Friday , 21 June 2024

Do You Really Want the Truth? OK, Here It Is – But You Won't Like the Conclusion

Damnit, how long do we have put up with this crap? Will we ever have an honest conversation on the facts of the matter related to what’s going on in the banking system — and has been since 2007 and indeed for the last 30 years? …That’s [unlikely] because there has been no recognition of the truth, not in Greece, not in Portugal, not in Ireland and not in the United States and here’s truth: Government cannot spend more than it taxes. Period! There is no “if”, there is no “and”, and there is no “but.” All the games played over the last 30 years, were, [and still] are, in fact, scams. Let me explain why. Words: 1700

So says Karl Denninger ( in edited excerpts from his original article*.

Lorimer Wilson, editor of (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Denninger goes on to say, in part:

[For the sake of this discussion,] instead of using the term “Dollars” or “Euros”, particularly as it relates to GDP, …we’re going to call them “units.” Remember:

  • GDP = C (consumption) + I (investment) + G (government spending) + (x – i) (exports less imports, or net exports),
  • each unit of GDP must be bought with one unit of money or credit, and that each unit of money or credit “turns over” some number of times during a period. Since GDP is measured over a year (a convenient period) we’ll measure the “turnover” during that period too. In economics this is called “Velocity” and
  • if there is more and more credit emitted into the system — faster than output goes up…the value of each unit of money or credit must go down.
[We’ll make my discussion of the situation even more] simple by making the numbers smaller but leaving the relationships alone, so you can understand this in a context that relates to your personal life. [Ok, let’s proceed.]

An Honest Look at the REAL Purchasing Power of the Median Household From 2000-2010

  • In 2000 there were 10,130 units of output in the economy.
  • There were 27,138 units of money and credit in the economy.
  • Each unit of output was therefore able to be bought by about 2.68 units of money or credit.
  • As of the 4th quarter of 2010, there were 14,755 units of output in the economy.
  • There were 53,353 units of money or credit, however, and this means you needed 3.62 units of money or credit to buy one unit of output, a direct decrease in your purchasing power of about 35%!

But wait, you protest, wages went up during that time. That’s true. In fact it would appear that you pretty-much kept pace, if you look at FRED and view the hourly earnings numbers. That’s misleading, however, due to the falling labor participation rate… which means a lower percentage of working-age people are actually working, and this makes the number look reasonable.

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Let’s look instead at median household income, since that reflects everyone. Median household income in current units (dollars) went from 41,990 in 2000 to 49,445 in 2010, a 17.8% increase. Where did the other half, roughly, of the purchasing power loss that occurred go? You lost it due to credit expansion. It was stolen from you and the banks are the ones who stole it, with the explicit support and permission of your government. In fact your government has and continues to explicitly hide the truth of what happened and how, even though their own statistics, if you know where to look, make clear exactly what happened!

Your purchasing power as a median household went down in real terms by about 17%, even though you had more “dollars.” That’s not a small decrease; it’s darn close to a fifth of your purchasing power! It is, in fact, exactly identical to a rough doubling of the federal tax rate on most middle-income Americans — and you suffered it from 2000 – 2010. The tax cuts under Bush and/or Obama [offset those increases, right?] Like hell — your effective tax rate doubled and the money didn’t even go to the government it was siphoned off by the banks!

This happened because your government allowed the private banks to create unbacked credit and debase the currency, skimming off the profits for themselves. Oh sure, some of the people got some of the money (e.g. if you had stocks, for example, you got some of it but most people did not.

Quantitative Easing from 2010-2012: Why It Didn’t Work and Won’t Work

Our Federal Government has added roughly $5 trillion in new credit into the system over the last three years and change which amounts to approximately $1.5 trillion per year, or about 10% of the nation’s economic output every year. FRED says that the total average weekly earnings of all private employers have only risen 7% for the entire three year period, not per year This is only if you have a job, however. If you don’t then it’s worse because when one factors in the decline in the labor participation rate the average household probably saw no increase at all!

