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What Happens When Nations Go Bankrupt: We’re All Greece

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We are now exiting the eye of the hurricane

The only thing the DEBT laden societies (their politicians and central banks that love the paper money) have done for last several decades is to kick the can down the Road. One small thing everyone forgot – There is a dead-end somewhere down the road…And there is butcher sitting over there to receive those that are not prepared to meet him at the dead-end.

Those who have their ears on the ground are realizing what is going on…. Unfortunately Six-pack-Joe is sleeping (nothing unusual about it…that is why sheeple get slaughtered when they do). The only question is – how are you prepared to deal with what happens?

Gold and Silver are on Sale again. We should welcome the discounted prices.

Here is how the things are doing these days? Any takers for collapse yet?

Images: Man sets himself on fire outside a Piraeus bank
A man pours a flammable liquid on his body to set himself on fire outside a Piraeus bank branch in Thessaloniki in northern Greece. The 55-year old man had entered the bank and asked for a renegotiation of his overdue loan payments on his home and business, according to police, which he could not pay, but was refused by the bank

What Happens When Nation Goes Bankrupt
When an entire nation goes bust, the pain is felt much deeper: the most basic systems and institutions that people have come to depend on simply disappear. Argentina’s millennial debt crisis is a great example of this… suddenly the power failed, the police stopped working, the gas stations closed, the grocery stores ran out of food, the retirement checks stopped coming, and the banks went under (taking people’s life savings with them). European leaders (with Chinese help) can postpone the endgame for a short time, but they’re really just taking an umbrella into a hurricane. It would be foolish to not expect a Greek default, and it would be even more foolish to not expect significant consequences. The only question is– how are you prepared to deal with what happens?

We’re All Greece – And On Fire
It’s not really very complicated; try using your credit card to maintain a $173,000 lifestyle when you only make $100,000 and see for how long you’re able to do it.  It’s inherently a pyramid scheme and inherently must, at some point, end.  It must end because eventually you run out of ability to sustain it – you run out of suckers and the pyramid collapses. This always happens because it mathematically must happen. When debt grows faster than output on a compound basis the two curves inevitably run away from one another and must always result in a collapse. This is not a political issue, it is not a left or right issue, it is a function of simple mathematics. This is the truth whether you wish to hear it or not.  Whether you wish to face it or not. And until we as a nation and the world as a whole stop playing pyramid games with debt there will be no actual and functional recovery.

Once upon a Time!
Gold is in the process of changing functions in the global economy. And in this transition, “the most visible transformation since it was first used as money,” it will plateau at a new, mind-blowing level before it resumes its proper function. This is happening. It must happen, because bullion bank paper promises cannot function like gold. So be careful what kind of gold you’re holding (physical is what you want), or you might just miss out on the revaluation of the millennium. Gaining a deeper understanding of what is happening, as you can here, here and here, should help those of you that worry about buying gold now because a few analysts, who have no idea what they’re talking about, keep saying this is the top. This is the “top range” prediction I made two years ago

Euro Collapse Could Lead to War
A collapse of Europe’s monetary union would likely lead to a breakup of the European Union as a whole, posing significant risks to the region and even raising the possibility of war in the long term, Poland’s Finance Minister told CNBC late on Thursday

‘World in danger zone’
Robert Zoellick, the World Bank president, warned “the world is in a danger zone” as the economic crisis in the United States, Europe and Japan threatened to ravage the rest of the global economy. “Europe, Japan, and the United States must act to address their big economic problems before they become bigger problems for the rest of the world.”

New York Mayor predicts riots in the streets if…
“That’s what happened in Cairo. That’s what happened in Madrid. You don’t want those kinds of riots here.”  Mayor Bloomberg warned Friday there would be riots in the streets if Washington doesn’t get serious about generating jobs…

Billboard Signals of Collapse
The billboard messages are dire, ugly, dreadful, dangerous, and full of destruction, typical of systemic failure. Too bad the Keynesian textbooks do not have a chapter on banking system insolvency, or one quarter of the households living in negative equity, or central bank toxic paper pits, or global currency war, or confiscation of tyrant accounts. The ineffective monetary & fiscal policy has ushered in the nightmarish systemic failure. That is what is occurring.

