Debt Forgiveness

[Image credit: (courtesy Google Images)]

If asked why I write and publish articles, most people would probably guess that I want to “teach” whatever it is that I know (or think I know).

They’d be wrong.

I don’t write to teach, I write to learn

Something interesting crosses my mind.  I’m drawn (I think by our Father YHWH ha Elohiym) to write about it.  As I do, word-by-word and phrase-by-phrase, I often find new insight(s) that I never imagined before I started writing the article.  Thus, I learn from writing. 

Learning excites me.  Writing is exciting.

This is not to say that everything I “learn” from writing is true.  But much of what I learn is interesting (at least to me) and new (at least to me).

I don’t publish articles in order to teach.  I publish to share what I’ve most recently learned.

The following article is an example of the writing-is-learning process.  I started out to write a 1,200 word article.  I ended with nearly 4,200 words.  The extra 3,200 words were necessary for me to learn some lessons and insights that I found fascinating.

I hope you’ll also find the lessons I learned to be interesting and, to some degree, true.

The Cypriot financial crisis occurred between A.D. 2012 and A.D. 2013.   It was marked by bank closings and the invention of “bail-ins” where bank customer deposits were seized to support the banks. Conspiracy theorists warned that the Cyprus debt crisis could trigger a global financial collapse.  That debt crisis seemed pretty serious at the time.

However, Cyprus failed to cause a global financial meltdown and it’s largely disappeared from the news over the past two years.  Based on this absence of news, you might’ve thought that the Cyprus debt crisis had been solved and forgotten.

But, no—the French news agency (“Agence France-Presse”; AFP) recently published “Bad loans could sink Cyprus recovery”.  According to that article the Cyprus debt crisis is alive and well:

“Cyprus is making progress on its bailout reform commitments but bad bank loans could derail a fledgling recovery, international lenders said on Monday.”

Ohh, goody.  Cyprus is having a “recovery”!—just like we are, here in the US!  But the Cypriot recovery might be derailed by “bad bank loans”—debts that can’t be repaid.

 “Following a review of the EU member’s economy by the ‘troika’ of international lenders [the European Commission, European Central Bank and International Monetary Fund], warned that bailed-out Cyprus still had obstacles in its way.

“There is tentative evidence that the slow pace of debt restructuring is picking up . . . .”

 

Q:  What is “tentative evidence”?

A:  An absence of evidence?  Imaginary evidence?  Prima facie evidence?  Evidence that has not yet been admitted into a court?  No evidence at all?

 

Q:  What is “debt restructuring”?

A:  It’s an agreement by creditors (that can be reached without an official bankruptcy proceeding) to cancel/forgive some or all of a debtors’ debt.  For example, if Cyprus owed $50 billion, seeing that it’s broke and can’t pay the full amount, its creditors might agree to “restructure” or “forgive” $20 billion and leave a remaining debt due of $30 billion.

 

Q:  Given the two previous definitions of “tentative evidence” and “debt restructuring,” what is the meaning of the sentence “There is tentative evidence that the slow pace of debt restructuring is picking up”?

A:  It means that so far, there’s virtually no evidence that “debt restructuring” (debt forgiveness) has taken place.  Cyprus is being held liable for the full, possibly unpayable, debt.

 

Q: Why is “debt restructuring” (cancellation of existing debt) going so slowly?

A: Perhaps, because:

1)  Whenever we “restructure” any existing debt, we cancel some or all of that debt.

2)  In a debt-based monetary system (which is predominant throughout most of the world including Cyprus), to cancel any debt reduces the currency supply.

 

Q:  Why does cancelling debt also reduce the currency supply?

A:  Because our debt-based monetary system is, by definition, backed by debt.  If you eliminate some of the debt you must also eliminate some of the backing for the fiat currency that’s based on that debt.

 

If we had no debt, we’d have no debt-based currency.  In order to protect the debt-based, fiat dollar, government must also protect, and even increase, the underlying debts.

