A Realization of Debt/Credit & Americans’ Purchasing Power


Chris Whalen Comes Partially Into The Light!

Well I’ll be damned.

Those who have read here for a while know that I’ve been all over Chris on multiple occasions as nothing more than a bank whore —including quite-recently.

But this is a very interesting piece, and one you should read, because it appears that Chris has come at least part of the way to Jesus when inflation and income inequality are concerned.

Neither Brown nor Paul Krugman nor my market savvy friend Barry Ritholtz seem able to accept the fact that by pulling tomorrow’s spending into the present day via inflation and public debt, and accommodating these policies with low interest rates from the Fed, we are slowly killing the economic hopes of all Americans, especially those of working people.

Since 1980, the real, inflation adjusted value of the dollar has fallen by nearly 75%. Over this same period, the wages of working people have been relatively flat, meaning that American families have lost enormous ground in terms of what their dollar will buy for housing, food, and other necessities. Over those three decades, Congress under both parties has happily voted for ever increasing federal budget deficits, based largely on the belief that deficit spending is good for Americans. These same luminaries now fret that “income inequality” is a public policy concern.

Ok, you got half of it.  And you’re right, as far as you go.

Now here’s the other half.

That’s the full credit picture.  Yes, that top bar is outrageous, especially in the last few years.  Now look at the rest of it.

How’s it compare against GDP?  That’s easy:

There’s your answer Chris.

It is not just Congress and Federal deficit spending.  It is pulling forward demand in all sectors by allowing banks to issue unbacked credit.  And when the capacity to do so with reserve requirements met hit the wall we started playing games with sweep accounts and all other manner of horsecrap (derivatives anyone?) so as to continue to allow banks to inflate the currency since credit and cash spend exactly the same way.

Congress is able to deficit spend because of the whoring out of unbacked credit committed by the banks.  Without that there would be no deficit spending because the price of doing so would rise precipitously and immediately.  Why were banks able to play the subprime game, the derivative game, the “let’s sell people things marketed as good investments when internally we call them vomit game” and similar?  

That’s simple — without those frauds the Government couldn’t have spent in deficit either because the price of such credit would be ridiculous.

How do you fix all of it?

You stop it.  You put in place One Dollar of Capital.

That stops all of the shenanigans.  Federal and private.

It’s the only way you can do it, and if you’re truly interested in income inequality, it’s the only means of actually solving the problem.

Come all the way into the light Chris.

It’s not that much further.

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