Learn to Be Grateful

Learn to Be Grateful

Our days in this world are limited, so be grateful for every day you have. Notice the small things around you and appreciate them. Often people don’t notice the good things around them until they are gone.

Often people don’t notice the good things around them, until they are gone. (Photo by Petri Kuittinen, 2015)

Continue reading


There is an Easy Solution to the Debt Crises

In recent years the growing debt and debt crises have been dominating the economic discussion the mainstream media and social media. Europeans argue whether Greece debt should be forgiven or not. The sad reality is that the amount of debt, not just in Greece, but in most countries of this planet, have reached such levels that it is impossible to pay it back in full with the current money supply. I will present a simple solution to this problem and explaining outcomes of the alternative solutions.

Death Spiral of Economy
The Death Spiral of Economy, enabled by the foolish or fraudulent politicians and fractional reserve banking.

I have been previously writing about photography. I feel that this is the most important blog article I have ever written. I urge people to read it and share it. The average Joe cannot do much alone, but together we maybe can bring an end to this madness, which is now holding entire nations and millions of families in a vicious death grip. At the same time the superrich elite, the 0.01 %, is getting richer than ever. The top 1 % and in some countries even the top 10 % is still doing okay, but the rest are suffering. Every new generation is more indebted than the previous one.

A Brief Lesson of History

I wish people would study more history to learn from the mistakes, but also remember the wisdom of old wise men. Nowadays the school text books give so brief treatment of history, basically just listing some major wars, people and years. This kind of superficial history is merely a parrot trick. A parrot can tell that USA declared independence in 1776, but most people do not really understand or value the meaning of the word independence or freedom.

Ancient Egypt

There have been debt crises in the history of mankind already for thousands of years. They already occurred in the Ancient Egypt and Mesopotamia. People borrowed more than they could pay back. In the old times the debt crises were solved by cancelling the debt, in other words either fully or partially forgiving the debt. This lead to a slight cut to the upper class, but a thriving economy for the rest until next debt crisis happened. One must remember that many of the ancient civilizations lasted far longer than any of the Western democracies have. E.g. the Ancient Egypt lasted around 3000 years, from 3150 BC to Roman times in 30 BC.

Rise and Fall of Empires

Rise and fall of empires

All empires have so far followed the same pattern, which has been illustrated by several historians. Each empire from Ancient Rome to the British Empire has followed the 7 stages in the life cycle of a great country:

  1. The age of outburst or pioneers
  2. The age of conquests
  3. The age of commerce
  4. The age of affluence
  5. The age of intellect
  6. The age of decadence
  7. The age of decline and collapse

USA is a global empire now on its final stage. The final stage includes the military over expansion, which drains the resources of the nation. USA has 700-800 military bases around the world in over 60 countries. USA holds a great influence over other the other nations using both its military and political power, but this also comes with a terribly high cost. Big part of the spending is fueled with debt. One sign of an empire being at its final stage includes the destruction of value of its own currency, which you can see from a figure below.

In 100 years U.S. Dollar has lost 95 % of its purchasing power

I will later in another blog post explain my own theory, why no global empire has ever been able to rise from its ashes like Phoenix bird and bloom again. I will also make yet another blog post of the predictions I made in 1990-1991 about the next 100 years, which includes my visions of what will happened to USA in 2010s, 2020s and 2030s.

United States Federal revenue vs spending 2012

There is More Debt than Money

The total amount of debt on this planet is roughly 2.5 times bigger than the total money supply. You might ask how it is possible to have more debt than money, but I have already explained that in another article called Fractional Reserve Banking = One of the Biggest Frauds of Mankind. Another wise person wisely put it:

“Commercial banks create money when then make loans to individuals, businesses and governments. But when they do this, they create enough money to make the loan, but don’t create the money that will be needed to pay the interest. Thus, if a bank creates $1 trillion in loans with interest at 2% and waits for 20 years, the total amount of debt  in the system will have increased to nearly $1.5 trillion. This is what has been happening for centuries, but the effects of that compound interest have now become totally out of control.”Simon Thorpe

The figure below illustrates the total debt vs money.

