World Debt Crisis Still Building
Another American debt ceiling is fast approaching. Persistent government profligacy has already moved its arrival sooner than projections following the last debt ceiling "crisis."
With establishment Republican support, Congress will pass a "clean" bill to raise the ceiling; the president will sign it; and debt will disappear from the news until the new ceiling is again reached prematurely.
But, unobserved, the problem only worsens.
A recent report by the International Monetary Fund reveals that the debt crisis is worse than it has ever been, not just on the periphery of Europe but in America and throughout the industrialized world.
For the past few years, the focus on debt has included countries like Greece, Spain, Italy and Portugal, but, according to the IMF, richer countries like America and those in northern Europe are also in trouble.
The IMF states that the magnitude of the debt problem is "difficult to overstate;" that debt levels have become extreme by any historical measure and that much of the western world must take extraordinary measures to recover.
The IMF report has received almost no coverage from the president’s lapdog American media, but, in the United Kingdom, The Telegraph’s Ambrose Evans-Pritchard reported:
"Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
"The (IMF) says the Western debt burden is now so big that rich states will need the same tonic of debt haircuts, higher inflation and financial repression — defined as an ‘opaque tax on savers’ — as used in countless IMF rescues for emerging markets."
What does that mean? Evans-Pritchard:
"Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies. Some of these methods are already in use but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.
"The policy is essentially a confiscation of savings, partly achieved by pushing up inflation while rigging the system to stop markets taking evasive action."
In other words, when sovereign debt reaches unsustainable levels, bondholders are forced to take losses, and savers are wiped out.
Of course, outright repudiation of sovereign debt isn’t necessary for any country that can print its own currency. If government ever stopped deficit spending, the U.S. could devalue its currency to repay debt with cheap dollars.
For currencies, as for any commodity, the law of supply and demand is remorseless. Absent real economic growth, values drop as supply increases. The greater the increases, the more sharply values drop.
In fact, by pumping out unimaginable amounts of unsecured currency, the Federal Reserve’s policy of "quantitative easing" is already devaluing the American dollar and fueling inflation.
But inflation destroys the value of savings and impoverishes people on fixed incomes.
To heedless, uncaring officials, these people — their victims — are inconsequential collateral damage.
When governments run out of money, politicians steal from others who have been more responsible.
It’s only voters’ fault if they reelect officials — in either party — who committed the theft.
Fed up? Speak up: www.contactingthecongress.org/. Hold Congress accountable for its votes: http://thomas.loc.gov/home/rollcallvotes.html.