Some misguided people say that America’s national debt of 102% of GDP, up from 57% in 2000, is not a problem. They cite historically low interest rates as proof this mountain of debt is harmless. Of course, it is a matter of trust and faith in the ability of a few people that their understanding of economics will see the US through this little rough patch. The wisdom of Ben Bernanke is unquestioned, even though he missed the housing bubble and didn’t foresee a recession.
The debt bubble is unsustainable; the only thing keeping interest rates low is coordinated manipulation by central bankers, the insolvent too-big-to-fail banks using derivatives and politicians desperately attempting to keep the worldwide debt Ponzi scheme from imploding. Their ‘solution’ is to kick the can down the road, but the road eventually ends.
At some point, something will trigger a collapse. No one knows exactly when the crisis of confidence and loss of trust will come, but come it will.
There are always those who think they are smart enough to fix the markets when they break down. These people inevitably end up in government, central banks and regulatory agencies. They refuse to believe the world is too complex, interconnected and to unpredictable to control, but booms and busts are the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings.
Human nature hasn’t changed in centuries. We have faith that humanity has progressed, but the facts prove otherwise. We are a species susceptible to the passions of power, greed, delusion, and an inflated sense of our own intellectual superiority. And we still like to kill each other in the name of country and honor. There is nothing progressive about crashing the worldwide economic system and invading countries for “our” oil.
History has taught that there will forever be manias, bubbles and the subsequent busts, but how those in power deal with these episodes has been and will be the determining factor in the future of our economic system and country.
Men of stature and wealth, sure of their superior intellect and with an egotistical desire to leave their mark on history always rise to power in government and the business world; this is why history follows a cyclical path and the myth of human progress is a fallacy.
To read James Quinn article: It’s a Matter of Trust – Part One
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