Wednesday, December 26, 2007

Fractional Reserve Debt Inflation


More eye bleeding reading which you will soon forget but it is something to do I guess if you feel up to it...

The psychology bubble is the biggest bubble…A key indicator of the health of the economy is the DOW and NASDAQ…Not to you and me but to Joe Q public…

But Hyper…Hyperinflation will ignite with low interest rates…

The only way to ignite and maintain hyperinflation is by printing cash and distributing it in massive quantities…That is not how this system currently works…

The floating exchange rate debt backed by debt fractional reserve system has a maximum potential to inflate debt…

The previous system…the Bretton Woods Gold backed fractional reserve system also had a maximum potential…Gold was pegged at $35 an ounce so under the previous system as long as the FED had an ounce of gold for every $35 redeemed by whomever decided that they wanted to convert dollars into Gold then debt could keep expanding…

In the early 60’s the system began to collapse and the US government/Federal reserve closed the gold window in 1971 when they ran out of gold to back the debt inflation…

The new system, the floating exchange rate debt backed by debt fractional reserve system allowed further expansion of the debt supply by replacing the gold backing of the dollar with the dollar backing of the dollar…Debt backed by debt…

Now on to the maximum potential of the new system…

Since previously created debt is used as a basis for the creation of new debt the following are true logical statements whether you think so or not or can comprehend them or not…

Debt is money…when you borrow money from a financial institution it is created out of thin air with compound interest attached…Currently the reserve requirement for US banks is 3% which means for every $100 a bank has on deposit they can create out of thin air with compound interest attached $3,400 to lend out…The Commercial banks can borrow liquidity from the FEDERAL RESERVE to expand their fractional reserve, so basically the Banks have an unlimited amount of money which is debt created out of thin air with compound interest attached to lend out…

The FED’s estimate of currency in circulation is $700 Billion which is the true fractional reserve and the total debt supply in circulation is $33-$34 Trillion

3% of the money supply of the US is actual currency and 97% is debt created out of thin air with compound interest attached…The evidence for how fractional reserve banking works is right in front of your eyes if you know what to look for…

Current consumer income is composed mostly of previously created debt and future income is composed mostly of new debt creation…

Fractional reserve debt inflation is sustained by creating more new debt than previously created debt… on paper to maintain debt inflation new debt created out of thin air with compound interest attached must at least be equal to the previously created debt created out of thin air with compound interest attached…

But people are the consumers of debt so ultimately there is no way to perfectly run or distribute debt you poke prod and entice consumers to consume and at the end of the day you hope it is enough to maintain debt inflation…

In business operating expenses are composed mostly of previously created debt and profits are composed mostly of newly created debt…

Just in case it was over your head, Debt is created out of thin air with compound interest attached and makes up 97% of the money supply

Cash makes up 3% of the money supply and it’s purchasing power is destroyed by debt inflation…If you save “cash” dollars in a shoebox under your bed in a debt inflationary environment they become worth less over time…

Two factors which cause self sustaining debt inflation…

1. The only way to truly pay or service compound interest which is not created out of thin air but attached to created out of thin air debt is by creating enough new debt out of thin air with compound interest attached to pay or service the compound interest attached on the previously created out of thin air debt with compound interest attached…

2. Debt = money and if it is inflating then the debt/money supply is inflating which leads to price inflation which means that in order to afford to consume a product or service you must continually increase the amount of debt created to account for the rise in price which leads to even greater debt creation the next time and so on…

But is there a maximum potential for debt inflation in a debt backed by debt system…

Yes

Since current debt consumer income is previously created debt and is used as the basis for new debt creation which is future income then on paper once the maximum amount of current income is used to service the payment on the creation of future income no further future income can be created or future income creation becomes less than current income…

Present income is what future income becomes once it flows through the system and if the ability to create more future income is reached then present income which is the basis for future income creation has to shrink or cease to exist altogether…

The simplest sign that debt inflation is working is employment is rising or sustained and prices across the spectrum are rising…the simplest sign that debt inflation is not working is rising or sustained unemployment and prices of wants such as computers and autos are either not rising or dropping and commodities such as food, energy, and some metals are rising

What are interest rates? Interest rates are profit derived from money or debt lent out whether it is actual cash or debt created out of thin air…

There really is not a problem with lending/renting out cash…But when you charge rent on something created out of thin air you are in fact manufacturing a product for consumer consumption…