10% credit inflation compounded over three years is a 33% increase. You saw — if you had a job the entire time — 7% of it. Where did the rest go? It too was legally stolen by the banks through the acts of government while claiming to be handing you “free cheese.”

Why are you struggling? Because you’re being lied to. You’ve been serially lied to for the last 30 years. These policies don’t work because it is mathematically impossible for them to do so. At best you can borrow and speculate with the borrowed money, and either have your speculation pay off (as it did for some property speculators who bailed out at the right time) or lose (and go bankrupt entirely) but that’s not “saving” or “investment”, it’s gambling, and if you refuse then your purchasing power gets relentlessly stolen by the banks and your government is the one making it possible.

It is not about left, right, Democrat, Republican or anything else. It is about mathematical fact, The debasement of your purchasing power is intentional and that purchasing power is being stolen to satisfy a bunch of banksters who “need” your production to avoid having to immediately recognize that they made a bunch of bad loans – and without those funds they would all be out of business!

Worse, every single politician who refuses to speak to this issue is stealing from you right now and every candidate who refuses or fails to speak to this issue is proposing to steal from you if you elect him or her. All of them — Republican, Democrat, Left, Right, Libertarian, Socialist, whatever.

Is this just? Exactly how is it just? You didn’t force these banks to make a bunch of bad loans! You did nothing of the kind. If you participated and took a bad loan or your company did it went out of business or you went bankrupt — or you have bill collectors hounding you at every turn. At the same time your government is robbing you so the people who made that decision to lend foolishly can remain in business and steal some more and this is going on in Spain, Portugal, Greece, Ireland and the United States!

Why do you think JP Morgan was selling off “good” assets to cover their “loss” on their trading desk from the “whale” that was “inconsequential” (or so we were told)? Don’t they have $2 billion in operating profits they could cover that loss with? Why do they need to sell prime assets? Is it because they have no actual money?

How Can the Situation be Resolved

Wake up folks. This problem can only be resolved if:

  • Government does not spend more than it takes in through taxation. Period.
  • Unbacked credit is not allowed to expand without bound.
  • Credit and money, on balance, does not expand more than GDP does. That’s economic balance. When there’s a recession credit and money must contract to match the decline in GDP! That’s exactly backward from what you’re told but it’s true and it’s been proved. In 1920/21 that’s exactly what The Fed and The Federal Government did. We had a nasty deflationary recession. The Fed removed liquidity, forcing interest rates up, and the Federal Government balanced the budget, ceasing deficit spending. The economy cleared and recovered in 18 months!

Now? We’ve been at this for nearly four years and there has been no recovery.

  • Europe is on the edge of detonation and so are we.
  • We have not forced the bad loans into the open and defaulted them; instead we have people living in zombie homes with a zombie mortgage they haven’t paid on in three years and the bank won’t foreclose because it then must recognize the loss, and if it does it goes bankrupt.
  • We’re told the economy and employment are “recovering” but the labor participation rate has not moved off the floor and the number of people on food stamps is at a record high. It’s all a lie.

This game cannot continue. We are seeing wild gyrations in the world currency and asset markets as one day everything is “ok” as the Ponzi gets another day and the next literal Armageddon threatens. Is this how you want to live? Juggling jars of nitroglycerin hoping you never drop one? All this so a bunch of fat-cat banksters don’t have to face the music for their acts, and our politicians can continue to lie to you and let them steal your wealth and earnings year by year, driving you into abject poverty? ARE YOU NUTS? Well, I hope not, but if you are, rest assured — arithmetic doesn’t care if you want to continue with this charade or not.


For each day you refuse to turn off American Idol and rise from your chair to

  • demand that the scams and schemes stop,
  • demand that the budget be balanced now and
  • demand that the banksters eat their own cooking

the worse the contraction in the economy and the inevitable damage to your personal standard of living will be.

It is your choice Americans, Greeks, Spaniards, Portuguese, Italians, English and Irish. There is no way to avoid what you’ve done, what we’ve all done and what we must stop doing – but we can stop it from getting worse by accepting that which we must face, and forcing those responsible to pay for their acts.

* (To access the original article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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