Archive for August 5, 2011

Queen: I Want To Break Free

August 5, 2011 1 comment

An old music video.. This is one of the first one I can remember as a kid.


Categories: Musings

Sovereign Debt is Meant to be Unrepayable

August 5, 2011 5 comments

News in the last few weeks has been full of talk about sovereign debt levels of various countries, including the USA. CONservatives and LIEbertarians keep on talking about the need to stop increasing sovereign debt and start paying it down. However these retards rarely ask themselves a few critical questions-

1. What is sovereign debt anyway?

Sovereign debt is the promise made by a government to pay more of the same ‘delusion tokens’ (aka money) it borrows after a certain length of time. Of course, how a government can pay significantly more than it borrows is a mystery. Even under the most optimal expansion conditions, inflation adjusted economic growth rarely exceeds 5% per year over periods longer than a decade. Rates of interest exceeding 2-3% cannot be paid with anything other than more debt.

2. Who buys sovereign debt?

Entities ranging from their own citizens, other countries or any financial institution can buy sovereign debt. It is also possible to buy sovereign debt without any real assets/currency to back it up as long as you can convince the debtor nation to spend most of that newly created currency buying stuff you made- like China.

Currency is created every time somebody buys more sovereign debt.

3. If sovereign debt = money then wouldn’t paying it off reduce the total amount of money?

Yes.. paying of sovereign debt will shrink the amount of delusion tokens (money) in the economy causing significant deflation and high levels of unemployment. Moreover even steps to reduce debt through “austerity” or increased taxes on average people will be deflationary and destabilizing.

4. Why does a sovereign nation have to borrow to create new money?

This is an artifact of the ‘gold standard’ and unscrupulous banksters. In an older barbaric era, kings and lords used to borrow from private moneylenders to finance wars and other bullshit that could not be financed by simply stealing more gold from their subjects. Since we now live in a world of fiat currency, electronic money and computers- a government could easily create money without borrowing it, but politicians are owned by bankers.

5. But what about hyperinflation?

Hyperinflation requires a government that has lost the faith of both its citizens and the outside world. Which large developed country is close to that point today? While examples like the Wiemar republic and Zimbabwe might appear to be cautionary tales about printing your own money, both entities did not have a functional government when hyperinflation occurred.

6. What is the endgame of sovereign debt?

In the absence of high rates of growth (USA 1900-2000) or stealing from other countries (UK 1750-1900) sovereign debt default, either outright or through inflation is the only real endgame of sovereign debt.