 

•  The implications are bizarre. To grow richer in a debt-based monetary system, we need more debt.  To wipe out debt through bankruptcy, also wipes out part of the currency supply.

The debt-based monetary system relies on debt (debtors’ mere promises to repay) to give the currency its value.  If enough debtors simultaneously filed for bankruptcy (and thereby broke their promises to repay), so much debt and correlative amounts of debt-based currency could be destroyed, that the currency supply would be reduced.

If the currency supply is reduced, the value of each of the dollars left in the remaining fiat currency grows.  That’s deflation.

Deflation is usually a hallmark of economic depression.  Given enough currency destruction by bankruptcy, the nation could enter a deflationary spiral downward into depression, national bankruptcy and economic collapse.

In a debt-based monetary system, bankruptcy is bad and should not be allowed.

This conclusion is consistent with the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”.  Prior to A.D. 2005, debtors could freely choose between filing a Chapter 7 and Chapter 13 bankruptcies.  Most chose Chapter 7 because it allowed for the complete elimination of debts without repayment.

However, under the A.D. 2005 law, there’s a new, fairly complex formula for determining if you are financially eligible to file for Chapter 7.  The new law essentially prohibits most Americans with above-median level incomes from filing under Chapter 7 and completely eliminating of their debts.

Today, those who file for Chapter 7 and have any remaining “disposable income” will be obligated to continue making monthly payments or their pre-bankruptcy debts until the debts are repaid in some part of in full.  Thus, Chapter 7 now imposes a kind of post-bankruptcy “austerity” on bankrupts—just as European creditors are insisting on “austerity” for Cypriot and Greek debtors.

Again, in a debt-based monetary system, bankruptcy is bad because it destroys part of the base for the debt-based currency supply.

This argument suggests that the system can’t tolerate too much bankruptcy without destroying so much of the existing debt and correlative debt-based currency, that mass bankruptcies could potentially collapse the economy.

Thus, it appears that, in a debt-based monetary system, the Powers That Be want you and me to go ever deeper into debt (so they can create more and more fiat currency)—and never, never, never get out of debt by means of bankruptcy or frugal living.  In fact, to live an un-indebted life in a debt-based monetary system is at least antisocial.

 

•  Does those conclusions sound absurd?

Of course they do.

How could it possibly be that people are punished for not going into debt and rewarded for going into debt?

Well, look at your own credit (debt) history.  You borrowed $5,000 when you were just out of high school to buy a cool used car.  You repaid all that you owed on time.  The bank rewarded you by lending you $100,000 to buy a new home a few years later.  You repaid all that you owed on time.  A few years later, the bank loaned you $500,000 as seed capital to build a new business.

At each step, you proved yourself ready to not only go deeper in debt, but to make sure that you repaid your debts exactly as you promised.  The bank rewarded you by allowing you to borrow more and more currency.  Eventually, the bank loaned you enough to build your $2 million dream home and drive an Escalade.

But suppose that after your borrowed that first $5,000 for your first used car, you got drunk, wrecked the car, and lost your job.  You could no longer repay your $5,000 debt in full or on time.

Would the bank still reward you by allowing you to borrow another $100,000 for your first home?  Or would they punish you by refusing to lend the $100,000—or, if they did lend the $100,000, charge you a higher rates of interest?

One way or another, you’d be punished for having failed to keep your earlier promise to pay your debts in full and on time.

This hypothetical credit history is consistent with the argument that “To live an un-indebted life in a debt-based monetary system is at least antisocial and possibly anathema.”  Society rewards those who go deeply into debt (and keep their promises to repay) by allowing them to go ever deeper into debt.  Society punishes those who do not go into debt at an early age and/or repay on time by refusing to grant more loans that entitle them to buy the cars, homes and things that the world sees as essential to “living the good life”.  Good debtors tend to (apparently) prosper.  Bad debtors tend to live in poverty.

