By D.K.Burton
The history of debt
The idea of debt stems from the Babylonian economic system of more than 4000 years ago, around 2000 BC. Instead of coins, the Babylonians used clay tablets representing the promise to pay. Money was borrowed when it was needed to survive, as opposed to today’s tendency for people to borrow for “wants”. A need is not a mobile phone, MP3 Player or a Porsche-these are all “wants”. People borrow to show off to people they don’t know or like, plus what they borrow for always falls in value (the above); when combined with the cost of money, this means big losses!
Farmers would borrow for seed for next year’s crop only after they had a previous failure. They were forced to go to the priests for a loan. The priest would lend the farmer, say, 10 talents with the condition that he should repay 11, thus charging ten percent “interest”. The farmer himself and his land, wife and children were used as collateral. When the farmer couldn’t repay 11 talents, as there were only 10 in circulation, he defaulted and the lender would take his land and cattle, and sell his wife and children to slavery. Most slavery came from debt. Nothing has changed, as today most farmers are slaves to banks; in fact 98% are, with only 2% having no debt. Now if you are thinking of selling your wife and children, think again, as not many people will want to buy them, and there is no good second-hand market for wives and children, therefore you had better look at simply avoiding debts!
The creation of money
Money is created out of nothing. Over the centuries coins and bullion were used. They became too awkward to deal with, so the people who stored them (smiths and smelters) issued paper receipts instead (now called IOUs).
Only 10 percent of the value of what is stored was being used at any one time, so they began to lend more than they had, and the banking system was formed. Paper money, called “fiat currency” has been used now for hundreds of years. History shows that this system is cyclic and has always ended badly, with a complete debasement of the value of the currency, similar to what’s happening to the $US now. Banks have been lending up to 100% of the value on some assets. This is doomed to fail. There is no real money; it’s only a computer entry from one account to another. If everyone went to the banks to draw out their cash – what’s known as a run – the banks would fail. Of course, only the people with no debt and term deposits can draw out all the money, the rest can’t, which leaves 98% stuck, and 2% with the cash.
The Matrix of money works like this; the government prints a $100 note for 6 cents, sells it to the bank for say 4%, which is $4.00 on $100. Now 6 cents into a $4 is 6,666% return. Then the banks lend it out to say a credit card at 19% or $19 on $100. This is 31,666% return on 6 cents. It gets worst, as the banks have been lending out around the world, 100, 200, who knows, maybe 500 times the $1 on deposit. If you lend $100 out, say, 100 times it equals $10,000.00, using say 10% interest rates that’s $1000.00 per/year. Now 6 cents into $1000 is a 1,666,666% return. Now if it’s 500 times, rather than 100 times, then it is 8.3 million percent. Of course, they aren’t printing fresh money each year to replace that $100, so say it lasts 10 year? 6 cents into $10,000 (10 years of interest at 10 percent) is 16 million percent return. Now, if its 19% like on credit cards, this means a 31 million percent return over 10 years.
For this system to work, the bank relies on you staying in debt and paying interest. When people don’t want to borrow, or pull their money out of the bank – like in the great depression – the system will collapse; or if everyone wanted to pay off their debt at the same time, it would collapse, and this is what is going to happen because the mathematics of money just can’t work – and the next great depression will prove this to be correct. Not everyone can pay off their debts because there is more debt than paper money in circulation – only 2% can.
Do you want to be in the 2% or 98%? It’s your call.
If you are in the 98%, it will be the banks’ call. They control your future, not you. Remember, if you are in the 2%, the other 98% are after your money. Go to this link to Money as Debt (48 minutes) http://video.google.com/videoplay?docid=-2550156453790090544#docid=-21878850.
Money is only created for people to work for wages. Look how much work is done by the masses for 6 cents. Look how much debt you can get them into for 6 cents. What a brilliant system has been created. Look how you are controlled!!
Don’t forget also that governments and big business (especially the banks) prefer a placated docile public – distracted and struggling, and without the energy and opportunity to look too closely at what the government / bank alliance is up to.
