{"id":1156421,"date":"2019-12-18T16:51:43","date_gmt":"2019-12-18T22:51:43","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=108748"},"modified":"2019-12-18T16:51:43","modified_gmt":"2019-12-18T22:51:43","slug":"the-ancient-solution-to-eliminate-americas-debt","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1156421","title":{"rendered":"The Ancient Solution to Eliminate America\u2019s Debt"},"content":{"rendered":"

This post The Ancient Solution to Eliminate America\u2019s Debt<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Yesterday we likened the economy to an overswollen tick, obese with blood.<\/p>\n

Rather than blood, the economy is obese with debt.<\/p>\n

Like our ludicrously engorged arachnid, the economy cannot much expand. It is impossibly loaded down\u2026 and groans under the burden, horribly swaybacked.<\/p>\n

The economy will continue to wallow \u2014 unless it can shake off the weight.<\/p>\n

But how can it?<\/p>\n

Today we blow the dust off an ancient solution\u2026 and polish it up for the 21st century.<\/p>\n

It may flabbergast and stagger you. You may laugh it out of court.<\/p>\n

But it may offer the only way out. What is it?<\/p>\n

The answer momentarily. We first check on another preposterously inflated behemoth \u2014 the stock market.<\/p>\n

The bears won the day on majority decision…<\/p>\n

The Dow Jones lost 28 points on the day. The S&P slipped a single point. The Nasdaq, meantime, scratched out a four-point gain today.<\/p>\n

In all, a quiet an uneventful December day.<\/p>\n

But how can the economy unload the gargantuan debt load that saddles it, hagrides it and torments it?<\/p>\n

We must first come to terms with the facts\u2026<\/p>\n

Not Much Bang for the Buck<\/b><\/h2>\n

The United States government has since borrowed some $13 trillion since the financial crisis.<\/p>\n

These borrowings have hoisted the United States national debt above $23 trillion.<\/p>\n

Yet the American economy expanded only $5.1 trillion these past 10 years.<\/p>\n

That is, while GDP has expanded less than 40%\u2026 the national debt has increased over 120%.<\/p>\n

Parallel the past decade to the locust years of the Great Depression…<\/p>\n

Real GDP 1929\u20131940 expanded at a cumulative 19.89% rate.<\/p>\n

But for the past 11 years, cumulative GDP expanded 18.85%.<\/p>\n

That is, the economy of the Great Depression \u2014 cumulatively \u2014 outperformed today\u2019s.<\/p>\n

And consider:<\/p>\n

Average real annual economic growth since 2009 runs to 2.23%. But the larger trend since 1980 is 3.22%.<\/p>\n

The Cost of Lossed Growth<\/b><\/h2>\n

One percentage point may seem a trifle. And one year to the next it is.<\/p>\n

But Jim Rickards calculates the United States would be $4 trillion richer today \u2014 had the 3.22% trend held this decade.<\/p>\n

Run it out 30, 50, 60 years\u2026 and Jim concludes the nation would be twice as rich over a lifetime.<\/p>\n

Here you have a grim lesson in the meaning of negative compounding interest.<\/p>\n

Meantime, the Congressional Budget Office (CBO) projects economic growth to limp along at an average 1.9% per annum 10 years out.<\/p>\n

That 1.9% stands against the 3.22% rate common until the great gale of 2008 blew on through.<\/p>\n

More debt\u2026 less growth.<\/p>\n

And so the Keynesian \u201cmultiplier\u201d has taken up division.<\/p>\n

A \u201cScoundrel Economics\u201d<\/b><\/h2>\n

Here is the deeper lesson:<\/p>\n

Debt-based consumption steals from the future to gratify the present. It brings tomorrow\u2019s consumption forward to today \u2014 and leaves the future empty.<\/p>\n

We have borrowed from the future so heavily and so long… we are writing checks against a failing bank.<\/p>\n

It is a juvenile economics, a wastrel economics, a deadbeat economics \u2014 a scoundrel economics.<\/p>\n

\u201cThe wicked borrows, and cannot pay back\u201d\u2026 as Psalm 37:21 informs us.<\/p>\n