 

•  This conjecture implies that government is only enforcing bankruptcy laws as a kind of puppet show to fool the yokels into thinking that that debts can be easily repudiated.

In fact, so long as the monetary system is debt-based, the government can’t afford to allow too many debtors into bankruptcy and thereby wipe out so much of the money supply that it collapses the economy.

This doesn’t necessarily mean that you must pay your debts.  But you can’t be allowed to easily file for bankruptcy and thereby “completely eliminate” and destroy whatever debt instruments you’ve signed.

The American Bankruptcy Institute recently posted and article under the headline “Bankruptcy Filings Fall 12 Percent for the First Half of 2015.”  Perhaps that fall is due to a stronger economy where people are more prosperous and less likely to file for bankruptcy.

But it’s not inconceivable that the falling bankruptcy rate might also reflect an unpublicized governmental policy to inhibit bankruptcy and the destruction of debt-based currency.  It’s remotely possible that government and banks might prefer to let some debtors live in their homes without repaying their mortgages in order to maintain the fiction that those mortgages (debt-instruments) are still a valid basis for issuing debt-based currency.

 

•  In in a debt-based monetary system, the government doesn’t need you; it doesn’t need your productive effort; it needs your debts. Government doesn’t need you to buy things with cash and pay for purchases without debt.  In a debt-based monetary system, the government might need you to shop with credit cards to allow you to into debt, if only for a month or two, in order create more debt that can serve as a temporary basis for more debt-based currency.

This conjecture is consistent with bank policy to sometimes impose penalties on borrowers who try to repay their mortgages too soon.  Government doesn’t want you to pay for your house in ten years.  It wants you to sustain your mortgage debt for a full 30 years—or, better yet, 40.  The longer your debt lasts, the better government likes it.  Longer, larger debts are the foundation for more debt-based currency with which government can effectively buy you, your town, your state and the world.

Government doesn’t really care if you ever actually pay the debt, so long as you pay the interest on the debt so that debt-instrument (mortgage, car loan, etc.) remains “performing” and is therefore deemed suitable as collateral for making more debt-based currency.

Look at government, itself.  It’s run up an $18 trillion National Debt.  Is there any chance that debt will ever be repaid?  No.  Does anyone really believe that debt will be repaid? No.  But who cares, so long as government keeps paying the interest on the debt, maintains the illusion that the debt is valid, and is therefore suitable as collateral for maintaining some of our debt-based, fiat dollars?

(That implies that the jig is up if government ever reaches a point where it can’t continue to pay the interest on the debt. The government will be forced into bankruptcy, the debt will be destroyed as will correlative amounts of debt-based currency.)

 

•  IF the previous conjecture were roughly correct, it should follow that, in a debt-based monetary system, your standing as a perpetual debtor gives you more value than your standing as a life-long worker and producer.

The need for debt could explain the endless government deficits and the ever-growing National Debt.

 

Q:  Why don’t we ever seem pay down on the National Debt?

A:  Because destroying the “official” $18 trillion National Debt would cause us to also destroy and remove $18 trillion from our currency supply and probably collapse the economy.

 

In a debt-based monetary system the National Debt becomes our National Treasury.  The more we owe, the richer we become.  The more we owe, the more we have.

The logic of a debt-based monetary system should cause government to eschew gold and silver (payments and assets) and instead favor mere promises to pay (debts and debt-instruments)—which seems to be exactly what government is doing.

This conjecture might also explain the loss of US jobs to foreign countries by shipping US industries to third-world nations.  In an asset-based monetary system, exporting our industries would be crazy.  But, in a debt-based monetary system our principle need is for more debt rather than more productivity.  We don’t need productive workers so we don’t need jobs or industries.  We need liar-loans issued to non-productive people who will merely promise to repay their debts.

Written by Alfred Adask
Full report at Adask’s Law

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