Neither A Borrower Nor A Lender Be

Polonius:
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Hamlet Act 1, scene 3, 75–77

As congress debates the farce known as the "debt ceiling," I thought it might be interesting to investigate the history of said "ceiling."  You might find this hard to believe, but there was a time when we didn't run deficits.

Referenced Wikipedia article.

From 1796 to 1811 there were 14 surpluses and only 2 deficits.  The War of 1812 caused a deficit, followed by 18 years of surpluses and 2 of deficits.  Not only were there surpluses but by 1835 the entire debt was paid off.  In fact, the $17.9 million surplus in 1835 was greater than the total government expenses for that year!  The surplus was passed on to the states who were in rough shape.  So in the first 36 years of our nation we had 32 surpluses and only 4 years of deficits.

I don't have the information from then until the Civil War.  However, for the 47 years following 1863 there were 36 surpluses and only 11 deficits.  During this period 55% of the US national debt, mostly from the Mexican-American and Civil Wars, was paid off.

World War I brought enormous debt, of course.  There is nothing to increase debt like wars, believe me.  Banksters love wars.  But even after WWI we had 11 straight years of surpluses while the debt was reduced 36%.

With the advent of the Great Depression and subsequent social engineering, the debt increased under Roosevelt from $20 billion to 33.7 billion from just 1933 to 1936.  Finally by 1939 congress invented the wondrous, mystical, all-important, gravity-defying, "debt ceiling."  Supposedly, this was to make congress more responsible.  We can see how that worked out.  Now the debt ceiling is at $14.2 trillion, give or take a few 10s of billions, which was recently breached.

So was Dick Cheney, who said "deficits don't matter," right?  And what is the point of even having a debt ceiling anyway if they are just going to raise it whenever the spending gets close?  And what has changed since the 1800s?  Is it really different this time around?

What has changed is the very nature of what we call money.  In the 1800s, money came into existence through mining ore and subsequent minting by the US Mint.  There was no paper money from 1789 until 1860, a little known fact.  With the creation of the Creature From Jekyll Island in 1913, the Federal Reserve, money would come into existence through debt, with the government issuing promissory notes called Treasury Bonds and Bills which were IOU's whereby the Federal Reserve would print the money out of thin air and loan to the govenment, thereby creating an obligation on the part of the government/taxpayers to support the Creature.

While all of the ramifications of this change could not be covered in a 1000-page tome, what is significant is the fact that now the government could get money any old time they wanted it.  Oh, it would be fantasy money created by paper and debt, but what did they care?  It might create more and more debt but didn't they get their pet project done and get reelected while the banksters made nice profits and bonuses?

In the 1800s, if the government wanted more money for their bankster buddies and Wall Street buddies they would have to raise taxes.  This isn't a good way to get reelected, nor do the banks make profits from tax increases.  The government got all of its revenue mostly from import duties and a few excise taxes, so we mostly only taxed foreigners while the locals paid LITTLE OR ZERO taxes.  Two income tax laws were ruled unconstitutional until 1913 when we passed the 16th Amendment to the constitution.  So taxes were nil, government was tiny, while the economy grew by leaps and bounds.  In the last 50 years of the 19th century, wages increased across the board by 50% while actual prices dropped 22%, as per government statistics.  The economy thrived, the little guy made out like a bandit even though the population tripled and we had a Civil War thrown in for good measure.

With our current system of debt, the little guy/middle class is getting ass-raped while the government and banksters are the ones making out.  If you don't think the game now is to grow government and reward banksters and Wall Street, then you aren't thinking.

Under the old system, savers were rewarded by getting paid 5% interest on their money.  Banks could then lend this money out to businesses or for mortgages and the economy grew.  At this point  Chase bank will now give you .5% on a 13-month CD, so you really have to be dense to save money.  With our debt-based system we are told that spending stimulates the economy, not savings.  This equates to saying that black equals white.  This is only possible in a fantasy world, not a real world.

So the $64 dollar question is, where do we go from here?  You only have to look at history.  This is not the first rodeo.  Fiat paper money has been tried and failed 599 times in history.  Paper money always fails.  Call me Chicken Little if you like, and don't let me confuse you with facts.  For those interested, here is the list.  FYI, the debt ceiling has been raised 74 times since 1962.

However, not all savers are getting punished.  If you have saved gold in the last 10 years your stack has gone from $300/ounce to $1500/ounce.






If you saved silver, your stack has gone from $5/ounce to $34/ounce.





What has caused this?  Simply massive paper debt and low ore production.  Should the debt ceiling be raised yet again and again, sidestepping financial Armageddon?  Can we dance on the head of this pin another 50 years?  Do deficits really matter? 

So should you buy gold and silver at these levels?  Do what you want, I don't care.  But answer me this....Do you think this government will cut spending and/or balance the budget?  Do you see the economy thriving?  Regardless of what the boob tube tells you, do you see signs of a strong economy that would help by bringing in more taxes?  Or maybe you think just taxing the rich will solve everything.  Maybe just throwing the bums out will solve everything.  Yeah, and monkeys might fly out of my ass.

Believe what you want, but if you like the debt game just know you disagree with Shakespeare.

Finally, big surprise, the IMF wants the US debt ceiling raised immediately.

http://www.thenewamerican.com/economy/commentary-mainmenu-43/8051-imf-wants-us-debt-ceiling-raised-immediately

The June 20th report of the International Monetary Fund (IMF) to the United States strongly recommended that the debt ceiling be raised because “if the debt ceiling is not raised soon…[it] would have significant global repercussions, given the central role of U. S. Treasury bonds in world markets.”

Like I always say sometimes, you can't make this stuff up.