The number 1 product manufactured in the USA for consumer consumption is debt and it’s main selling feature or sales gimmick is “It makes your dreams come true” better yet it is the key product which is needed to make “the American dream” a reality…

Since debt is a product interest rates are the cost of purchasing that product…the debt itself is your future income but the interest attached is the profit derived from it’s creation… the creation of the debt itself is wholesale the attachment of interest and the signing of the contract agreeing to pay it back plus the attached interest in a certain time span by the consumer is the retail operation…

When a consumer uses their current income to borrow future income they are in fact creating their future income into existence…

Since interest rates are the profit of the created out of thin air product called debt which is the key component in the realization of the American dream by the banks then the cost of the American dream to the consumer is interest rates…

Banks are just accountants who have the ability to lend or create the future income of the consumer who will then use that future income to service the rent/interest charge on their idea of what the American dream is currently for profit…

In order for banks to maintain a profit then the product called debt must keep inflating or volume must keep increasing…

In order to maintain product volume the cost of the product must also keep dropping…

In order for the debt inflation experienced for the past 23 years to be sustained the volume of debt must be maintained and that was done for the past 23 years by the systematic lowering of interest rates whenever volume appeared to be on the verge of dropping or was dropping…

But Banks and financial institutions are not non profit organizations the cost of production can not be more than the profit so frontline interest rates such as prime can only drop so low…once rates are as low as they can go and volume begins to dry up then the banks are forced to maintain profits by raising interest rates…

But that would cause a further drop in demand…and rates would have to be raised further…

Rates can not drop below zero and most rates can not go to zero and rising rates cause volume to dry up…

So the mechanics of debt inflation for the past 23 years of systematically lowering interest rates to maintain and expand debt volume to sustain profitability for the banks and maintain self sustaining debt inflation which is the primary fuel of economic growth is almost at an end… and will become apparent in a very short period of time…

If you can not lower interest rates or the price of a product to produce profit then you have to raise the price to maintain profits on lower volume…

But the product which currently exists is used as collateral for the creation of more product and if the volume drops then future volume will have to drop…

It is called a “recession” when the volume of debt creation slows to the point that debt inflation is not self sustaining and if the problem of declining volume is not solved then it is only a matter of time before the point of no return is reached where the debt deflationary forces are to great to overcome…

For the past 26 years interest rates have been systematically lowered to produce the required amount of self sustaining debt inflation needed to keep the banks solvent and the economy growing…Basically lower low and lower highs…

But 0 interest rates or as low as interest rates can go to produce a profit is the bottom line…If you produce a product and the profit eventually is reduced to zero to maintain volume and volume continues to dry up then the jig is up because if it costs more to produce a product than the return or profit from that product then the company will soon run out of resources to produce it…

Debt is a special product that consumers can not do without, since debt is money and the demand for money is without end, so if profit can not be maintained by volume then the price or interest rate has to rise…

The Facts of a debt backed by debt system

Debt makes up 97% of the money supply

Debt is created out of thin air by the banks with compound interest attached

Previously created out of thin air debt by the banks with compound interest attached is used as collateral for the creation of new debt created out of thin air with compound interest attached by the banks…

The only way to sustain debt inflation is with greater debt inflation.

The only way to increase debt inflation is by increasing volume and the only way to increase volume is by lowering the cost or interest rate to allow/create the conditions needed for more debt consumption. Then using the fulfillment of the American dream as a marketing tool to entice the maximum amount of consumers to request the banks create enough debt to satisfy the consumer demand…

Also finding more debt free victims to indebt can help...

Once the maximum amount of previously created debt is devoted to servicing the cost to maintain the creation of new debt then the maximum potential of debt inflation is reached and if the cost or interest rates can not be lowered to a point that allows the production of the required amount of debt inflation to cause a self sustaining chain reaction then there is no “current” way to maintain debt inflation…Debt inflation will falter and transform into unstoppable debt deflation…

Now a deeper look into the psychological bubble or the just think positive infinite inflation religion.

Basic marketing is used to convince the maximum amount of consumers that a given action is wrong and if you do it you are a loser but if you instead take our advice you will be doing what is right and will surely be hailed as a winner by your friends and family…

The weakest and simplest in society become the leaders of the pack and peer pressure soon causes even the mighty to fall for fear of being left out or left behind.