Meantime, federal debt presently rises three times the rate of revenue coming in. And trillion-dollar deficits gape to the farthest horizon.<\/p>\n

CBO projects annual deficits 10 years out will average $1.2 trillion.<\/p>\n

Allow for the inevitable smash-up recession. Deficits could double\u2026 or possibly triple.<\/p>\n

As is, debt service alone could rise to $915 billion by 2028 \u2014 nearly 25% of the entire budget.<\/p>\n

For the long-term sufferings we turn to the Brookings Institute:<\/p>\n

\n

Sustained federal deficits and rising federal debt, used to finance consumption or transfer payments, will crowd out future investment; reduce prospects for economic growth; make it more difficult to conduct routine policy, address major new priorities or deal with the next recession or emergencies; and impose substantial burdens on future generations.<\/i><\/p>\n<\/blockquote>\n

$210 Trillion in Debt?<\/b><\/h2>\n

And we have failed to mention \u201cunfunded liabilities.\u201d<\/p>\n

Future Social Security, Medicare and Medicaid obligations are not fully tallied in official number crunching.<\/p>\n

Work them in\u2026 and America\u2019s true debt may rise to an obscene $210 trillion.<\/i><\/p>\n

\u201cThe pen shrinks to write, the heart sickens to conceive\u201d the enormity of the coming migraine.<\/p>\n

Such obscene debt obligation cannot possibly be met. And debts that cannot be paid\u2026 will not be paid.<\/p>\n

We cannot \u201cgrow\u201d our way out of it.<\/p>\n

Meantime, America labors under record student loan debt, credit card debt, auto debt, mortgage debt, corporate and state and local government debt.<\/p>\n

Again we ask: Is there a way out? Can the economy unload its impossible cargo of debt?<\/p>\n

Hyperinflation<\/b><\/h2>\n

One way out \u2014 or partial way out \u2014 is hyperinflation on the scale of a Venezuela.<\/p>\n

Inflation lightens debt\u2019s burdens. But a hyperinflation hauls them away altogether.<\/p>\n

But hyperinflation is a very rough medicine \u2014 worse than the ailment it cures. Besides, the Federal Reserve cannot even wring a sustained 2% (official) inflation from the economy.<\/p>\n

How could it bumble into a hyperinflation?<\/p>\n

Furthermore, no major Western industrial power has endured hyperinflation in over 50 years.<\/p>\n

The United States will not likely be the first.<\/p>\n

Is there another way out?<\/p>\n

In theory \u2014 in theory \u2014 there is. But we must furl back the scrolls of time\u2026 to the sunrise of civilization.<\/p>\n

The 5,000-year Old Solution to America\u2019s Debt?<\/b><\/h2>\n

Here is the answer:<\/p>\n

A debt jubilee.<\/i><\/p>\n

That is, the mass forgiveness of debt.<\/p>\n

Heave the ledger book into the fire. Run a blue pen across the red ink. Wipe the tablet entirely (or mostly) clean.<\/p>\n

The practice began some 5,000 years distant in ancient Sumer and Babylon\u2026 where a new king would delete the people’s debts.<\/p>\n

Was it because the new king was a swell fellow? Or because he was a tribune of the proletariat, an ancient Karl Marx?<\/p>\n

No. He cleared the books to preserve his hide. He was alert \u2014 keenly \u2014 to social stability.<\/p>\n

An impossibly indebted class was a disgruntled class. And a disgruntled class is a dangerous class.<\/p>\n

Economist Michael Hudson is the author of …And Forgive Them Their Debts<\/i>. From whom:<\/p>\n

\n

The idea was to restore the economy to the stability that existed before widespread debts ran up during the preceding ruler\u2019s reign. What was \u201crestored\u201d was an idealized \u201coriginal\u201d or \u201cnormal\u201d state in which nobody owed debts to the palace\u2026<\/i><\/p>\n

