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Monday, September 16, 2013

Why Keynesian Economics Won't Work to Stop a Third Depression

                Keynesian Economics says that if you run a deficit, you can make more money by borrowing more money and investing it. Unfortunately, in a depression, like the one that the EU and the United States have been in since 2008, the best way to get out of the economic depression is to eliminate the debt.
                 On both sides of the ocean there exists the faulty logic that this problem can be solved by pouring more gasoline on the economic fires instead of taking the fuel off of the fire and making smaller fires out of it. As any fireman can tell you, smaller fires are easier to put out. However, the US Federal Reserve and the ECB have created a smokescreen instead of a forest fire. The economic problems of the EU were created to a great extent by the lax economic policy and auditing divisions of the ECB. A 3% annual GDP to debt deficit was allowed for over 12 years. Compounded, this creates the problems that Greece faced in 2008-2012 before we pulled them out of the fire and off of the fiscal cliff.
                   Yes, the ECB has helped to fix the problem as has Mr. Draghi, but the larger problem of debt resolution remains. If the European Union would take the time to establish a EU Treasury and issue EURO BONDS and convert the Eurozone country treasury bonds into EURO BONDS, up to 92% of the European Union countries debt would be consolidated. Who would own the debt, the citizens of the European Union of course. Who would benefit by this clearing house of debt, the citizens of the EU of course.
                   You say, we want to keep our sovereignty, are you truly sovereign nations now? If you are, it is in name only. I am the king of the world in my dreams too, but in reality, I am just a man. The US Federal Reserve is changing people but still has no clue as how to unravel this pack of lies that it has told the world.
Debt ceiling? What debt? The treasury of the United States is indebted to its people, to various state governments, to various government agencies, to China, to investors, and to you possibly.

Let us see the debt charts:

Graphic: Web of Debt
Source: http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.HTML 


Yes, I know, a lot has changed since 2010. But take a long look at who owes who here.

If you sold all of this debt to a EU Treasury which then issued Eurobonds, the countries would be cleared of a majority of their respective debt loads. This would free those banks and countries to invest in Small Business loans, education, and infrastructure all areas of the economy of the EU which would then create more JOBS, more tax income, and more JOBS, and more tax income, and more jobs, and more tax income.

Here's what I mean,  say I have $100,000 in student loans to pay off from five different banks at five different interest rates and five different complex payment scenarios, it is to my benefit to take out one long term loan and pay the f'ing banks off and just deal with one bank. One interest rate long-term. I know what to expect then don't I?

             Under Keynesian economics, I would just borrow  $200,000 and invest $100,000 in the stock market or lottery tickets- your choice- same odds of making a long-term sustainable profit over 20 years and hope to God that my profits covered the taxes, my brokerage fees, transaction fees, and the compound interest rates of the $200,000 loan. Otherwise, I would have to borrow the same $200,000 from Bubba the loan shark to pay off the bank loan, and Bubba doesn't take excuses as payment. He takes knee caps and fingers.

              This depression has taken knee caps and fingers from millions of over extended people and their relatives who trusted Keynesian economics. They borrowed themselves into a mile deep hole and can not borrow any more and Bubba wants his money. So, we try to negotiate with Bubba by printing more worthless money. The value of our money has gone down so Bubba wants more. Our Fed prints more money. Instead of killing Bubba and taking our money back, we keep feeding the debt by increasing the debt ceiling.

Here is the United States Debt:

As of March 2013, the national debt stood at $16.7 trillion [source: Dept. of the Treasury]. Technically the U.S. doesn't owe that entire amount to its creditors. Around $4.8 trillion is held by various government trust funds, so only $11.9 trillion is considered debt held by the public.

Out of that $11.9 trillion, about 32% is owed to China, Japan, Brazil, Taiwan, Switzerland, Russia, Luxembourg, Belgium, and Hong Kong. Another 36% is owed to the US public, state, and local governments. The balance is owed to corporations, insurance companies, banks, etc.

The balance of $4.8 Trillion of the $16.7 trillion US debt is owed to itself through intergovernmental loans.

All told only around $3.73 Trillion of the $16.7 trillion US debt is owed to other countries approximately 22% . The balance of 78% is owed to itself and its citizens, corporations, etc.

This debt could be eliminated by exchanging the debt for future tax credits, low interest rate loans, etc. at very little expense to the United States Treasury. 

