Assets vs.Debts

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Sonbeams's picture
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Joined: Jun 20 2008
Posts: 1
Assets vs.Debts

While it is true that assets fluctuate in price, (with volatility varying, depending upon the asset class), it is not exactly true that debts remain fixed, except in a nominal sense. If we accept that inflation reduces the purchasing power of "the dollar in your pocket", it also reduces the relative value of the debt you are carrying. This is why the current monetary system favours the borrower rather than the lender, the speculator rather than the saver, if manipulated correctly. It is no mystery that the volume of debt has increased exponentially since most people recognise this fact intuitively. If you can purchase an appreciating tangible asset like real estate with nothing down, using depreciating dollars to make your payments, the decision is a no brainer (literally). Of course the exercise is an illusion but the temptation is supported by media hype and is difficult to resist.
In a hyperinflationary environment, into which we appear to be heading, all debts will fall in value to approach zero while tangible fixed assets will become valuable only in a barter sense since most monetary exchanges will freeze up. This means that you may as well hold on to your house, if you can keep up the payments,especially if it is your primary dwelling. Pay off your debt in the future, when it has depreciated exponentially, with a single ounce of silver or gold. Intangible financial assets, stocks, bonds etc., having counter party risk will also fall in value to close to zero. Tangible moveable assets such as precious metals will assume enormous importance for the purpose of sustaining any economic activity whatsoever. In other words we shall enter upon a time of adjustment as we create, or implement, a new economic paradigm, such as that envisioned by the Austrian School of Economics. The alternative would be to move to global governance with the new paradigm being presented as a fait accompli by those who have engineered the current crisis. It would not surprise me to find that "they" have been accumulating gold and silver in vast amounts, as well as land and energy resources from debtor nations (including the United States,which is why you cannot access your oil reserves in Alaska), acquired over the past 75 years using their fiat monopoly money to buy them. They also have a model, courtesy of FDR, for the confiscation of all the gold and silver in the world. These tangible assets will be used as the collateral for the new world currency called the mondiale managed by a Planetary Financial Authority, created by merging the IMF and the BIS, and overseen by an Economic Security Council; just a wild guess, not a prophecy.

sczech's picture
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Joined: Apr 15 2008
Posts: 4
With regard to the post by
With regard to the post by Jeremiah and all those who worry about the coming crash: We have been in a crash since the early 1970's ever since the US defaulted on its gold obligation (Bretton Woods) under president Nixon. For those who remember, the US accumulated in the late 1960's large trade deficits (small in comparison to today's trade deficits). Under the Bretton Woods system, foreign creditors were entitled to exchange their Dollar balances into gold at the fixed rate of $35 per ounce of gold. Unfortunately, at that rate, the Dollar claims held by foreigners exceeded the US gold reserves. Hence the creative solution by Nixon to simply close the so called gold window in effect denying foreign creditors the right to exchange their Dollars into gold at that bargain rate. The most remarkable thing to learn about the default of the US under Nixon is the fact that the world did not object. Everybody went along with it. More recently, there were further escalations of the US defaulting on its Dollar obligations. The perhaps most spectacular was the attempt by China to buy a US oil company with their accumulated Dollars. That bid for a US oil company by a Chinese oil company was stopped by congress. The message is clear. The US will not allow the exchange of Dollar denominated claims against real tangible US assets whether gold or oil companies. Again, the really astonishing aspect of that story was that the world accepted that decision and did not complain. For that reason, I do not believe that the coming crash will mark the end of the Dollar. The Dollar will continue to exist for a very very long time. In fact, the trend since 1970 of steady devaluations of the Dollar against other currencies will continue. If you have doubts about that, please remember that the US is still among the top three exporting countries. We import a lot, but we also export a lot. That is the reason why the Dollar will continue to exist for a long time. Neither the US nor the rest of the world are seriously interested in the collapse of the US Dollar. It will not happen. After WWII, Japan devalued its currency (Yen) by 99%. Despite this catastrophic collapse of the value of the Yen, the Japanese did not abandon the Yen. The Japanese Yen today is still the same Yen used by Japan before WWII. There is no way that the Dollar is in danger of devaluing 99% in the near future. This gives me the confidence to assert that in 20 years, we will continue to pay our grocery bill with Dollars and not with silver or gold coins as some people suggest.

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