In the last 30 years the number of billionaires has increased from 10 to 800. This is an explosion of super-rich by the 80-fold or 8000% As you know from our reports about the Bilderberger group and other talks with absolute TOP PEOPLE they expect that this number of billionaires will again grow by the factor 5 within a few years. Do you have any idea what this explosion of wealth on the one side will mean for the indebtedness on the other side, the private and especially public sectors?
While watching the reports of the billionaires in the world or the super-rich Russians have you ever wondered where all this money comes from? A look at the oil price or the price of gasoline at the pump shows only the tip. A look at the indebtedness of many households and the development of the states gives you the explanation. And once the households and businesses do not or cannot continue debt, for example because they don’t get loans from the banks as is currently very common, then the state has to step in.
And that’s exactly what is currently happening worldwide at an ever accelerating pace.
Worldwide means that we are witnessing the same global developments everywhere – although to varying degrees – but exactly in the same direction.
What does this mean as far as politics is concerned?
The forces mentioned by us in this article are so powerful and unalterable like laws of nature that they operate everywhere in the world, no matter at all which politicians are in power in a country or a continent. All are powerless against this current development. If it was dependent on politics or political decisions, all politicians worldwide whether left or right wing, conservative or liberal, democratic or republican or no matter who, would have to be the greatest idiots and failures. This is impossible, therefore politics has no solution to offer, nowhere in the world and in no party or political direction. So from now on forget about all attempts to get a grip on things through politics. All of the problems mentioned at the beginning of this article are present in all countries of the world – crisis, scissors poor-rich, redistribution of wealth, social injustice etc. – sometimes less pronounced sometimes more, but the basic direction is the same.
So with today’s article it should finally be clear to you that any political program or analysis on the subject and any proposed solution is fully redundant and can never lead to a reasonable result – hence all the talk shows end without a concrete and workable approach to a solution.
The only thing that can be suggested is to either increase the redistribution from top to bottom by increasing taxes or else have the ones at the bottom (who carry the debt and interest burden) run faster, or help them carry their load through public transfer payments. These transfers, however, only shift the debt problem from the individual to the state – which is the sum of the individuals. But that is not the solution to the problem, it moves it only from the right pocket into the left pocket, just like a bun turns into a roll, no real difference.
The cancellation of the home-owners bonus (in Germany, translator’s note) in 2005 resulted one more time in a surge in new debt by private households through start of new housing projects. Thus the private households have partly taken the necessitation for further debt-accumulation off the state’s shoulders for a short while. Do you now understand the real reason for this measure? The people’s savings, that is interest-bearing money, had to be taken from them thereby decreasing their income and take even more people to the debtor side. In this way many beneficiaries of interest-payments – “scissors poor-rich top sitters” – turned into interest payers, that is “scissors poor-rich bottom sitters”. And because now they have the debt load to carry instead of having 50 000 or whatever in savings they have to shut up at work because they must pay the monthly instalments. If they were still flexible, living in rented accommodation and having the money from before surely one or the other would have quit their job by now.
So they have not only burned their money but also lost their freedom and independence. Money and financial independence liberate.
So a pair of scissors with wealth on top and debt on bottom opens up further and further! Even the stock market crash after 2000, the high tax revenue at that time and the special effect of the billions that the state then collected by the sale of UMTS licenses could not stop the scissors.
That means quite something! By the way, have you ever considered the effects and consequences that the state guarantees, bailouts and fiscal stimulus measures – in their incredible volume – have on the scissors poor-rich? They achieve exactly that the fortunes and assets of those who sit on top of the scissors are protected and guaranteed by those who sit at the bottom.
The general public of taxpayers and citizens thus secure the assets and property of a few. Thus an ever-growing divergence is guaranteed, because a further escalation of the crisis and even more bankruptcies would have resulted in the wealthy losing a lot of money which is invested in bonds etc. In that case we would have, for the first time in recent history, seen the situation that the scissors would have started to close because on the top money and property would have been destroyed. And where money is destroyed debt is dissolved, no matter whether corporate debt or government debt.
The crucial thing is that the total indebtedness goes on growing, the sectors and institutions may therefore alternate. The bulk of the private sector have lost their debt potency several years ago already, then the corporations followed and now it’s the states’ turn. But exactly that, the closing of the scissors, should not and must not be! They call it systemic relevance. So through state interventions and programs, be it by state or central banks, the fortunes on top are secured so the game at the expense of the masses can go on. So it is system-relevant not to allow the scissors poor-rich to close! The concerns and losses of the governments, citizens and the man in the street however are NOT system-relevant.
