Tuesday, November 1, 2011

Cris Sheridan calls for the Jubilee Cycle

Writing in Financial Sense, Mr. Sheridan points out the end result of the massive overhang of debt in America: "The Inevitable Jubilee" (http://www.financialsense.com/node/6783).

It is amusing to read him quote the CEO of Goldman Sachs, Lloyd Blankfein, claiming they are doing "God's work" by putting everyone in debt: “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.”

The truth about the "virtuous cycle"

In fact, bank lending has nothing to do with a virtuous cycle. The expansion of credit into any market drives up prices. The banks, which enable this spike in prices, then profit even more by skimming their parasitic profit off the top of the credit-inflated transaction, making it even more expensive.

The healthiest, most affordable, and least distorted markets are those which are devoid of credit, as they are immune to speculation and "investment bubbles". There are far better ways to coordinate capital creation and accumulation than investment banking.

An excellent read, quoting Sheridan:

National debt is a cancer. It starts out small and then multiplies. Eventually, it reaches a point where it can’t be ignored, spreading itself through every layer of the economy until it threatens the life of its host.


In light of the similarities between then and now, some prominent names are beginning to warn that the only cure for our troubling situation is some form of massive debt relief, or Jubilee—a biblical commandment given to Israel to wipe away all debt every 50 years and start with a clean slate.


Unfortunately, what most people seem to miss, is that the original notion of a Jubilee was never intended to be applied after society has been enslaved by debt. It was meant to prevent such a scenario from ever occurring in the first place. Regardless, whether a society chooses to voluntarily rebalance its scales or not, eventually the invisible hand of the market will step in and balance them for us. Perhaps politicians should be wary of that point and take the necessary steps while certain options still exist. Let's not forget, there is already rioting in the streets.

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