July 7th, 2014
in Op Ed
by Reverse Engineer, Doomstead Diner
Econintersect editor's note: One of the solutions for too much debt is to write down the debt. It can be in the form of a debt Jubilee (such as discussed by Steve Keen and Michael Hudson, among others) whereby debt is simply cancelled - lenders lose an asset and debtors lose a liability. The problem is, of course, determining which debtors are let off the hook and which creditors take the loss. The following rant from Doomstead Diner suggests a possible course of
debt wealth destruction that might play out to the detriment of the middle class and the moderately wealthy.
Greetings Doomfans, and welcome to another edition of the Frostbite Falls Daily Rant, here on the Doomstead Diner.
For today, I want to look at the specter of Wealth Confiscation coming down the pipe, which has already occurred in places like Cyprus, but looks likely to expand in scope as the general financial Ponzi of the World implodes.
Graham Summers of Capital Research is a regular contributor to ZH, and a regular predictor of Financial Doom as well. His schtick is how you need to set up your portfolio for Doomsday.
In his latest piece, Graham talks about how TPTB will come after anyone with financial assets over around $200K, striking FEAR into the Heart of every 1%er out there.
The idea here is, TPTB will do anything and everything they can to try to keep the financial system floating another day, and if that means they have to confiscate the paper wealth of 99.9% of the people with some money in the bank, they will do so.
While worrisome to the 1% crowd out there, this is probably not quite so worrisome to the .01% with wealth measured in $Billions$. These folks are "Key Men", and though they may take a Haircut at the beginning, they won't lose it ALL.
For the average Millionaire though without the ability to sequester money in Tax Havens and the like, there is a likely chance your money will be confiscated along with the Pension Funds of J6P.
Who besides the Billionaires does NOT have anything to worry about here in such a scenario? The 50% or more of people with either ZERO money in the bank or in Graham's analysis, less than $200K. If you go up that far, this is probably 90% of the population of the FSoA.
Anybody with a net worth BELOW $200K should be IN FAVOR of such a Haircut. Nothing to lose here for them. So on a Democratic Level, one would expect this to be quite popular. Not too popular an idea on Zero Hedge of course.
I will not be surprised at all if such means are undertaken to try to salvage the financial system. I would be surprised if it actually WORKED.
The issue here is probably 99% of the Assets that will be confiscated are various forms of Irredeemable Debt. After they Repo these Bonds and Corporate Paper you have in your Portfolio, who will they sell them to? Certainly nobody will buy them at par, and why would the .01% buy them even for pennies on the dollar?
The deal here is of course is that such a confiscation won't Zero Out anybody's debt, certainly not the Trillions in debt of the FSoA Goobermint. In fact, even confiscating the wealth of the .01% won't do that. However, on the way down the Toilet here, the folks to get flushed first are those who still have some money, but little to no power as far as Da Goobermint is concerned.
If you are amongst those in the population with maybe 2 months of bills in the bank, you have little to worry about here that you are not already worried about. If confiscating the "Wealth" of 1% of the population will keep the Banking System floating another day so you can still access your 2 months of savings, this is GOOD for you. The worse outcome is where the whole system crashes at once and NOBODY gets out alive.
In the end, even confiscation won't work, since the resource deficit relative to population size is so great. However, it remains a likely possibility in the spin down, so if you have assets in $200K+ territory, it's pretty likely the Tax Man Barber will arrive soon to give you a Haircut.
What seems to be outside the grasp of most people, including the dimwits running this Ponzi is that all the "wealth" of the world is measured in terms of DEBT. The more of somebody else's debt you hold, the RICHER you are! Hold enough of it, and the interest payments alone are enough to pay for your mansions and yachts and jts without ever doing any work at all!
What becomes of this when the Lightbulb Goes OFF, that the folks who owe this debt can't pay it off? That really is EVERYONE, because you as an individual are obligated to the debts the Nation State you live under accumulated under this system. Goobermints are the Sinkhole of Debt, but when those Goobermints no longer have resources available to service the debt issued, they too can go Bankrupt. It is a MYTH that a Goobermint or central Bank cannot ever GO BROKE, they most certainly can and many have throughout the course of history.
The irredeemability of debt denominated in dollars is becoming quite apparent now to the international community, the Ruskies and the Chinese first in line here, now backed up by the French as well in the call for "de-dollarization". These folks are asking themselves WTF are we using Dollars we can't manufacture out of thin air but the FSoA can to do all our trading?
The dollar is just a Credit Instrument used to buy Energy. He who controls the Oil resource issues the credit to buy it. WWI & WWII were fought to gain control and hegemony over the Oil buried under the ground in MENA. The FSoA won those wars, and as a result the Dollar became the credit instrument of choice globally to buy Oil. Long as the FSoA and NATO had control over this resource, they could issue the credit to buy it. This worked pretty well long as the vairous Nation States created in the aftermath of these wars had plenty of Oil to export, but one by one throughout the region those countries have been depleted of Oil to the point they are now net energy importers rather than exporters. These of course are all the countries that have devolved to chaos first, Syria, Egypt, Algeria et al.
A few places like Saudi Arabia and Kuwait still do have Oil to export, however already the Kuwaitis are suffering from the contagion in the region all around them. There are simply too many people all around the region who have been disenfranchised and impoverished down to the existential level, and they have nothing left to lose. ISIS is a manifestation of this phenomenon, its not just a situation of the CIA instigating it anymore, they just let the Genie out of the Bottle on this.
There are two main problems working in synergy here, first is the overall depletion of the total Oil resource available to issue credit on, the second is the realization that the credit instrument used for the last 70 years since the end of WWII, the Dollar, is now irredeemable debt. All those USTs held by the PboC, basically worthless toilet paper and the Chinese know it. Their problem is they don't have any resource to issue credit on themselves, and don't have control over MENA oil either.
The Ruskies DO have some Oil left, so they could issue Roubles as credit to buy it. They also can take sides in the proxy wars down in MENA to try to control some of that Oil as well. However, no way will NATO let go of the last big Oil Cows left to milk here, Saudi Arabia and Kuwait.
As I have said before, this is a war nobody can win. The fight for control will destroy the infrastructure necesssry to extract what is still left to extract there. There isn't enough left to issue credit on by anyone who controls these places to deliver a Happy Motoring lifestyle to 7B people on the planet, or even at this point probably to feed them through Industrial Agriculture.
Despite the stupidity of engaging in this battle, it will be engaged in nonetheless. There are too many people who's livelihoods are dependent on the system continuing to function, at all levels, from the Billionair Pigmen right down to J6P and Retirees as well. The fight will go on, until there is nothing left to fight with, or for, anymore.
And that's all the Doom, this time until next time, here on the Doomstead Diner.