They are simply a sacrifice that has to be made in hard times like these – we are all so sorry for that! Creditors want to be served their interest continuously, sorry. Which is where we are back to the “financial crisis, housing crisis, social envy, issues of poverty, redistribution and the shift to the left”. Total financial assets / liabilities Germany: One of the most interesting graphics on this site explains that where wealth is created debt increases equally.
One person’s wealth is the other person’s debt.
This explains the increasingly debated scissors poor-rich. As the financial assets continuously want and need to be served by interest there is almost a compulsion towards even further indebtedness on the other side. These may be private individuals, companies, but also states! Noteworthy is also that even the stock market crash after 2000 could only stop the gap for a short time
The current financial crisis would have caused huge losses in many asset classes (real estate, stocks, bonds) without the intervention of central banks and the state (taxpayers). Thus the scissors would have closed because the assets of the “top ones” would have gone down in value. But the taxpayers and the central banks have stepped in to prevent this. The gap can and will most likely open even faster and further.
BUT NOT INDEFINITELY FOR SURE! THEN THE BIG BANG SHOULD COME!
The above mentioned forces are now so strong that more and more people and states collapse under the burden of interest and rescue efforts, and in their wake the banks who have lent them money. More and more people fall into poverty and call for social justice and redistribution. This is the cause of the shift to the left that can currently be observed (in Germany, translator’s note), the only reason why this is not more violent being that the leftist have only people in leadership positions who have a bad reputation because of their political past, or simply because rhetorically and professionally they don’t meet the heart of the masses. Normally, the left ought to represent by far the largest party also because many more people are losers in the redistribution process through compound interest than there are winners. And in a democracy – a priceless value – this leads to the current discussion about social justice and more and more redistribution.
And we stand only at the very beginning of this discussion.
We have already mentioned the figures that currently there are several million more people who receive transfer payments than there are people who work and pay taxes – this is, among people of employable age plus pensioners and except children under 18. What does that mean? It will become increasingly difficult to distribute the ever growing mountain of wealth to the bottom, therefore the rescue attempts and problems of politics are also getting bigger and will very soon be impossible to solve. Even the political parties have – for electoral reasons – made a significant swing. But the ones on “the top” don’t want to give away any more and the ones “at the bottom” scream louder and louder.
So the bang must happen at a certain point.
This redistribution can be managed for a certain time – in appearance only – with paper money getting more and more worthless. Exactly this is happening now. So they cannot or don’t want to take something away from the wealth of “those on top” (companies abroad, money abroad, clever use of depreciation and use of tax loopholes, etc …). Yet the ones “at the bottom” grow in numbers and whine and scream louder and louder, so they get satisfied by the transfers without there being any real payers any longer – that is the current explosion of debt. That means: spending money (bonds) which has no value (to go into debt) and thus pay for the nominal purely numerical claims at the bottom (unemployment benefit, short-time working benefit, economic programs…).
And because the ones on top increasingly see through this game and buy less of these bonds or demand a higher interest rate thus compensating for the water in the bottle, that is the decreasing value of money and the increase in default probability. This continues until we run into hyperinflation or national bankruptcy. Probably first inflation will return in huge waves and then the house of cards will collapse completely.
The question is not of whether this will happen but only when.
Thus the fundamental causes of the current problems have been explained. But of what help is the diagnosis without a medicine? To escape from the first issue, the problems that paper money itself brings with it you have to consider replacing some of the money, at best all of it, with “real value” e.g. gold, silver or other material assets which keep their value. We have written a lot about real estate already, so please read there carefully before you blindly invest into it believing it is a good material asset!
To solve the second issue, compound interest, you should try as far as possible not to become an interest payer, i.e. a debtor. If you have debts, it would make sense to repay as soon as possible or refinance at low interest rates. Especially because 99% of your debts are for consumption or real estate which is the same garbage. To be indebted however makes sense if the interest rate is lower than the appreciation of the thing that you buy. Consumer debt is nonsense because the holidays are soon over but the debt remains. Also the car loses in value and is eventually worthless, yet the debt remains. Home prices will also fall much further, so here you pay interest on an investment which decreases in value so that you are the fool twice (interest payment and loss in price). Only the precious metals have, due to the current developments, a very good chance to beat the interest rate increase.
