Ch 11.24 - Debt/Default
"The empire could no longer afford the problem of its own existence." - Unknown, on the fall of the Roman Empire
a. Debt
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"When your outgo exceeds your income, your upkeep, becomes your downfall.” - Unknown
"The dollar is the world reserve currency and treasuries are the world reserve asset." - Unknown
"Treasuries do not have a risk free return. Treasuries have return free risk." - Unknown
"USD comes with UST think as a pair. USD is borrowed into existence. Gold has no pair." - Francis Hunt
"Dollar down and debt down is like losing your virginity. Once it’s happened it’s a lot easier to happen again." - Francis Hunt
"You’re on the wrong side of a compound interest equation." - Francis Hunt
"The important question isn't 'is the US debt sustainable?' It's 'why has the debt been sustainable for so long?' Two main reasons:
1) The currency is imposed upon the people by a legalized monopoly.
2) Rules & regulations ensure the holding of government debt as the safest & most liquid of all reserve assets.
The government does what every monopoly excels at, which is buy up potential competitors, suppress competition, pursue regulatory capture via lobbying, and spend freely on deceptive PR." - Unknown
”It is NOT that there is debt. Debt can be good or bad.
- Good debt borrows now to invest as capital and generate greater profits in the future.
- Bad debt borrows to maintain/increase wasteful spending of ineffective govt programs. For example, social programs that generate only more social programs (and nothing of productive value)” - Unknown
"There should be something called a 'too big to fail' tax. Everyone who's viewed as financially significant should pay a huge tax up front so that you and I and fellow taxpayers don't have to pay extra taxes or run a bigger deficit to bail these guys out." - Unknown
“It is a sh*t storm out here. You have no idea the kind of crap people are pulling, and everyone’s walking around like they’re in a goddamn Enya video.” - Mark Baum, on the 2008 financial collapse in the movie The Big Short
"There is surely something odd about the world's greatest power being the world's greatest debtor." - Larry Summers, US Treasury Secretary
"Global Debt Projections
1971 - 4 trillion
2000 - 100 trillion - 25x in 30 years
2021 - 300 trillion - 75x in 50 years
2030 - 3 quadrillion? - 750x in 60 years?" - Unknown
"The rich ruleth over the poor, and the borrower is servant to the lender" - Proverbs 22:7 KJV
b. Default
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de·fault - noun - failure to fulfill an obligation, especially to repay a loan or appear in a court of law. From Latin fallere meaning to ‘disappoint' or 'deceive’.
"Our liquidity position is strong, we are adequately capitalized." - Alan Schwartz, Bear Stearns, March 2008 before they became insolvent and were taken over by Bank of America.
”What have I told you since the first day you stepped in my office? Be first, be smarter, or cheat. And I don’t cheat.” - Margin Call
"They [Banks] never go bankrupt. In a bankruptcy the books are opened in court. That never happens anymore. The books of anything big are just too dirty for that kind of exposure. Lehman no BK. Bear Sterns no BK. MFGlobal no BK. Etc." - Unknown
"JP morgan senior partner in madoff. Imagine how corrupt you have to be to be willing to launder a ponzi scheme? They saw all the money going back and forth yet did nothing to stop it." - Catherine Austin Fitts
"I lived through '08 as the tenant of a master manipulator. The owner was a mortgage lender. I tried to buy the place on the cheap, but between the bank accepting virtually any stall tactic and the owner using every stall tactic, the owner stopped making payments, and never made a payment for 5 years while the bank pretended to care. It was like a cat and mouse game only the cat had no interest in actually ever catching the mouse. The bank would file a notice of foreclosure and the owner would list the property for sale. Foreclosure sale immediately postponed. When it didn't sell, bank filed another notice of foreclosure and the owner called me and asked me to make a lowball offer. Foreclosure halted. Appraisal generated and it actually came in too close to my offer, so the bank waited 6 months and then needed another one because the old one was stale. Then they just claimed to have lost the next two appraisals. This went on for 5 years until the property bought at the peak in 2006 for $860K with payments stopped in 2007 finally resold in 2012 in a swarm of buyers for $1.1M. By then the mortgage had been 'sold' by the bank to the Fed at full value and the fed got every penny plus late fees and interest. The bank had gotten all its money back from the fed, and took a small loss from the payments missed. So those of you salivating at the enormous crash to come should know better than to think you live in a capitalist society. There isn't going to be a crash for the same reason there wasn't much of one in 2008: the banks can't afford it. Stop thinking what will happen is what you learned in elementary school." - Unknown
"The year of 'Shmita' or 'Shemitah' (meaning: letting go), also called the sabbatical year, occurs every seventh of September or October. The story behind the Shemitah is that the 7th year is the year of resting and releasing. The year also stands for debt forgiveness to break debt cycles. Then immediately, it repeats the idea of Shabbat: Six days, you shall do your work, but on the seventh day, you shall cease labor. The implication is that just as there is a rhythm to the work week whereby activity needs to be punctuated by periods of rest, a parallel rhythm pertains over a seven-year cycle; we need periods of rest and renewal." - Unknown
"Book of Jubilees
The book divides all of history into exact 49-year cycles called "jubilees."
