Debt & Deflation Potpourri


"Is there anything ethically or philosophically wrong with the central bank system of money as it has evolved? My answer is yes. As gold was systematically removed from the system, the system became a "fantasy system."

I say fantasy because the central banks are able to create money at will, with no discipline to stop them. This I believe is immoral, even evil. The current system allows a central bank to create money out of nothing - whereas I and my fellow Americans have to work for that same money.

Is it ethical, even logical, that I have to work my whole life to make say a million dollars when the Federal Reserve can, in a minute, create billions of the same fiat dollars that I work so hard for? The system defies logic and defies reality. It's a scam. But because there is no limit to the fantasy-dollars that the system has created, the system has simultaneously created a giant edifice of debt. Nobody is certain how much debt has been built into the US structure, but the accepted figure is around $38 trillion. If you figure that the average interest on this debt is 5%, then you are talking about $2 trillion a year needed to service that debt.

Thus, the system now requires inflation to handle the debt. You see, inflation renders debt less onerous through time. This explains why the Fed is so terrified of deflation. In deflation, debt becomes increasingly difficult if not impossible to handle. In deflation dollars become scarcer and more potent, while the debt remains constant. This, in a nutshell, is why the Fed is so frantic to thwart the forces of deflation.

The forces of deflation? What forces? During the '90s people, cities, states, the federal government, corporations - they all borrowed heavily. A huge world of "prosperity" was created. But alas, the structure toppled over starting in late-1999. We refer to that as the "bursting of the bubble."

Why did the structure topple over? It toppled because "no tree grows to the sky." It's as simple and yet as mysterious as that.


Dow Theory Letters, Inc
Richard Russell, EDITOR-IN-CHIEF


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"We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."

--Robert H. Hamphill

Atlanta Federal Reserve Bank


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"By this means (inflation) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."

--John Maynard Keynes
(the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).


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 The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth.
 --Alan Greenspan
Gold and Economic Freedom (1966)


"Financial Forecasts"

"Debt is the Achilles' heel of the American economy," said Don McAlvany, the guest on Tuesday night. As the editor of the McAlvany Intelligence Advisor, he analyzes financial developments and their effect on personal finances.

"We are headed for a great world depression," worse than the one of the 1930's, "as the debt pyramid is now unraveling," McAlvany said. He believes we are at the beginning of a long-term drop in the standard of American living, and that China and Asia will be the dominant economic force of the 21st century. Pointing a finger at the Federal Reserve, he said that artificial stimulations of the economy to try to keep the prosperity of the 90's going, were akin to the needs of a drug addict.

"There are ways to protect ourselves," the first being to get out of debt, he said. McAlvany also advised getting out of the stock market entirely, and investing in gold and gold stocks, as well as starting a home business as a sideline. The currently strong real estate market however, is very vulnerable. There's a "giant ice pick" ready to burst that bubble, he warned."


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