Monday, October 14, 2013

The Truth About "The Ultimate Safe Asset"

By, Chris Rossini

Gold, for many thousands of years, has been "the ultimate safe asset" and used as money all over the Earth. However, at the start of this article, we're not going to delve into gold, but instead take a very scary trip into the paper money fantasyland, where the failure rate of such monies comes in at a very impressive 100%.

To lead us on this journey, who better than Paul Krugman to act as our guide. For in the fantasyland of paper money, only a distinguished professor of his caliber can win a Nobel Prize in Economics. Such a feat is equivalent to Barack Obama (who routinely kills innocents with drones) wins the Nobel "Peace" Prize! In paper money fantasyland, everything is turned upside down.

The bureaucrats, media, and financial gurus are all in a frenzy because of yet another 'debt ceiling crisis'. The crisis is not that the debt ceiling has been reached (for something like the 95th year in a row)...No, the crisis is that it may not be raised!! Remember now...fantasyland thinking.

Ivory tower Krugman looks down on Earth and does not like the ramifications of this crisis:
Financial markets have long treated U.S. bonds as the ultimate safe asset; the assumption that America will always honor its debts is the bedrock on which the world financial system rests…
Normal thinkers will find it interesting that a U.S. bond would be the "ultimate safe asset". In other words, they would find it fascinating that an instrument of debt from government would be considered an asset at all.

This debt is not from private individuals or companies, who have to voluntarily provide a good or service in order to pay it back. government must forcefully extract the money from the shrinking number of productive Americans in order to pay it off. So not only is the "ultimate safe asset" an instrument of debt, it's also immoral to boot.

The immorality extends way beyond direct taxation. The government also "honors its debts" by creating money out of thin air. So not only are Americans taxed directly, they're also taxed again in a much sneakier manner. They're taxed indirectly, by having their purchasing power taken away when more money is created.

Americans see the results of the theft later on, with incessantly rising prices. However, they're trained to blame other things like "greedy businessmen" or wars, or whatever else. They also have the government constantly telling them that price rises are only an illusion. "Two-percent" is the mantra. If you're seeing more, you must be the crazy one.

A clear thinking person would think to him/herself: "Wait a second. Aren't the debtors getting the shaft as well? Whenever the government prints money, the debtors get paid back in depreciating money. Aren't they the crazy ones?"

And the answer is "Yes, the lenders are crazy." But this is fantasyland, where everyone thinks and acts in very bizarre ways.

What happens if everyone starts to wake up from this bad nightmare?

Well, that causes concern for Nobel Krugman:
Now suppose it became clear that U.S. bonds weren’t safe, that America couldn’t be counted on to honor its debts after all.
Notice the words "suppose it became clear". Truth and clarity are the enemy in fantasyland. Krugman's job is to keep the smoke from the clearing. He and his Keynesians are a never-ending fog machine.

This is what happens, should the fog clear:
Suddenly, the whole system would be disrupted.
Ahh yes, "the system". I spoke about elites and "the system" just yesterday. Status quo is King (when you're the King).

Krugman tries to stay positive though, should there be a disruption:
Maybe, if we were lucky, financial institutions would quickly cobble together alternative arrangements.

The world has suffered enough from all of the cobbling together. We've had enough of getting together and forming one failed "system" after another.

It's time for these self-proclaimed Einsteins to get out of the way! It is time for the marketplace to (once again) determine what shall act as currency.

For thousands of years, people all over the world freely chose to transact in gold and silver. Chances are excellent that the market would choose to uphold that tradition, especially with the technological advances that have exploded over the last 50 years.

No longer would people have to lug around gold and silver coins or bars. Our digital world can function beautifully with sound money that cannot be created at the whims of the professors.

The banks would have their role to play. They can go back to acting as lawful warehouses of our money. They store our money and charge a fee for the service. They may not lend what has not been explicitly been granted to them to lend. And they may not lend a single ounce beyond that. Our digital technologies can monitor any banker much better than ever should they try to break their contracts.

Like the separation of Church & State, there absolutely must be a separation of Bank & State. The rewards of the latter will be just as spectacular as the rewards we've reaped from the former. We could escape the paper money fantasyland that has spun completely out of control.

But we cannot rely on "luck" for honest money to return. It takes strenuous effort to spread the ideas that clear away the fog. Luck is surely welcomed, but the focus is education. People must understand.

Spread the ideas!

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  1. A bond is not a liability to the lender. It's an asset. Pretty simple concept.

    You open a savings account. That's an asset to you and a liability to the bank.

    Very basic stuff.

    You purchase a 30 year bond. That's an asset.

    1. Why did this man not win the Nobel Prize in Economics this year? "A bond is not a liability to the lender, " alongside "You purchase a 30 year bond. That's an asset (presumably to you)." Which is it Jerry? Have you taken Accounting 101 yet? Maybe just pick up Accounting for Dummies.

      If a bond payable is an asset to the issuer, it follows the issuer has no obligation to repay--default is a viable option, since all liability rests with the buyer. Is this what you're advocating for USG debt?

      Jerry, please explain how risk of default is incorporated into the interest rate paid to the holder of the debt (their asset) .

    2. Does Jerry Wolfgang really exist, or is he just someone's pseudonymous strawman for Krazy Keynesianism?