Very likely a gold purchase on credit at certain conditions, within certain limits will be worth wile during the next few years. If the money supply continues to rise then at some point also the interest rates will rise and repayment of debt, whether private or state, will be increasingly expensive and difficult and impossible in the end. The moneylenders will not tolerate for long – as currently – that the interest for their money doesn’t cover the loss of purchasing power (negative real yield).
These are THE “magic moments” of the precious metals!
Multiple creation of deposit money:
The banks generate (create) money. Bank 1 issues a credit to Household 1 (HH1) and credits the money to his account. HH1 pays a bill with the money and transfers the money to Bank 2 -> No change in the money supply
Bank 2 uses the funds to issue a credit to HH2 and credits the money to his account -> The money supply rises
This process of multiple creation of deposit money could theoretically go on indefinitely. It is limited only by the need to keep the liquidity reserve with the central bank.
What volume of money is created out of 1000.– € central bank money ?
Bank1
Liquiditätsreserve:
20,- €
Kreditvergabe:
980,-€
Bank 2
Liquiditätsreserve:
19,60 €
Kreditvergabe:
960,40 €
Bank 3
Liquiditätsreserve:
19,20 €
Kreditvergabe:
941,20 €
and so on…
The cash reserve ratio is 2% Bank 1 Liquidity Reserve: 20.00 € Credit: 980 € Bank 2 Liquidity Reserve: 19.60 € Loan: 960.40 € Bank 3 Liquidity Reserve: 19.20 € Loan: 941.20 € etc. …
The process of multiple creation of deposit money ends when the entire original amount of 1000 € is fixed in the liquidity reserve. 1000 € = 0.02 x Balance Balance = 50 000 €
So with a cash reserve ratio of 2% from an initial financial volume of 1000 € the amount of 50 000 € is created.
Incidentally, it is questionable whether it makes sense to take up debt, pointing out that inflation would eat it, thus reducing the value! How then could the finance industry create such values – if they have lent people “valuable” money and got back “worthless and inflated” money over the years with the repayments?
The finance industry has done well no doubt in recent decades when things were smooth, and in times of crisis when the value of their assets fluctuates the state/taxpayer will help out. The decisive factor is probably the volume of loans, their purpose and duration.
Normally people should be encouraged to more meaningful savings. A politician must, however, think in economic terms and encourage people to increase consumption. That should boost the economy and also is much more popular.
Don’t you like that better, too?
Now you know why you cannot expect PRECISELY THIS to be addressed by any politician, talk show host, economist or analyst. He would immediately be called the “defeatist, kill-joy, spoilsport, scapegoat…”
I know now it’s probably me who is the scapegoat, but this – the purchase of gold and silver by and for the individual – is the only approach to break this vicious circle of devaluation, debt and bankruptcy.
I know this regrouping of investments is not easy but nothing comes from nothing, and the saying goes: “You have to drive out Satan with Beelzebub!” (to replace one evil with another) Or, as stated in the “Feuerzangenbowle” with Heinz Rühmann:
“MEDICINE MUST TASTE BITTER – OTHERWISE IT WILL NOT HELP”
Interesting facts about gold
Here a few figures on gold which may surprise some of you: Who would expect a cube of 37cm length to be such a heavyweight of one ton?
The value of gold is in its rarity, as seen below!
Well then all the best! And good health to your finances! Thus you need to convert all cash receipts (paper money), or claims to cash receipts (deposits at banks and insurance companies, or elsewhere, which are denominated in paper money) into real money – that is, gold or silver. GOLD IS MONEY: You can tell this by the simple fact that no VAT is imposed on gold purchase or sale. No tax can be imposed on money since it is not a thing neither a ware or a service. Silver is a bit different. In Germany the reduced rate of 7% VAT is imposed on silver coins, whereas on silver bars the full amount of 19% is applied since industrial usage is presumed. Thus, the government treats gold as money which is also tax free! Or have you ever picked up 100 € including or excluding VAT from an ATM? This closes the circle, and you can escape from the spiralling crisis!
Only like this! So I repeat my advice to redeploy really 100% into the precious metals. You will not solve the problem by diversifying – into wrong assets – even if this has been recommended many times.