The Stock Market
The stock market is only an extension of money. Companies float on the stock exchange to off-load their assets to the public at inflated prices, and to create a large amount of money for the owners. Shares are issued to get interest-free money from the public, and then the directors and staff can have a fat time, travelling, dining, cars, bad investments etc, and then when they have used all the funds, they issue more shares… like they print money. All banks around the world have done this to get more funds, to make their balance sheets look good from the bad debts they created. Members of the public are so stupid they even borrow money from the bank to buy stocks, doubling up their risks. So when the company has been stripped and gone bankrupt they are left holding worthless pieces of paper, plus the debt to the bank they can’t pay back. No one floats a great company, they keep it for themselves. There has been a large number of CEOs that have committed fraud, stealing share holders funds. Not only are they overpaid, they have to steal from you as well. If these CEOs are so good, then why don’t they say: ‘I will work for nothing and only get paid a % of the shareholder’s funds when we have no debt and cash in the bank.’? They couldn’t do it as they would starve to death. This is why I have never owned a share for 18 years, and never will. I don’t need shares to make money and neither do you!! You are crazy to own stocks ever. You will lose all your money.
Inflation
The inflation really started when we went off the gold standard in 1971 – a move pushed through by Richard Nixon (front man for the Federal Reserve).
Most people are not aware that the Federal Reserve is not owned by the US government. It is in fact a privately held company. It started with a secret meeting in 1910 between the Rothschild’s, Warburg’s (Europe), Rockefellers and Morgan’s (USA). The Federal Reserve was formed at 6:05 pm on the 23rd December 1913; it was done on this date, as most members of the congress were on leave just before Christmas, so it was passed quickly.
US President, Thomas Jefferson warned
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered… I believe that banking institutions are more dangerous to our liberties than standing armies…”
—Thomas Jefferson
Going off the gold standard meant that they could print money with no assets backing the paper money. As money was printed, it then became easier and easier to borrow up to 100% of the asset; this of course pushed the value of the assets higher, so you would borrow more as the equity increased, putting you further into debt. When the borrowers stop borrowing and the credit is pulled in, you are left holding over-inflated assets at the top of the market and which are about to crash in value. This of course created the bubble in the share market, land prices and other debt-ridden products. People borrow at the top, not wanting to miss the greed from the boom which they thought would last forever, and they are the ones that liquidate at the bottom when fear sets in.
Now if printing money creates inflation, how is it we only have 2% inflation, as stated by governments? What they have done is taken food and oil out of the index, the things that measure and create inflation. Go to http://www.shadowstats.com.
They also don’t include new taxes, rates etc in the indexes. They do this so the wage-earner doesn’t make any claims for higher wages – which would push inflation even higher; of course if the union rank and file membership ever really understood this, they’d stop voting Labor immediately!
Our governments off-load inflation to lower wage countries like China and India, by getting cheaper and poorer quality goods. Companies move to those countries to lower costs, make larger profits by selling the same goods at the same price back to the country they just left. The real inflation will show up when the raw materials are used at high prices, and the costs will be passed on as the $US falls further, causing hyper-inflation.
Oil compounded at 30% per/year from 1999 to 2008, so it’s not possible to have 2% inflation.
Another trick is to lower the standard of service and goods while retaining the same price. If you sell a bag of chips, you can put fewer chips in and more air, or use lower quality potatoes. When you buy a car, the metal and the leather in the old cars are now replaced with plastic and sold for the same price; this doesn’t register as inflation, but you get lower quality goods which is inflationary. Buying gold isn’t going to help as a hedge, as no one needs gold to live, we need food. The holders of debt like the Chinese will buy commodities which are in $US. Why would they buy bank bills at 1% when they may get 30% rise in commodities which would equal 30% interest in a term deposit?
Printing money pushes the costs of goods up and leads to demands for higher wages, which keeps the spiral going. Governments like this because it pushes you into a higher tax bracket which is called bracket creep. This is why they don’t want a flat tax, which is easy to manage.
My god, a flat tax would be an incentive to work harder! The government doesn’t want that – it needs the higher taxes paid by the best workers so that it has more to give to its voters – the Labor losers!
The governments quote 2% inflation and want the rate to be low – why? – Because they want you to pay more tax so they can give it to people who create nothing – Labor voters.
Let’s look at capital gain tax:-
You sell your investment property for a huge gain, the tax payable is between the 2% and maybe the 100% you made, not the true inflation rate. If they did it on true inflation of about 8% -10% they would make much less. Look at the figures: 2% x 10 years equals 20%, 8% x 10 years equals 80% , 50% capital gains tax between 80% and 100% is only 10% versus capital gains tax of 40% between 20% and 100%. Now we know Labor voters won’t have capital gain taxes because they go into debt to fund housing for other Labor voters who can’t save money, and rent.
You are better off not expanding, but contracting and doing very little – as you can see, all you are doing is working hard to fund Labor voters. Just get out of debt and live off interest.
Global warming!!
