“Suicidal Credit-Based Money System”

Bill Bonner wrote a hypothetical college graduation speech which he did not present.  What he would have said included:

“You are heirs to claptrap, nonsense, bogus theories, and trillions of dollars in debt. 

The systems, programs, and institutions your parents set up are mostly worthless scams. Worse, they produce outcomes contrary to their stated goals.

Welfare programs do not help people escape poverty; they keep them mired in it.

Health care programs do not make them healthy; they make them dependent on the drug industry.

Defense industry spending doesn’t make us safer; it funds drones, bumbling interventions, and assassinations… and it creates more foreign enemies.

We end up not only poorer, but also less secure.”

 “You need to stop your parent’s suicidal credit-based money system.”

 “Well, the system is corrupt and self-destructive.  It works only by increasing the amount of debt in the society – including student debt.” 


We add a few more points in the same spirit as Mr. Bonner:

  • Central banks were not created to assist the functioning of the financial system. Instead they assist the transfer of wealth to the financial industry.
  • Quantitative Easing (QE), “money printing,” liquidity injections and monetary manipulations are rationalized as “stimulus.” In fact QE was little more than a bail-out for the financial industry and the US government at the expense of taxpayers, savers, and pension plans.
  • The “War on Poverty” and the “War on Drugs” are like the “War on Terror.” They are expensive, support a massive bureaucracy and promote private agendas.  They have strong support and will continue, regardless of how little they accomplish.

The US national debt exceeds $18 Trillion, NOT including off-balance sheet items, Fannie and Freddie, and unfunded obligations such as future payments for military pensions, Social Security, Medicare, and more.  Depending on who is counting, add another $100 – $200 Trillion in debt.

We all know this debt will never be paid – defaulted maybe – but never paid.  We all know that borrowing ever larger sums forever is not sustainable.  We all know that something is deeply wrong with:

  • Total government expenses
  • Ever increasing debt that will never be paid
  • Defense (and offence) programs
  • Central banking, QE, ZIRP, and negative interest rates
  • Health care and Medicare
  • Taxpayer bailouts and bail-ins
  • War on Poverty, Drugs, and Terror
  • Welfare spending
  • And much more…


Because governments and central banks have been able to “extend and pretend” by printing a few $Billion or $Trillion to keep the system working, which maintains the money flow to the political and financial elite.  The elite are purchasing elections, legislation, and votes, and for this they expect to receive benefits from their investments.

What should we conclude regarding the above?

  • Sovereign debts will increase and never be paid.
  • But debt cannot increase forever. Hence there will be a reset.
  • Expect another crisis – even Jamie Dimon of JP Morgan says so. Remember the 1987 stock market crash, the LTCM crisis of 1998, the NASDAQ crash of 2000, real estate and derivative crash of 2006, and the financial crash of 2008.  Crashes happen and intensify as the financial system becomes larger, more complex, and more levered.
  • The global financial system is complex, connected and interactive. Safety will be elusive in the paper and digital worlds of fiat currencies and sovereign debt.
  • The next crisis is likely to be sudden and catastrophic.
  • Gold and silver will be “shelter from the storm” because they have no counter-party risk. They are the ultimate money independent of politicians, taxes, government spending, unpayable excessive debt, and the complex interconnectedness of an increasingly unstable financial system.

As Darryl Robert Schoon says, “Buy gold, buy silver, have faith.”


Gary Christenson

The Deviant Investor


12 thoughts on ““Suicidal Credit-Based Money System”

  1. Quoting the bible is like asking us to follow the teaching of Bilbo Baggins the hobbit. They are both well written works of fiction and contain no knowledge which pertains to the future, please keep both out a financial discussion..

  2. The real problem has nothing to do with politicians or monetary policy or central banks. The problem is that the majority of our people are in favor of free lunches, in favor of free services provided by the government, in favor of social security payouts in excess of SS taxes collected etc etc. The list is endless. The national debt of 17 trillion is not the real threat. The real threat is the astronomical obligation of the US government to payouts of Social Security, Medicare, Disability sum etc, all exceeding future tax revenue multiple times over. The major opposition to the gold standard does not come from the banksters. It comes from common people (and its representatives in congress) who would suffer terribly if we would go back to a gold standard. The credit based monetary system is a practical necessity in order to maintain social peace. It is that simple.

  3. The problem is NOT credit. Credit is a very good and useful thing.

    The problem is USURY — INTEREST. Any purported economy subject to interest will eventually go bankrupt. That is the design.

    Usury is genocide. Until we learn that, you can strangle all the kings with priestly entrails and it will not matter. Bankers are your rulers, now.

    • Interest is necessary to secure the incomes of the employees of the financial sector and to compensate for the losses caused by debtors defaulting on their loans. Asking for interest free loans is asking for free lunches.

    • Entrails – strangled with the entrails… as in internal organs, esp. the intestines.

  4. The problem stem from two basic problems,
    1, Which will be scoffed at; that if people cease to act in accordance with the Tem Commandments, then it is impossible to hire enough Police Officers to keep the Society on the correct track, so it is a failure of the Priests.
    and 2. Democracy is a system in which politicians promise that which the Society cannot afford in order to retain their power; it is not the best form of government and as yet we have not developed a civilised form and what is worse we are not even trying to. The pity of it is we are seeking to export it as though it is workable.

  5. I do mind you saying. Quotations from a 2000 year old fable are not helpful, and do not add to this discussion of real issues in the real world.

  6. The holy scriptiures contain good words, but were fabricated by ancient politicians for use as a “pacification tool” that keeps
    people’s minds contained in a channel. The bible(s) need to be left out of natural law.

  7. Good analysis; but with one exception.

    As Darryl Robert Schoon says, “Buy gold, buy silver, have faith.”

    Would you or he say that to the poorest members of our society? If you don’t mind my saying, the Holy Scriptures disagree; the future for both gold and silver is not bright.
    Those will be cankered. I.E. Useless!

    • You can take your holy scriptures and stick them where the sun don’t shine for when the reset of the financial system occurs blind faith in the bible will lose out to a privately held store of precious metals…….

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