When downturns arrive, central banks and governments work together to use government debt and newly printed cash to keep asset values afloat. “Ensuring solvency” of a bank, for instance, means keeping its debt burden from exceeding its asset value — keeping its infinite money machine in operation.
When debts exceed asset values for a company, that company’s value quickly goes to zero – unless they get a bailout (Source: Wall Street Journal
Banks are often the first beneficiaries of government bailouts but not the last. With each crisis, central banks and governments are injecting more money even further across the economy.
So, low interest rates drive high growth in asset prices, widening the fertile ground on which infinite money machine Ponzis grow and develop. Downturns usually cut these Ponzis down, yet we see governments stepping in to bail them out with yet more credit. This, in turn, feeds asset prices, and on and on the cycle goes.
Can we ask our elected officials to simply stop pushing down interest rates, bailing out those who took on too much debt, and instead let downturns run their course?
Let’s Just Stop
If central banks and governments stopped making credit easier and easier to get through lower interest rates and debt monetization, we could put an end to this Ponzi scheme behavior and get back to an economy where we sell useful goods and services to each other.
Where’s the problem?
Central banks and governments cannot stop taking on debt and printing money, because our currencies themselves are a key part of a massive infinite money machine Ponzi.
The U.S. dollar and all other major currencies in circulation today are fiat currencies, with central banks and governments able to work together to create more units of the currency. In practice, new units of currency are created through loans by central banks to banks or the government, and by banks to people and businesses. The currencies we use every day are actually debt held by people, businesses and governments.
The source of this infinite money machine is central banking. A corporation or individual needs to show a lender that they are creditworthy, but the central bank is a special type of lender. This lender bears no cost to lend their currency, so they can lend to anyone, anytime, at any rate. Governments utilize this special lender as their literal infinite money machine. And they even admit it’s an infinite money machine!
Central banks and their money printers enable the illusion of both lower interest rates and GDP growth. When central banks push interest rates down, they are injecting new currency into the economy. This currency circulates and pushes prices for everything up, all at different rates and times. As a result, GDP floats upward.
Can we not adjust GDP for this inflation? Sadly, no. No economist or supercomputer is capable of parsing the complexity of price movements in markets to say what percentage of a rise in GDP came from actual productivity versus simply more currency units floating around, pushing up prices. If someone could, they’d be the richest person in the world overnight by perfectly trading the financial markets.
However, a central bank and its fiat currency have the same Achilles heel as a Ponzi scheme :
“With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.”
If central banks and governments stop printing money, or if demand for their debt or currency falls, the entire ruse will collapse.
How does a government ensure demand for their debt or currency?
Dictating Demand to Keep the Ponzi Going
A corporation or individual who lets their debts surpass their assets must peaceably file for bankruptcy and unwind the whole folly. A government would go down just the same once people began to realize the inanity of the fiat currency system. However, we have given governments our blessing to use force, and in many cases given up our own capability as citizens to resist that force.
To keep their Ponzi currency going when people become aware of it, governments must restrict freedoms or use violence.
Legal tender laws and taxation are one way in which governments restrict freedoms and employ violence in order to prop up their currency system. By demanding taxes be paid in their own currency, governments are able to prop up demand for citizens to acquire their currency and then take that currency out of circulation. Proponents of modern monetary theory are very direct about this, believing that the purpose of taxation is to control inflation by sucking liquidity out of the system. The backstop to ensure these strategies work? That government’s police will gladly lock you up if you do not comply.
Imagine you decided not to continue lending to a company because you didn’t think they were solvent, and an employee of that company handcuffed you and threw you in a cell. Who would be in the wrong here?
Governments may also employ military force on the international stage to tackle threats to its Ponzi scheme. The U.S. government is particularly adept at using military power — or simply a projection of it — to defend the U.S. dollar system from threats. When other nations challenge demand for dollars on the international market, say for use in oil markets, the missiles start flying. This is the truth behind the meme below.
As the government goes deeper into debt, it will need to take more drastic measures to ensure the fiat currency Ponzi continues. That will mean more inflation, higher taxation, stricter controls, and strategic use of the government’s backstop of violence. They will increase taxes , seize assets , tighten surveillance and even “debiting FedAccounts ” when inflation inevitably accelerates . All the while, the severity of the eventual collapse will grow.
If the government won’t help us get out of a system that is hurting us all, what can we do by ourselves?
Ending The Ponzi Ourselves
Thankfully, we, collectively, as citizens of the Earth, can fix this problem — not through votes or UN resolutions but through individual actions to cease participating in the machine governments have built around us.
We are already bombarded by messages that it is the greedy rich and capitalism itself which is to blame for our societal ills, but now we know they are only following a playbook and strategy enabled and encouraged by a government-led Ponzi scheme.
Source: CNN .
Ironically, these messages drive people to hand more power to governments, who are seen as the only answer to controlling the excesses of the private sector. The result is exacerbation of the problem, not resolution, as government-centric monetary systems are the root of those problems.
Thankfully, defunding the fiat currency Ponzis and ridding our world of their catastrophic systemic risks is already in progress. Day by day, individuals are opting out of a broken financial system and into a new one, out of government reach and fixed in supply: Bitcoin.
The existence and growth of the Bitcoin network represents a challenge to a system which must exert more controls and increase systemic risks in order to survive. That system would have us work harder for less just to keep the Ponzi scheme ticking. Each person who chooses to hold bitcoin instead of assets which governments can seize or devalue is doing their part to dismantle that scheme.
Will you be one of them?
This is a guest post by Captain Sidd. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
