Tuesday, April 29, 2008

The Twilight of Irredeemable Debt

Schiller’s dictum: “Anyone taken as an individual is tolerably sensible and reasonable. But taken as a member of a crowd ― he at once becomes a blockhead”. Economics professors and financial journalists are no exception.

It is a delusion to think that the government can splatter debt all over the economic landscape to cover up its warts, and reap everlasting prosperity as a result.

Perhaps the worst aspect of the regime of irredeemable debt is the lowest level of morals followed by governments in modern history. It is epitomized by an elaborate check-kiting conspiracy between the U.S: Treasury and the Federal Reserve. Treasury bonds, contrary to appearances, are no more redeemable than Federal Reserve notes. It’s all very neat: the notes are backed by the bonds, and the bonds are redeemable by the notes. Therefore each is valued in terms of itself, rather than by an independent outside asset. Each is an irredeemable liability of the U.S: government. The whole scheme boils down to a farce.
His solution at the end is bogus.

The solution is simple, the results painful.

Just repeal all legal tender laws. Use whatever
you like as currency.

Ain't gonna happen. It would bring down The System.

Doesn't matter.

System self-destruct on the way.

The Gun in the Room assures it.

Full article.