What made this dangerous:
• It contradicted traditional religious calendars
• It claimed to reveal the exact structure of time itself
• It created a precise dating system from creation to Moses" - Unknown
Dow/gold monthly chart shows resets in 1933 1977 and 2027 if 49 years apart:
1786 - Shays rebellion in Massachusetts’s against foreclosures and high taxes.
1835 - last time US govt paid off debt under Andrew Jackson
1884 - Panic of 1884
1933 - 1.94 ounces bought the Dow
1980 - 1.29 ounces bought Dow
"Imaginary money, Imaginary debt." - Unknown
"US government has the Ultra Black Gold Travel Rewards Card that never has to be paid so it never needs to cut spending. How many of you just pay the minimum on a credit card? Uncle Sam does. Wait until the US credit card starts seeing 28% interest rates. The introductory 0% rate is gone." - Unknown
"It takes 50 minutes to fill a stadium size pool if you double a drop of water every minute. The US National Debt doubles every 8 years..." - Unknown
"0% of $31 trillion was no big deal. 5% of $31 trillion on the other hand..." - Unknown
"Just some basic math here. Moving from 0% interest rates in 2020 to 5% today is more painful than going from 6% rates in the 1970’s to 20% rates in 1982. Few people understand this." - Unknown
"The US government has defaulted many times:
1781 - Loans, Supply Certificates, Wage Certificates interest unpaid / French govt refused to roll loans
1790 - US Govt assumed and retired debts of colonies. Deferred interest until 1801.
1861 - Defaulted on US demand notes. Govt printed 'greenbacks' which sold at discount to gold
1933 - Overt default on gold bonds that were paid in paper instead
1942-1951 - Yield curve control. Allowed govt to borrow dollars at much lower rates. Paid to borrow.
1968 - Refused to honor redemption of silver certificate paper dollars for physical silver
1971 - Refused to redeem dollars held by foreign govts for gold under Bretton Woods
1979 - Failed to send $122m in checks out on time (with no obligation to pay interest on late payment)" - Unknown
"The US has absolutely, indisputably defaulted before. This began in the wake of the American Revolution when the US defaulted on domestic loans. After the new constitution was in place in 1790, the federal government renegotiated past debt at less favorable terms for investors. That's a default. Then there was the Greenback default of 1862. The original greenbacks were $60 million in demand notes which were redeemable in specie. Less than five months later, in January of 1862, the US Treasury defaulted on these notes by failing to redeem them on demand. Perhaps the most egregious case was the Liberty Bond default of 1934. The US was contractually obligated to pay back its debts on these bonds in gold. Franklin Roosevelt decided to default on the whole of the domestically-held debt by refusing to redeem in gold to Americans and devaluing the dollar by 40 percent against foreign exchange. The US refused to make good on its end of these bond contracts. That was also a default. Then there was the short default of 1979. As Jason Zweig noted in 2011: In April and May 1979, amid computer malfunctions, heavy demand from small investors and in the wake of Congressional debate over raising the debt ceiling, the U.S. failed to make timely payments on some $122 million in Treasury bills. The Treasury characterized the problem as a delay rather than as a default. While the error affected only a fraction of 1% of the U.S. debt, short-term interest rates—then around 9%—jumped 0.6 percentage point and the U.S. was promptly sued by bondholders for breach of contract. So, the next Time Joe Biden or Janet Yellen go on television to insist the US has never defaulted, know that you are being lied to." - Unknown
"bank·rupt·cy - the state where a person or organization declared in law unable to pay outstanding debts. Bankruptcy originates from the Italian Banca Rotta or 'broken bench.' Bankers in the 16th century Italy would conduct their business from a bench or table. When they could no longer fulfil their obligations, their bench was smashed to signify that they were out of business." - GoldSwitzerland
"'How did you go bankrupt?' Bill asked. 'Two ways,' Mike said. 'Gradually and then suddenly.'" - Ernest Hemingway, The Sun Also Rises, 1926
"I don't always downgrade the US Credit Rating, but when I do, I do that on a Friday after market close." - Dos Equis Commercial Guy on the Moody's downgrade of the US Credit rating
bond - a certificate issued by a government or a public company promising to repay borrowed money at a fixed rate of interest at a specified time. From Old English beand meaning to 'bond', 'chain', or 'fetter'.
mort·gage - a legal agreement by which a bank or other creditor lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt. Mortgage originates from old French, literally meaning ‘dead pledge’, from mort (from Latin mortuus ‘dead’) and gage ‘pledge’.
