The fiat US dollar is backed by debt. New dollars are created when somebody borrows money against some asset. No new money is created unless some new debt was also created (this is true even when the US Fed prints money to buy treasury bonds for its own account – they wouldn’t do THAT would they?! LOL).
Given this constraint on the creation of new US dollars, the US government and the US Federal Reserve (which is a private corporation that we the people pay interest to for the money they create out of thin air) need some asset class to rise in value so people and businesses can borrow new money against the rising assets.
Real estate has provided this rising asset class since 9/11 – several trillion dollars worth of new debt/money has been created based on increased real estate values.
Prior to 9/11, the rising equity markets served as the recipient of new debt/money.
Because it takes money to service all the debt (interest expense) that is created, each new dollar provides less ‘bang for the buck’ in stimulating the economy. It now takes 4 new dollars of debt/money to create 1 dollar’s worth of GDP (this ratio was below 2 prior to 2001).
As of 2005, we the people are paying over $352 billion in annual interest on the national debt. That is almost $1 billion / day JUST IN INTEREST. And remember that we the people are borrowing about $2 billion / day just to keep our economy running.
So, let’s see, we are borrowing $2B per day in new debt and using almost half that money to pay the interest on the existing debt.
How long could you run your household using this type of financing?
America is headed into the Next Great Depression and most Americans don’t (and won’t) understand why.
The ‘rising prices’ that you are currently suffering from are caused by the debasement of our money supply. Prices aren’t rising – what’s happening is that your debased dollars are buying less and less. Inflation is a lie which has been sold to the public for decades – we’ve been told that a little inflation is necessary and even good. There is no inflation (short of serious supply/demand imbalances), only monetary debasement.
The coming depression will restore honesty to our fraudulent monetary system but it will be a VERY painful process.
Silver and gold are the only real money and they will serve you well as the US dollar heads towards its true value – ZERO!!!
