Globalisation debt & banking

[breakfastburrito]

Perceptive question Blackhand.

The billions are paper obligations - they don't exist as real wealth. You are the one that will help convert this "paper obligation" to "real wealth" (goods and services) as part of your (taxpayer) obligation! Think of it as a continuous obligation to pay the vast majority of the fruits of your labour for the rest of your lifetime to private institutions controlled by a very small number of people - the true elites. This obligation extends to those that haven't even been born yet - the future population.

The cunning part is that the billions are owed in the future, backstopped by the taxpayer to the private banks. These obligations are to be enforced by the government by force if necessary. How will they extract the money? Via direct taxes and the hidden tax of inflation. The government will simply take the obligations onto its books and make the elite whole, just as they have and are doing in the US/Europe & Japan. Almost all the populations of those regions have been converted to debt serfs.


I've shown this chart before. Reserves is another name for assets, of which the bulk is likely to be bonds and derivatives of bonds, AKA debt obligations. What this chart shows is that since 1971, reserves have begun to accumulate at a much greater rate than real production. As of the 2006, there was roughly 10:1 reserves to real production.

Therefore, the vast majority of these obligations cannot be "realised" into real goods & services, ie spent. This is why creditors (obligations owners) will accept "haircuts", because, in the end, if they end up with 20% of the value of the bonds, they are still owed more than the ALL the global production of goods and services.


So, in answer to your question, where are the billions? They are sitting as paper obligations in the financial system. Ultimately the workers & citizens backstop this unpayable debt. This backstop consists of government enforced labour expropriated by tax (direct or inflation). This constant debt obligation is simply a method to control & milk the populus, shifting real wealth up the pyramid to the elites.


Here's an interesting article on the "fear" that the US government may actually pay off its debt, and the consequence.

What If We Paid Off The Debt? The Secret Government Report

Planet Money has obtained a secret government report outlining what once looked like a potential crisis: The possibility that the U.S. government might pay off its entire debt.

It sounds ridiculous today. But not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system.

We recently obtained the report through a Freedom of Information Act Request. You can read the whole thing here. (It's a PDF.)

The report is called "Life After Debt". It was written in the year 2000, when the U.S. was running a budget surplus, taking in more than it was spending every year. Economists were projecting that the entire national debt could be paid off by 2012




This was seen in many ways as good thing. But it also posed risks. If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world.

"It was a huge issue ... for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration.


The U.S. borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds.

But the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.

Banks buy hundreds of billions of dollars' worth, because they're a safe place to park money.

Mortgage rates are tied to the interest rate on U.S. treasury bonds.

The Federal Reserve — our central bank — buys and sells Treasury bonds all the time, in an effort to keep the economy on track.

If Treasury bonds disappeared, would the world unravel? Would it adjust somehow?

"I probably thought about this piece easily 16 hours a day, and it took me a long time to even start writing it," says Jason Seligman, the economist who wrote most of the report.

It was a strange, science-fictiony question.

"What would it look like to be in a United States without debt?" Seligman says. "What would life look like in those United States?"

Yes, there were ways for the world to adjust. But certain things got really tricky.

For example: What do you do with the money that comes out of people's paychecks for Social Security? Now, a lot of that money gets invested in –- you guessed it — Treasury bonds. If there are no Treasury bonds, what do you invest it in? Stocks? Which stocks? Who picks?

In the end, Seligman concluded it was a good idea to pay down the debt — but not to pay it off entirely.

"There's such a thing as too much debt," he says. "But also such a thing, perhaps, as too little."

The copy of Life After Debt we obtained reads "PRELIMINARY AND CLOSE HOLD OFFICIAL USE ONLY."

The report was intended to be included in the official "Economic Report of the President" — the final one of the Clinton administration. But in the end, people above Jason Seligman decided it was too speculative, too politically sensitive. So it was never published.

The danger that we would pay off our debt by 2012 has clearly passed. There are plenty of Treasury bonds around these days. U.S. debt held by the public is now over $10 trillion.

Read More: How The Surplus Turned Into A Deficit, In One Chart

NPR: What If We Paid Off The Debt? The Secret Government Report