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SOVEREIGN MAN

Bankrupt nations try to stop the future from happening, fail

May 25, 2011
Santiago, Chile

Debt is slavery… or at least indentured servitude of the worst kind.  That looming mortgage, the high interest credit card debt, the short-term car loan– these are the forces that keep people from breaking free and taking action.

Ironically, debt begets more debt. According to FinAid, the average US student loan debt for a four-year private university graduate is nearly $36,000, and $24,000 for public. Throw in that first car loan and maybe a mortgage, and suddenly you’re staring at hundreds of thousands of dollars in demoralizing claims on your future income.

At this point, most people figure… ‘hey, I’m already in debt up to my nose, might as well get in up to my eyeballs and buy a new plasma screen on credit.’

Debt is an enormous psychological burden that influences life’s major decisions. It’s why so many people stay committed to jobs that are unfulfilling in cities they detest under conditions they find disheartening. Nobody wants to rock the boat too much… take too many risks and you could lose your job, and hence the ability to make those monthly payments.

This familiar story has been playing out across the developed world for years. This is not an ill, however, that exclusively affects individuals and families. Even at the macro level, debt has the power to subjugate entire nations to the whims of their creditors.

Enter the IMF.

In July 1944, world leaders gathered in Bretton Woods, New Hampshire to be dictated terms of the new global financial system. The US dollar was set as the global reserve currency, and the International Monetary Fund was established to shower the world’s nations with the dollars they needed to participate in this system.

Like most governmental and non-governmental organizations, however, the IMF eventually took on a life of its own.

(The CIA is a perfect example of this; formally established in 1947, the CIA was charged with… wait for it… being the ‘central’ agency to coordinate US intelligence. It grew quickly into its own beast, culminating in the creation of the post-9/11 National Intelligence Directorate. It’s job? You guessed it: being the ‘central’ agency to coordinate US intelligence.)

Over the years, the IMF became the roving economic police force of the ruling class, coercing developing nations to take enormous loan packages they had no hope of paying off.

As a result, the local IMF (or World Bank) representative in developing countries became extremely powerful figures. Leaders in poor countries were so terrified of loan default, the IMF was able to shape policy and allocate national resources as the west saw fit.

Clearly the tables have turned.

By 2011, the IMF’s biggest customers have become ‘developed’ (i.e. contracting) countries like Greece which are relying more and more on the generosity of China. Now with the IMF’s former chief locked up in disgrace for the foreseeable future, the race is on to see who will replace him.

The new order of things is very clear. The western hierarchy of the past is insolvent, and its capital has migrated south and east. Western leaders refuse to acknowledge this reality and are clinging desperately to antiquated institutions like the IMF in order to retain control of a now defunct financial system.

Newsflash: the IMF is only relevant to western leaders who live in the past. French Finance Minister Christine Lagarde’s official bid to become the new IMF chief only shows how pathetic their intentions are. It’s like someone trying to take command of the Titanic as she’s headed toward the ocean floor.

China, the world’s second largest economy, is routinely relied upon to bail out the west… yet it has a paltry 3.65% of the IMF’s voting power. Europe, however, is arguably the most insolvent region on the planet, though it insists on remaining at the helm. Ultimately, the market doesn’t care and has been orienting itself towards the developed world for years.

Little by little we are seeing signs of a revolution in the financial system– grumblings from Zimbabwe about establishing an asset-backed currency, new exchange-traded gold contracts in Asia, more bank wiring routes that bypass New York City, and corporations in the developing world issuing debt on the international market in local currency with ease.

I’ve written extensively that China’s renminbi is being increasingly considered a reserve currency to compete with the dollar and euro. Other developing countries have already entered into swap agreements to accumulate renminbi reserves, and even western companies are issuing renminbi-denominated debt.

There are signs of more liberalized exchange controls all the time; it’s possible for individuals and corporations to hold savings in renminbi through a variety of ways… you can even walk into the New York City Bank of China branch and open an account.

The latest move is American Express’s new renminbi-denominated Travelers Cheques– a ‘cash equivalent’ issued by a non-Chinese financial institution. This is a major step, and its implications are far, fare more important than whichever white person is jonesing to head an irrelevant organization of the past.

Western leaders simply don’t want to accept their loss of primacy; they’ve become enslaved themselves, not only by the insurmountable sovereign debts they’ve accumulated, but by their stubborn refusal to acknowledge the simple reality of a new system they can’t stop and don’t control.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Chuck B.

    Like many western institutions, the IMF is a product of a bygone era; content with maintaining the status quo with no ability to innovate and adapt. Someone was recently quoted calling the IMF a “post-colonial relic”. The European establishment is so desparate to maintain control of it for obvious reasons – they’ve done such a great job running their own countries into the ground and they don’t want outsiders turning off the tap since Europe is set to be the IMF’s biggest customer.

  • Modelerr

    Simon,

     

    In today’s blog you stated:

     

    “There are signs of more liberalized exchange controls all
    the time; it’s possible for individuals and corporations to hold savings in
    renminbi through a variety of ways… you can even walk into the New York City
    Bank of China branch and open an account…”

     

    I checked NYC BOC’s website and their FAQ specifically
    states: “…No. We do not provide RMB accounts or currency exchange service
    between RMB and USD.”

     

    Can you please explain this contradiction? Thanks.

     

  • http://www.bzemic.com/impossibleInstinct/ steve ward

    Thanks Simon for a well thought out article, it funny but i keep seeing a connection between the west loosing power and how much they are trying to control where American’s put there money at.

    for instance im a global person i dont mind getting taxed on my money. the problem comes from when im not allowed to say open up a Swiss account because im a American.