ETS stands for “Extra tax scheme”. If we believe that humans created global warming wouldn’t we cut down the birth rate so we had less people? Here’s an idea! Reduce the population (and improve the gene pool!) by not letting people over 30 and under 23 breed; also you could stop anyone on benefits, who was unemployed, had a criminal record, used drugs etc, and of course you could stop Labor voters breeding as well. They shouldn’t breed, they haven’t even worked out in the “Education Revolution” that if you spent more money than you earn, you will go broke!
Then we would have more water, resources etc, to last the (improved) human race longer.
Droughts and floods have hit the earth every since it has been spinning. The Mayans faced a 200 year drought in 800AD, and they didn’t get taxed!
The cycles take 26,000 years to repeat, have ‘climate researchers’ looked back that far? No!!
The poles shift every 12,000 years – of course there’s always been climate change. We have simple examples of earth’s rhythm every year as we change from winter to summer and back again. Do you think there are no slightly longer rhythms out there? Hang on, shouldn’t we just have summers? If you listen to socialist politicians, perhaps they think there are no rhythms and a steady state is what we’re supposed to have!! They are very rarely right on anything. It was hotter 800 years ago.
Go to http://pages.science-skeptical.de/MWP/MedievalWarmPeriod.html
The Labor government wants the population to get to 35 million, causing more pollution? What do they want? The main reason for enhancing the ‘end of the world’ hysteria is not concern over global warming, but an underhand push for global power and new world government and currency. If Rudd got away with the ETS it would cost about $15,000 per/person per year. Although a cost of $1,100.00 was quoted, the real compounded cost means you need to gross another $15,000 per year, because on average the dollar compounds about 9 fold as it passes through the consumer chain.
The goal is to get all countries to agree to global action on climate change, and then in the resulting depression the owners of the Federal Reserve will say ‘it’s not working so we should reduce the population’.
Go to:-http://www.prisonplanet.com/articles/january2007/290107rockefellergoal.htm
Deflation
After the inflation bubble, they pull in the lending and funds to create the collapse, of course under the right cycle to get maximum effect. The spiral starts again and as fear sets in more money is lost.
Here’s how it’s done: say Borrower A bought a house for $500,000 – at the top of the inflation boom (maximum printing of money) – and in the recession/depression, the house value falls 50% to $250,000; Borrower A desperately puts the house on the market and the banks lend $250,000 to the new buyer, Borrower B at, say, 10% interest rates. Borrower A has a $250,000 loss and will also have to pay late fees, the loss and the interest, making more money lost than the value of the original loan. If Borrower B goes broke then the same thing happens. The more that go broke the more money the bank makes, which incidentally explains why the banks continue to pay their executives huge bonuses during a recession – they profit from your misfortune, like the true parasites they are!
People paying interest on a mortgage may have an annual interest rate of, say, 8% and businesses have loans at 10%. Why do home borrowers have a cheaper rate? Well they don’t. ‘Per annum’ means once a year, but house buyers are paying monthly in advance, which is effective, a higher rate. When the banks receive 1/12th of the annual interest paid in the 12th month, then 1/12th in the 11 month and so on, the interest gives the banks more deposits to lend out to new borrowers. This is how banks make so much money out of nothing: and don’t forget all the fees and charges as well. Banks are only good for one thing, depositing money and earning interest, so they can lend to people who want debt.
Next is the first home buyer, to become the first home seller. They have borrowed with a 95% loan which has to be paid back with after-tax (nett) money, and the loan has been approved on the basis of two incomes, to get the maximum loan. The only people making money out of this are of course the banks, the developers, the builders – and the government through stamp duty and taxes. With increases in taxes, new taxes like the ETS (extra tax scheme), the home buyer will have more trouble paying off his loan, as all these increases are taken from his nett money – after he has already paid his income tax. The interest isn’t a tax deduction either. Of course with the increase in taxes, unemployment will go up, and many businesses will move to China and India – where you don’t have this nonsense yet.
The bank knows that there will always be a large number of bad debts – because the system can’t work. To recoup the loss, they just add a risk margin to those that can pay, and widen the spread between the depositor and the borrower. They can’t and won’t lose, but you can, if you have debt.
G-20
What our politicians are doing is inventing a way to control the world under a new world order, world government, world currency, etc, and there will be no better time to do this than in the next great depression between 2016 – 2020.
