now the Asian Development Bank among others is aware that China, Japan, Taiwan and South Korea have huge stores of Debt-0-Saurus food. These countries are keen to reduce the damage Gov, Corp and Priv are doing in their lands. To do this they are sending the food back to the US. Our three monsters are following the food.

They Are Hungry … Very Hungry

Our devaluing Debt-0-Saurus food is everywhere. The voraciously hungry Mega-Debt-0-Saurie are chewing through the poorer quality food at an increasing rate. We can’t feed them fast enough. They are now making extreme demands. “Work harder, give us more … feed us”. To demonstraee how serious this is in March of 2006 Gov-Mega-Debt-0-Saurus grew to unprecedented size. Our leaders met to arrange to allow it to be fed and grow bigger. They really did not have a choice. Before they met, Gov-Mega-Debt-0-Saurus found nourishment in the G-Fund and began to eat it. Had we not decided to feed it, this fund and every other mutual or retirement fund already used to nourish it could have been drained. This would have sent Corp-Mega-Debt-0-Saurus and Priv-Mega-Debt-0-Saurus into a planet destroying feeding frenzy.

For some strange reason the keepers and feeders of Gov-Mega-Debt-0-Saurus who also attempt to control its siblings have decided to further devalue the quality of Mega-Debt-0-Saurus food. The question any observer is driven to ask is whether increasing the hunger of three uncontrollable beasts is the best way to manage them.

Enough Already!

Ok folks here it is. US private, corporate and government debt is huge. It has been chewing on our savings for years. Until Congress raised the debt ceiling in March 2006 G-Fund money was used to pay debt and run the government. Don’t even begin to think that debt is phony or can be paid by simply printing money. If that were the case why touch the G-Fund or your private funds for that matter? Our dollars are returning home from all over the world and are of significantly less value. More of them will be required to pay the INTEREST on our debts. Refer to my last article on this topic and do a personal inflation test to compare today’s buying power to last years’ buying power.

At a recent discussion on global financial imbalances in Hyderabad, China’s Vice Minister for finance directed an ominous statement at Tim Adams, the US Treasury undersecretary for international affairs. Mr Li Yong said that he had heard a “rumour” that the US dollar was headed for a 25 percent drop. Think dear friends what would ensue if a drop this size is what Ben Bernanke and John Snow had in mind at the recent G7.

So Do You Mean ….?

Am I saying that our chickens are coming home to roost?

No

They are not chickens and they won’t be roosting.

chrisliv's picture

Hey,

Fun article. I hope to see more in this series, since I am becoming more interested in global finance, too.

I like how you personified "Mr. Debt" and morphed him into "Debt-O-Saurus".

Even US Citizens should know that the debt that federal politicians and bureaucrats have accumulated, often quoted as a so-called $30,000 per-person debt, makes no one liable for it, unless every North American is born into Slavery.

Wash DC politicians know that taxes can or never will pay off that debt. I mean, there are people still alive today who know that almost all Wash DC functions were financed through indirect tarriffs, imposts, duties, and an excise on income generated from stock exchange profits, until the WWII Victory Tax applied a direct-tax to most Labor, and that the Victory Tax was also repealled after WWII.

Before WWII, most Americans had never seen a 1040 Form. And, I sometimes think the so-called income taxes collected from most US Citizens annually is just a way to scoop up some of the fiat currency, and strike it out of existence, so the inflated money supply won't seem worthless.

My understanding of the Jeckyl Island plot and the Federal Reserve is that it enables private banking cartels and Wash DC state actors to flood the money supply with US Dollars around the globe like magic (while incurring debt), which they could never do through taxes. Of course, that still extracts the value from those who hold Dollars and other Assets. But, the seeming Power of those printing presses and ledger credits must be intoxicating to wield, especially when it comes major overseas bombing campaigns or giving 3 billion dollars a year to the State of Israel, et al.

Apparently all major Central Banks: FED, Japan, Swiss, Euro, and England, do cooperate with each other and function on the same fractional-reserve, fiat currency style. They all seem to have a vested interest, like certain parasites, in keeping their host alive as long as possible. So, it may be a slow dying process. But, in the end, the host (FED System) will probably die. The terminal stage may be quick though. I mean, Osama Bin Laden states that he wanted to lure Wash DC resources into the Middle East to cause its financial ruin, and George Bush seems to have granted Bin Laden his wish.

When the US Dollar collapses, some other fiat currencies probably will too. And, since they are banking inventions and debt instruments anyway, i.e., scraps of paper with pictures of dead slaveholders on them, it will take no time at all for another currency or medium of exchange to emerge that people will accept or reject.

The price of gold has increased dramatically, which just shows how much value the Dollar has lost in the last few years. If the Dollar faulters too much, certain foreign state actors, especially oil producing ones, may demand that Wash DC make payments with other currencies. Or, Wash DC may have to guarantee its debt with gold, like it was up until 1971, I believe. And, I think I just read somewhere that Wash DC reportedly has around 230 million ounces of gold at its disposal.

And, if Wash DC state actors ever do have to rely on nothing more than gold reserves and various taxes, like they did in the recent past, they may become very humble, very fast, all around the globe.

Wouldn't that be something?

