Sovereign Debt is Meant to be Unrepayable

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.

Comments?

  1. Joe
    August 5, 2011 at 9:21 pm

    “What is the endgame of sovereign debt?”

    Social control of the population via debt slavery. Austerity measures will cripple the middle classes of western euorpean countries, the US will follow. Inflation, VAT taxes, carbon taxes, cuts to SS/Medicare. We must be fiscally responsible after all.

    It is no longer the 80s or 90s. People are too disenchanted, there are far fewer entrants in the ponzi scheme and the experts have lost credibility.

    Football, celebrity gossip and reality TV will have to preoccupy people after their 12-16 hr shit job days. I’m wondering if the corporate controlled media will be able to confuse and redirect peoples’ anger towards Iran, China etc. We’ll probably have another large war in 10 years or so. Glad I won’t be draft age.

    http://deadlinelive.info/2011/07/23/the-11th-marble-by-mike-rivero/

    I see systemic unraveling through neglect and apathy.

  2. August 6, 2011 at 8:28 am

    I studied the following hypothetical situations:

    1] In a previous era:
    You have 7 persons:
    a] one person produces 7 loaves of bread,
    b] two persons produce knives,
    c] one person is the chief who has a function over the group,
    d] three persons are assistents to the chief.
    The chief takes as taxes 4 loaves of bread and 1/10 of the knives for himself and for his men. The bread maker and the knife makers exchange bread and knives. Surely, the chief can take substitutes to bread and knives like gold. However, there was always shortage of gold.

    2] Nowadays:
    You have the same situation, except that the chief is producing lots of electrons as money. He can produce an infinite number of electrons at no cost ever. In fact, he can produce as much money as he needs bread and more. By producing as much money as he wants he can buy anything he wants. In previous eras, gold was in shortage so he couldn’t produce an infinite amount of money; he had to take taxes in kind if gold was absent. Nowadays, he can produce money at no cost an buy whatever he wants without the need to take taxes. In fact, this money he produces (provided that he’s the only one producing it because he is the chief) is a substitute to taxes. There is no difference between taking 4 loaves of bread as taxes or buying 4 loaves of bread with money produced by him without any cost.

    So what does all of this mean? It means that money (paper or electron) is a substitute to taxes. In fact, the government needs not take taxes at all. All it needs is to issue money whenever it needs.

  3. August 6, 2011 at 10:22 am

    I’m just starting to read up on this stuff–

    Doesn’t look like the federal reserve is our friend….

    http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad

    • Joe
      August 6, 2011 at 12:59 pm

      It’s funny that much of early US history involved the struggle between politicians that believed the government should have the abiltiy to issue its own currency, and central private banks that wanted to do it for us, but charge us interest for the privilege. It was a constant issue to keep these psychopaths out of our affairs. Nowadays, the fact that unelected persons, essentially private interests, exercise this much control over our money and by extension our government, isn’t even questioned. I suppose Thomas Jefferson and Andrew Jackson were conspiracy theorist nutjobs. “Representative” government indeed.

  1. August 7, 2011 at 12:42 pm

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