Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Mathematical calculations regarding our compound interest based currency system (2)

In Part 1 I have tried to show the finiteness of our compound interest based monetary system. It is probably new to many that there even exists a limit and that the limit is reached relatively quick.

Oh, you think there is an error in my last post, and the price of a kilo of gold would of course be much higher and so on .... Well, then you find it quite normal, 2,000 years after the introduction of a currency to pay for loaf of bread 1.16 * 1034 $?

Now you can argue that, from time to time one could eliminate some zeros - not uncommon in African currencies. This would be only a "technical" measure and has no a disadvantage.

But in principle, for every dollar paid as interest, a debtor must exist that is willing to take a loan and pay interest. And with an increasing debt burden, it will be increasingly problematic for the debtor to pay the interest on the debt, unless the loan is pressed by inflation in value. By pure elimination of trailing zeros neither debt nor credit worth is lowered.

Situation today:

Once the community of states has abolished the gold backing of the currencies bit for bit in the course of the last century, the public authorities have begun the unrestrained expansion of money. Since the monetary expansion is currently much faster than the inflation can depress the value of the debt, there are only two ways out:

  1. National bankruptcy
  2. Acceleration of the inflation rate in the coming years

Both scenarios are not refreshing.

U.S. government and the FED are currently working hard on Scenario 2. The U.S. government creates daily deposit money and paper money en mass. Creditors are increasingly no longer private U.S. Citizens or private citizen of the world or bond funds (-> withdrawal of Pimco). Chinese also retreat, and want to establish the Yuan as future reserve currency. Emissions from the U.S. government are increasingly drawn exclusively from the FED.

And this is the current plan. The state assumes the role as the enlarger of the volume of money, the Fed buys government bonds issued (left pocket, right pocket) and in the event of the national bankruptcy they will agree to delete the bonds. A refund would be a monetary contraction and this would have a depressive effect on the economy. And that is not desired by the government.

The probability for the scenarios is nearly 100 percent in a period till 2030. Each investor must therefore include this fact in his mid to long-term planning.


Avoidance of U.S. treasury bonds and dollars in cash and book money holdings of any type (currency account, savings account)

Read the next part, how you can protect your capital against the coming devaluations (of the U.S. Dollar, but also the Euro).