by Bill Holter, Miles Franklin:
Nice chart huh? Once upon a time in an age long ago the amount of gold held was equal to or more than the amount of debt owed. It didn’t have to be like that, it would have been OK to have more debt than gold as long as the debt got paid off…eventually…and in a currency that remained relatively constant. This of course did not happen; instead the “payable” currency was debased and debauched. And somewhere along the way (probably back to the days of John Connally’s “It may be our dollar but it’s YOUR problem” comment) it was decided that the debt would NEVER be paid off.
What has happened year after year is that new (and exponentially more) debt was issued (borrowed) to fund our lifestyle and payoff (roll) old debt principal and interest. When all of this started years ago…”debt worked” as a gearing mechanism. A $1 borrowed would create more than $5 of GDP growth, this is not the case now. Now, $1 borrowed creates less than .50 cents of growth so we have gone from a very positive gearing to actually a negative gearing. Yes I know, “deficits don’t matter”…until they do. Just ask the various European countries whether deficits matter or not.
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