Bernanke is saying US debt default would be a major crisis. Gold is surging because it is unimaginable that the US can sell of treasuries under these circumstances, also while it has already been buying them (printing money) for some time.
Oil/Credit
It is a recurrent theme of this blog to point out that the debt represents burned oil, bought with the dollars issued, and that there was never an intention to repay it. Debt carrying interest is just a way to keep the balance tilted towards the issuers of money. Of course the notion that new money would have a cost (interest) was only thought up because 1. the government and banks wanted to print unlimited amounts and 2. They needed a mechanism so that spend money did not stay in circulation, but would at one point or another return under the control of banks.
So anyone holding bonds and other instruments based on them should know he/she is holding a piece of the economy that is a bogus representation, but has a function in tying everyone in the same extortionist scheme, which is a sure win, because people can’t make oil, gas, coal, plastic. Most other stuff remains and can be sold on, like steel or aluminium. Fuels can’t be sold on so a permanent debt and deficit is created the moment it is burned. That permanent debt is a bogus debt.
Confusion on Wealth
Below an advisor of Ronald Reagan, the one the invented ‘trickle down’ economics is allowed to present the fact that the rich now own more wealth than was created in the entirety of human history before the Reagan era. Of course we only need to look up the newspapers to see that this can not be true, because a vast amount of wealth has been destroyed and depeleted. Animals and fish stocks, rainforest and water basins are a fraction of what they where when this man first started to make MONEY the only important thing in the world. Together with Reagan deciding that the climate change problem was to inconvenient to take on and was better ignored. This is where the Oil/Credit system truely took off. The sad irony is no mountain of money in any shape or form is going to restore the earth to a viable planet. It takes WILLPOWER, WORK and INGENUITY.
Shocking, but totally irrelevant
Throw the switch
But back to the topic: As everyone still believes in the debt and it’s effects the international financial system can basically throw the switch. It can shut down and make trillions of dollars dissapear overnight. It has to, because the OIL is not there to buy if the money was released in circulation. Energetically the world can not bear the purchasing power of the financial reserves, so it has to be destroyed. The quandry is what to do with the ordinary citizen that believes he is saving for his pension. Aknowledging the irrelevance of the big debt would remove the power structure of the financial system. That is not what anyone in it wants to happen, which is why the debt game is kept going. One way to resolve the issue short term would be an announcement of a huge oil find in Alaska which would be sold to China for a couple of trillions. In reality there would be no oil, but a covert military standoff.
Maybe the debt ceiling problem is about the military sovereignty of the US. The army has until now fought oil wars, but does it want to? The Pentagon has made many attempts to drive renewables, algae fuel for planes, ammonia plants for vehicles. It is needed to protect the debt accumulation, because it needs to ensure the oil is delivered usually against the will of the countries involved.
The justice system has just alligned itself with Wallstreet, a bad sign, but it is hard to see how the Penatgon be bested by anyone. They make the rules. Some point out that a default would allow for special measures and cuts, giving a lot of power to Obama.
The Dip That Saved Life On Earth
The issue should not be debt, oil or money at all, it should be how to get renewables into a self supporting growth model, how renewables can power manufacturing of renewables. Only renewable energy can sustainably power a debt free economy. It seems a descendance to a lower level of organization, one we could see if the US financial might collapses, may be usefull in finding a new higher level of organization. So a dip to local selfreliance on renewables back to a world economy that uses the abundant free energy instead of a poison to our oceans and atmosphere.