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U.S. is built on
foundations of sand. It cannot possibly continue in perpetuity.
By Gordog
September 06, 2021 -- "Information
Clearing House
- "
Moon of Alabama" -
Some continue to
delude themselves about the so-called US economy, which is
nothing but a house of cards---and this meaningless, completely
fabricated 'metric' of GDP. In real terms, China's economy is
already bigger by half then the US. And that is being
charitable.
Let us review some
basic facts about how NUMBERS actually work. This is known as
MATHEMATICS.
Take for instance the
Ponzi Scheme. This is an ingenious bilking scam where a group of
investors is promised a guaranteed rate of return. Since there
is no PRODUCTIVE business of any kind that can generate any
return, the only way to pay those initial investors is to draw
in more investors over the next term, usually a year. The
incoming investors are likewise paid their return by the
next crop of investors, etc. Now it is obvious just
from this description that the amount of new investors has to
INCREASE each year, in order for this to stay afloat.
The mathematical
underpinning of this scheme is
exponential growth. This is a
mathematical function where the growth of something is a
function of the EXPONENT of TIME.
In simple terms: if you
start with a single cell that splits in two...then those two
each split in two and so on, it is obvious that the number of
cells doubles at a given rate of time. In a
Petri dish, such organisms will rapidly multiply in number until
they have exhausted all the nutrients available...and everybody
DIES!
Now let's consider a
bank that is lending money at interest. Here we have a group of
BORROWERS rather than investors.
If in the first
year, the bank has a given number of borrowers, it will receive
back not just the amount of money it has lent, but an additional
amount of money in interest. This accumulation of interest will
continue building in perpetuity, according to the exponential
math exactly like the Ponzi Scheme
or Petri dish.
This is the
fundamental mathematics of both. Only they are mirror images of
each other. One is drawing in lenders [investors], while the
other is drawing in borrowers. From the wiki entry on
exponential growth:
Finance:
For instance if you
borrow money at a rate of 9 percent interest per year, the
amount you owe is DOUBLE after just 8 years [provided you are
required to just pay it all back in one lump sum and not
payments].
Now let's take into
account that the ONLY way for brand new money to come into
existence is if it is created as a BANK LOAN. That is actually
how our system works. The borrower can be a consumer, a
corporation or a government. It doesn't matter. But somebody has
to step up to the bank counter and say 'I want a loan' before
any new money can come into existence.
So here is the catch
22: Because the borrowers in any given year are also paying back
interest, that means that more and more brand new money
has to come into being each year, simply to account for
that extra interest money that wasn't there before!
So you need an
ever greater amount of borrowers stepping up and asking for
loans.
Where do they come
from? Can you just keep going like this forever?
Obviously the Petri
dish and the Ponzi Scheme both tell us that this is a house
built on foundations of sand. It cannot possibly continue in
perpetuity. It all has to come crashing down.
Consider that 100 years
ago, very few ordinary people needed to borrow money. Oftentimes
people would buy a house or a car with money they had saved. By
the time of the postwar years of the 1940s, you already had a
new kind of borrowing culture emerging, where people would often
seek credit to buy their own home more quickly.
[Recall the scene in
Frank Capra's It's a Wonderful Life, where George
Bailey [Jimmy Stewart] who runs a family savings and loan that
lends to aspiring homeowners, confronts the badguy Henry Potter
who is a slumlord and wants to ruin the small family S&L.]
For good or bad, this
depiction of getting ordinary folks to borrow money so they can
more quickly own their own home, as something positive and
progressive, took root. Of course getting people to borrow for
buying a house and car was just the beginning. Soon, you needed
a whole new crop of borrowers, so we started women entering the
workforce and becoming part of the debt slave pool.
[Remember, just like
the Ponzi Scheme, the interest lending scheme needs EVER GREATER
numbers of borrowers each year.]
Then when that dried
up, you had to start importing brand new PEOPLE, ie immigrants!
