The global financial system appears to be built on shaky ground. Current data shows this clearly. Whether we blame it on the global lockdown and pandemic, or whether we point fingers at modern day capitalism (which includes Keynesian economics and MMT modern monetary theory) or whether we suspect that some hidden hand is pulling the strings at the WEF, one thing is for sure – the world is looking financially poorer. The cupboard may be looking shiny and new with lots of bells and whistles, but when you open it up, the cupboard is looking mighty empty right now.
I say this based on stats regarding sovereign debt, or the amount of money a country owes to lenders. The World Bank, IMF, BIS, ECB, etc are central banks who loan money to struggling countries who need to boost their economies. That’s how capitalism works. It’s based on debt. You have to go into debt in order to grow, it seems. We can discuss the philosophical implications of this type of strategy all day long. Ask some simple questions and this system seems to be like that empty cupboard all over again.
For example, where does the money come from to lend to these nations in the first place? Where do these central banks get their cash to lend to others – at interest? The answer is that they make it up out of thin air. They press a button and the money printer goes Brrrrr... That sounds like a big shiny cupboard full of empty promises to me. In other words the capitalist system is built on a foundation of nothing. Money is backed by nothing. It’s printed out of thin air, and we cannot eat thin air. Yet that’s how the foundations of a capitalist economy are built – upon thin air.
In past generations fiat currency used to be backed by gold. In past millennia money consisted of coins made of silver and gold. It was worth its weight. It never lost its inherent properties, since gold and silver are pure metals that cannot really be eroded. I have discussed the idea of the failed gold standard before and its key part in the destruction of wealth and real money in our global history, thanks to the sharks at the USA under President Nixon in the 1970s who removed the gold standard.
Here I want to simply remind you of how hollow this whole global monetary system really is, when a private central bank can print money out of thin air and lend it to a sovereign nation, and then expect it to be repaid – with interest. Firstly, is that even moral or ethical? And secondly, where is the money to pay the interest supposed to come from?
Money is not made outside of that printed by the banks. It merely circulates in the system from one hand to another as a means of payment for good and services. The velocity of money, or the speed at which it passes from one hand to another in the economy, is a clear indicator of that economy’s health. And velocity has slowed in recent times.
So how is a nation meant to acquire this extra money to pay the interest on top of the loan that the central bank printed out of thin air? And who invented such a fragile and delicate system, which to me looks like a ponzi scheme of sorts. Whatever you call it, it looks immoral and unethical from my point of view. The central bank is making money out of nothing and then loaning it to nations, while getting interest back. Making money upon their money which is built upon – nothing.
Perhaps I’m belaboring the point. It’s just that I’m struggling to wrap my mind around the whole concept. And to answer the question of origins, this entire scheme was engineered by the few men at the head of the central banks themselves. It came about hundreds of years ago when wealthy men started the banking system to fund kings who went to war against each other. And it went from bad to worse over time. At least in the past gold was the store of value. Those days are over for central bankers. It’s all paper now and will soon be all digital. Exceptions appear to be modern day Russia and China who have been accumulating physical gold over the past few years in order to build real wealth that can back their currencies as the others collapse.
Perhaps I’m naive regarding macroeconomics but this kind of system is doomed to implode like the true ponzi scheme that it is. If you follow the concept through to its natural conclusion, you will realize that the debts can never be repaid. The interest on those debts can never be repaid by the nations that take the loans. And we are seeing that now in modern times. The data clearly shows it.
Global debt, or the amount of debt owed by all people and nations combined, reached $226 trillion in 2021. The biggest one year increase in that since WW2 came in 2020. The global debt to GDP ratio is thus now at 99%. This means that for every 100 created by a nation, 99 has to go to repay the debt. And interest rates are rising, possibly faster than growth. That is totally unsustainable and will implode, in my opinion. Most of this is government debt owed to the central banks. The World Bank says that any country with a debt-to-GDP ratio over 77% for a prolonged period of time will experience economic slowdown.