    Or doing a Tim ferriss Geoarbitrage with my money and get grief for it. that ok, it just means that im doing something right or i would not be pissing off so many people

  • http://www.mynotetakingnerd.com/blog Lewis LaLanne – NoteTakingNerd

    My brother just graduated from a private university and has hit the real world with a big hunk of debt. But thanks to guys like you spreading the wisdom that you do, I think I can help him stay off the credit cards. Thanks for saying what few want to Simon. I’m grateful for what you share here!

  • http://www.facebook.com/sefton.hanley Sefton Hanley

    The opening part of this piece is so true, debt is a form of population control, it creates the idea that your ‘invested’ in the house you dont own but are making payments on. People are less likely to tell the boss to go screw himself, or to walk out and explore the world. Its a way to make people think they are free while keeping them in a form of bondage. 

    • Outtahere

      So right! You never really “own” a house, unless you buy it outright with cash (rarely possible in the US). If more people rented and had less “stuff” and debt tying them down, they’d have more mobility. More mobility means you can tell your horrible boss/slave driver to go jump in a lake. That’s one way to take back our country and our jobs, IMHO.

      • erik leigh

        no one owns anything outright – ya think ya own the house 100%? ya got land tax, insurance, council rates, levies. the moment you stop paying these – see if you still own that lousy house.

  • http://evilspeculator.com molecool

    This goes along very well with this post: The Extended Confessions Of An Economic Hit Man: http://www.zerohedge.com/article/extended-confessions-economic-hit-man

  • ct01

    Debt caused my marriage to crash and burn. It wasn’t the only problem but it was one of the biggest.

    And yet I have a good friend who is in debt up to his eyeballs and he says it has no effect whatsoever in making his marriage difficult. So it’s different for everyone I guess.

  • Mark

    “Debt is slavery” How true.  Eight years ago I bought a house.  If I had only knew. I could have moved to a nice developing country and live a debt free, stress free life with my down payment.  I have my house rented out and I am learning to teach English as a second language

    • Outtahere

      Your story sounds almost identical to mine. I’m moving overseas in 4 days. TEFL is the natural way to go. It’s a built-in job and you can often be your own boss. Good luck!

  • Lonejack

    Individuals, fortunately, still retain the choice not to borrow. Compared to personal debt, taxation is by far the more onerous form of slavery.

    The power of The International Monetary Fund, The World Bank, The Bank of International Settlements, and central banks relies on the ability of governments to confiscate the fruits of their subjects’ labor in order to repay interest-bearing loans which they conjure from nothing, mostly by typing entries into electronic ledgers, and which enable first their semi-anonymous financier overlords and then their client tyrants to acquire tangible wealth and effective, though not necessarily nominal, control over more and more natural resources and more and more human capital, without ever having to lift a finger to create honest value in exchange.

    These institutions should not even exist. It is a waste of time to discuss their apparent merits or failings. However, they do exist, and, as long as people can be duped and manipulated, such institutions likely will continue existing far longer than we believe they should.

    In the Far East, they will likely replicate or reincarnate, perhaps with different names, but with identical functions. The cartel which controls them has long since quietly and stealthily planted its “advisory” agents in the upper political and economic echelons of the Asian Tigers.  

  • Deuce

    Best title ever!

  • The horses are coming

    We are simply seeing the fruition of a plan long ago imagined: Control the 1st world sheeple through debt.  Sad but true.  Even sadder is that I know what the future of America looks like – current day New England.  For America it all happens in New England first.  It was the first permanent colony, it had the first universities, the first to industrialize then the first to deindustrialize.  When we went through the recessions of 1981-82, 1987, 1991-91, and 2001 our recoveries were “statistical” recoveries only with no increase in jobs or wages.  NE historically had the highest wages and highest standard of living, but no longer.  During the recoveries following these recessions, much of the rest of the nation actually did have new job creation.  But the rest of America has now caught up to NE.  This “recovery” is statistical only, no real job growth, no wage growth.  Just as NE had been de-industrialized, now the US at large is de-industrialized.  Just as factories left NE for the South and Midwest, never to return, factories have now left the South and Midwest for 3rd world countries, never to return.  So the happy future for the US is chronic stagnation.  Lots of over education, over qualified people fighting it out for a few low paying jobs, becoming dependent upon the state all the while being told how wonderful everything is by the government and the controlled main stream media.
    Cheers.

  • Jim

    Debt converts a lender to being a slave until the lent funds are returned — the borrower becomes free when the funds are lent.

  • Karikattil

    Ever since Christopher Columbus opened the way out for the western world, the rest of the world has lived in fear. The local population in every continent has been slaughtered, their land and resources taken over by the so called first world. People have been bought and sold, their resources became the property of the white man.Often with the support of a few bought and paid for locals!

     All this with the control of weapons of mass destruction. The infighting among the western powers saw many wars and the end of second world war saw the collective dominance of the western world, Let us stand united, let us not fight among ourselves, let us screw the world together : Nato, CIA, World Bank and IMF were created by the Western World to enslave and to rule the world.

    The rise of BRIC nations particularly India and China going neuclear spoiled the plans they had to be befriended.

    Money started flowing in the opposite direction, so did jobs and manufacturing… The west is paranoid of others procuring even a tiny fraction of their stockpile of weapons!

    Does the west need NATO? To defend what? 1200 military bases? Maintained with borrowed money? Like the World Bank and IMF, NATO and CIA will soon be in the dust bins of history before long. But wait they have a lot more killing to do and enslaving to accomplish before that happens!  

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