If the Treasury bond holder has current debts that are owed to the United States government, a fair exchange could be made debt for debt. I believe that if immediately implemented, a debt reduction of 25% could be realized in the first 5 years.


But, I digress, Keynesian Economics and economists like Mr. Krugman believe that borrowing worthless money from the Monopoly bank is good business. Sooner or later the bar tab must be paid. The bouncers will take everything you own to pay it, your clothes, your jewelry, your cars, your house, and even your life (I hope you are insured) to pay what is owed plus vig.

In every Monopoly game I have ever played, the richest player keep getting richer while the other players quit in anger as a result of going bankrupt. Many players bear long-term grudges over the rich players tactics.

Imagine playing Monopoly if there was a never ending supply of money to borrow from the bank. Now, imagine that it is not a dream, but the 196 countries of the world in 2013 are playing for the lives of their citizens. Each roll of the dice either saves or kills 100 people. Who wants to play? 

Every decision that is made by a country's treasury either makes or breaks someone in that country financially, every day. Lives are on the line. Futures are on the line. Still want to borrow more money? Still want to increase the debt ceiling?  Still want to keep printing more money and using that worthless money to support the US stock markets to support the wealthiest 1% of the population of the world? 



Do you remember Mexico in 1994- the Peso Crisis? 

Do these facts sound familiar to our present day financial crisis? 

The crisis is also known in Spanish as el error de diciembreThe December Mistake—a term coined by outgoing president Carlos Salinas de Gortari in reference to his successor Ernesto Zedillo's sudden reversal of the former administration's policy of tight currency controls.
The root causes of the crisis are usually attributed to Salinas de Gortari's policy decisions while in office, which ultimately strained the nation's finances. As in prior election cycles, a pre-election disposition to stimulate the economy, temporarily and unsustainably, led to post-election economic instability. There were concerns about the level and quality of credit extended by banks during the preceding low-interest rate period, as well as the standards for extending credit.
 Source:wikipedia


So what will work in a depression?

1. Belt tightening.
2. Debt reduction
3. Debt consolidation
4. Asset reduction that bears debt
5. Job creation
6. Education
7. tax turn-around inheritances in excess of $1,000,000
8. debt exchanges
9. increasing cash flow from banks to borrowers for small business loans
10. jobs programs
11. a thirty hour work week
12. government seizure of oil and gas assets (immediate price reduction worldwide)
13. joint government oversight of banks along with Monetary Reserves around the world
14. Make bankers responsible for their poor investments
15. Take gas, oil, coal, and water off the commodity exchanges and nationalize these assets
16. reduce the number of over paid worthless government employees
17. Implement a cost/benefit medical expense lifetime allotment of $500,000 per person that would be   
      transferable to others as needed.
18. The rule of 7's debt elimination. (See  Torah)

This list is not in order by priorities. Each of these ideas will save your country billions to trillions of dollars.


If the US Federal Reserve does not gradually reduce the money supply and its debt load to rationale numbers by next June, we could see a THIRD DEPRESSION, a triple dip depression that will make March 2009 look like a child's game.


Want more? Read below.

Which one of us can take it with us?



What does the Bible say about debt?



Deuteronomy 15:1   God said to the Israelites:

Parallel Verses
New International Version
At the end of every seven years you must cancel debts.
New Living Translation
"At the end of every seventh year you must cancel the debts of everyone who owes you money.
English Standard Version
“At the end of every seven years you shall grant a release.
New American Standard Bible
"At the end of every seven years you shall grant a remission of debts.
King James Bible
At the end of every seven years thou shalt make a release.
Holman Christian Standard Bible
At the end of every seven years you must cancel debts.
International Standard Version
"You must cancel your debts at the end of every seventh year.
NET Bible
At the end of every seven years you must declare a cancellation of debts.
GOD'S WORD® Translation
At the end of every seven years, you must cancel debts.
Jubilee Bible 2000
At the end of every seven years thou shalt make a release.
King James 2000 Bible
At the end of every seven years you shall make a release.
American King James Version
At the end of every seven years you shall make a release.
American Standard Version
At the end of every seven years thou shalt make a release.
Douay-Rheims Bible
In the seventh year thou shalt make a remission,
Darby Bible Translation
At the end of seven years thou shalt make a release,
English Revised Version
At the end of every seven years thou shalt make a release.
Webster's Bible Translation
At the end of every seven years thou shalt make a release.
World English Bible
At the end of every seven years you shall make a release.
Young's Literal Translation
'At the end of seven years thou dost make a release,
Parallel Commentaries
Matthew Henry's Concise Commentary
15:1-11 This year of release typified the grace of the gospel, in which is proclaimed the acceptable year of the Lord; and by which we obtain the release of our debts, that is, the pardon of our sins. The law is spiritual, and lays restraints upon the thoughts of the heart. We mistake, if we think thoughts are free from God's knowledge and check. That is a wicked heart indeed, which raises evil thoughts from the good law of God, as theirs did, who, because God had obliged them to the charity of forgiving, denied the charity of giving. Those who would keep from the act of sin, must keep out of their minds the very thought of sin. It is a dreadful thing to have the cry of the poor justly against us. Grudge not a kindness to thy brother; distrust not the providence of God. What thou doest, do freely, for God loves a cheerful giver, 2Co 9:7.
Pulpit Commentary
Verse 1. - Release. The word thus rendered (שְׁמִטָּה, from שָׁמַט, to leave, to let lie fallow) occurs only here and in ver. 2; in Exodus 33:11 the cognate verb is used, and from this the word is best explained. The debt was to be left in the hands of the debtor, as the land was to be let lie or left untilled for that year.
Gill's Exposition of the Entire Bible
At the end of every seven years thou shalt make a release. Not of servants, for they were not to be dismissed from their service until they had served six years, as is directed to in a following law; for if they were to be set free whenever a sabbatical year came, they might be discharged when they had not served more than a year, or than half a year, or than a month or two. Indeed when the year of jubilee intervened, they were released be it at what time it would; but not in a sabbatical year, which was a year of release of debts, as the following verses show, as well as there was, then a rest of the land from tillage, Leviticus 25:2. Now this was done at the end or extremity of every seventh year; not at the latter end or extremity of it, for if the debt of a poor man might be exacted of him in the year, and until the end of it, it would not in this respect have been a sabbatical year, or a year of rest and quiet; but this was done at the first extremity of it, at the beginning of it, as Aben Ezra and Ben Melech observe; though Maimonides (b) asserts it to be after the seven years were ended; for he says,"the seventh year releaseth not monies but at the end of it,''according to Deuteronomy 15:1 that as in Deuteronomy 31:10 after seven years is meant, so the release of monies is after seven years.
(b) Hilchot Shemittah & Yobel, c. 9. sect. 4.
Jamieson-Fausset-Brown Bible Commentary
CHAPTER 15
De 15:1-11. The Seventh Year, a Year of Release for the Poor.
1. At the end of every seven years—during the last of the seven, that is, the sabbatical year (Ex 21:2; 23:11; Le 25:4; Jer 34:14).
Deuteronomy 15:1 Additional Commentaries
Context
The Seventh Year
1"At the end of every seven years you shall grant a remission of debts. 2"This is the manner of remission: every creditor shall release what he has loaned to his neighbor; he shall not exact it of his neighbor and his brother, because the LORD'S remission has been proclaimed.…
Cross References
Deuteronomy 15:2
This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the LORD's time for canceling debts has been proclaimed.
Deuteronomy 15:9
Be careful not to harbor this wicked thought: "The seventh year, the year for canceling debts, is near," so that you do not show ill will toward the needy among your fellow Israelites and give them nothing. They may then appeal to the LORD against you, and you will be found guilty of sin.
Deuteronomy 31:10
Then Moses commanded them: "At the end of every seven years, in the year for canceling debts, during the Festival of Tabernacles,
Nehemiah 10:31
"When the neighboring peoples bring merchandise or grain to sell on the Sabbath, we will not buy from them on the Sabbath or on any holy day. Every seventh year we will forgo working the land and will cancel all debts.
Deuteronomy 1:1
These are the words Moses spoke to all Israel in the wilderness east of the Jordan--that is, in the Arabah--opposite Suph, between Paran and Tophel, Laban, Hazeroth and Dizahab.
Deuteronomy 14:29
so that the Levites (who have no allotment or inheritance of their own) and the foreigners, the fatherless and the widows who live in your towns may come and eat and be satisfied, and so that the LORD your God may bless you in all the work of your hands.
Deuteronomy 14:28
At the end of every three years, bring all the tithes of that year's produce and store it in your towns,
Treasury of Scripture Knowledge
At the end of every seven years you shall make a release.
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