Private and public debt, total debt per country, money supply per country. Courtesy of Simon Thorpe 2013

Some countries are more indebted than others. For example USA has 3.5 times more debt than its total money supply. Most Western economies have 2-4 times more debt than they have money. Chinese people are well known to be keen on saving money. China has 0.78 Debt to Money Ratio, but these numbers are from a year 2013 blog post. Since 2014 China has been slashing down its interest rates to artificially prop its economy. In July 2015 China just created 445 billion euros of new money out of thin air to stop the collapse of their stock market. I have no access to the latest Chinese figures, but it seems China is on it’s way to join the club of countries, whose governments try to desperately make sure the financial elite doesn’t lose any of their precious money, while the rest are screwed. I don’t think it is possible for China or any other country to stop the housing bubble or the stock market bubble from bursting without trashing the value of its own currency or creating other very severe effects, which would been even worse.

Fiat Money is an Illusion – Yet a Great Master to Enslave People

Most of the money on this planet is not real money. It is just bits in a computer system and speculative financial instruments, like the derivatives. The amount of coinage + paper notes (= cash money) is surprisingly small as you can see from the figure below. And history has shown that all fiat money, meaning every single currency used now, will eventually go down to intrinsic value, which is close to zero. Thus the only real money is one, which is tied to some physical asset, like gold, silver or oil.

Illusion of money: derivatives, assets, debt, stocks, currency, cash, silver and gold

Possible Solutions

There are three basic solutions to solve the debt problem:

  1. Continue with the current path
  2. Increase money supply to pay back the debt
  3. Cancellation of public and private debt

I will now briefly address the positives and negatives of each. The first one is politically the easiest choice. This is what majority the political parties from left to right are doing. There are talks about austerity, cutting of benefits, cutting of government work force and salaries etc. At the same time, each of these countries is every year spending more than the previous year and becoming more indebted, so the public spending is clearly out of control, despite the “cuts”. These same countries are taking an increasing number of immigrants, who mainly come from Africa and Middle East. The vast majority of them come to Europe in wish of a better life, mainly richer life and many pay 10000-20000 euros to international human traffickers to get them into Europe. This has already caused a lot of civil unrest and will surely continue to do so. And of course it will increase the expenses.

( Side Note: Most Western countries have just 1.4-1.9 babies born per each woman, meaning that without immigration their population would be soon shrinking. And the old baby boomer generations are bigger than the new ones. The newer & smaller generations need to pay the increasing pensions and health care costs of the aging population. Many leading politicians suggest increasing any sort of immigration would solve this problem, but I will explain in a latter blog post, why job-based immigration can be beneficial to a country, while immigrants who mainly come to seek for richer life and better social benefits just tax the social welfare state even more )

Now let’s look at the debt more carefully:

National Debt and Interest 1 Wallace
US National Debt
Main holders of U.S. debt

Democracy Failed around the World

A political leader, who does harsh cuts in spending, will not be a popular one. Politicians in general care more about winning the next election than the long-term benefit of their country. Every successful political party is populistic or disguises well to be so. It is so easy for politicians to lie that they are cutting or saving, when they are still every year adding more debt on top of existing one.

The democracy truly failed, just like it did in Ancient Greece. I recommend people to read the writings of Plato, one of the greatest philosophers and thinks of all times. His teacher, the great philosopher, Socrates was condemned by a democratic jury to drink poison after criticizing democracy. Plato fled in fear and wrote the Republic, where he sees democracy as one of the failed forms of state.

Every government is almost guaranteed to spend more than the previous ones. Thus the already over indebted countries are getting more and more indebted. The interest payments of the increased debt consume more and more money. Due automation, globalization and many other factors more and more people will fall out of the labor market and will be on the mercy of their governments, receiving some unemployment benefits, food stamps. Logically these people will vote for those politicians who promise them more. Almost everybody thinks they deserve more and more.

The media is full of advertisements and messages, making people want more and more, whether it is physical goods or experiences, like a trip or a party. This will lead to even more debt. The lust for debt is like an addiction. And the vast majority of the people living Western world are addicts. And the central bankers and leading politicians are like drug dealers as they benefit from this status quo. And some leading economical experts give such messages, which are then interpreted by the mass media and politicians that having more debt is not a problem for a country.

Bankers of course want to get richer and richer by any means and gamble with the money people deposited to their banks and give loans to such individuals who are surely unable to pay them pack. When this threatens life of a huge commercial bank, they yell for the governments to help them as they are “too big to fail“. The central banks and the governments give more and billions to the banks, who continue this game. The death spiral of economy is ready. And you know who the real rulers of this game are.

The pyramid of finances and control.