Recession: America’s lost generation..
In record-setting numbers, young adults struggling to find work are shunning long-distance moves to live with Mom and Dad, delaying marriage and buying fewer homes, often raising kids out of wedlock. They suffer from the highest unemployment since World War II and risk living in poverty more than others – nearly 1 in 5…

…Society Is Breaking Down
“Things are going to get much worse,” Celente says. “Society is breaking down on every level: socially, economically, politically and it’s not just the U.S. It’s worldwide.”…Currency wars have already started he said…Severe economic contraction, followed by currency wars, trade wars and, ultimately, armed conflict…

The 13 Signs of a Societal Collapse
I am terrified for our future, and frankly, fear that many of our dear friends and family members will fall victim to the dismemberment of our economic system and be caught in the crossfires of economic unrest, poverty and third-world country conditions. Like it or not, we are in an economic depression and a large percentage of the population is completely ill-equipped to survive it.

China and the Doomsday Scenario for Europe
What was once considered a worst-case scenario is quickly becoming a real, if not a likely possibility: A European country—most likely Greece, but maybe Italy or Spain—is going to default in the very near future. Officials in the United States are in an early state of panic….So who remains to play savior to the United States and Europe? Look eastward….China, the Last Man Standing…China has yet to offer assistance to the U.S., its rival for global economic dominance. But in a doomsday scenario, the United States might not have any choice but China.

Europe Is In State Of Financial Collapse he is very clear on where he sees risk and return potential in the world

Get ready for the next crash
European leaders may stave off a banking crisis for a few more weeks. Markets may even stage a relief rally as Greek debt worries abate. But make no mistake — a deeper crisis in foreign banks is coming.

Economic Collapse Approaches – Preppers Shall Inherit the Earth
If you are not seeing what is emerging you are simply not paying attention…It has been very clear to those who are paying attention that the path for humanity is on is headed for cliff

‘Only a Matter of Time’ Before Greek Default
Market forces are about to do what governments will not do – i.e., withhold credit from the troubled countries and banks all over Europe. The situation is about to collapse.”

“The Great Crash Ahead”:
The recent gyrations in global stock markets are just the beginning, says U.S.-based economist and author of upcoming book “The Great Crash Ahead”, who believes the Dow will fall below 10,000 in the near term before crashing to around 3,000 in 2013.

Americans going to Canada to find work
Usually, you hear stories of people fleeing to America, not the other way around. But the jittery state of the U.S. economy is driving an increasing number of its citizens to seek better prospects north of the border. Americans are the latest economic refugees, and they’re heading to Canada

POVERTY RECORD: 46.2 million Americans now poor…
The number of Americans living below the poverty line rose to a record 46 million last year. The number of poor Americans in 2010 was the largest in the 52 years that the Census Bureau has been publishing poverty estimates. The economic deterioration depicted by the figures is likely to have continued into 2011 as economic growth diminished, unemployment remained stuck above 9 percent and fears grew of a possible double-dip recession.

22 percent of American children in poverty…More than a fifth of Americans under the age of 18 lived in poverty last year

Crime Scene in America – Its Economy Stupid!

VIDEO: Teen mob attacks clerk, robs convenience store…

Entire family arrested for shoplifting at SEARS… A family of four –including two teenage sisters — were arrested over the weekend after they attempted to steal about $550 worth of shoes and cologne from a Sears store in Burbank, police said.

Men accused of stealing $60,000 in toilet paper, plastic utensils… Will County warehouse worker partnered with an accused murderer to rip off $60,000 in toilet paper and plastic utensils from his employer.

Woman Steals 2,000 Books From Library, Planned To Resell Them… Police say a Southland woman suspected of stealing thousands of public library books and DVDs was likely going to hold a book sale of her own

67 people shot in NYC over Holiday Weekend…  New York on Tuesday show that at least 67 people were shot between 12 a.m. Friday and 11:59 p.m. Monday. That includes nine on Friday, 10 on Saturday, 33 on Sunday and 15 on Monday.

Gov’t Battles Copper Thieves… The US Department of Energy and its Oak Ridge National Laboratory have built a security system that is aimed at thwarting at least some of the copper thefts that plague utilities and other large facilities.