The idea of debt amnesties was to prevent debt from tearing society apart \u2014 to prevent the kind of crisis that the United States has been in since 2008, when President Obama didn\u2019t cancel the junk-bond debts, or the debts that tore the Greek economy apart \u2014\u00a0 when the IMF and Europe imposed them on Greece instead of letting it default on debts owed to French and German bondholders.<\/i><\/p>\n<\/blockquote>\n

More:<\/p>\n

\n

Recognizing that a backlog of debts had accrued that could not be paid out of current production, rulers gave priority to preserving an economy in which citizens could provide for their basic needs on their own land while paying taxes, performing their… labor duties and serving in the army\u2026<\/i><\/p>\n

Even in the normal course of economic life, social balance required writing off debt arrears to the palace, temples or other creditors so as to maintain a free population of families able to provide for their own basic needs\u2026 <\/i>Societies that canceled the debts enjoyed stable growth for thousands of years.<\/i><\/p>\n<\/blockquote>\n

The debt jubilee was smuggled into Judaic law\u2026 and the Bible. Every 50th year would be a jubilee year, says Leviticus:<\/p>\n

\n

You shall make the 50th year holy, and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee to you; and each of you shall return to his own property, and each of you shall return to his family.<\/i><\/p>\n<\/blockquote>\n

Now come home\u2026<\/p>\n

Might these United States witness a debt jubilee? After all, the average American sags under $38,000 of debt\u2026 or some such.<\/p>\n

Already cries arise for a debt jubilee of sorts. Democratic presidential candidates \u2014 for example \u2014 have announced intentions to forgive student debt.<\/p>\n

Four Prerequisites for an American Debt Jubilee<\/b><\/h2>\n

Porter Stansberry of Agora\u2019s Stansberry Research has canvassed the history. He identifies four requisite elements of an American jubilee:<\/p>\n

    \n
  1. The wealth gap must be getting dramatically bigger.<\/i><\/li>\n
  2. There must be cultural threats from those with different values or from outsiders (in other words, minority populations and immigrants).<\/i><\/li>\n
  3. The government must be ineffective at providing solutions.<\/i><\/li>\n
  4. And there must be growing anger toward the \u201celites.\u201d<\/i><\/li>\n<\/ol>\n

    We append no comment.<\/p>\n

    Clearing away all the deadweight sitting on the economy is perhaps the way to renewed American prosperity.<\/p>\n

    The economy can then proceed on solid foundations of capital, unencumbered and unbridled by debt\u2026 like a stallion suddenly freed from the barn.<\/p>\n

    Of course, any such jubilee would bring consequences. <\/i><\/p>\n

    It would peel back the lid on a can of wriggling worms\u2026<\/p>\n

    The Fallout<\/b><\/h2>\n

    What about all the creditors a jubilee would clean out? Not all are villain Wall Street banks. Must they all go scratching?<\/p>\n

    And what of moral hazard?<\/p>\n

    Who would not load up on debt? After all, someone will one day lift it off your shoulders.<\/p>\n

    And who would loan anyone money at all \u2014 knowing one day he may be fleeced, dragooned and clubbed \u2014 and holding an empty bag.<\/p>\n

    That is, a debt jubilee would tilt the delicate balance between creditor and debtor.<\/p>\n

    In conclusion, we expect no jubilee of the sort here envisioned.<\/p>\n

    But we do expect a jubilee\u2026 of a sort. Only this jubilee will bring little jubilance.<\/p>\n

    It will arrive with the next recession. It will wipe out trillions of creaking corporate and personal debt.<\/p>\n

    It will also sink the economy. And only the avenging gods will rejoice…<\/p>\n

    Regards,<\/p>\n

    Brian Maher
    \nManaging editor, The Daily Reckoning<\/i><\/p>\n

    The post The Ancient Solution to Eliminate America\u2019s Debt<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    This post The Ancient Solution to Eliminate America’s Debt<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

    The 5,000-year old solution to wipe out America’s debt?…<\/p>\n

    The post The Ancient Solution to Eliminate America’s Debt<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[3724,366,626,463,3726],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1156421"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1156421"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1156421\/revisions"}],"predecessor-version":[{"id":1156422,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1156421\/revisions\/1156422"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1156421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1156421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1156421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}