Humans have tried to dodge their debts for millennia. And they’ve come up with some remarkably creative ways to do it. But this one may take the cake…
No, it isn’t modern monetary theory to create infinite currency to inflate away the debt.
Neither does it involve crashing the market.
It may sound crazier than these.
What if borrowers no longer need to repay their creditors because of a stunning revelation that disqualifies the lenders?
You wouldn’t expect to hear this story from the resident gold guy. Heck, I should be the last person at Fat Tail Investment Research to believe this is possible. After all, why hold gold if this could be a reality?
But this isn’t wild fiction. There are telltale signs that this lender could be the one to default, not its debtors.
What would be the implications?
And does it mean you can write off your mortgage debt and load up the credit card?
No, you won’t be able to get away with that. We’re talking about borrowing and lending at a higher level. You still need to repay your loans. However, the implications may still be in your favour, but in another way…
A crooked system
Since the establishment of the petrodollar system in the early 1970s, the US dollar became the world’s reserve currency. People didn’t just use US dollars in global trade. They stored their currency reserves in US dollars too. It replaced gold and gave the US an exorbitant privilege where the US government could borrow indefinitely and saddle the rest of the world with the inflation that resulted.
As goes the US, so does the world. Many democratic nations followed the example of the US in running governments based on luring their people to vote for them based on what handouts they can promise. This led to endless government deficits, borrowing from central banks, and ballooning debt circulating in the system.
The world developed an addiction to spending beyond their means, accumulating debt, and delaying repayment and consequences.
Those responsible for creating this mess want everyone to dance to their tune and participate in their scam. That or they take away the stage, the instruments, and the entire venue.
It’s their way or the highway.
Circling the drain, one rate cycle at a time
The system has lured the world into the complacency of easy credit by bringing interest rates lower for longer. Make it easy to borrow, pump the asset markets upwards, and slowly raise interest rates to pull the rug on the economy at the right time.
Rinse and repeat. The banks win. They pocket the gains when it’s in their favour and force everyone else to pay up when they lose.
The problem is that this game is unsustainable. The system can only bear that much debt until the point where the burden of the debt and interest outpaces productivity.
People have awakened to this scam and are bracing for the inevitable collapse of this debt-ridden system. Every rate cycle shakes out more businesses and households that borrowed too much when rates fell and couldn’t repay when rates rise. When the creditors call their loans back and the amount is too much or there aren’t enough players left, it all comes crashing down.
Except what if the creditors make their call but the loans don’t need repaying?
To achieve that, you’d have to discredit the biggest creditor…
The Fed is a predatory lender
You may be aware that the system hinges on the survival of the US Federal Reserve. That’s because it has the US government as its biggest customer. The US government keeps the Federal Reserve in business through its seemingly insatiable appetite for deficits and borrowing.
But what if the Fed is corrupted?
The US Federal Reserve puts a thumb on the scale by setting the Federal Funds Rate, which is central to pricing almost everything in the world.
There is nothing scientific or academic about how the Federal Open Market Committee sets this rate.
Don’t believe what they tell you. Nor the hundreds of academic papers published about economic theory and data science that inform their decisions.
For decades, the FOMC has been a political instrument first and foremost, and a government bureaucracy, second. None of these are in the interest of the broader public.
The Federal Reserve’s little credibility was lost in its gambit to hold interest rates before and following the Trump administration introducing tariffs against other countries in early April. It claimed that this could negatively impact the global economy and result in accelerating inflation.
Almost three months later, the stock markets have returned to a raging bull. Yes, it looks bubbly right now, making possible a correction.
Next, the outbreak of the Israel-Iran hostilities in mid-June gave the FOMC the cover to hold rates a week after the outbreak. It expected the effects of tariffs and the price of oil spiking 20% might cause inflation to return.
Well, the Trump administration’s bombing of the nuclear facilities in Iran and the negotiation of a ceasefire between the two feuding nations brought oil back to around US$65 a barrel.
Add to that the huge cuts in government agencies that will take effect and that might cut the US government deficit further. This could calm inflation and back the Federal Reserve into the corner.
These are all moves to place the spotlight on the Federal Reserve as the key culprit in causing the global economies to boom and bust.
Should the US government really owe vast debts to an institution that is trying to undermine it?
Actually, the Fed’s subversion is even more absurd than that…
Remember how Elon Musk was appointed the head of the Department of Government Efficiency earlier this year? One of the many shocking discoveries he made was the 14 computers in the US Treasury. These computers existed purely to create receipts and send funds to various agencies.
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Well, which agency abetted in this fraud? None other than the US Federal Reserve, the creditor.
When the creditor becomes the criminal
Perhaps we’re watching the exposure of a massive sordid criminal network that managed to get into all echelons of power. Their funds came from a creditor, the Federal Reserve, feeding on the world’s biggest borrower, the US government.
Suddenly, the Audit the Federal Reserve Bill that has lain dormant in Congress doesn’t seem like just an ornament or relic of political demagoguery. It seems like there is a concerted plan to push the US Federal Reserve to make one more mistake and spring the trap.
The people must ask Congress to act. They need to make themselves heard loud and clear.
What is interesting is earlier this month the Trump administration appointed Michael Horowitz to the Office of Inspector General of the Federal Reserve Board and Consumer Financial Protection Bureau. Horowitz previously served as Inspector General in the Department of Justice and investigated the Trump-Russia hoax and Hillary Clinton’s email server. That investigation blew open a massive scandal revealing a coordinated and politicised campaign aimed to destabilise President Trump in his first term.
Perhaps we will gradually see what the Federal Reserve had been up to and the nefarious activities it sponsored. That might be enough grounds to invalidate it. With that, do you think the US government will still repay the debt owed to the Federal Reserve?
I doubt it. That would break the spell of bondage with a debt-ridden system.
The Federal Reserve Note that we call the US dollar would no longer have value. But long before that happens, its alternatives, gold, Bitcoin, and anything unencumbered by debt, would be soaring as people seek refuge elsewhere.
Aren’t they rising already? Perhaps people are picking up the hint.
This might sound like a fanciful story now. But fast forward a few years and come back to it. You might marvel at having heard it once upon a time.
It wouldn’t be the only steps Trump is taking to help the US escape its debt load. Tariffs are raising record tax revenue already. And the next phase of Trump’s economic plan will put money in the pockets of investors too.
God bless,
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Brian Chu,
Editor, Gold Stock Pro and The Australian Gold Report
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