Power lines in Indiana stripped…. A utility company says thieves have climbed utility poles and cut live electrical lines in order to steal hundreds of pounds of copper in a northwestern Indiana neigorhood.

Facing foreclosure, dad abandons son: A father accused of abandoning his 11-year-old son because his home was in foreclosure has been arrested in a small coastal town in central California

Thieves Steal Batteries From 32 School Buses: Someone broke into 32 buses at the Miami-Dade County Public Schools’ bus depot, stealing the batteries from the vehicles

Semi tractor-trailer with 21 tons of meat stolen… Iowa Police said thieves stole more than 42,000 pounds of meat when they took off with a loaded semi tractor-trailer last weekend

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Why do I write all this? I just want to make, all those interested, aware about where we as a society are heading, so that they can protect their future generations to a possible extent. It is going to be very very ugly before it will be better. In my view, our children's world is going to be entirely different than what we have seen. We have already consumed the resources of our future generations. What we have left for them is an empty bag and the consequences of our actions (without the knowledge that it is us who are responsible for the mess our children will be in) ...while I write this I also wish that I am absolutely wrong...and our future generations will live in a better world than ours. DISCLAIMER: All the content of my blogs is presented for educational and/or informational purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it intended to be taken as such.


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16 Responses to "What Happens When Nations Go Bankrupt: We’re All Greece"

  1. Burr Glarr says:

    Thank you for encouraging all Hindoos to buy gold and hoard it. I am waiting for the big collapse when for $150 for a SAturday Night Special and $3 for a ski mask and $0.10 for a plastic garbage bag, I can just walk into these Hindoos’ palatial homes and come out rich.

    GREAT strategy to protect myself through the Depression. Thanks!

  2. Sam says:

    Mr Burr Glarr – And after you have done all the hard work and step into the street, you will find someone waiting to take your loot and clothes too considering the total collapse Mr Joshi is predicting. How does Bare Glarr sound?

    My suggestion is that you postpone retirement.

  3. Bare Glarr says:

    Sure! Why retire when there are so many Hindoos hoarding gold still left. I wonder why Mr. Joshi does not advise people to buy only gold, which one cannot eat, instead of cows, which one can eat or will at least provide milk until they are eaten. Or chickens, which can run around when their heads are cut off much like Mr. Joshi is advising Hindoos to do.

  4. Sam says:

    he wants to make things easy for people like you. Have you any idea how much a cow weights – difficult to carry off? Also when you are retired, you have to reduce your exposure to risks. Risks like getting shot, lathi on the head, dog bite on the backside is not appropriate risks for a retired person.

    Seriously, Mr Joshi is making the point that we might face a disorderly collapse of civilization. In this case the last refuge for hoarding wealth is gold and to a slightly lesser extent silver. While you cannot eat them, they will be valuable for restoration of society after the collapse. The downside is that it will make you a target for legions of burr glarr’s who will make a business of robbing gold from those who possess it. The danger is real since it has happened before as the example of the Roman empire and Minoan civilization shows. I disagree with him in that a financial crisis is not sufficient to make civilization to collapse. A confluence of events like climate change, war, pandemic etc is more likely to cause a collapse.

  5. Burr Glarr says:

    I agree with the two sides, and may I point out (seriously now) that desis are being targeted increasingly in US because they are perceived to be wearing/carrying gold? I may not be out there with the Saturday Night Special, but this threat of violence is a real concern and desis esp. women should heed it and think about it carefully. Panic buying of gold has severe risks, and not just to the value of the gold. There is a good discussion for the past 5 years on the root causes and implications of the economic upheaval, at bharat.rakshak.com in the Economics forum (Not advertising it, just commenting). I eventually started paying heed to them, and have much for which to thank them in taking at least belated measures in both January 2008 and recently. There is already a 25 to 30 percent drop in most mutual funds in the US in the past 2 months, and the basic issue is that there are no new industries or real wealth-generation, while there is no shortage of scams. Do I have a prescription better than Shri Joshi’s? No. Do I understand what to do, from Shri Joshi’s prescriptions? No, because I am not buying gold. It may be that Indian rupee has a much brighter future than US dollar despite short-term appearances, but that requires die-hard optimism about India’s governments. When I read the other articles posted here, that becomes hard. Also, while I hold no brief for Europe which is basically full of colonialist drunkards, I do believe in the American capacity for radical innovation and productivity, and coherent response to real threats. Americans just have to agree, and get a good leader. I am sure one will arise, and not because they are iklauta baccha/beti of present President, Party President etc. 236 years of survival and success should deserve some faith and trust, hey?
    “Praise the Lord, But Keep the Powder Dry!” is the slogan of the American Revolution. The powder is not necessarily cocaine. Please keep the articles coming, Shri Joshi.