Peace to you all,
C. Livingstone

EWMI's picture

I agree with your observations about Jekyll Island and central banks. IMHO many fiat currencies will fall at about the same time. Recently I spoke to some Chinese business men experienced in the import export business. A concern held by the big creditor states is that a 50% devaluation of the dollar will happen fast and hit them hard. Of course it will hit everyone.

The first big question is how long will it last? The second one is how quickly will the changes manifest?

chrisliv's picture

Well,

If you mean, how long another North American Depression will last? I'm sure it won't be known until it has first been declared to have hit, and then it has been declared to have ceased.

If Gold goes from its current $650+, to $1000 by the end of the year, then I would be alert, and would suspect that harsh changes may come if the price takes off to around $3000 within another year.

Gold was already at around $650 in 1980, and those dollars were more valuable than today. Gold was also at around $125 in 1976. So, Gold is actually quite cheap right now, and when it moves, it can make big moves.

Here's a brief historical chart:

http://www.wisegeek.com/what-is-the-historical-price-of-gold.htm

Notice the $21 price before 1935, when Wash DC banned and confiscated the private possesion of gold bullion. Then Wash DC artificially fixed the price at $35. There's a New Deal for ya!

But, I'm guessing that we'd have to see more dramatic and faster price moves than those in the 1970s and 1980s to signal the collapse of the Federal Reserve Banking Cartel.

Peace to you,
C. Livingstone

Virgil's picture

Al you are off base again :) The US economy grew at a rate of 5.6% last quarter so it is hardly on the verge of collapse. Or is that a wish? :)

EWMI's picture

No it is not a wish at all. It is my daily prayer that I am wrong. In my next article I will deal with GDP and CPI. We will see if the economy is really growing as they.

Ed's picture

Well Al, your prayers have been answered...

ed

ed

Papa is especially fond of us

EWMI's picture

Now if God would just answer my body weight and baldness prayers :)

Ed's picture

Well, it seems to me that bald guys get some really good looking ladies...sometimes I wish I were bald (except for my extremely misshaped head).

ed

ed

Papa is especially fond of us

EWMI's picture

Well I have a really good looking lady, the problem is that she kept her looks and mine ... well ... you know.

Ed's picture

Al, it just goes to show, you can be a good man and still be wrong about a lot of things.

Bald is beautiful.

ed

ed

Papa is especially fond of us

Islamaphobe's picture

I shall offer some quick comments. First, fiat currencies are as good as their governments, and gold is not coming back. If you have a rotten government, a gold-based currency will simply be undermined by devaluations (gold price increases). Second, while I believe that total debt in the U.S. (gov't, household, business) has grown too rapidly in recent years, you have failed to note that the danger of debt growth is related to growth of income. If my debt grows 2 percent per year and my income grows 6 percent per year, no problem. U.S. economic growth in recent years has been very rapid, and our careful monetary management is now restraining the growth of indebtedness.

For what it is worth, I regard the greatest danger to the economy in this country and elsewhere as the too rapid growth of government spending. I had hoped that Marxism would die with the death of the USSR. No such luck. It lives in academia, in various movements such as environmentalism and feminism, and among populist politicians in Latin America and elsewhere. And the soft-headed leftism represented by liberalism remains very strong, though it lacks a coherent ideology. The appeal of gaining something at others expense through government actions remains all too powerful.

Then there is the danger to the world economy posed by the world's failure to deal properly with militant Islam. I am a lot more worried about how the world is going to deal with Iran than with the growth of debt in this country and elsewhere, and my worries are partly based on economic considerations. What happens in Iran and elsewhere in the Islamic world has great potential for adversely affecting the world economy.

John S. Evans

EWMI's picture

Good comments John,

I doubt that most people's debt is increasing slower than their income. Even if this is the case for individuals it is not so for most heavily indebted governments.

Your comment on spending is interesting. I agree that only a few countries have been able to retire debt and curb excessive spending. Are you indicating that "soft-headed leftism represented by liberalism" is responsible for the high spending/borrowing of the current administration?

It seems that our fostering and perhaps even creation of militant Islam in the 70's is blowing back.

Islamaphobe's picture

At the present time, government revenues for the U.S. government and most of the states are rising faster than expenditures. Of course, when that happens, it usually does not take long for the governments to increase spending! The net result then is that both government revenues and government spending increase relative to GDP. I am far less concerned about government borrowing than I am about the growth of government spending relative to GDP. I haven't looked at the national accounts lately, but I do sense that the growth of consumer indebtedness is slowing relative to household income.

My comment about "soft-headed leftism represented by liberalism" does hold with regard to this administration, which has allowed its commitment to "compassionate conservatism" to sacrifice fiscal prudence. President Bush has not vetoed a single bill passed by Congress, and he has gone along with some huge spending increases on domestic social programs that have assured us that government spending will continue to grow rapidly. But liberalism/socialism has done more damage in most other "Western" nations than here because it has succeeded in pushing the welfare state to a greater extreme of economic insanity.

Islam is a religion that preaches world conquest by force of arms and compulsion. In my judgment, it was inevitable that it would enter into a great conflict with the rest of the world, and the responsibility for the present conflict lies with Muslims and the primitive culture their religion has fostered, not the people of the United States and "Christendom." I know that many Muslims would prefer to live in peace than in a state of war, but I doubt that their religion can be reformed to permit that to happen.

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