The Great Global Debt Prison

By Giordano Bruno

Neithercorp Press – 2/4/2011

Tense and terrible times inevitably summon an odd coupling of two very different and difficult human conditions; honesty, and brutality.
Certain painful truths are revealed, and often, a palpable fury erupts. Being that times today are particularly tense, and on the verge of
being spectacularly terrible, perhaps we should embrace both conditions in a constructive manner, and become brutally honest with our-
selves. This begins by admitting to that which most ails us. It begins by admitting how far we have fallen…

Our economy, our culture, our entire world, is built upon debt. No one ever asked us if that‟s how we wanted it, it is simply how the sys-
tem was designed when we came into it. Many of us have lived our entire lives under the assumption that debt is a necessary function
of daily commerce and a valuable driver of successful society. Most households in America operate at a steep loss, trapped in con-
stantly building cycles of liability and interest. There are even widely held schools of economic thought that are centered completely on
the production and utilization of nothing but debt. Only recently have many people begun to ask themselves what the tangible benefits
are (if any) in being dependent on debt based finance.

After careful examination, it becomes evident that debt does not fuel economy, it suffocates it. It does not nurture growth, it stunts and
poisons it. Extreme debt is not a fundamental organ in a body of commerce; it is an aberration, a spreading cancer which disrupts the
circulation of healthy trade. Debt is, in large part, unnecessary.

Of course, debt can be very useful if you are the controller or determining overseer of a system, especially if you wish to centralize and
maintain power over that system. The tactical wielding of debt has been used by elites for centuries as a means to imprison the masses,
or to create an atmosphere of endless dependency. Let‟s take a look at what debt really is, and how it is being used against the average
American today…

Understanding Debt

The Charles Dickens classic „Little Dorrit‟ is commonly misinterpreted as a “love story”, however, the primary character in the book is not
Little Dorrit, or the kindly Arthur Clennam, but the debt system of Britain itself, and its effects on every social class from the street beg-
gar to the elitist socialite. Dickens despised the idea of debt and debtors prisons, being that his father was thrown into one for a good
portion of his life, forcing young Charles to work just to support his parents. Dickens understood well the evil intent behind the debt sys-
tem, and railed against it often in his writings.

One figure in „Little Dorrit‟ which fascinated me was the character of Mr. Merdle, a national banking superstar who dominates the invest-
ment world with the help of British treasury officials and various political deviants. Merdle is referred to by merchant circles as “the man
of the age”, a financial marvel who seems to make fortunes in every endeavor he touches. Little does anyone realize that Merdle is a
fraud, a Ponzi scheme artist who takes money from unwary speculators and sinks it into increasingly more tenuous investments. In or-
der to continue hiding the fact that all his financial ventures are ending in ruin, he lures more and more depositors to pay off previous
debts. The problem is that Merdle is creating debt to chase debt. Eventually, his insolvency, and that of all those who trusted him, will
catch up and overtake the lie he has carefully projected. All economic instability is invariably revealed, no matter how expertly it is hid-
den.

Mr. Merdle, in my mind, is an almost perfect literary representation of today‟s private Federal Reserve and the global banking syndicates
of JP Morgan, Goldman Sachs, Citigroup, etc. The Federal Reserve, with the help of politicians on both sides of the aisle, created a se-
ries of illusory incentives (through interest rate cuts) which allowed banks to begin lending almost unlimited fiat at rock bottom prices.
America was awash in credit, to the point that it was nearly impossible for the average person to avoid the temptation of borrowing.
What we didn‟t understand then, but are beginning to grasp now, is that credit derived from fiat is not “capital”, it is NOT wealth. Credit is
the creation of an obligation, to be paid at a later date, if it is paid at all, and because there are no rules to tie the debt to any legitimate
collateral (at least for banks), there is nothing to back the obligation if it falters. Therefore, fiat induced credit is not the creation of wealth
(as Keynesians seem to believe), but the destruction of wealth!
The Consequences Of Debt

How has debt based economics served us so far?