  6. M Joshi says:

    Hello Burr Glarr,

    You have raised several valid points in this comment. If I address all of them, my response will be bigger than this article itself (and seriously I would like to write one to address your points sometime in the future..but no promises yet).

    Here is the shortest response:

    What I see happening sometime in the near future (“near” is relative term, it may be 5 years or may be 20 years I don’t know) is that the money as we know will die (I know it is cryptic statement and may not make sense to many people.) But unfortunate fact is the money that we see as EURO, Yen, Dollar, Rupees, and all types of currencies paper currencies WILL eventually die because they are all FIAT currencies. What I mean by die is they will reach to their intrinsic value of “0”. They will be worth less than the toilet paper. There will be many currency wars and several events before the end comes. BUT THE CURRENT MONITORY SYSTEM WILL END..IT WILL HAVE TO END THERE IS NO OTHER CHOICE. The impact of this event will be much bigger than any major event that has happened to the history of man for at least two thousand years. After this death comes, there will be a new monetary system that will come into existence. And the way I see it, the new system will be backed by the Gold and Silver (because there are no other viable options.) Gold / Silver has been the store of value for 5,000 years and it will continue to be for another 5,000 years.

    Those holding Gold/silver and any tangible assets (including Cows and chickens) will be the least affected by the eventual death of the monitory system. I am fully aware of the risks of owning God/Silver. I am more worried with the USA govt confiscating citizens Gold before the Burglars will try to take it (This has happened in the past 1933 – USA took citizen’s gold overnight and owning Gold was a crime for several decades thereafter in USA – It may happen again)

    Having said the above, in the eventual death and rebirth of the Monitory system, Gold and silver holders would have preserved the maximum value of their wealth (would have taken the least loss I would say) Those holding other tangible assets will also be the least affected in the eventual end game..but percentage wise they will still be more affected than those holding gold/silver (if they can still hold it thru the end)

    ..But there is a downside too…If the path to the end game goes through depressions, then all assets will get punished – Gold, silver, real estate, cows, chickens and all tangible assets. They all will go down anything between 30% to 50% or even more.

    ..So do I really know how the path to the end goes? No…not at all. How much am I confident about the end game – 100%.

    The only possibility we shall avert the death of the system is – if ever all the politicians and Central banks of the world become responsible and Greed-less overnight, take depression for 10 years, and behave monetarily responsibly all the times…I pray it happens, but chances of this happening? 0%…Hence my confidence of the eventual collapse and rebirth = 100%

    …I already wrote too long a response, time to stop.

    Anyway, I shall certainly try to address many things in the future.

    Thanks
    M Joshi

  7. Sam says:

    Mr Joshi and Burr Glarr

    The American economy was built on the unyielding innovative spirit and high productivity of her people. This is something that no financial crisis can extinguish. America’s ascendancy is different from that of the British and Roman and Arab empires which were built on the plunder of the wealth and labor of other nations and was not sustainable. Mr Burr Glarr has said this already in different words though.

    There is a flaw in modern Keynesian economics in that government spending is seen as the way to stimulate the economy. However we are seeing clearly in Greece right now while government spending is inelastic revenues are very elastic. Once government has reached a certain level of spending, it is impossible to reduce the spending to the governments revenue without there being riots in the streets. The result is the bankruptcy of the nation is inevitable. We need to dump Keynesian economics now.

    Mr Joshi – you are making the mistake of thinking that gold and silver currency cannot be debased. Gold kept in the form of bullion is actually out of circulation and does not contribute to economic activity. To have utility, gold and silver has to be in the form of coins. In the closing years of the Roman Empire the amount of gold in “gold” coins was reduced progressively until faith was lost in the coins and the currency became useless. Therefore gold and silver currency is at the mercy of the government too (but still better than fiat money).

