The most relevant and likely example of a deflationary crisis results as a consequence of usury, or debt, otherwise known as “credit.” The only way a country can sustain inequality when its currency is highly valued is by providing an unprecedented volume of credit, which is why The United Kingdom is the most indebted nation in the world today (we’re talking “private debt,” not “public debt”). The same rule applies in an inflationary economy. When wages remain stagnant while the money supply expands, money flows into the hands of the few while the majority treads water in an ocean of high prices and excessive debt. Americans now own almost 40 trillion dollars in private debt, or over two times the GDP. That means we would all have to work a little under three years without any income to pay it off. If you were to add public debt to the equation, which - including intragovernmental holdings - exceeds the national GDP by roughly 1 trillion dollars, then the total United States debt today equals a little under 57 trillion dollars, or almost four times the GDP.
Our ancestors were well aware of the consequences of debt. Numerous groups were excommunicated from the church, exiled from The Roman Empire and denounced by prophets for the negotiation of loans at interest. It was considered exploitative, unnatural and abusive. Aristotle called it “the most hated sort” of money-making, “for money was intended to be used in exchange, but not to increase at interest. This term ‘interest,’ . . . means the creation of money from money . . . Of all methods of acquiring wealth, this is the most unnatural.” Thomas Edison, the cut-throat businessman and inventor, summed it up neatly in a New York Times article published on December 6th, 1921.
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.”
Economies suffer as a result of debt and inequality. That’s the bottom line. The stock market has little or nothing to do with it. The stock market is the biggest circle jerk in history. Yes, it measures profit, but it neglects to trace the origin and destination of those profits. When banks loan each other money - remember, today, those loans are issued at an extremely low interest rate - they loan 90 percent of every deposit, and so on. If those loans were being made to fund local commerce, this practice, which is referred to as fractional banking, could possibly help the economy, but like the money slushing around in the stock market, we’re unable to trace the origin or destination of those loans, and manipulation of the stock market is relatively easy provided you have access to the funds necessary for its execution. Jim Cramer did, and in a 2007 interview with TheStreet.com, an online boiler room he co-founded with Marty Peretz, the former Wall Street mogul confessed that hedge funds regularly engage in “pump and dump” and “short and distort” schemes, rumor mongering and price fixing. “Too-big-to-fail” banks, the engines that power the stock market, receive an annual 83 billion dollar subsidy from tax payers, an amount that’s nearly equal to the bank’s annual “profits.” That same subsidy amounts to 830 billion dollars over ten years, the exact amount targeted by across-the-board budget cuts, the domestic austerity measures referred to as “sequester.”