Today that is an increasingly fraught subject as the wheels
continue to come off this Ponzi machine and there is less to go
around for everybody. So people start resenting the newcomers.
Yet, the powers that be insist on bringing in ever more
people! They are needed. Each one is going to go to the
bank and borrow to buy a car, a house, etc. Just like that Ponzi
Scheme somehow has to find new investors to avert going tits up.
Then you had credit cards, and then a very big one: EDUCATION.
Now you have not only mom and pop debt slaving away, but even
junior has to be pressed into the chain gang, before having even
gotten an education or a vocation in life.
Is there any possible
stone that has been left unturned in the search for new debt
slaves? And this is all supposed to be so 'glorious'?
Some have
foreseen all of those problems, such as Michael Hudson. He told
us long ago that ancient civilizations had all come up against
the same problem with EXPONENTIAL MATH: When you attach interest
to loans, the amount of debt reaches unmanageable levels and has
to simply be wiped clean. We see this from the
graph of exponential math:
bigger
A real productive
economy can be expected to grow only linearly, as in the red
line. And even then, at some point it cannot grow any more!
But the amount of
accumulated debt starts overtaking the amount produced by the
real economy until it is double, triple or even many more times
that of the real, productive economy. Obviously, the only thing
you are doing is producing money itself, not actual and real
things! That is why we have had ZIRP for more than a decade now.
Zero interest rate policy. Not wanting to actually write off
unpayable debt, at least cutting the money creation rate to zero
is supposed to accomplish the same thing.
Only it's not
working. And it's not ever going to work.
This is the fundamental
problem. And the fact is that the moneychangers who are in
charge of directing this whole Ponzi ball of wax are much much
dumber than they imagine themselves to be. They work like Wile E
Coyote: trying the same scheme over and over [greed], but hoping
for different results. But the end result is always the same:
BLOW UP IN FACE! And that's not even to mention the absolute
morons who look up to these idiots as some kind of 'bright'
people, lol! And absorb all of their made-up bullshit
practically by osmosis!
But the REAL
results cannot be papered over. The US is a third-world dump
across vast swathes of its living terrain. Look at a comparison
of the
Moscow
and
New York
subways, for instance.
Many of these dimwits
who believe the bullshit peddlers also seem to think that the US
still has some kind of advantage or lead in technology. WRONG!
In real technologies that are hard to do, like rocket science
and nuclear, the US is nowhere [despite a lot of ridiculous hype
about the former]. China is already ahead in many key aspects.
Even in consumer electronics like computer chips, which is not
actually any kind of difficult technology, but simply a
commodity business dominated by countries like Taiwan and Korea,
China is systematically plowing ahead. The only real flagship
industry where the US still has something left in the tank is in
civil aviation manufacturing, although even here formerly great
companies like Boeing have recently shown to be moving downhill
quickly as they become 'financialized.'
The bottom line is that
our physical world is governed by real, foundational principles,
not by made-up bullshit that says Ponzi Schemes can succeed.
They can't. No matter how much you contort yourself to believe
that.
On the matter of wealth
and gaining it, The Great Thinker had much to say:
There are
two sorts of wealth-getting, as I have said; one is a part
of household management, the other is retail trade: the
former necessary and honorable, while that which
consists in exchange is justly censured; for it is
unnatural, and a mode by which men gain from one another.
The most
hated sort, and with the greatest reason, is usury, which
makes a gain out of money itself, and not from the natural
object of it. For money was
intended to be used in exchange, but not to increase at
interest.
And this term
interest, which means the birth of money from money, is
applied to the breeding of money because the offspring
resembles the parent. Wherefore of all modes of getting
wealth this is the most unnatural.
Aristotle, Politics Book One, Part X
There is no getting
around these foundational truths. No amount of bullshit from
various flim flam artists on Wall Street or Madison Avenue is
going to change the result.
It's quite obvious that
the wise and learned folks who are carefully guiding China along
the path to a truly Great Society have taken these known truths
to heart.
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