"Credit monitors had a specific pecking order that was the 'normal' course of defaults for American consumers:
1) Default on Store Branded Credit Cards.
2) Default on Major Credit Cards.
3) Default on Auto Loans.
4) Default on Mortgages.
Quite quickly the average consumer figured out that they could default on their mortgage and face none of the usual consequences (foreclosure, eviction), but they needed their most basic credit cards to purchase the items they needed every day." - Unknown
Combat Warfare Categories:
1) Minor civil disobedience and/or riots
2) Major civil disobedience, riots, and/or insurrection
3) Minor bombing and/or ground invasion
4) Major bombing and/or ground invasion
5) Nuclear destruction
Economic Warfare Categories:
1) Increased mortgage foreclosures, some strip-shop and mall closings, decreased spending overall
2) The above, plus tariff wars, stock and bond market crashes
3) The above, plus minor inability of governments to pay entitlements, significant inflation, credit collapse
4) The above, plus the end of the dollar as a reserve currency/end of the petrodollar, considerable inflation, short-term bank closures
5) The above, plus major inability of governments to pay entitlements, permanent closure of the majority of banks, currency collapse, confiscation of deposits, major internal capital controls
"Yields Rising. Because it hurts too much to say bond prices are crashing." - Unknown
"You can squeeze a water balloon seven ways from Sunday but eventually it pops out somewhere. They are running out of little tricks to pull out of their bag." - Rick Santelli on rising yields and yield curve control
"When the Fisher Effect knocks in and bonds are discounted due to future expected inflation due to printing, all SHTF." - Unknown. The Fisher effect is the tendency for nominal interest rates to change to follow the inflation rate. The real interest rate is independent of monetary measures (known as the Fisher hypothesis), therefore, the nominal interest rate will adjust to accommodate any changes in expected inflation.
"Time is cruel master. So is compound interest." - Lawrence Lepard
"If one thing resonates for me on why yields are grinding higher, it is a lack of faith in the government’s willingness to control and even pay debt." - Unknown
"Risk free rate. The whole of clown world is built on the assumption that these Treasury Bills of Exchange are risk free." - Unknown
"The only yield you better be concerned with right now is the bitter harvest that the destroyer is going to unleash in the end of days. SOUNDS OF THE DESTROYER. Only those who hold a certain credential/qualification will be removed from the earth before it arrives. To find out what that qualification/credential is and how to get it, I would suggest you read the link above. Quickly." - Unknown, on the next crash being Biblical
"Two Conditions Required for a Financial Bubble or Crisis:
1) The banks need to be heavily exposed to the asset. Banks are the lynchpin of the financial system, so for anything to create a bubble, it needs to hit the banks. And to hit the banks, they need to own a lot of it.
2) The asset has to be owned on a highly leveraged basis. Leverage is what creates forced sellers. It probably sounds trite, but you have to have a margin account to get a margin call. Forced sellers are the key and that is directly tied to owning an asset on a leveraged basis.
My view is that you need a ‘safe’ asset, that banks own a lot of, and that both banks and other investors own with significant amounts of leverage. Does any asset fit these criteria better than treasuries?" - Unknown
"This is what happens at the end of every Empire throughout history...the Treasury is looted." - Unknown
"There are those that have been robbed, and those that are going to get robbed." - Unknown
"After some consideration a person may come to the conclusion that if the gov wants your money then they'll get it and it doesn't really matter how you invest it." - Unknown
"James Trafficant gave a speech in 1993, before Congress, on the US bankruptcy of 1933. THEY jailed him after that and when he still spoke the truth, he had a little "accident" on his farm and died. The guy was a hero. Look up the speech.” - Unknown, speech here https://annavonreitz.com/mcfaddenspeechonthefed.pdf
"Being a part of Gen X is like the scene from Andor where they are stuck in the slave camp. They tell you that you are a short timer only to realize that you will be moved to another slave camp when your time is up. The only way out is to die." - Unknown, on how Gen X is not going to get social security but be stuck paying for everything
"We boomers didn't get the $33 trillion. The politicians and their rich cronies did. But you are correct that the national debt they caused has doomed you to a future of economic devastation. Just like your politicians are doing A LOT WORSE to your children now. Many many times worse. So if we should have stopped them from doing it to our children, why aren't you stopping them from doing it to your children now?" - Unknown
"You can’t buy financial instruments to protect against risk in the financial system. You have to be outside of it." - Unknown
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