The “current” purpose of marketing is to convince people that think they are on the right path to begin following the wrong path… currently non stop mindless consumption is what is being marketed and the only way that can be accomplished is by massive consumer consumption of debt…

Second hand cars are for losers and lower forms of life… renters or previously constructed home owners are losers and lower forms of life… Only by buying the newest and biggest home can you even think of considering yourself a part of legitimate society…

Clothes without holes but out of date are not fit for an animal to lay on let alone for a member of society to wander around in public dressed in…

A 27 inch TV for family viewing is for welfare bums…

A computer under 2 Ghz is a total disgrace…

And so on and so forth…

The very act of saving has been reduced or transformed into consumption at a lower price then last week or raising the price by 10% and then saying it is for sale and seeing how many suckers can be fooled into thinking they are actually saving money...

For the marketing to be effective you need massive debt consumption or debt inflation and the just think positive infinite inflation religion to dispel any fear that it will ever come to an end…

If debt inflation ends then it is only a matter of time until the just think positive infinite inflation religion collapses… and if the just think positive infinite inflation religion collapses it is only a matter of time before debt inflation ends…

Or the thought of the good old days ending will end the good old days and if the good old days end the thought of the good old days will end…

The psychological bubble must be maintained at all costs or it doesn’t matter what monetary actions are taken to produce self sustaining debt inflation because the blind faith needed to reach inflationary goals will just not exist…

The truth is that the current system is almost finished and any consumer that signs on the dotted line to agree to service long term debt which is dependent on debt inflation will default and/or be wiped out…If the psychological bubble based on the just think positive infinite inflation religion were to pop consumers would stop signing on the dotted line and create a self fulfilling prophecy…

All the talk of unconventional measures and printing press tricks are just that…TALK to add strength or legitimacy to blind faith in the just think positive infinite inflation religion.

If the FED were to actually inform the public that the jig was up and that the floating exchange rate debt backed by debt fractional reserve system was in it’s terminal phase

The jig would be up…

If an asteroid big enough to wipe out civilization was discovered too late do you think they would come on TV and announce that the world as we know it was going to end next month? Don’t be so stupid. But we can see the end of the system so what has to be done? Well not a crash program to mount a 1 Gigaton bomb onto a rocket that is for sure…

The only way to stop the debt deflationary asteroid from impacting the financial system and economy is to hit it with a greater force of debt inflation… and for the past 26 years interest rates have been systematically cut on average of 83 basis points a year to provide the blast of liquidity or debt inflation to keep debt deflation at bay…

So in order to continue much farther financially and economically the United States of America must keep dropping interest rates on average around 83 basis points a year…

But here’s the problem…to drop interest rates past zero is impossible, any economist that has not recently suffered a shotgun lobotomy knows that it is impossible to maintain debt inflation or keep banks solvent with negative interest rates…There has never been a bank in the recorded history of banking which advertised negative rates…Banks are in the biz to make profit and 0 or negative rates = 0 or negative profits…

So the problem is “how do we drop rates past zero to support debt inflation” and the answer is “You can’t…it’s impossible”

Not quite…

There is a final system that could be used to solve that problem…

In a debt backed by debt system the only times that a printing press has to be used to print a dollar is…

1. When a previously printed dollar becomes warn out

or

2. If consumers demand/request more paper dollars than currently exists in a bank’s vault…

That’s it kids the Fed is not printing dollars sorry…It is a debt backed by debt system and the fed has an almost unlimited potential as the bankers bank or lender of last resort to create debt and lend it to commercial banks who in turn fractionally reserve it 34 to 1 and find enough consumers willing to sign on the dotted line to consume the newly created out of thin air $34…

The FED pumps debt into the system…asset and to a certain degree commodity price inflation is a result of debt inflation created by the FED and commercial banks at the request of the consumers for their consumption to live or at least service the cost of the inflationary American dream…

The FED is not printing money… sorry…”The Bernanke Printing press address” was aimed at a specific group of cowering simpletons who needed to be assured that the debt inflation that they are addicted to was never going to end and the thought of a printing press printing forever put their fears to rest…

The printing press trick has existed since paper and ink were combined to produce cash…

It is nothing new just the regulation method has changed from a specified amount of gold backing debt to a debt backing of debt…Both systems stop producing debt inflation if consumer demand for debt is not greater than the previously created debt but the gold backed system was limited by the supply of gold so the system had 2 maximum potentials either the US ran out of gold or it would run out of consumers able to sign on the dotted line in great enough numbers… when the US went off the gold standard in 71 it eliminated a roadblock or a potential limit to maximum debt inflation to allow debt to continue being inflated past the point where it ran out of gold…

