The Emperor's New Clothes

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That’s the title of the famous short tale by Hans Christian Anderson, translated into over 100 different languages, well known and appreciated as the tale transcends different languages and cultures to the human condition, something everyone recognizes no matter where they are from.

I listened to this tale again just recently and it made me think about the current situation where very educated, professional and influential people are saying the recession is over, as a matter of fact they are laying future plans based on the recession being over, a similar condition exists around the world transcending culture and language, it’s that same human trait as described in the Hans Christian tale. 

The experts say the recession is over, who are we lowly people to disagree, certainly most people would like the recession to be over,  so if  “they” say so and provide snippets of statistics to show it, most people will be inclined to take their word for it but maybe in their hearts of hearts they know something is wrong.

The little boy at the end of the tale proclaimed "But he isn't wearing anything at all!" Suddenly those around realized that it really was that simple, he really just had no clothes on.  In our real life drama I’m saying the recession is not over, nothing has changed for the better and in-fact things are getting worse, and the truth is right in front of us, it’s that simple.

The below article describes how the New Zealand treasury are busy borrowing 250 Million dollars a week for our government, just to keep it running.  There are only 4 million people in New Zealand!  Yet the article tends to focus on how they raise the funds and how they must work hard to promote our bonds to do so, but not how crazy it is that we are borrowing like this in the first place!  See: Treasury office keeps NZ afloat

The recession is not over when governments replace “the people” as borrower, governments get their money from “the people” in the first place.  Will our government ever recover this money from tax payers without selling many major assets… I don’t thick so.

Even selling assets is more honest than what is going on in the US, I have suspected for some time that the major buyer of USD bonds has been the US itself! This would have been thought crazy only 1 year ago, yet they are doing it, and to a much higher level than  outlined in their “quantitative easing” program, this is Zimbabwe economics and it’s really happing. See this article for more detail (a must read I think)

Bottom line is New Zealand, UK and US are still spending more than they earn (now at an accelerated rate),  This extra borrowing is called “Stimulus”.  But how do you stimulate an economy that is dying of indebtedness with more debt! It’s not logical, it’s a lie that all should see clearly, its right out in the open, its simple, not complicated, you don’t need to be highly educated to understand this, you don’t need to be the top dog in the reserve bank to know this.  36+ years of spending more than we earn will not go away in 1 year… have we started to pay it back…No.   Have we at least stopped borrowing more…. No.

Lowering interest rates does make the burden more manageable, like transferring bricks from a back-pack to a wheel barrow, it’s easier to carry but the weight is still there and in-fact still growing bigger as more bricks are being added.  Commentators suggest that with the “recession over” interest rates will need to be pushed up to curb inflation,  the RBNZ likes to be imagined poised with their hand on the interest rate lever waiting for the first sign of recovery and inflation.   Reality is there is no way our economies can stand increasing interest rates, this would be like taking the bricks in the wheel barrow that have now increased in number and putting them back in the back-pack,  impossible to carry collapse will quickly follow.

Does debt really matter? Can’t “they” just print money and bail out businesses and even people?


Debt really does matter, if debt does not matter then neither does money, we cannot have it both ways.  Making debt not matter with bailouts, stimulus and self funding debt (printing money to buy bonds) is the path of hyper-inflation.  A path the US and UK are heading down, buying their own bonds means that debt obligations don’t matter, there is no limit to it, thus money changes from a limited token of exchange to a worthless piece of paper. Will NZ be following this example?

However I do think debt forgiveness is a good thing,  this is different to a bailout.  A bailout doubles the amount of money originally borrowed because the original amount is “out there” in the economy, the bailout amount is added making the pool of money bigger (Inflation).  

Shakespeare said “Neither borrower or lender be”
I think the lender must take responsibility along with the borrower.  However reality is our governments are not heading down this path, they are firmly on the bail and stimulate path, this is rapidly increasing the public burden and this will come back to bite.

“the borrower is servant to the lender” (Proverbs 22:7)

So who are the lenders to our government and population, what will they ask of our countries?

Debt is a task master, and like a servant indebted countries and people must ask their task masters first before they do anything, they are not free or flexible to changing situations.

It seems all too late to change the outcome now, the fireworks will come, ask yourself, are you prepared? 
Purging debt is a very good place to start.
(Matthew 6:24) (1 Corinthians 7:23)

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