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08/23/2005 Archived Entry: "Be Careful What You Wish For: The Debt Crisis Arrives October 17, 2005"

BE CAREFUL WHAT YOU WISH FOR particularly when your wishes are granted by the US Congress. On October 17, the monthly minimum payment due on tens of millions of credit card accounts will double.

That’s right, double. With real wages falling for the past 3 decades, inflation raging (even if fedgov lies fool most people most of the time), home equity tapped out, housing prices in a huge bubble, and unemployment at dangerous levels, millions of families will open their November credit card statements and find the straw that breaks the camel’s back.

Banks who issue credit cards asked for this. Congress granted their wish. Banks have grown fearful of ballooning debt levels leading to consumer bankruptcy. They preferred demanding government coercion to free competition with one another to sort the mess out. But as Ludwig von Mises and Murray Rothbard proved conclusively (and rather eloquently, IMHO) all government interventions in the market end up producing precisely the opposite of what was intended.

Dana Blankenhorn penned a nice summary of what is likely to happen and why. Thanks to Gary North, whose great free newsletter Reality Check has alerted me to this and countless other important developments in economics and finance.

Silver

Those who live by the sword, die by the sword. Banks have used government violence for centuries to enable their lucrative counterfeiting of money via “fractional reserve” banking. It’s a polite term for lending something that you don’t have, and its a crime in every enterprise except state-sanctioned banking. Now, thanks to their own foolish demands, there is an excellent chance that some of the biggest, most well organized criminal enterprises in history will meet the fate they so richly deserve.

Unfortunately, their fate is now closely tied to our own, and this could be the event that collapses the entire fraudulent pyramid of debt and credit. Gold could go to the moon and gold bugs make a killing, but I for one would much prefer a slow, free-market solution to this problem rather than a collapse. But as Gary North says, “I am not in a position to manufacture stability. But I am in a position to hedge myself against havoc…”

Posted by Silver @ 11:44 AM CST
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