We are now in the final stages of a journey which by future historians will be seen as unreal as Lewis Carroll’s “Alice in Wonderland”. Just like Alice called the “Mad Tea Party”, “the stupidest tea party she had ever been to”, the last 100 years could be called the Craziest Extravaganza in history. At the end of the story the Queen of Hearts shouts “Off with her head”. But Alice is not afraid and calls them all “A pack of cards” before she wakes up.
Although the story was written 150 years ago, had Alice dropped down the rabbit hole to the current fantasy world, she would have called the current kings and queens, aka (also known as) government heads and central bankers, not a pack of cards but a giant house of cards. Because we are now at the end of a tea party which in the last few decades has become increasingly extravagant.
WHO WILL PICK UP THE TAB FOR HISTORY’S BIGGEST TEA PARTY?
The problem with the current tea party is that there is no one to pick up the tab since the king and the queen have had to print and borrow $250 trillion to pay for ink in the printing machine which is running dry.. But not only that. They had to create lots of funny financial instruments, to the tune of $1.5 quadrillion, which they knew would blow up one day and cause immense misery. They called them derivatives so that no one would understand what it meant. Finally they promised the people future medical care and pensions of at least $500 trillion, knowing that they could never pay it. But it would keep the people happy until they found out that it was an empty promise.
So this has been a really fine tea party. The king and queen and their friends, the bankers plus the top 0.1% of the population lived in luxury. And ordinary people were totally unaware that they were liable for this debt. Of course it wouldn’t have mattered if they knew, because they could never repay it anyway.
THE MOST INGENIOUS INVENTION IN THE HISTORY OF FINANCE
Wonderland slowly ran out of money over a 100 year period. But the debt grew much faster when in 1971 the king, (aka Nixon), decided to replace gold with paper money. Until then all money issued was backed by gold. But the king and queen and their banker friends loved the new era when they were no longer fettered by the discipline of running a balanced budget and could instead just print pieces of paper that they called money. This was a great period for the king and queen and their close friends. Since they got the money first, whilst it still had value, they could buy what they wanted. Once it reached ordinary people, the paper money was already debased and worth a lot less. And the taxes of the people had to increase from virtually nothing 100 years ago to 50% or more if all taxes were included. This was necessary to finance the deficit spending and service the debt.
The king and queen rewarded their banker friends generously for this ingenious invention. Rather than using expensive gold as money, they could just print whatever they wanted at zero cost. They never understood of course, that if you print money at zero cost, it has zero value.