The definition of insolvency

Imagine that you maxed out your credit card, your line of credit, and that you are late making payments on your Visa, your car loan, your mortgage, and all your other bills.  The bank comes to you and says if you don’t pay your credit card bill, your car loan, your mortgage, and your line of credit, we will seize your car, your house, and anything else of value that you may have bought with the credit card.  Now you look at your bills: they are $3500 every month.  But your monthly net income is $2000.  You’re insolvent.

Timothy Geithner, the Treasurer of the United States says that if Congress doesn’t increase the debt limit the United States will default.  Why?  Because the bills are higher than the income. The United States is insolvent.  This is the definition of insolvency.  And Geithner is not lying.  He is, after all, working for the Obama Administration.

So you say to the bank:  Ok.  I’ll be able to pay my bills.  Just let me start another line of credit, and I’ll be able to make the regular payments on all my bills (mortgage, credit card, old line of credit, and car loan) using the new line of credit.  The bank says sure.  Then starts handing out the money.  That bank is called the Federal Reserve, and it is monetizing the insolvency of the United States. When this happens, hyperinflation follows.  It is just a question of doing the math.

(Hat tip:  Monty Pelerin, “The Government is Like NPR pimped by Tim Geithner“)

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4 thoughts on “The definition of insolvency

  1. I think these guys are clinically insane. Any normal person would be called such if they showed up at any bank with that kind of crazy talk. I’m all maxed out on debt, but hey, no problem, I can use my new Discover card, make the payments and earn some points. But this line of reasoning passes for brilliance in the halls of Congress, and is saluted by the markets as the Fed announces QEII. Nutty stuff….

  2. Pingback: Monty Pelerin's World » The US Has Already Defaulted

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