The governments engineer this by working hand in glove with the banks, and here’s how: the world stimulus (the printing of money) has only added more cash for the banks to have on deposit, no new lending has happened – in fact people now have to have larger deposits and better balance sheets to get loans, which is the tightening of credit. Now if the G-20 decides not give more credit, then debts will climb on existing loans on real-estate, stock market, cars, credit cards etc. The banks (= government) will then take your land for free because the debt will be larger than the asset value, as your assets keep falling in value. Once governments take all the land, they will become the new landlord, you will be a tenant, and we will be back to having much more socialistic countries as capitalism dissolves. People will be happy to have just food and shelter, then just give them a uniform (people like to belong) – just as Hitler provided to the German people in the 1930’s after Germany’s hyper-inflation in 1923. Then we will have a new dictatorship, a new Hitler, a new civil war.
Money Supply
Let’s have a look at the graph below; in 2006, the Federal Reserve stopped publishing the M3 so it didn’t show the printing of money (the red line). But the blue line shows it climbed to a peak in 2008. The M3 isn’t a new highway, but the highway to HELL. The Australian Government M3 grew at 19% in 2008. Now if your assets didn’t grow by 19% or thereabouts, you are losing money.
We all think we are clever by how much our real-estate has gone up – it give us a warm fuzzy feeling – but in fact it was the loss-lending and going off the gold standard in 1971 that made values go up; it had nothing to do with you – the cost of living and value had to go up together.
Now that credit has tightened, just watch values fall – and fall for a long time. You have to be able to switch from different assets to cash and back to assets at the correct time to make your wealth grow. There may be long periods of time where you should be in cash, collecting interest and having a good time!
Buying power compared to 1980 USD | |||||
Year | Equivalent buying power | Year | Equivalent buying power | Year | Equivalent buying power |
1774 | $10.53 | 1860 | $10.22 | 1950 | $3.42 |
1780 | $6.20 | 1870 | $6.51 | 1960 | $2.78 |
1790 | $9.30 | 1880 | $8.31 | 1970 | $2.12 |
1800 | $6.77 | 1890 | $9.34 | 1980 | $1.00 |
1810 | $6.91 | 1900 | $10.12 | 1990 | $0.63 |
1820 | $7.25 | 1910 | $8.94 | 2000 | $0.48 |
1830 | $9.21 | 1920 | $4.11 | 2007 | $0.40 |
1840 | $9.83 | 1930 | $4.93 | 2008 | $0.38 |
1850 | $10.88 | 1940 | $5.87 |
The Bond Market
The world wide bond market will collapse between 2011 and 2014, a year or so before the great depression.
Why will this happen? Well, let’s say banks retreat from lending $100 to $1 back to $20 to $1. That’s an 80% tightening of credit – so guess what is going to happen when you tighten credit? The debt on the $80 can’t be paid, as explained above. However people with equity will rush to get funds to finance their debt, pushing rates far beyond anything you have seen in your lifetime. In the 1890’s, the cost of money in the USA went overnight to 145%, and that was before they went off the gold standard there. This why if you have your loan locked in for ten years as suggested in 2008, you won’t be affected at all.
But no debt is best.
The tightening of credit will also mean fewer crops grown as farmers can’t fund their growing costs. This will send food prices very high, and will create the next civil war. Look at the US debt http://www.usdebtclock.org/
The true debt is running at about 120 trillion dollars.
In a year, the Labor government in Australia has blown all the savings carefully stockpiled by the conservative governments of the last decade – and run up a debt of $400 billion dollars and mounting. This money is borrowed, so why is Wayne Swan so surprised when the banks rates go up higher than the Reserve bank rate? They have to because of the Labor’s bad money management.
Wait to they get to 18% again, as they always do under Labor!
The Great Depression
The depression has already started; again governments don’t give you true figures. Look at the US – the true unemployment figure is 22% (see the graph below). Unemployment would be a lot higher if you took pensioners, those on sickness benefits or incapacity pensions, government employment, people in prison, and of course the boat people, etc, and added those people to the rate quoted. The idea of government and media is to keep the masses calm. But if I was you I would gear for a great depression between 2016 and 2020. No use having 20:20 vision in 2020!!
How to survive:
⦁ Get rid of all debt, now
⦁ Sell everything you don’t use or want
⦁ Learn to barter with people in your area thereby creating a local currency
⦁ Grow your own vegetables
⦁ Leave big cities, they will become war zones
⦁ Don’t own shares or real-estate
⦁ Have your own power and water
⦁ Don’t vote Labor, as they will make the depression worse, even with good government now, there’s still going to be a depression, as the previous conservative government took 10 years to pay off $90 billion, and we are already $400 billion + in debt after one year of Labor. We are in a financial mess.
⦁ Don’t employ Labor voters.
The word “ONE DOLLAR” means “ONE-DO-LIAR” MONEY IS A LIAR!
David Burton 11th December 2009
Websites for more reading.
www.schoolofgann.com
www.commhedge.com.au
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