- $10 of debt for each $1 of growth…
- The triumph of “creditism”…
- April 15 is right around the corner. Have you learned about one key loophole in the tax code that can LEGALLY save you thousands in taxes this year?
Dear Reader,
How much credit expansion is required to expand the gross domestic product — the real domestic product?
Mr. Mike “Mish” Shedlock is an observer of economic affairs.
His researches reveal that… since 2019’s fourth quarter… $10 in credit expansion has yielded $1 of economic expansion.
Recall that credit is debt’s twin. Credit is the mirror of debt, debt is the mirror of credit.
Thus the economic apparatus heaved up $10 of debt to churn out $1 of growth.
Here you have the crowning glory of the modern monetary system.
Dramatic Progress!
Yet Mr. Shedlock is tickled to report “dramatic progress” in 2024:
- It “only” took a $3.80 trillion in total credit expansion to produce an increase in real GDP of $650 billion.
- In 2022 it took an expanse of $6.85 trillion in credit to produce an increase in real GDP of $845 billion.
- Is that progress, or what?
It is progress — of a highly unique and peculiar sort.
It is progress towards the poorhouse. It is progress towards the gutter.
It is progress towards ruin.
It is nonetheless, in the looking-glass world, progress.
The Death of Capitalism and the Birth of “Creditism”
As I have maintained previously, the Keynesian “multiplier” has clearly taken up division.
Is this the failure of capitalism? Or is it the triumph of “creditism?”
Many still insist ours is a capitalist system. Yet economist Mr. Richard Duncan tells them to have another guess.
He argues that the capitalist system went into the grave when the gold standard went into the grave.
The two share a common plot.
Credit — that is, debt — is king of the post-capitalist system.
All economic growth, in this fellow’s telling, requires the unceasing expansion of credit.
If credit fails to expand at the requisite rate, economies will wither and wilt.
A Brave New World
Most fail to appreciate the vast changes that divide the capitalist world from the creditist world. Mr. Duncan:
- For centuries, money was backed by gold. That anchor held the financial system in check. But in 1968, everything changed. A quiet legislative shift severed money from gold — permanently. Most people have no idea how profound that moment was. But if you want to understand why the global economy looks the way it does today, you need to know what happened next.
- The transformation of money after 1968 unleashed forces that reshaped economies, built empires, and shattered others. It set off an explosion of credit creation, making possible the greatest economic boom in history — while also laying the foundation for massive financial instability. The impact has been staggering. The world we live in today would not exist if money had remained backed by gold…
- Capitalism might have survived had it not been for World War I, the Great Depression, World War II, and the necessity of preventing Soviet Communism from taking over the world.
- But Capitalism didn’t survive.
I believe there is tremendous justice here.
I myself have lamented gold’s murder and its replacement by the paper unit.
Gold Couldn’t Survive the 20th Century
The 20th century came along with its wars, I have written… its world-improvers… and its cranks.
Like a boulder blocking the road to the sunlit uplands, gold was in their way.
And they were determined to push it out of the way.
That is because the greater good is beyond gold’s care. Gold has the public spirit of a cat.
It shrugs its shoulders in the face of want.
Meantime, gold lacks martial spirit… and turns from the roar of cannons.
“You go over there,” gold tells its fiat counterpart.
“I’m staying right here.”
The Gold Standard of Price Stability
Thus only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered dreams of the 20th century.
Debt-backed money willingly sacrifices its value for the greater good.
Gold, meantime, guards its virtue with fantastic jealousy.
Author G.Edward Griffin:
- At the Savoy Hotel in London, one gold sovereign will still buy dinner for three, exactly as it did in 1913. And, in ancient Rome, the cost of a finely made toga, belt, and pair of sandals was one ounce of gold. That is almost exactly the same cost today, two-thousand years later, for a hand-crafted suit, belt, and a pair of dress shoes.
- There are no central banks or other human institutions which could even come close to providing that kind of price stability. And, yet, it is totally automatic under a gold standard.
Those Whom the Gods Would Destroy…
Yet today we wallow under $36.6 trillion of national debt and $102.8 trillion of total debt — both public and private.
We must fabricate $10 of debt for one lean dollar of growth.
Yet it is too late to turn back.
It is said that those whom the gods wish to destroy they first make mad.
Yet I hazard that those whom the gods wish to destroy they first indebt.
They need merely sit back, munch popcorn… and watch us destroy ourselves.
Brian Maher
for Freedom Financial News