Slowdown in growth means that the debt stays the same or actually increases as interest rates increase, but your ability to repay it gets weaker and weaker. Naturally the outcome is stagnation and default. It does not work, based on simple math. And default by numerous nations is starting to play out currently around the world.
In other words, it appears to me that we were born into a financial system that was designed long before we were born by a few elites at the top who already had much of the real wealth. And they decided to engineer this system of capitalism based on debt and money lending with interest. With this system they built a world where you need to go into debt to achieve anything in life, like buy a house or a car or study at a tertiary facility, or build a business.
So they continued to make money out of nothing while subtly enslaving the masses by obliging them to work to pay off the debt plus the interest. Yet today we sit with a situation where not only citizens, but entire governments are defaulting on their debt and are simply unable to repay the loan. The ponzi scheme is collapsing. In theory the loaned money can be used to create tradeable assets and generate more wealth, but the system has been skewed in recent generations. Someone has their finger on the scale in this equation, tipping it in their favor by printing more money out of thin air and thus devaluing all money as a result.
Thus you can still loan money and earn or generate more of it, but that same money is losing value or purchasing power by the day. It is a constantly depreciating asset. So real value is dropping despite the fact that more money is being printed into circulation. It’s a crooked system, in my opinion. And it won’t end well for the masses. The only solution is to hold gold and silver, which keeps its value. Or buy Bitcoin, which is the equivalent of digital gold or real “hard money”.
The reason for this is that you can’t keep printing more bitcoin out of thin air. It has a hard cap of 21 million and about 20 million are already in circulation. This is our new form of money as a store of value and medium of exchange, thanks to blockchain technology. Time has already proved this to be true, though some may want more than the 13 years of Bitcoin’s lifespan to indicate reliable results. Nevertheless, in the past 13 years of its lifespan, Bitcoin has only gone from strength to strength, based on the coding an on math. Therefore Bitcoin is the people’s money, where fiat is the government’s money and gold is God’s money, as the saying goes.
(image pixabay)
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Thanks for that Julian and totally agree.
I am no economist etc as I have spent a life in the bricks & mortar industry for food on the table but it is amazing to see someone far more clued up be able to pen those points so well in items that have always boggled my brain ,with me presuming the same as you have factually nailed on the head or points that I felt were pertinent in the past that have been killed off for "some's cunning gain"......viz the ability of merely printing billons out thin air to put most of the world in huge debt & be owned by these master printers, The second point was that it was at least always logical to me the piece of paper in my pocket was based on the promise to exchange it for a bit of gold.
Cool Steve, thanks for your feedback. The real treasure in life is a heart of gold lol. 😇
Totally so in my book too : )
I think you're preaching to the converted and also think you're right. Most normies unfortunately see Bitcoin as a place to park their fiat value for removal later on (also in fiat value).
Yes that's true here, though I aim to inform newcomers which arrive occasionally.
Best wishes
Today's elites tell us to focus on sustainability. And in return they rely on their continued status as elites on an unsustainable monetary system.
And have done for millenia. We are not the first to experience a likely collapse. The Roman empire had similar issues and fell apart rapidly after fighting its disintegration for centuries.
The universal problem we face is that there is such a thing as a sound money monetary system. We just never seem to be able to stick to the rules! Because at some stage it becomes profitable for the elites (usually) to break them!
And in our specific case, they started breaking them back in the 1970s and have kept the wool over the population's eyes successfully since. Not for much longer though. And then we'll need alternatives.
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Well said friend, bitcoin is hard money for the people of today like us.
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I have always thought that from the moment the US completely abandoned the gold standard, the decline began for the US dollar (and for every fiat currency in the world that copied its example, as indeed it did afterwards). On the other hand, Bitcoin is the solution against all the vices of the predominant monetary and banking system. Bitcoin is the future, here, today
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Yes that removal from gold std was a watershed moment. Life has never been legit since in finance.
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"The answer is that they make it up out of thin air. They press a button and the money printer goes Brrrrr... That sounds like a big shiny cupboard full of empty promises to me. In other words the capitalist system is built on a foundation of nothing."
It's one of the biggest cons in history :) It's hilarious and (at the same time) insanely depressing and sad.