    And yes – buying gold in a panic is risky. When Mr Joshi wrote his article, I think gold was at $1900 an an ounce and right now it is around $1600 an ounce. Some predictions for the price is $800 an ounce.

  8. Burr Glarr says:

    Very good. There is a great international pressure especially in the Mid East / Islamic countries, Russia and China to replace USD with some other currency. However no one can agree on the replacement, so it cannot be one single currency.

    On the other hand, the internet and instantaneous global market information, enable a real-time determination of barter value. In other words, think of EVERYTHING being a stock with its value set by the global market. In this system, the Maoist sitting in rural Chattisgarh can trade with the pirate in Somalia for the value of an AK47 and establish the value instantly, as delivered in Beijing or Reykjavik. Question is, there is a need for some unit of value. You can call it Pakis or Sonias or Palins or Bamas whatever, but there needs to be a unit. THAT will be the global “currency”. If you want to hold Indian rupees, you can instantly value how many rupees will buy 1.37 Pakis, for instance. This is the Purchasing Power Parity system.

    This system is not far away, it may be almost there already. In this system, there can be wild fluctuations in the prices of the present currencies, but eventually it will stabilize to a global equilibrium. In my opinion, if countries like India survive the violent upheavals initially and don’t sell everything to the pirates, then Indians will be modestly wealthy, with high PPP. But so will Americans because of America’s vast lands and other natural resources, and because American workers are actually quite productive and strong. Will national borders survive this upheaval? I think the US will survive, at least because of geographical insulation from Pakistan and Somalia. It will require a good military and tough leadership to see a nation through this.

    In this system I am not very bullish on gold because the person with the food will simply not sell to the person with the gold until they reach an agreeable barter value. OK, got to go out and learn how to dig holes better, because that will be a useful skill, more than typing on a keyboard.

  9. Burr Glarr says:

    To add to that, don’t you think that this whole business of “nations going bankrupt” is utterly unfair and manipulated? The worker in Greece and in India works hard, within the constraints of opportunities, ability and supervision. It is not the worker that borrows irresponsibly. Why is it then the worker that suffers? It is never the bankers or diplomats who pay. They just jet around first class, stay in $2000 per night hotel suites and try to rape maids and get drunk, and live in mansions even when arrested for crimes. And even when signing that “cutback” deal, these leeches get their $100M bonuses and Fees. How can this be a fair system? So the real problem is that vast amounts of money are controlled by cynically corrupt germs.

    The only solution I see is where the distributed world market establishes equilibrium. How to regulate it to keep out the mass manipulators is beyond my ability to figure right now.

    Think of the Asian Tiger Economies of the early 1990s and how their currencies were utterly raided and raped by these European and American bankers. That was sheer computerized greed and loot. Korean women sold their jewelry at low prices to save their nation.

    Now let Europe enjoy the boot up their musharrafs, it is just Karma. They need to figure out how to hang the real villains, the manipulators, starting with the executive suites of the World Bank, IMF, and a lot of big banks – and the entire Euro Parliament.

  10. Sam says:

    Firstly regarding a reserve currency – it is clear that a single currency like the dollar won’t do anymore since this currency also serves as a safe haven. You will be aware that markets are driven by extreme emotions like fear one one hand and greed on the other. Therefor the demand for this currency will fluctuate wildly and so will its value relative to you own currency. A currency is supposed to be a store of value – how can this value differ from day to day for no apparent reason except supply and demand. This is how the real economy (bread, haircuts, samoosas – tangible things) becomes separated from accumulated wealth. One idea that has been floated which I like is that we have an international currency which is made up of a basket of at least 12 currencies weighted appropriately – e.g. 8% dollar, 6% yen, 6% rupee, 8% yuan etc. This currency will be more stable and less susceptible to manipulation and its reserve value will have more confidence.