There is an invention called the printing press alright and has existed since any of us were born it is nothing new and in fact the “Hyperinflationary system” which I alluded to before has been tried before…with predictable results…

In a gold backed system maximum debt inflation is pegged to the convertibility of debt for gold and also the ability for consumers to service greater amounts of new debt using previous debt creation as collateral…

In a debt backed system maximum debt inflation is pegged solely to the ability for consumers to service greater amounts of new debt using previous debt creation as collateral…

In a Hyperinflationary system maximum debt inflation is pegged to the printing press and an effective distribution method plus the computational abilities of the society…

All fractional reserve banking is inflationary or to be accurate “Inflate debt at all costs or die”

When the inflate debt at all costs or die basic mechanics reached the gold limit then the debt backing debt limit was introduced…when that limit is reached then a hyperdeflationary implosion will result or you can/could base debt inflation on the printing and effective distribution of non debt backed currency to buy more time…

Ultimately that is the purpose of maintaining debt inflation… to buy more time, more time for what? Who knows except the culprits…

How much time can a hyperinflationary system buy? On paper as long as the printing presses can keep printing or to be more accurate…as long as greater and greater amounts of non backed by debt “money” can be effectively distributed quicker and quicker to sustain debt inflation which leads to price inflation there is no real limit…except the human being consumer themselves…at the start of hyperinflation it is slow but the exponential nature of attaching the inflate debt at all costs or die debt backed by debt system to a non debt backed source as it’s limit for the maximum potential you then have effectively removed the limits to price inflation or interest rates…except the ability for human being consumers to compute or account for it… eventually the system hyperinflates to the point that it takes longer to figure out how much something costs then the price is rising…

How long does this process take? Not very long… maybe 2 years…

The bad aspect of instituting a hyperinflationary system is that the paper trail leads directly back to the culprits so it is not the perfect crime…Only if someone has a death wish do they actually choose to back a hyperinflationary system…

When the current system collapses the culprits will stay hidden because the cause of debt inflation is consumer consumption of debt and you will never be able to prove in a court of law that the FED or the Government or the Commercial banks forced consumers to consume debt… When the current system collapses the losers will get the blame… they always do… when you are bankrupted you are a loser and the winners don’t care if your excuse is because the maximum potential for debt inflation was reached so there is not enough new debt being created to allow my job to exist anymore…They will just laugh as they violently shake you by the ankles over a wheelbarrow.

If you think debt inflation can last forever then you had better be prepared to lose that bet…

Talk of printing presses and a rerun of the 1970’s inflation are the grasping at straws of desperate people in denial of the fact that blind faith in the just think positive inflation forever religion will not provide the justification for your actions or salvation from them…

You want to run with the herd? Then you risk running off the cliff to be harvested to sustain those higher in the economic food chain…

Those who are owed debt are the shakers and those who owe are the shakees.

In order to service debt, New debt inflation must be greater than or equal to previous debt inflation if it should stop or slow for any reason due to either the inability for consumers to borrow more or the refusal for consumers to borrow more…Debt will deflate and be unstoppable…

You can either play your part by leveraging yourself to the hilt or reducing or eliminating your debt consumption…the inability for interest rates to be lowered forever to produce unlimited debt inflation will be reached one way or the other and when that day arrives debt deflation will be totally unstoppable and the $34 trillion debt supply will begin to vaporize at a rapid rate…

If this is too scary to deal with…then just walk to the nearest T.V., turn it on and you will soon forget about such horrible concepts and be mesmerized to contented docile sleep yet again…and again and again forever and ever AMEN.

From the very millisecond that a Fractional Reserve Banking system is in operation the creation of new debt has to be greater than or equal to the compound interest charged... That is called Debt Inflation...

A fractional Reserve Banking System is basically insolvent from creation but does start out with a "base of reserves" but eventually the reserve ratio becomes smaller and smaller until it is ZERO...

As long as Debt inflation is greater than or equal to the compound Interest charged the system "works or functions"

You borrow $1000 at 5% interest for 1 year...

After a year you owe the banks $50 where does the 50 dollars come from? It has to be borrowed!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Or the money supply shrinks...

