…It is no secret that the bonds, notes, bills, and other obligations of the U.S. government, or any other government, for that matter, are irredeemable. That is, they are redeemable in nothing but more of the same. For example, the bonds of the U.S. Treasury are redeemable in Federal Reserve credit, which is itself irredeemable and is “backed by” the self-same bonds of the U.S. Treasury. Why is it, then, that these Treasury obligations are in demand where one might think that redeemability is a sine-qua-non of issuing them? What makes people participate in this shell game? How can such a crude check-kiting scheme mesmerize the entire population?
Come to think of it, the sight of this Ponzi scheme would shudder the Founding Fathers of our great Republic.
This is not an easy question to answer. But going through all the alternative explanations one by one, we come to the conclusion that the debt of the U.S. government is still redeemable in a sense, however limited or restrictive it may be. The debt of the U.S. government has a liquid market in which it can be exchanged for Federal Reserve credit. In turn, Federal Reserve credit can still be exchanged in liquid markets for physical gold, the ultimate extinguisher of debt, albeit at a variable price.
But if you break that final link, when gold is no longer for sale at any price quoted in U.S. dollars, then the rug will have been pulled from underneath this house of cards, and the international monetary system will collapse like the twin towers of the World Trade Center. And this is the situation that we are confronted with…
…None of the policy-makers sees the uniqueness of the coming and predictable crisis, or the need to confront it with a comprehensive plan. There is an overwhelming unwillingness to admit that the international monetary system as now constituted has been built on quicksand. It is a mere makeshift that took its origin in the last gold crisis of 1971. Cracks have been papered over as they appeared after every subsequent crisis. Every opportunity to sit down and work out a permanent solution was passed up. This seems to have worked well enough in the past. Policy makers see no reason why it would not work in the future.
Yet the Last Contango in Washington will be different from all previous crises. It will be elemental, devastating, and apocalyptic. It will destroy virtually all paper wealth and render virtually all physical capital idle. It will involve hordes of unemployed people roaming the streets, caring for no law and order, pillaging homes and institutions. It will destroy our freedoms. It may destroy our civilization unless we take protective action…
3) From Yahoo’s Tech Ticker, retail sector expert Howard Davidowitz says, among other pungent observations, that:
“…we are in the tank forever. As a country we are out of control, we’re in a death spiral…we’re non-functional….”
I can’t embed the darned thing, so watch it yourself by clicking on the link above and then looking for the video player.
Bonus question: As the Administration loses what little control remains and the economy continues to spiral towards catastrophe, Tax-Cheat Timmy and his boss, the Mighty Kenyan, will:
a) admit that the best thing that the Fed Gov could do would be to cut spending and taxes while the productive sector of the economy purges its excesses and then recovers;
b) blame prior Administrations for the economic debacle;
c) raise taxes and increase enforcement efforts, thereby igniting more citizens’ revolts;
d) launch a mainstream media campaign highlighting the threat of domestic terror groups;
e) create false-flag diversions that can be blamed on domestic terrorists and other miscreants;
f) answers (b) – (e) but not (a).
You have five minutes for this portion of the examination.