Fraudulent debt … The only way out… - Posted by Linda jason
Posted by Linda jason on September 23, 2011 at 21:44:49:
We hold this to be self-evident: When Debt is Fraud, Debt
the Last and Only Remedy.
Today I present an important guest essay by long-time contributor
Yiamouyiannis, who suggests that when debt is essentially
then debt forgiveness is both the logical and the only remedy. In
missed his previous analyses on oftwominds.com, I list some of
previous essays at the end of the entry.
Finally serious economists are considering a position I have been
maintaining and writing about since the 2008 financial meltdown.
Whatever its name? erasure, repudiation, abolishment,
jubilee?debt forgiveness, will have to eventually emerge forefront in
global efforts to solve an ongoing systemic financial crisis.
?On a grand scale the only way to erase counterfeit money and
(counterfeit) assets of hundreds of trillions of dollars is to erase the
associated with those fake assets. (Let me underscore again, these
not ?toxic? assets, they are fake assets.)? Forgiveness in general,
forgiveness of debt in particular, stand as virtues if they free us up
acknowledge, address, and learn from our culpability, start anew,
create forward.? ( The Big Squeeze, Part 3: The Quiet Rebellion:
Disobedience, Local Markets, and Debt Erasure (January 29, 2011)
Debt forgiveness, therefore, accomplishes two important things. It
eliminates the increasing and outsized portion of productive
pay off unproductive obligations, and it clears the ground for new
opportunities, new thinking, invention, and entrepreneurialism. This
the ability to declare bankruptcy is so essential in the pursuit of both
happiness and innovation.
Currently we are mired in a ?new normal? and calls for ?austerity?
are nothing more than the delusional efforts of a status quo to avoid
consequences of its own error and fraud and to profit evermore. So
bedazzled by the false wealth created by debt multiplication and its
concomitant fantasy of ever-higher returns, this status quo
be stupidly amazed that people are not spending and that the
not picking up. But how could it be otherwise?
Productive wealth has been trapped in a web of parasitic theft,
counterfeiting, liability evasion, non-regulation, and prosecutorial
accountability. All the fundamental attributes of a functioning
economy have been warped to reward creative criminals. I spoke
extensively about this in my posts from 2008. ( Imaginary Worth,
of Debt: How Modern Finance Created Its Own Downfall (October
The unsustainable nature of debt
Two observations: 1) Fabricated/parasitic so-called ?wealth?
by diluting the value of productive wealth. 2) Debt/credit that cannot
paid back is never an asset and is always a hot-potato liability
be foisted to a greater fool to garner ?profit? and transaction fees):
?The models [modern debt are] based upon had no contact with
They assumed unlimited growth and ability to pay. When matched
the reality of people paying ten times their salary for mortgages that
actually added more money owed to their principal (i.e. with
amortization), required no money down, and set up ?balloon
large step-ups in payments after a few years) there is no possible
they could NOT default in a predictable span of time.? ( Part II: How
Credit Default Swap Scam Works (October 13, 2008)
Systemically, all debt that charges a percentage (?usury?) originates
delusion. Debt grows exponentially indefinitely, growth (income and
otherwise) cannot. This leads to a widening condition where the
productive ?growth? devoted to interest payments increase until
are entirely consumed. (The Elephant In The Room: Debt Grows
Exponentially, While Economies Only Grow In An S-Curve
Once this happens, stores of wealth (hard assets) begin to be
cannibalized to make up for the difference. You see this in Greece
sale of public assets to private companies, and in middle-class
where people are liquidating retirement accounts to pay for their
This problem is compounded by a private Federal Reserve that
money into circulation at interest, and then allows the multiplication
consumer debt-money liability through fractional reserve banking.
money in circulation today could pay only a small fraction of the
private and public debt. That fact alone is evidence of a kind of
fraud. ?If you just work hard enough, save, and make sensible
you can get out of debt? could only physically work for a bare
the population, given the money-to-debt ratio. The rest would have
simply default to clear the boards.
This is why debt forgiveness makes not only moral but rational,
mathematical sense. Finances require balancing to be coherent.
must be some way to redress systemic imbalance. One has to be
?zero the scales? to get an accurate weight of value and to re-
healthy value creation.
Voices in the debate
Some analysts are beginning to see the forest through the trees in
of debt forgiveness. Steve Keen, Australian economist and current
deflationist, and Michael Hudson, American economic contrarian
prescient essayist, are both using clear-sighted reality-based
analysis to debunk accounting games that obscure the untenable
situation and to call for debt forgiveness.
How can selling sovereign assets and imposing austerity on Greek
citizens (taking money out of their hands through higher taxes and
benefits) do anything other than hollow out value and contract the
economy in the face of a deep global recession? Michael Hudson: It
Greece?s debt needs to be written off.
?It seems unreasonable and unrealistic to expect that large sectors
New European population can be made subject to salary
throughout their lives, reducing them to a lifetime of debt peonage?
only way to resolve it is to negotiate a debt write-off?? ( The
European Debt Wars: EU Countries sinking into Depression
Hudson, Global Research, April 9, 2010)
( “[We?ll Have] a Never-Ending Depression Unless We Repudiate
Debt, Which Never Should Have Been Extended In The First Place”
Why isn?t ?quantitative easing? and flooding the U.S. economy with
money working to prime borrowing and lending? Steve Keen:
money is going into deleveraging in a time of overextension:
?Bernanke is throwing (a) trillion dollars into the system. Rather than
leading to ten trillion dollars of additional credit money, creating the
inflation people are expecting, that trillion dollars is all that goes in,
people deleveraging actually reduce their level of spending by more
a trillion dollars by trying to pay their debt down, and it cancels out
the government is trying to do? We need a 21st century jubilee.? (
Edge with . . . Steve Keen (Max Keiser, video)
Other well-known commentators are not seeing the debt forest at
their contentious debates over deflation and inflation, neither Rick
Ackerman nor Gonzalo Lira seem to be aware of the
fraudulent nature of present global debt-- including the 600 to 1,000
dollars of fabricated notional wealth represented by the derivatives
markets, fraudclosure, and a host of other sources.