The US total debt is $32 Trillion, at Let’s say 5% interest/year that means that the US has to borrow (Create debt) $1.6 Trillion per year just to keep Debt inflation going or the system “working and functioning”

Slight problem #1 the 1.6 Trillion if borrowed at 5% interest adds an additional $80 Billion in compound interest payments!!!!!!!!

Compound Interest can never be paid off ever never it is impossible… and debt is just debt backed up by debt so it can never be paid off also it can be re-mortgaged at a lower interest rate but let’s say the interest rate is 0% then borrow $32 trillion dollars and what do you have? 32 trillion dollars… who will buy bonds that pay 0%?

Answer: nobody… How does Japan survive at 0.01%? They borrow a billion YEN then Buy US dollars and loan it in the US at 29% or just buying US securities that’s how, plus a whole bunch of other complex interconnections that I’m not going to get into because all that matters is Japan needs the US to inflate it’s debt to survive… for their system to “work or function”

Fractional reserve banking and civilization as we know it would collapse if the interest rate went to 0% the way it is structured plain and simple...

Now once you reach the maximum potential debt inflation meaning you have lent all you can lend and more people owe than don’t owe or…

Slight problem #2 Once the compound Interest payment is greater than the debt inflation, debt inflation becomes currency deflation or Debt deflation…

Golden Fact #1 since 1971 the federal reserve using all the tools at its disposal has been pumping liquidity into the system to keep the economy of the world running by replacing gold as the world reserve currency with the US dollar which has basically lost 1000% of its value because of Debt inflation and the world is now maxed out… The world is now passed the maximum potential for Debt inflation and Debt deflation is how the system “works and functions” now…

How does Debt deflation work? In reverse… We are going backwards to 1971 because if the compound interest can not be paid you have to declare bankruptcy/default and write off the Debt… which causes the money supply to shrink and causes Taxes, commodities and necessities to rise and luxuries to drop…

Slight problem #3

Cars are a prime example of a luxury, yes we need cars but if a new car costs $10,000 to break even for the manufacturer and after everyone has bought their commodities and necessities and paid their taxes and can only borrow $9,000, and that’s if they need a car, then the car manufacturer has to cut production or employees or costs or borrow or go bankrupt… That just Adds to Debt deflation…

The Fractional reserve banking system of the world is Finished we are now in a death spiral that is about to become evident…

That is the magic of charging compound interest on debt backed up by debt as the money supply shrinks debt is defaulted on and written off and Unemployment will rise… and it will keep gaining speed until all the home equity is wiped out and banks start failing and martial law is imposed or “Financial doomsday” or the “US loses it’s shirt in the great fractional reserve banking Poker game”…

Marxism and capitalism, freedom, democracy, communism, don’t mean a thing if they depend on compound interest it is all slavery and blood money to the banks and no Elected representative or Dictator has the slightest clue that they are only administrators for the powers that be…


"Let me issue and control a nation's money and I care not who writes its laws."
-Meyer Rothschild International Banker

Why is something not done to change the system?

Because the bankers are not in the habit of putting clubs in the hands of those that would destroy them… They control the education system, the Government, and the media…

People are just dummies… simpletons, lab rats, or lemmings engorged on easy money and addicted to Compound Interest…

I know how money works and “Christmas” is nothing but a rip off pure and simple. The general population believes that it is about joy and giving… But it is rape and pillage. The world is a sickening place… You know what Wall Street does with all the money it milks off of everyone? Invests it into the milking infrastructure of course. When the milking is over then the investment will stop and collapse is the result. The FEDERAL RESERVE and Friends have been doing this for 70 years. Milking milking milking.

Inflation? Deflation? They milk it all fools…

They are going to run out of victims soon… the pitched battle occurs at seasonal changes…

The next “season” is not summer and the FED is not Mother Nature…

Your own humanity is your failing because BANKERS do not possess humanity they have nothing but contempt for every human being on the planet and are in the business of taking more than they give. FIAT allows them to take it all and give nothing in return…

But don’t be fooled, Hypertiger scoffs at this latest attempt by the losers of the human race to fool me into thinking that they are winners. I know better.

Every day is one step closer to the end. Hey I know, next year they should just cut taxes on Wall Street and raise taxes on main street...

1 comment:

rb said...

Compound interest is a problem -- but the problem will not go away by shifting to simple interest or any return on money that increases with time. See the work of Margrit Kennedy.

We just replace exponential growth with linear growth -- both are unsustainable