The credit card debt of the average American household ranges from $8000 to $15,000. Total household debt including mortgage and
home equity loans has hit an average of 136% of annual household income:

http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php

http://blogs.forbes.com/moneybuilder/2010/06/24/one-big-difference-between-chinese-and-american-households-debt/

Approximately 80% of mortgage loans issued to subprime borrowers over the past decade were Adjustable Rate Mortgages (ARM),
meaning 80% of mortgages in the U.S. have reset or are ready to reset at much higher interest rates. There were approximately 1.4 mil-
lion bankruptcy filings in 2009, and 1.5 million in 2010. One in every 45 homes in America received a foreclosure filing in 2010:

http://www.marketwatch.com/story/top-10-cities-where-foreclosure-rates-are-highest-2011-01-27

http://www.uscourts.gov/Statistics/BankruptcyStatistics.aspx

Keep in mind that in 2005, new government regulations were implemented making filing for bankruptcy much more difficult. In 2006, fil-
ings collapsed. Now, despite stringent obstacles, filings are up again over 100%.

The “official” national debt now stands at over $14 trillion, which is around 100% of U.S. GDP (with entitlement programs like social se-
curity included, this number is probably closer to 400% of GDP) . The 100% mark is often cited as the breaking point for most countries
struggling to sustain liabilities. Greece‟s national debt stood at 108% – 113% of GDP when it collapsed into austerity. From 2004, to
2010 (a span of only six years) our national debt has doubled. To put this in perspective, it took the U.S. over 200 years to reach its first
trillion dollars of debt. Now, we are looking at the accumulation of at least a trillion every year. This is unsustainable.

The much talked about debt ceiling has been raised six times in the past three years. This frequency is unprecedented. International rat-
ings agencies are now openly suggesting an end to America‟s AAA credit rating:
http://www.bloomberg.com/news/2011-01-28/moody-s-says-time-shortens-for-u-s-rating-outlook-as-s-p-downgrades-japan.html

A credit rating downgrade would be devastating to what little foreign interest is left in the U.S. Treasury bond investment.

On the local front, cities and states are on the verge of folding due to the evaporation of municipal bond markets. Cities depend greatly
on two sources of revenue in order to continue operations; property taxes, and municipal investment. Property taxes, obviously, are dis-
appearing as property values continue to spiral downwards. This leaves only municipals, which have also unfortunately fallen off the
map:

Wall Street analyst, Meredith Witney, recently stated in an interview with 60 Minutes that she believed 50 to 100 American cities would
default in the midst of a municipal crisis in 2011. She was promptly lambasted by the rest of the MSM for her prediction. In my opinion,
she was rather minimalist in her estimates, especially if the Federal Reserve does not commit to another round of quantitative easing
(QE3) for the states (Bernanke denies this policy would be enacted by the Fed, though, which means there is a good chance it will be).

To summarize, the U.S. is swimming in debt. Absolutely nothing has been changed for the better in terms of wealth destruction and li-
abilities since the credit crisis began, and the situation only looks more precarious with each passing quarter.

Where Is The Debt Roller Coaster Taking Us?

What is the most likely outcome of the conditions described above? The vital factor will be the continued Federal Reserve policy of fiat
bailouts as a “counterbalance” to the evolving debt crisis.

As is clearly explored in the Dickens novel we discussed earlier, staving off the effects of debt by creating more debt is a temporary so-
lution that only leads to greater calamity down the road. Anyone who believes that fiat inflation actually “cancels out” debt instability is
going to find themselves sorely disappointed. At bottom, government created stimulus is not a solution to corporate engineered debt
burdens, but a reallocation of debt away from banks and into the laps of the American taxpayer. The Federal Reserve and our own
Treasury have not paid off anything. They merely shifted the responsibility of payment away from the banks that created the problem,
and handed that responsibility to us. On top of this, they have also set the dollar up for a crushing blow of devaluation. Here is where the
prison bars enclose…

If our historic debt is not being diminished, but only moved around while it expands, then this means that eventually our credit worthi-
ness will come into question. In fact, it already has. Foreign investment in long term Treasuries has dwindled. Our own central bank is
now the largest holder of U.S. debt, surpassing even China (Note: this news has so far been ignored by almost all mainstream outlets):

http://www.ft.com/cms/s/120372fc-2e48-…

So, the question of debt default turns from theoretical to quite imperative. If the Federal Reserve continues buying our debt with fiat, it
means that the effects of the debt will only be delayed, the dollar will be dropped as the world reserve currency, and hyperinflation is a
certainty. If they do not continue buying, then our government defaults, the country‟s financial infrastructure ceases to exist, the dollar
loses its world reserve status, and hyperinflation is a certainty. The banking elites haven‟t just erected a prison, they‟ve tossed us in Al-
catraz!

