Thursday, February 2, 2017

The Debt Will Never Disappear

The debt will never disappear. Unless of course we come to the realization that the market must properly adjust, forcing a complete repudiation of the national debt itself.

During a readjustment process, as was discussed in a previous post, market prices fall to their proper free market level. In order for this readjustment process to be effectuated with ease, the free market must be free of any precluding laws that uprear market prices.

These underpins that are in place are unnecessary hindrances of the clearing out of bad practices. Some may refer to this period as the liquidation of bad assets on business balance sheets.

In order for a market to function properly, especially during these moments of falling prices (deflationary period), the government mandated impediments must be eliminated. A gracious clearing can occur when the market represents a glade in absence of government laws.

As we speak, the debt stands at around $19 trillion. This is an astronomical leviathan of false prosperity. When the monopolized benchmark is slowly adjusted anew upward, Treasury prices within this realm of affected yields, will fall.

Therefore, a raising of rates simply makes current market prices of outstanding debt instruments fall. Unless the IOU matures, the instrument has a remaining time of existence. A fall in Treasury prices does not shrink the debt.

The only debt instruments that disappear are those from failing companies in the private sector, yet even then many private equity companies and investment banks revive some of these feeble IOUs of trifling value and attempt to recreate a profit seeking venture. Capitalism has a unique way of rewarding those capitalist-entrepreneurs who gauge market prices correctly.

The reason for such a vast amount of failures during a rate hike is due to the common business strategy of managing cash flows with debt issuance. Rate hikes make new debt issuance more expensive. Hence higher amounts of cash flows must be paid out.

Government debt instruments are managed differently, their method is to issue debt whimsically. This is where the old proverb of "printing money" comes from. Debt issuance leads to new money in the system which is filtered through the fractional reserve banking system. Namely, loan agglomeration.

Debt monetization (coined "money out of thin air") is the more aggressive approach to injecting new money into the system. Both government debt issuance thereof as well as the socialist central banking method of debt monetization create new money which enters the economy spontaneously. The two aforementioned processes are anti-Free-market and lead to another false boom or simply stated, an amplification of the business cycle itself. Inter alia, transient expedients.

Hamilton's utopian perspective was to have a centralized bank manage the cash flows of a government. His Treasury serves this purpose, it is itself a central bank.

Government expenditures cannot be managed with the estimates used in the competitive private sector, as extortion must be enacted in order to pay off the obligations. The monetary unit is debased at every step of the way within this process.

The CBO attempts to manage expenses by suggesting a rate of expropriation suitable to garner the matching amount of revenues that will pay for those expenses. This is unknown until the end of the year. Many times governments decide to spend more than is estimated, requiring further expansion of credit. There is truthfully no optimal tax rate.

A surplus is ultimately paltry to the failed measurements in expenditures by the government. Extra money in one year would mean less credit expansion the following year, whilst, once again, debt is constantly being issued. Treasuries are sold twice a month for Notes, once a month for Bonds, and more frequently for Bills (typically once a week).

In order for the debt to disappear the government must cease expanding credit, that means cutting all expenditures outright. At this point, only the remaining outstanding obligations would need to be paid off, consecutively managing the cash flows then later paying off the full amount at maturity. Radical cuts to this measure are not in the plans any time soon.

Surely one can deliberate a mystical strategy as to how to rid the country of it's Tower-of-Babelesque sized debt, but this socialist planning would only be useful as pretexts for keeping the coercive monopoly in place. Without a doubt, one might see how the theories of mathematics are earnestly nothing but artifice with symbols called numbers.

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