Just have a look at the banks and insurance companies who go on telling you about diversification and risk management: either they don’t follow their own advice or they have lost heavily by diversifying into various dung heaps during the last few years.
The state respectively the stupid taxpayer recently had to save those who had always been a big mouth and had talked about risk management and diversification – something is not quite right here.
The principle is demonstrated well by the example of “Joseph’s Pfennig”, which you may already be familiar with. In English it is known as the “miracle of compound interest”. There is no better and simpler way to explain the inevitably finite nature of money and the compound interest system:
If at the beginning of our era, about 2000 years ago, Joseph of Nazareth had invested one pfennig – half a cent – at 5 per cent interest in a bank for his son, by the year 1466 it would have grown into an amount equivalent of gold in the size of our globe. By 1990 it would have been 134 billion globes of gold and up to now over 200 billion globes of pure gold. (24 duodecillion Euros, gold price of 20 Euros per gram i.e. 620 Euros per ounce, 10 to the power of 33 tons of gold) At 2% interest rate, it would be 50 million tons of gold – that is only a tiny yet powerful fraction.
Just for comparison: so far some about 140,000 tonnes to 155,000 tonnes of gold were extracted in history (exact data are not available). Also very interesting: If the 5% interest on the original amount had not been interest-bearing but had been collected on a separate interest-free account, the one pfennig would have grown only into little more than half a euro by today (5% interest per year x 2000 years – that is 10,000% interest on the original amount. 10,000 per cent is the hundred fold, so 1 pfennig turns into 100 pfennigs or about 50 cent).
The explosion is therefore not caused by the return on the actual base amount, but the yield of the compound interest.
This explains 4 things, and one question remains open:
1. This is a simple computational example to show the long-term impossibility and the finite nature of any paper money system which is based on interest.
2. In a finite world nothing can grow indefinitely. So a monetary cut is needed again and again, a deletion of almost all assets and liabilities and a new beginning – mostly following a hyper-inflation!
3. What has happened to all those globes of gold? That’s what you should ask your banker if he doubts these ideas. This is probably the biggest and most perfidious robbery and fraud in human history – unfortunately as yet unresolved.
4. Put a cent into your bank account right now – your descendants in 30 generations will not be able to carry all the gold! Waiting for the first million or billion has kept many a miser alive for a long time. Once the goal was achieved then the meaning of life was gone – and off he went into the box! Fairytales and greed keep people young. So now you know what to do – as for me I will start running and go seek at least one of these 200 billion globes of gold. Such a big thing cannot simply disappear can it? And I used to think: “Nothing can get lost inside the house”. – You really can’t trust anyone any longer… I refer at this point to the appropriate link with other figures and explanations at Wikipedia: http://de.wikipedia.org/wiki/Josephspfennig # Josephspfennig_und_Realit.C3.A4t in English search for: miracle of compound interest
Anyone who does not understand this or is just too lazy to read a lengthy article like this cannot be helped. Really! Not wanting to read or understand out of laziness or stubbornness is my personal definition of STUPIDITY.
I would like to tell to such people:
1. Some people buy things they don’t need from the money they don’t have to impress people who they don’t like.
2. Half of the people who you know are below average.
3. Two things are infinite: the universe and human stupidity. But about the universe, I’m not sure. (Einstein)
4. You cannot overtake someone if you follow in his footsteps.
5. It is not enough to know, you have to apply it. It is not enough to want to, you have to do it.
6. Never laugh at the stupidity of others. It is your chance.
7. Nothing in the world is distributed as justly as the mind. Because everyone is convinced that he has enough of it.
8. We all live under the same sky, but we do not all have the same horizon.
9. Some people would rather die than think. And they really do it.
10. If you are not willing to take risks for your beliefs, then either your beliefs or yourself aren’t worth their salt.
11. The best disguise is the truth. Nobody will believe it.
12. The advantage of wisdom is that you can pretend to be stupid. The opposite is more difficult.
13. Quite a few experts see their raison d’être in endlessly complicating a relatively simple issue.
14. The wiser man gives in. Very true, unfortunately, and also the foundation of stupidity’s world dominance.
15. An expert is a man who can tell you exactly after the event why his prognosis was wrong.
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Best regards,
Gerhard Kastner and Frieder Morneweg
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