    Regarding nations going broke – the people are responsible not the bankers. People vote politicians into power because they promise all sorts of things for free. Nothing is for free – someone pays and right now they have been borrowing and spending on the people – the people must realise that only they can pay back the borrowed money. When we individuals borrow money, we make sure we are able to afford the installments from our salary. When governments borrow money they just have to make sure that they are able to borrow more money to service the interest on the money borrowed previously. This is not sustainable – and which is why public finances have collapsed from time to time. The Greek public servants were receiving 14th (yes 14th) cheques as a bonus from borrowed money – now they must pay back. Greek is the peoples fault – not the bankers.

    The collapse Mr Joshi has predicted, will apply to certain economies like Greece but not globally.

  11. Sam says:

    There is another disturbing trend. In the run up to the 1929 collapse, wealth became more and more concentrated in the hands of a smaller and smaller elite and the same thing has happened now. A free market needs more and more spending to continue to keep growing and if wealth is concentrated in the hands of a few the money effectively becomes sterilized and does not contribute to economic activity. How much of bread, wine and cars can someone consume. The productivity gains made in the USA in the last few decades have not been reflected in wages and salaries. Because the productivity gains were not reflected in salaries the government revenue from taxes on salaries has also lagged but government spending has not lagged. Obama is trying to address this with higher taxes on the rich and hope he succeeds but the solution will be to link salaries to productivity gains too – not sure how.

    If we all follow Mr Joshi’s advice and buy gold and silver then we will hasten collapse – it will become a self fulfulling prophecy. We need people to spend and not lock away wealth.

  12. M Joshi says:

    I have couple of responses to two recent comments here:

    1) Burr Glarr says: October 6, 2011 at 2:51 PM – “To add to that, don’t you think that this whole business of “nations going bankrupt” is utterly unfair and manipulated? The worker in Greece and in India works hard, within the constraints of opportunities, ability and supervision. It is not the worker that borrows irresponsibly. Why is it then the worker that suffers? “

    In one of my blogs I have clearly mentioned the following:
    “There is no such thing as an “unpaid” debt. Debt is paid either by the buyer or the seller. Unfortunately, in case of Governments it is always the buyer (people) that pays the debt in the end. Adams Smith warned in a book ‘Wealth of Nations’ in 1976 that no Govt has ever paid back its debt and stopped borrowing ever! This has been the course of public debt since the first default in 1788 BC (notice the two characters ‘BC’). Governments will continue to apply the only remedy they know to fix the financial problems, which is issuing debt that will never ever be repaid with normal money. Every Govt has defaulted in the history of the mankind. Why should it be different this time around?”

    Yes it is “utterly unfair and manipulated”…But that is the fact of the life – The debt WILL BE PAID BY THE CITIZENS (or people living in those countries). There is no other option. That is how it works – Period!!!

    “Why is it then the worker that suffers?” – Those who DO NOT WANT TO suffer (pay the debt of their countries) should get educated and protect themselves. No govt in the world will protect their people from the wrath of the FIAT money (DEBT).

    THIS IS EXACTLY THE MESSAGE OF ALL MY BLOGS. Protect yourself if you can else don’t expect govts or some one else to do it. It is not going to happen. Look at the history. We are standing at another cliff. Slaughter of the middle class is inevitable in my view (I wish I am wrong)


    Sam says: October 11, 2011 at 12:09 AM – “One idea that has been floated which I like is that we have an international currency which is made up of a basket of at least 12 currencies weighted appropriately – e.g. 8% dollar, 6% yen, 6% rupee, 8% yuan etc. This currency will be more stable and less susceptible to manipulation and its reserve value will have more confidence.”

    Yes, this will happen. A basket of currencies will be born after Dollar weakens substantially. But this solution will die too, under its own creation (FIAT MONEY). When this solution will fail then only would the final solution be born – The Gold standard.

    I am not saying gold standard will solver the problems of humanity and everything will be great. But Gold standard will be the birth of a new economic era after the collapse of the current PONZI scheme run by primarily the western civilization (and eastern too)…

    Thanks
    M.Joshi

  13. Sam says:

    Mr Joshi says “There is such thing as an unpaid debt”. This is a new concept to me and am still contemplating it. If a delinquent debtor does not pay his debt then the creditor extinguishes the debt as a write off against his assets. It is actually a transfer of wealth from the creditor to the debtor and Mr Joshi proposes that this is a settlement of the debt although not in the intended fashion. Every debt that is extinguished in this manner has to be matched by a write down of assets on the other side.This is how it works for public debt too. I note that the Greeks are demanding a haircut of 50% which is the same thing.