Rick Ackerman: ??Ultimately, every penny of every debt must be paid
not by the borrower, then by the lender.? Inflationists and
implicitly agree on this point? and we differ only on the question of
borrower or lender, will take the hit.? (Let?s Think This Through
I posted a pithy response in the comment section:
?Both Rick and Gonzalo left out the obvious third way–debt
No? debt does not have to be paid by someone; it can be
especially debt created upon fraudulent and/or counterfeit-ridden
practice? (D)erivatives are not real wealth, and neither was the
climb in the values of housing resting in large part on those phony-
The only ?real wealth? here revolves around ability to produce real
needed goods (to allow us to survive), and the ability to create
that increases one?s quality of life (to promote our thriving). Precious
of the present global economy involves either one of these. Yeah, if
use FASB standards and Goldman Sachs accounting, we can
worthless junk is all really simply very rare, ?unique condition?
worth trillions of dollars.
I?ve got a better idea. Take our financial junk out of the global attic
boxes, put them out on the front lawn, and see if anyone wants to
few bucks for the various items, give away the leftovers to anyone
interested passing on the sidewalk, and recycle, donate, or dispose
rest. It?s a moving sale, and if our economy is going to get moving,
we ought to have one.? (Zeus Yiamouyiannis April 6, 2011 at 4:11
How it might play out
This subtle debt extortion creates a system of never-ending debt-
for a vast majority of the population. When this ?manageable?
aggravated by a desire to use hardship to extort ever greater assets
the overburdened at ever cheaper prices (what Naomi Klein calls
capitalism?), by open and unapologetic widespread fraud, and by
unjust offloading of risk and liability to taxpayers who had nothing to
with poor decisions of private banks, then the systemic abuse is
in the daily lives of citizens.
Debt creates scarcity, which stimulates fear, which drives manic
competition, which favors opportunism, collusion, and
power, which translates to abuse, which results in a collapse of
for the economic system. Overreach causes a breaking point, and
getting close to it. Will the response be warfare, taxpayer revolt,
upheaval, mass default, debt forgiveness, something other, some
combination? I have predicted pockets of violence would be mixed
some softer combination of taxpayer revolt, mass default, political
upheaval, and debt forgiveness, along with a return to community
exchange to meet basic needs. ( The Big Squeeze, Part 3: The
Rebellion: Civil Disobedience, Local Markets, and Debt Erasure
This possibility of epic reprisal may very well compel banks to come
table around debt forgiveness to avoid violent backlash and criminal
prosecution, even over preserving their gravy train companies. The
irony of these companies and their galloping greed is that they
victimizing each other by selling junk to each other and extracting
real value in salary and bonuses. Their assets rest on notional
when unmasked would drive each into immediate insolvency. They
simply been scam artists, producing little value and extracting
What might this look like? Looking at present trends and using the
useful framework of Kubler-Ross?s stages of grief, it might go
- Denial: Liquidate savings to pay for over-priced house and cost
- Anger and fear: Exhaust resources, experience want,
- Bargaining: Attempt to negotiate with bank through HAMP and
mechanisms to lower payments. Banks don 't bite and even have
incentives to foreclose.
- Depression: Lose/default on the house and move in with family or
- Find out life is better without being a debt slave and spend more
with community and the ones you love.
- Denial: Collect 144 billion in bonuses after financial collapse and
as not a single trading day loss arises for zombie TBTF banks
subsidized by governments.
- Anger: Express false righteousness, indignation, and hubris over
modest/toothless demands/regulations attempted to be placed on
governments. Exhibit sadistic zeal at being able to simply claim you
and liquidate properties they have no clear title to.
- Bargaining: Experience dawning awareness that may have just
your own gooses as strategic defaults skyrocket, populist demands
prosecute fraudclosure gain traction, and quantitative easing ad
dwindles and fails to keep stock prices artificially aloft. Improvise
attempts to “be reasonable” and actually negotiate, once the asset
money flow well runs dry.
- Depression: Contemplate and realize possible bankruptcy by big
Retreat to the Hamptons to hire criminal defense lawyers,
empty life, and shoulder the abuse of media and contempt of a
- Acceptance: Trying to regain “good guy” status and avoid
prosecution by agreeing to be part of debt forgiveness.
Once defaults happen in increasing numbers and certain asset
plunge (i.e. real estate), what will initially look like a bonanza for
parasites could easily get out of hand, with people either unable or
unwilling to buy inventory even at greatly reduced prices. Profits
tank at banks, liabilities would skyrocket even with most of it
government guarantee. Because no one plays the game anymore,
could go under as well, as people rise to vote out bank-friendly
and simply refuse to pay. This unraveling could easily force
the notional value of derivatives in banks as worthless, meaning
as bankrupt as the people they exploited. At this point, there will be
common desire and need to simply “forgive” the debts and try to
some way to distribute these empty homes.
Debt forgiveness simply calls out either the inherent systemic
make good on debts or the recognition that debt was produced
fraudulent means. In the present situation, both conditions obtain.
has likely been no point in world history where debt forgiveness has
so comprehensively merited. The only speculation from my point
world-wide global feudalism and eternal debt slavery) is whether we
initiate such forgiveness or be forced into it.