by Bill Bonner
Yesterday, we described how the U.S. government has changed over the last three decades. Now, neither party is worried about deficits… or the U.S. federal debt, which hit a new milestone last week, at $21 trillion.
Instead, they are all onboard the Bankruptcy Express… Democrats, Republicans, Congress, bureaucrats, and cronies… with Mr. Donald J. Trump as Casey Jones himself… running wide open and stopping only to pile on more debt.
It’s already loaded with $230 trillion of debt from all over the world. And with the additions of 2017, U.S. government debt alone will tote to $40 trillion by 2028.
On board are most of the world’s central bankers, too. Bank of Japan governor Haruhiko Kuroda is in the passenger car. So is Europe’s Mario “Whatever It Takes” Draghi.
Also there, of course, is America’s new Fed chief, Jerome Powell. They all seem to be having a good time, ordering glasses of brandy at public expense.
Only the Germans decided to give this ride a pass. They still remember their last disastrous train wreck, when hyperinflation in the ‘20s destroyed the integrity of German society and its institutions.
What happened next was the worst period in German history since the invasion of the Huns. Tens of millions were killed, the economy was destroyed, and the Germans’ civilized reputation was stained forever.
Everybody knows you can’t keep borrowing forever. But everyone also believes that the conductors, engineers, and stokers in charge of this train will “do something” to prevent any serious accidents.
After all, they’re our elected officials… with their expert PhD appointees. They’re the brightest and the best… Well, aren’t they?
We tried to show yesterday that every government is eventually taken over by its insiders. Then, it becomes a government of the cronies, by the cronies, and for the cronies.
Of course, people don’t like to think so, because it sets in motion a whole backfield of vaguely seditious ideas. But we will pass over those issues in silence. Today, we want to focus on the money.
Not only is the government not working for the average citizen, neither is its money. The dollar is a fake currency, manipulated by the same insiders, more or less, who control the government.
In two moves – one in 1968 and the other in 1971 – the feds changed America’s money. It still looks the same. But instead of being backed, at a fixed rate, by gold… this new dollar is a “Federal Reserve Note.”
Real money, as people realized more than 2,000 years ago, must be limited. But this money is not.
When Alan Greenspan became Fed chairman in 1987, the bank owned all of $200 billion worth of bonds, which it had acquired over the preceding 74 years.
By the time Fed bond holdings reached their peak under Ben Bernanke, the bank had $4.5 trillion worth.
Where did it get the money to buy those bonds? Easy, peasy… it just created it out of thin air.
And that new money… along with trillions more being created by other banks… is what has made the elite so rich: They got the new money.
The Fed pumped the new money into Wall Street, not Main Street. People with Wall Street connections made money. Others did not.
As we saw on Monday, the working stiff’s main asset – his time – declined in value… while Wall Street’s assets – stocks and bonds – rose 10 times in real terms.
It’s hardly surprising that the elite are enjoying the ride.
And so far, why not? It’s been all downhill.
From 18% in 1980, the fed funds rate has gone down to 1.42% today. Carrying debt is no trouble when you can refinance it at lower rates.
But what happens when the downhill run turns into a gentle rise… and then a steep incline?
We will see.