Jim Rickard’s Solution to US “Debt”

… Economists Ken Rogoff and Carmen Reinhart carried out a long historical survey going back 800 years, looking at individual countries, or empires in some cases, that have gone broke or defaulted on their debt.

They put the danger zone at a debt-to-GDP ratio of 90%. Once it reaches 90%, they found, a turning point arrives…

At that point, a dollar of debt yields less than a dollar of output. Debt becomes an actual drag on growth.

What is the current U.S. debt-to-GDP ratio?

105%.

We are deep into the red zone, that is. And we’re only going deeper.

The U.S. has a 105% debt to GDP ratio, trillion dollar deficits on the way, more spending on the way.

We’re getting more and more like Greece. We’re heading for a sovereign debt crisis. That’s not an opinion; it’s based on the numbers.

How do we get out of it?

For elites, there is really only one way out at this point is, and that’s inflation. …

Now, the Fed printed about $4 trillion over the past several years and we barely have had any inflation at all.

But most of the new money was given by the Fed to the banks, who turned around and parked it on deposit at the Fed to gain interest. The money never made it out into the economy, where it would produce inflation.

The bottom line is that not even money printing has worked to get inflation moving.

Is there anything left in the bag of tricks?

There is actually. The Fed could actually cause inflation in about 15 minutes if it used it.

How?

The Fed can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price of gold is $5,000 per ounce.

They could make that new price stick by using the Treasury’s gold in Fort Knox and the major U.S. bank gold dealers to conduct “open market operations” in gold….

https://dailyreckoning.com/golden-solution-americas-debt-crisis/

Ummm … did you catch that?  “most of the new money was given by the Fed to the banks, who turned around and parked it on deposit at the Fed to gain interest. The money never made it out into the economy, where it would produce inflation.”

Reiterating: the “fed” pays interest on these deposits, purely at the “fed”‘s discretion.  And we’re supposed to believe it’s a surprise to anyone that the money isn’t being used for anything constructive?  This is so f*cked up I don’t know where to begin.   And for Rickards to gloss over it as if it wasn’t a compete outrage is itself a complete outrage.   And that the economy needs $20T worth of inflation to keep functioning is yet another outrage.

But let me predict the future here: when/if the economy finally signals a bottom by turning around for whatever reason despite the most strenuous efforts of the “fed” and its wall street groupies, a lot    of that QE money which is parked in INTEREST BEARING accounts (I can’t even believe they’ve admitted this with a straight face) will be used to buy up physical assets for pennies on the dollar.  Just another variation on the great ripoff of the 30’s, which was ALSO caused by  the policies of the “fed” ( http://thoughtcrimeradio.net/2014/03/reprise-bernanke-admits-fed-caused-great-depression/ ) and which ALSO vastly benefited the “fed”‘s shareholders.

Is there no limit to what the american people will put up with?

The level of fraud and theft involved in all this is so extreme it defies description.  When the F*CK are we going to ditch this vampire squid and get something that can at least pass the laugh test as a public financial institution?    Oh  yeah, that’s right: politicians who pursue such commonsensical policies tend to be sacrificed to satan.   Funny how that works.

http://monetary.org

 

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