Robert Fitzwilson continues:

“That is not a requirement, however, just a sweetener.  What could be better than debt backed by real assets as well as the full faith and credit of the issuer able to be used as legal tender (money)?  The really wonderful part of this scheme is that the ‘money’ can be lent and re-lent many times over, allowing the initial supply of this money to multiply many times over the original amounts that were created.

At some point, the outstanding amount of issued debt overtakes the value of the underlying real collateral.  The ‘guarantee’ becomes diluted as more debt is issued.  Eventually, the issued amount exceeds the value of any real collateral or the link is severed as occurred during the Nixon Administration.  At that point, the debt (money) is backed only by the full faith and credit of the issuing entity....

Continue reading the Robert Fitzwilson piece below...  


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“A characteristic of this system is that it requires more and more debt to be created to generate more and more money to ‘grease’ the economy.  In normal times, this is considered a benefit.  Increasing debt allows for more loans, which generates more interest income for bankers. 

Increasing loans allow for the acceleration of consumption and business activities.  We call that economic growth.  That generates more jobs as more and more people enter the work force.  More income means more taxes.  If the politicians do not have enough in tax revenues, more debt can be issued generating more loans, income and increased consumption.

This all worked well in the past for the United States.  A culture of debt and consumption was nurtured that came into full bloom during the late 1990s and early 2000s.  When it faltered early in that latter decade, interest rates were dropped.  This had two significant benefits to the United States.  The first is that fueled a massive housing boom. 

The dramatic increase in prices allowed people to feel wealthier and to enable them to extract increasing amounts of their home equity.  Those home equity loans fueled another wave of consumption.  The second benefit to lower rates is that it took away the carrying cost of the debt that was being created.  The United States could continue to maintain existing debt as well as creating more to fund deficits as the carrying cost (interest paid) declined significantly.

The European experience with this system has had similar results, but it played out on a much more compressed time frame.  What took 40 years in the United States, took a mere 10 years in Europe.  It was the same pattern of massively increasing debt to increase GDP and consumption, and it then began to fall apart in late 2008.

The creation of debt, driven by our Federal Reserve continues apace.  It is all they know. Life to them is a lever that must only go forward.  To pull back on the lever and have less debt is an unknown that could cause a chaotic deflationary collapse.  They dare not try.

The problem is that the rest of the world views debt in a different light.  Culturally, they are savers.  As the Fed pushes forward on the debt creation lever, the newly issued debt/money at best replaces old debt that was replaced by earlier write-downs. 

If the jobs are overseas and those workers are savers, the debt is not recycled back to create economic growth.  It just festers in the accounts of multinational corporations or is converted into real assets and real money, such as gold and silver.

In the mid 1970s, a product was introduced into the United States called the ‘Roach Motel.’  It was designed to lure roaches into a compartment that included a sticky substance, effectively trapping the roaches inside.  The tag line for the advertisements was ‘Roaches check in, but they don’t check out!’  As more and more debt is created by the central banks, more fiat money is being created.  Rather than fostering economic growth, it is being trapped into the figurative monetary Roach Motel.

It is just a matter of time and simple arithmetic before this magical scheme and the sleight-of-hand are relegated to the dustbin of history.  Time is running out for those who wish to protect their savings through the purchase of real assets such as energy, gold and silver.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Eric King

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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,

rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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