    For most people a return to the gold standard is unthinkable. All the gold ever mined can fit into a room which is 21 cubic meters. Gold will never be able to meet the demand for money. The government is also competing with its own citizens too money so who will take precedence. I don’t think is the ultimate store of value either although is has served us well in the past. If the collapse comes, what will be the intrinsic value gold. Gold’s ultimate intrinsic value is also 0. If at the very extreme we cannot say that one ounce of gold = 1600 loaves of bread then gold has an intrinsic value of 0. An apocalyptic collapse will lead to a wipe of large sections of the population in the cities. The real assets will be farms and seed banks and of course guns and ammunition. How will gold serve us in a city which has no food.

  14. M Joshi says:

    “Greeks are demanding a haircut of 50%” – That is what I mean the Debt is paid by the buyer in this case. When is write-off is done it is “paid”.. What I am saying is even beyond these technical/accounting terms. When someone (family, company or nation) goes bankrupt, the members of that entity (family members, employes or citizens) pay extremely high penalty for unpaid debt, the effects of which last several years. The future is about the payment of “Debt” taken by several countries by their citizens (those are our future generations, and most probably its us and our immediate future generation – Children/Grand Children)
    .
    “The real assets will be farms and seed banks and of course guns and ammunition. How will gold serve us in a city which has no food” – I agree Gold will be almost 0 that time. But in my views (I hope) we shall not see that kind of collapse. And even if it does you will have ample of opportunities where you can trade your Gold (at high price) with things that will become more valuable in the future (Farm, seeds, ammunition etc). I dont see Gold going to 0 in a straight line from here…It will reach a very very high value (in terms the currencies around) before it goes to 0 (if it does) I really don’t want to see us going thru this scenario.
    .
    My basic point is, First the currencies will go to worth-less value – then may be Gold too if we see a total collapse.
    .
    I certainly envision riots, civil unrest, hunger, food fights in many countries (including several western countries) but we shall not go into total collapse of the Currency, Monitory, Governmental, Civil and Social collapse at the same time…It is just a hope.

  15. Sam says:

    So when debt is extinguished by the seller or lender by means of a write down and if the the business or capital is wiped out in the process there is a human cost too. Thanks for pointing this out. If the Greek and Spanish experience is looked at carefully we see that the human cost actually starts being paid before the debt is so extinguished as the debtor takes drastic action to stave off default. In Greece we see the government slashing wages and laying off workers for this purpose and business are going bankrupt with loss of jobs and income. The shelters in Greece are full right now.

    I have heard one commentator say that Americas can pay off their debt next week. They can print 14 trillion dollars and hand them out their creditors. This will destroy the dollar an increase inflation but the debt would have been extinguished at face value. This however is just apocryphal.

    I also don’t see gold going to 0 in a straight line either. While gold has an ultimate intrinsic value of 0, I agree that peoples perception of gold as a store of value as a last resort will linger for a long time to come. If civilization collapses completely then it does not mean all knowledge will be lost. I agree that golds resilience as a store of value will still be remembered and it might well play a role in establishing civilization again or as it has done in the past be used to finance wars and more human misery. Human time on earth is short – i rather live through one of the good times in humans history that a bad one.

  16. M Joshi says:

    “we see that the human cost actually starts being paid before the debt is so extinguished” – The global economy and people are currently in this phase.
    .
    “I have heard one commentator say that Americas can pay off their debt next week” – There are ONLY two ways the DEBT can be paid
    .
    1) By hard default – that will bring deflation/depression (35% unemployment and all that for a decade) This is the better option of the two that can bring back the prosperity eventually.
    .
    2) Devaluing the currency – “print 14 trillion dollars and hand them out their creditors” – This WILL cause tremendous amount of INFLATION.
    .
    PEOPLE OF AMERICA AND MANY MORE COUNTRIES ARE GOING TO SUFFER WHICHEVER WAY THEY CHOOSE TO PAY THE DEBT. That is what I mean (under option #2) middle class will be slaughtered.

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