Our economy has become based on credit. Not real wealth, but funny money.  Our leaders and our media tell us that the economies of all developed countries depend upon credit, and then they act like it is a good thing and try to develop plans to keep it going.

It doesn't work.  It can never work. 

 

There is a basic premise to Economics.  You cannot, indefinitely, consume more than you produce.  It's sad that our politicians who make up our budget cannot understand this simple premise.  As citizens, we can not run our personal finances like that(although too many try), so why do our politicians think they can run our national finances like that?

Let's make it simple. I owe you $20, and you owe me $15. If we cancel our debts, I end up owing you only $5. That means that $30 in fake money disappears.

Lets say we don't cancel it out, and I will use the $15 you owe me as collateral, or as an asset, and you do the same thing. Now, instead of one of us having $5, combined we now have $35 in wealth.

We are a very 'wealthy' nation, but only because we are using fuzzy math. We both know that there is really only $5, but on paper we can make it look like there is $35.

That kind of math catches up to you when people start trying to collect. The only way to keep such a silly system going is if we keep borrowing from each other, and keep 'accumulating wealth'.

In today's economy, people are on the brink of realizing that any 'money' they let people borrow has the potential of not being paid back. The news media describes it as 'credit is drying up' or 'credit is getting tight'.

The only way to encourage more lending is for the gov't to back some of that fake debt with fake money, hence the '700 billion dollar Bail Out Plan'. All the bail out plan does is extend the cycle for a few weeks, or a few months. Don't get me wrong, people will still make 'money', but it isn't real. It's just shuffling numbers around.

Me and you could develop millions of dollars in wealth between us. I borrow a million dollars from you. You sell that asset to somebody else for a little less than a million dollars so they can make a 'profit.. Now, we both have a million dollars. We keep doing it until nobody will buy up our debt, since it is obviously bad, and they keep selling the original debt to others. Then we wait for the gov't to pump in more money so people will keep buying our pretend debt, while we are making money the entire way.

There is not enough money in America to settle all of the accounts, and even if there was, it would wipe out trillions of dollars worth of 'wealth'...much like our settling up effectively made $30 disappear.

It's called a 'bubble', and they all eventually collapse, so why is the government trying to postpone the inevitable?  The larger the bubble, and the longer the collapse is delayed, the worse it will be when it happens.

 

Let's get it over with, I would rather live my life in the rebuilding stage, than the prolonged collapse stage.