What Will 'Debt Jubilee' Look Like?

NEW YORK ( Bullion Bulls Canada) -- Debt Jubilee: Countries wiping the slate clean by burning all of the bad debts created by the bankers and politicians. It could happen. It has happened. However, "we the people" will face a different future.

The economies of the West (with few exceptions) are all hopelessly insolvent. Globally, debt-levels have reached such an extremely bloated magnitude that outside of the banksters' derivatives casino, this is our new "biggest bubble." For reasons that will be made clear shortly, many readers are unaware of the severity of this global debt-crisis. Let's review the facts.

Virtually all Western nations are sitting with their highest debt-loads in history, meaning their debt-to-GDP levels are their highest ever -- and most are well past the level that constitutes an official "debt crisis." Worse still, all of these debtors have debts that are increasing at a much, much faster rate than economic growth (and this gap continues to increase).

In other words, those nations that are already insolvent have no rational hope of ever becoming solvent again; while those nations that are merely "nearly insolvent" have no rational hope of avoiding insolvency. Yet we have this collection of debtors assuring us again and again and again that they are "bailing out" each other.

How is this possible? It's not. As an elementary premise of arithmetic/logic, it is impossible for one debtor to ever "bail out" another -- directly. In fact, there are only two ways in which one debtor may attempt/claim/pretend to be "bailing out" another debtor:

a) borrowing more money one's self, and then giving (i.e., gifting) it to the other debtor;
b) "kiting a cheque," and then giving that (illusory) "money" to the debtor.

However, our governments have never claimed/admitted doing either one of those things. Here is what our governments are telling us.

They claim to have "bailed out" these insolvent debtors (starting with Greece) by lending them more money. Again, as an elementary premise of arithmetic/logic, it is impossible to "bail out" an insolvent debtor by lending that debtor more money.

Not only does it make the insolvent debtor even more insolvent; it instantly turns that debt-market into an open Ponzi-scheme. Only ever-increasing quantities of new loans can delay implosion, and the longer the Ponzi-scheme is perpetuated the more damaging/devastating the ultimate collapse must become.

The original rebuttal of our governments (and bankers and the media) to such obvious criticism was simple: None of these debtors "would ever default." Recall when Greece's banker -- EU "monetary chief" Olli Rehn -- told reporters over and over (in 2010) that there was "no possibility" of a Greek default. Obviously these "leaders" were forced to stop making this inane assertion after Greece defaulted on its massive debt.

So when these debtor-governments, and their bankers, and the "economic experts" in the media claim that these nations are being "bailed out," they are lying to us. They are lying as a matter of simple logic. And the lies have been demonstrated as such, empirically, through the harsh prism of hindsight.

This brings us to what our governments are not telling us: Where are they getting the "money" for these phony "bail outs"? Obviously the lesser-debtors are not borrowing the money to give to the greater-debtors. Even our political drones can operate a calculator well enough to understand that borrowing money, and then throwing it away by funneling it into these Ponzi-scheme debt markets, would make the "lesser-debtors" also greater-debtors -- and in about as much time as it takes to say the words "compound interest."

This means our lying governments have been "kiting cheques" in order to perpetrate these sham bail-outs, the only other economic possibility. Of course, these serial liars don't admit to this either; rather, they tell us they are "using their printing press."

What does a Deadbeat Debtor do when he/she kites a cheque? He takes an ordinary piece of paper (with absolutely nothing "backing" it), hands it his creditor, and (after signing his name to it) claims that a debt has been "paid."

What do our Deadbeat Governments do when they use their printing press to perpetrate one of their (endless) "bail outs"? They take an ordinary piece of paper, with nothing backing it, they hand it to creditors, and they claim that debts have been paid.

But wait! Our governments tell us that the paper that comes off of their printing presses is magic paper: It has "value" even though there is absolutely nothing backing it. How does this magic paper acquire its value? Our governments tell us the paper is valuable, and (of course) if our governments tell us something it must be true.

Such is the wonder of fiat currencies, where our governments can turn ordinary paper into magic paper, just by turning on their printing presses (and saying the magic words). Of course, from the time we were children, we have all been familiar with "magic" goods. Jack traded the family cow for some "magic beans," and went on to fame, fortune and glory.

Unfortunately, that's just a children's fairy tale. In the real life tales that are spun by our politicians, bankers and media talking-heads, there are no "magic beans." Trade-in the family cow, and all you're left with is one less cow.

The biggest lie that the politicians/bankers/media talking-heads continue to successfully pass-off on the sheep: It's "impossible" for any nation with its own printing press to ever default on its debts. Those readers (above the age of 10) who have ever accepted this farcical statement as truth, should be thoroughly ashamed of themselves.

Germany's Weimar government claimed it would/could never default, because it too had a "magic" printing press. What happened? Excessive money-printing totally destroyed the value of its currency, devastating its entire economy, impoverishing all of its citizens -- and then it defaulted. Except by then, its debts were a hundred times larger.

Printing infinite quantities of fiat currencies can only turn a small debt default into a gigantic debt-default -- while completely destroying one's own economy in the process.

This brings us to Debt Jubilee: Hitting the reset button. Wiping the slate clean by burning all (?) of the bad debts created by these bankers and politicians. It is a regular, recurring event throughout history. Whenever one or more governments sink to such a level of political/moral/economic corruption, debt-default is usually one of their lesser sins.

So what will our 21st century Debt Jubilee look like? With history's most-corrupt governments, expect the most-corrupt "solution." The debts of our governments, the big banks, and the wealthiest Oligarchs will be totally erased. We will be told they are doing this to "save us" from drowning in their (reckless/fraudulent) debts.

However, the little people will face a somewhat different future. Their debts will be maintained at 100-cents-on-the-dollar. The bankers, politicians and Oligarchs (via their corporate media) will tell us that this is necessary to "protect the integrity of the system" (their system).

Think this level of perversity/injustice is impossible? We already have precedent. After the Wall Street banks had caused (created?) the Crash of '08 (with their reckless fraud/gambling), and after they took their $15+ trillion from the U.S. government in assorted hand-outs, 0% loans, tax-breaks, and "loss guarantees" (i.e., more hand-outs), the Wall Street banksters kept their massive bonuses.

We were told this was because of "the sanctity of contracts."

Then after this massive give-away, various U.S. governments began unilaterally hacking-and-slashing the wages, pensions and benefits of their own workers -- which had been freely/fairly negotiated in their own contracts. The reason? After giving trillions of dollars to the bankers, the workers were told the government "couldn't afford" to honor their contracts.

You've been warned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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