The faint path was winding upwards through the misty landscape. Just before the steep climb there was a large, crumbling boulder, stuck in at the beginning to the route for the summit of the Debt Mountain , cloud hidden, its whereabouts unknown. A faint, disappearing engraving on the boulder, written in the mist of time, stated the nature of the Debt Mountain. Some say there have been more than three laws written on it, but the crumbling time erased them, Some say there is still to be seen a Fourth Law stating that time is not money, but as much as Witchdoctor tried to decipher the fading lines in the stone, he could not read them.
The first law- growing more than the interest paid on the debt.
If a county does not grow more than the interest rate on its debt, recession comes, and taxes rise, and the bitter end is there. The sovereign debt starts to pile up, together with the compound interest.Many countries are in that position. And the money masters know it. They started pushing the interest on the debt down, ZIRP, NIRP….. to stay within the First law. The same applies to any business.
The second law -the floating reserve– says, that in a country there has to be the same amount of the loose, floating cash as is the fractional reserve, so at least min. 10% in the EU. This is the law of balance.
If you break the second law, the stagnation , recession starts.the defaults happen more often, and the population gets over indebted. The credit card, not one but 10, 15 credit cards are being used as a loan and escape from bankruptcy because of the falling purchase power. The missing buffer zone of the Second Law leads to society depletion and the disappearance of the middle class.
The third law-the law of default.
The third law says that the money in circulation – the monetary mass, must match the weighted average of the amount of the interest on the debt circulating in a country. If this is not the case, recession, stagnation and deflation starts. The point is, that in the fractional reserve banking, money for the repayment of the interest is not created. So the money for the interest comes from cutting prices and wages, or by defaulting. The defaults matches the average weighted interest rate in the economy. The default is embedded in the fractional banking,debt driven economy.
The default or bankrupcy is the dynamic force in the economy.It forces subjects to be more competitive and make innovations constantly. The bad side of this coin is that, globally, everybody is doing the same, but from different positions. Most of the so called emerging markets have none or lousy health and pension schemes, no laws forn the pollution, so they cheat in the game, employing the working force for „free“ and destroying the environment. Their cost is de facto hidden, they are cheap because the do not follow the same rules. The free trade is a scheme or a trap, which leads everybody to the lowest common denominator.
The QE distorts the price discovery through false interest rates. Ok, if they would not do it, the States and half of the financial sector will go in default. But on the other hand, the almost no interest rate is slowing the economy, because the dynamic force- the threat of default, is no longer there. And there is no risk for the Oligarchy investments. And the capital allocation becomes a slowing force of the economy.
The supply side economics is dead. The demand side-economics is not possible in this model of the debt driven economy. There is no room and will for the raising the purchase power of the population, so we are doomed for the slow decline.The purchase power in the global economy can be raised only by new regulation, which forbids the unfair competition through low prices because the other party is having „slaves“ as a workforce. There has to be a introduction of the customs tax which reflects if the imported goods a are made by paying the workforce a minimum health and pension or if it respects the environment . It can be made progressive, depending on the amount of cover the workforce has.
The Giant Vacuum Cleaner is in place, and is vacuuming from the bottom of the World to the top of the Debt Mountain.
Witchdoctor was busy transcribing the Laws, when he heard the sound.The first sound of the day. A blurred figure was slowly descending from the misty top, passing through layers of solid debt formations crumbling slowly under his feet…
Many questions arose, but the blurry figure started to speak first;
Hey, he said, do not go on the top. It is growing and crumbling at the same time.
But what is on the summit? Witchdoctor asked.
Nothing, the blurry figure answered, the top is so high and far that you see nothing, there is just Nothing all around. And the last layers of debt, after the synthetic derivatives, are the never paid debt packed with high interest and resold. They just dissolve in the mist… Listen, go away and climb some other mountain, cloud hidden, its whereabouts unknown….
Suddenly Witchdoctor woke from the Dreamtime, looked around, the notes were still there in his hand, all black from the crumbling black dust of the debt formation layers on the Debt Mountain.
He opened the window and fortunately the Box of Rain was still in place. Smiling, a thought crossed him; but, for how long?
It is one man/woman only writing- Witchdoctor. You are free to elaborate as much as you want, as a reply, in medias res… or anywhere else.