The Biggest Depression in History – 2008 and Continuing

And unlike the previous depressions, this one we face now will not just last few years or a decade. I predicted in early 2008 that the current depression would at best last at least 10-15 years, assuming total rebuilding of the financial system, but I told my students that would be highly optimistic and highly unlikely scenario. A much more likely scenario is that the current depression and economic turmoil will last at least a generation of more. That is why I call those who were born 1990 or later as the lost generation (those born 1967-1989 are the payer’s generation and the 1940-1966 is the greedy generation).

Increasing the money supply to pay back all the debt is not always politically easy and creating too much new money too quickly can create dire consequences. First of all there are countries, like the Euro zone, which do not have direct control of their own currency, but are controlled by the European Central Bank (ECB). The Federal Reserve Bank (FED) is actually not an USA government entity, but a privately owned power of its own as well and it is controlled by the financial elite and their selfish interests.

Anyways, to pay back all the debt we would need to create roughly $100 trillion money on this planet. That is 6 times the Gross Domestic Product (GDP) of USA. Such massive creation of new money would lead to serious inflation. If you increase the money supply twice its current worth, you can guarantee that sooner or later almost all the prices will at least double. This assumes that the money goes into circulation and not into the vaults of the few super rich Scrooge McDuck, who rarely spend a dime. This option would risk hyperinflation, which would mean total destruction of all bank and money savings. Money would revert to its intrinsic value, which is close to zero. Well, you can always use paper money as a wall paper or toilet paper or burn it to heat the houses, just like they did in the Weimar Republic in Germany when the Deutch Mark had hyperinflation.

A woman heating up the oven with money.
Zimbabwe is a warning example of hyperinflation.

Cancellation of All Debt

The third solution is simply to forgive all debts, public and private. This wouldn’t mean just pardoning a few indebted nations, like the Greece or USA, but forgiving everyone. One could describe this as starting everything afresh from a clean slate. I will explain the benefits of this solution:

Currently many families and countries are struggling under their debt load. Due the housing price bubble, many young families were either forced to take a huge loan for their home or live on an expensive rent. Many have taken credit to buy things they needed or thought they needed.

Despite the historically low interest rates, many Western countries are forced to spend 15-20% of their entire budget just to pay back the interest. The central banks are forced to stay at 0 % or near zero interest rates for decades, making saving unfeasible for masses and fueling even more reckless spending. Even a slight increase of interest rates, let’s say 5 % hike up would bankrupt any Western economy and create serious civil and political unrest. I remember a time when Finnish banks paid much higher interest rate for savings account and the mortgage interest rates were well above 10 %.

Now imagine if any country, including your country would become debt free. It could spend billions more, not needing to pay interest rates. This would mean the country could take better care of its weakest. Give decent housing + basic means of living for the poor, have better public health care, education and so on. Small scale and middle sized companies could use the spared money for investing on things which create growth instead of making the banker’s wallets thicker. Normal families would have more money to spend, meaning small scale businesses, shops and services would boom. More people would have jobs.

The down side of forgiving all debt would mean major restructuring of the entire financial sector. This is no small undertaking and would require the co-operation of governments around the world + the smartest altruistic minds of this planet. It would mean many current financial institutions would cease to exist as they are. It would also mean significant money loss to the financial elite. But the superrich would still be filthy rich. They would still have their mansions, villas, yachts, luxury cars, private airplanes, LV bags, jewelry and so on. It wouldn’t necessarily mean wars, which destroy big part of this planet.

We have had examples of complete or partial cancellation of debt. For example after the second world war (WW2) Germany was in ruins. Other Western countries pardoned German’s debt in 1947-1953 for a sum which was roughly 280 % of the GDP of Germany. After getting most of the debt forgiven, Germany has been the financial super power and engine of Europe.

Occupy Wall Street protestors

I hope more people would understand my solution. Instead of wasting their time arguing that “my political party” is better than yours, fighting between the left or right, people should work together towards a common goal. Instead of shouting and protesting many different things, focus on one major message: Forgiving the Debt.

In order to have jobs and healthy economy we need to significantly reduce the debt burden and stop this mad debt addiction. Talk about this with your family and friends. If this resonates with you, share this article on social media. Maybe someday the public pressure can spark serious talks and negotiations to restructure the entire financial sector into a more healthy one. Restart again with no debt. Wipe the slate clean.The pessimist inside me says this won’t happen, at least not on my life time, unless there are some extraordinary dire situations (= catastrophes and world war), followed by revolutions.

