Debt comes and goes in cycles, often referred to as the "credit cycle" or the "business cycle". But thinking people will just realize it is the "Ponzi cycle". During the early stages of the cycle people take on debt in order to start businesses and create production. They do well at it and so others get into the act. Everyone creates new production using debt. By production I mean everything from 37 flavors of baskin robbins to every different kind of specialty restaurant to every product (and especially specialty/unnecessary product) you can imagine under the sun. As time goes on, too many people get into the act and that causes too much competition for manufacturers to make any profit. As profits wane, there is always just one solution: take on more debt and deliver a better competitive product.
Early on you know it is early on because $1 of new debt can create $4 of GDP. But then over time and as competition arrives, the diminishing returns become $3, $2 and then unity ($1) debt growth to GDP growth. And that's when shit begins to go wrong because quickly thereafter $1 of debt growth only results in 90 cents of GDP growth. This is the beginning of the collapse stage of the debt Ponzi because as people begin to realize that taking on debt in order to produce something actually costs them money, they stop doing it. And those who are running the Ponzi begin to realize that it is actually more beneficial to stop buying more production with the new debt and to instead just give it to people so that they can consume more. Sound familiar?
But the people feel the hammer coming down and so they save the money they are given instead of spending it like they are "supposed" to. And that is when the con men running the Debt Ponzi know their time is short. Because the production then collapses BUT THE DEBT REMAINS. Without production the only way to pay the interest on the debt is by currency debasement. And if you do this long enough even those who are slow on the uptake, figure it out and then they begin to panic. We are months and quarters away from the panic stage by my best models. Maybe 2 years. MAYBE 3. Not more.
What do I mean by slow on the uptake? I mean people who think they have forever to get some of their wealth into hard assets that cannot be inflated away. I mean people who have read my blog for 10+ years and still don't have one OzT of physical gold or silver to their name. I mean people who think they are going to beat the herd into gold and silver at the last second when it becomes completely obvious to everyone that paper money is fake money. I mean people who still think fake paper assets are safe and physical metals are "risky".
Just this past Saturday the US national debt was $25.268 trillion. One day later it is now $39 billion higher. So when you hear politicians talking about spending $50 million for this or that program you know it is a stupid distraction. When a politician uses the word "million" when talking to people about financial matters, it is essentially talking down to us like we were bumpkin fools who are easily impressed. A million is a joke. 10s of Millions have rolled by in the time it has taken me to bang out this post.
Thirty Nine (39) BILLION with a B have been tacked onto our debt since yesterday. 39 thousand million!
The numbers are now so large that it boggles the mind to carefully consider them. There are 330 million people in the USA. Each of us now owes $118 more than we did yesterday. Yes that's right. The debt is going up by 118 dollars per person per day. Many in this country hardly make $118 per day! Even at the brand new minimum wage of $15/hour that still just rolling out across the country it means that the $120 earned each day by $15/hr wage earners is completely offset by the debt which is being added on in their names. And that number includes children and retirees, neither of whom work. So lets say it's more like each working person's debt is going up 200+ per day. If you think this will not matter then there is no saving you and in fact you absolutely will deserve what you get. The world does not care if you are a good person or not. The world only cares if you are wise or gullible. The world excels at fleecing suckers. Don't be a sucker!
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