The Endgame of Debt Based Currency

All debt based currencies, fiat or metal based, have the same endgame.

Debt default followed by system reset and another ‘new’ currency

Whether this occurs voluntarily through a jubilee of some sort, some combination of inability to service debt and unilateral default or inflation, every debt based currency has to reset to zero for civilization to continue. Human greed has always created more debt than is serviceable- either through lending practices and/or usurious interest rates.

The experience of the white west in the last 150 years is an aberration in which technological advances, population growth and moderate inflation combined with credit based increases in income stopped an outright default by any major white western country. But that is the past.

So what does the future look like? Consider the amount of private and governmental debt of most white western countries (and even asian ones like japan). Do you think that either the private debtors or sovereign governments can make the creditor of those debts whole, especially under the current socio-economic paradigms?

Who are these countries going to export to? and with what will their customers pay? What about promised payouts to their own citizens such as pensions? Do you think that countries who starve their own citizens to pay creditors will be functional or even exist for long? What about the insane continued increases in wages of generally useless and often harmful professions such as doctors, lawyers, MBAs, teachers and bureaucratic types? Where are the “new” jobs coming from? Have official policies and attitudes not destroyed opportunities for real innovation in the past 20 years? You may heard about the “it will be all right” shit and projections excreted by financial types and regurgitated by their cronies- but do you seriously believe them?

The real question is no longer if we will have worldwide default, but what form it will take and how long the process will last.

Comments?

  1. Someguy
    September 12, 2010 at 10:51 am

    You are essentially correct IMO.

    There are basically two paths a debt based currency can take.

    As the compounding interest debt finally exceeds the ability for people to pay, bankruptcies and deflationary collapse loom. Simply, peoples ability to borrow is exhausted. They can’t or won’t go any further into debt.

    Government can pick up the slack and start to monetize debt and keep the ponzi going. This is the trajectory towards hyperinflation and destruction of the currency. Winner : real things .. eg. factories, land, gold and silver

    If there is no monetization then a hyperdeflationary spiral begins. Ironically, this will also resolve in the destruction of the currency , but for a different reason. Tax revenues will plunge, and government won’t have the funds to service their debt. Risky debt carries higher interest rates , on bonds. This piles on the total debt load and thus default in payment looms and the currency is toast.

  1. September 12, 2010 at 2:38 am

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