Thanks for reading this long text to the end. What do you think? How would you solve the debt crisis problem?

Disclaimer: I am not proposing for countries nor private individuals to take more debt just in sheer foolish hope to have it all pardoned soon. The examples of highly indebted countries and private individuals are scary and tragical. I have no debt myself, besides my house mortgage, which I intend to pay back fully in less than 10 years. I hope this mad love with debt is coming to it’s end.

Fractional Reserve Banking  = One of the Biggest Frauds of Man Kind

Most people, including politicians, do not understand how the banking and our monetary system works and this creates a lot of misconceptions of the economy in general. I will try avoid any complex terms and explain on layman’s terms how the modern banking works.

Most people falsely assume that when you deposit money to a bank, the bank actually saves the money in its vaults. Thanks to the fractional reserve banking the bank needs to keep only a small fraction of the deposit and it can spend the rest of it as it wants. The bank can use the money to speculate on derivatives, stock, government bonds or financial instruments or simply lend the money to others.

Fractional Reserve Banking Explained

Visual explanation of the basic fractional reserve banking cycle.

Let’s assume the fraction which the bank is obliged to keep is 10%. If a person A deposits $1000 to a bank, the bank must keep 10 % of it, namely $100, but it can lend the remaining $900 to person B, who can deposit the money to bank. The bank needs to keep 10% of the $900, namely just $90, meaning it can spend $810 and so on. In just 3 iterations there is $3439 in the system and the bank has merely $271. What happens if A would draw out all of his money as cash? The bank doesn’t have enough money to allow that to happen. Luckily most customers do not want to draw out their money at same time and this very fragile and fraudulent banking system can continue. But in a matter of crisis, like the recent events in Greece have demonstrated, people flood to Automatic Teller Machines (ATM) to draw out their money. The bank doesn’t have enough reserves nor cash money, thus European Union and European Central Bank + International Monetary Fund (IMF) had to come to rescue Greece.

Henry Ford on our banking system
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford

To make matters worse, the reserve is much lower than in the example above. In the euro zone the reserve requirement is mere 1% since 2012 (it was 2% before that). That allows the banks to multiply the money almost 100 times! This is the fuel of the current boom-bust death spiral economy. The fractional reserve banking has led to a situation that there is much more debt than there is money on this planet. It is simply impossibly pay back all the debt without dramatically increasing the money supply. Creating lots of money to pay back all the debt would lead to serious debasement of the money, meaning money would lose big part of its value. People with savings would suffer and prices would double or more. In worse case it could lead to hyperinflation.

Believe it or not, banks can legally create money out of thin air.

Another false assumption to banks happens when a person loans money from a commercial bank. Most customers assume the bank is actually lending the money it owns, but the loaned sum just appears on the bank’s balance sheet. In other words new money was created into the system. And the bank is asking interest to pay back the money it didn’t own in the first place! If any normal company would operate like commercial banks do, that would be called “cooking the books” and those responsible of it would go to jail. I would call this a totally fraudulent system and any politician worth his salary should demand to abolish such system. Instead the banks enjoy the highest support from the world government.

After the 2008 the central banks have dramatically increased money supply to the commercial banks and started to buy back their own bonds. This is same as creating money out of thin air. Most of the this money went to the biggest banks and thus to the financial elite. And the sums I am talking about are trillions. Why haven’t we yet hit hyperinflation?  Simply because there is so much debt on this planet and perhaps all the super rich elite haven’t yet spent all that money, thus it hasn’t trickled down to the lower levels of the economic pyramid.

Trickle Down Economy Doesn’t Work as Advertised

Those who are first to receive the newly created money benefit the most out of it. Thus if the vast majority of hundreds of billions which went to “save Greece”, actually went to the commercial banks, the main owners of the bank would the biggest ones to benefit from this. Trickle down works. It just takes a long time, many years, before the money money reaches the lowest levels of the pyramid. During that time the money has lost big part of its purchasing power. Thus the elite get richer, because they can buy more with the same money. The current system is totally rigged for the elite.

How Trickle Down Economics “work”. The richest get richer, the rest goes down.
Giving aid to the elite gives very little for the poorest


In my next blog article I will explain the economic turmoil we are experiencing now and solutions to the current debt crisis.