The political collapse of Mainz is a clean example of the crisis of debt that we face today. The city of Mainz had gained its rights to be self-governing in 1118. It had become a free city in 1244. But the corrupt management of the city was pervasive. From about 1332 onwards, the trade guilds (unions) became deeply involved in managing the government that managed to stem the tide of any economic crisis until 1411.
Mainz was the birthplace of printing in western Europe - Johannes Gutenberg who had invented movable type for printing about 1440 and this period has been known as the age of “Golden Mainz” fuelled largely by debt and the good times.
To have funded the city’s Golden age and its freedom, it was building a national debt with perpetual deficits year after year. The debt crisis that was brewing was truly massive From the outside looking in, Mainz was the symbol of wealth. It was the envy of all it appeared to be the land of milk and honey.
However, in 1411, the crack in the looking glass began to appear. The debt crisis was multiplying like a virus in a lab dish. Taxes were now rising and a political upheaval was in motion. The payments on its debt reached a crisis point and 48% of the expenditure now went to interest to roll the debt.
In 1411, there was a popular uprising that now forbade the sale of any more debt without the consent of the trade guilds. Yet, the financial conditions continued to worsen. By 1436-1437, about 75% of the total city expenditure was now being consumed by interest.
Interest rates began to rise as there were subtle fears that Mainz might not be able to pay its debts. The interest rates climbed to find buyers for their debt. The interest rates jumped from 3% to 5% during the 1430s.
By 1444, the total debt of the city of Mainz had now reached 373,184 gulden. The amount of money owed was truly staggering for a city. In 1448, the city tried to sell just 21,000 gulden to roll-over debt coming due. The was NO BID!
The crisis that hit showed that 60% of its debt was held by people outside of the city - foreign debt holders. The city was forced to default and the fun just began. Because of this high external debt, the city lost its independence. Mainz was now seized and placed under an imperial ban by the Holy Roman Empire. The Pope excommunicated the city for being a borrower under the Sin of Usury.
The rich fled the city, which began prior to the bankruptcy. They held their capital and wealth outside of Mainz just as capital remains offshore today because of taxes. Deserted by the rich, the city became impoverished, it was captured and then set on fire for retribution.
Ireland is imploding, I have received numerous letters from Ireland asking if I could help. the answer to save Ireland exists. But they have to be ready for a new way of doing thing to save the country.
Ireland is in a debt crisis implosion that is being caused by the massive bad loans and the leverage the banks got themselves into, and that suppresses the real estate market which in turn creates the economic decline and that cuts into the tax revenue that then forces a reduction in government. We are watching these dynamic forces feed into each other.
There are ways to deal with this crisis but they are going to require dramatic and profound change. I wrote before that I see a possibility for Britain and Ireland to be the first to reform. I stand ready to help when they are serious about saving their people from disaster. Until then I must keep my mouth shut on the how details.
This is not a simple liquidity crisis. If it was just that simple. Pouring trillions into the banks was the WRONG move and has been like passing a law that fines the wife if she fails to force her husband to take out the trash. The banks were the FIRST blush of the problem, but that was the least of it. You cannot save the banks and nation without understanding the real estate crisis.
The fate of the Irish banks will still be shared by others. We are in a CONTAGION crisis. As the banks foreclose, they depress the real estate, that depresses consumer spending when they fear their savings are gone, and that depresses revenues for the government and forces higher taxes, lower economic growth, and increasing the odds of political upheavals, revolutions, and war. WE HAVE TO BREAK THE CYCLE OF THIS CONTAGION IN A REAL AND PRACTICAL MANNER THAT IS NOT BASED UPON SMOKE & MIRRORS!
On the one hand, you have people now blaming the mortgaged property owner and argue they have to be forced out or the real estate market will never come back. So go ahead. Throw everyone out on the street and throw 40% of the houses up for sale and watch what happens. The depression will be massive!. Real estate is dead for 26 years from 2007. There will be some rallies but the game is over. They created the 30 year mortgage to restart the real estate market during the depression. How do you expect to do that without any such tool?
This is more than forcing people out of the homes and selling them for scraps. You are ASSUMING that people will jump back in and housing will rise in price as soon as that glut is gone at any price. The NASDAQ bubble was 2000. The market did not come back yet. Ain’t gonna happen! So either we face the reality of a COMPLETELY new economic model or we hang up everything now.