Monday, October 8, 2012

How much you can trust paper money ?

“$20 trillion of US debt, think about that for a moment.  US tax revenue is now around $2.3 trillion.  If you examine $20 trillion of debt, and factor in a dramatic increase in interest rates in coming years, as money is printed and inflation enters the picture, an interest rate of 12% is very likely. 

Take 12% of  $20 trillion and you get $2.4 trillion per year just in interest.  That figure is more than the current tax revenue of $2.3 trillion.  So the US will reach a point, in the not too distant future, where the total debt servicing will be equal to the total tax revenue.  That is of course unsustainable.

If you look at global debt, in the last ten years it is up from $80 trillion, to $200 trillion.  These are figures which are hard to comprehend.  Global debt has increased $120 trillion in just ten years.  So when you look at the so-called prosperity of the world, it is all based on debt.  So it is all an illusion.

Central bank balance sheets are also exploding.  They have increased 16%, compounded, per annum.  What are the central banks doing?  Just like the Fed, they are buying toxic debt which has zero value.  What are they doing to buy that?  They are printing worthless pieces of paper, they call it ‘money,’ and with that ‘money’ they are buying another worthless piece of paper which they call an ‘asset.’ 

So it is the most massive Ponzi scheme the world has ever seen, and this will clearly end in total disaster.  It will end with the implosion of debt and the implosion of assets.  But before that, we will have hyperinflation.  As governments continue to print, we will have hyperinflation.

Hyperinflation comes from a collapsing currency.  Take Iran, that is a good example.  Iran’s currency is now down 70%, and inflation is now estimated to be running at 50% per month.  This is what we will see all over the Western world in coming years.  I’m absolutely certain about that.”