The battle over yet another increase of the debt ceiling has obscured the fact that the debt has already done all the damage it needs to
do. Freezing the ceiling in place becomes a battle of principle, and an important one, but it would in no way stop the dysfunction and
chaos to come. At best, it might shorten the duration of the disaster by a few years. The important thing to remember is that government
intervention will only incur greater loss. There is no easy way out, no magic shortcut, no last minute brilliant idea that will wrap up this
mess. Years of hard work, determination, honesty, and sacrifice are ahead of us.

Inflation will be the buzzword of 2011. Endless debt facilitates endless Keynesian liquidity. Expect to see commodities double once
again this year.

Household debt will probably level off through 2011, as more Americans abandon their credit habits and make more concerted efforts to
save. In 2009, Visa lost 11% of its credit use, while MasterCard lost 22%. Over 8 million consumers have stopped using credit cards al-
together since the end of 2009:
http://abcnews.go.com/Business/holiday-shopping-americans-cut-back-credit-card/story?id=12367547

Bank lending is still tight as creditors raise the requirements necessary to receive FHA (Federal Housing Administration) mortgages:

http://www.bloomberg.com/news/2010-11-17/home-ownership-gets-harder-for-americans-as-lenders-restrict-fha-mortgages.html

Will credit use and debt based consumption ever return to levels similar to 2006? Not a chance. One might predict then that savings will
rise dramatically as credit use falls, but this too is unlikely. Why? Because over the next year Americans will be spending far more on
essential goods due to inflation than they ever have before. Whatever savings they would have accrued will be eaten up by the relent-
less spike in commodity prices. The term used for the combination of chronic debt, low job growth, and burgeoning inflation, is
“stagflation”. I honestly can‟t think of a worse situation than being subject to exploding costs in light of a dilapidated standard of living. As
Dickens points out plainly in „Little Dorrit‟, how can a man be expected to settle his obligations when he is imprisoned for them?

Breaking The Cycle In The Midst Of Global Strife

Why after thirty years under the despotic rule of the Hosni Mubarak regime did the Egyptian people suddenly decide to revolt? Why
now? The MSM will field a number of political tales, but the key to most popular uprisings, especially in the Middle East, has been the
lack of necessities. The last time Egypt saw an uprising of this magnitude was during the Bread Riots of 1977, when the IMF terminated
state subsidies of basic foodstuffs. Is it any wonder that turmoil has developed so quickly in the region as grain prices double? This is
the devastating power of debt, and the so called “solutions” which merely perpetuate debt.

Tunisia, Egypt, and Yemen, are only the beginning. The sting of inflation will be unbearable as austerity measures take hold in Europe,
and the potential for riots in Greece, Spain, Portugal, and Italy looms large. The most volatile environment on the planet to date, how-
ever, is the United States, which, as we have shown in previous articles, is being dismantled deliberately and viciously in preparation for
IMF regulation and centralization. Today, the IMF is stalking Egypt, ready to pounce as the nation goes mad. Tomorrow, it will be us. I
will be very surprised if we are not hearing about IMF intervention in the U.S. economy and the dollar by the end of this year, offering
more debt, and more unaccountable governance.

The secret to breaking the circle of debt is to adopt a policy of decentralization, and self sufficiency. To take back control of our local
commerce and to establish micro-economies with self contained methods of trade. Debt must be removed from the equation altogether,
and systems protected by flexibility and redundancy must be applied. Savings and meaningful production would have to take the place
of endless spending and outsourcing. The claustrophobic nurse-maid philosophies of globalism would have to be cast aside and re-
placed with goals of independence and self reliance. By cutting our dependency on the corrupt establishment, we sever its ability to feed
off of us. By building a better system, we make the faulty one obsolete. Whether or not we throw off the trappings of the debt machine is
entirely up to us.

Two very important steps are required; the realization that debt is not the only way, and, the realization that debt is the worst way. Pros-
perity is not achieved at the expense of the future. The society that finally takes this fact to heart will accomplish incredible things in-
deed…

You can contact Giordano Bruno at: giordano@neithercorp.us

SPECIAL NOTE TO NEITHERCORP READERS: Our Alternative Market Project which is being developed in tandem with Oathkeepers
will be officially announced in the the next two weeks. I also have been invited to speak at the very exciting ‘Save America Convention’
in Tampa, Florida in March. Keep your eyes out for our announcement, and an article on the details of the convention which should be
published shortly.