The Economic Collapse – by Michael
Will this be the last normal
holiday season
that Americans ever experience? To many Americans, such a notion would
be absolutely inconceivable. After all, in the affluent areas of the
country restaurants and malls are absolutely packed.
Beautiful holiday decorations are seemingly everywhere this time of the year
and children all over the United States are breathlessly awaiting the arrival of Santa Claus.
Even though poverty is exploding
to unprecedented levels,
most families will still have mountains of presents under their
Christmas trees. Of course a whole lot of those presents were purchased
with credit cards, but people don’t like to talk about that. It kind of spoils the illusion.
Sadly, the truth is that our entire economy is a giant illusion. The
extreme prosperity that we have been enjoying has been fueled by debt,
and any future prosperity that we will experience is completely
dependent on our ability to go into even more debt. The total amount of
debt in our economy is
almost 10 times larger than it was just 30 years ago, but we don’t like to think about that too much.
Most Americans are way too busy living
the good life to be bothered with “doom and gloom”. Well, get ready
to say goodbye to normal. As history has shown us, no financial bubble lasts forever,
and time is rapidly running out for us.
You know that the hour is late when even mainstream news sources start publishing articles with titles such as this: “
Will 2013 Mark the Beginning of American Decline?”
That article appeared
on Bloomberg.com the other day, and it was written
by Simon Johnson, a former chief economist at the
International Monetary Fund. He is convinced that a
day of reckoning is coming for U.S. government finances, and he seems resigned to the fact that we will not be ready when that day arrives…
“Sooner or later, it will be America’s turn to fall out
of favor with investors and to see its own interest rates rise. It is
hard to know when that day will come, or precisely what pressures the
country will face.
Let me only venture one forecast: We will not be ready.”
Other analysts are far more pessimistic. For example, the following
is what Gerald Celente said about the “bond bubble” during a recent
interview with
King World News…
Eric King: “Gerald, I wanted to take a look
at this upcoming issue you have coming out. (In here it says,) ‘Bonds
Away! The bond bomb is ready to explode … threatening to make the real
estate and dot-com bubbles, and even the Great Recession, look like
market corrections.’ Can you talk about that?”
Celente: “Yes. This piece is being penned by Dr. Paul Craig Roberts,
the former Assistant Treasury Secretary under Ronald Reagan. And he is
convinced that the bond bubble is about to burst. This cannot continue
to go on the way it is. Everyone knows that the whole game is rigged,
and so is this….”
“The whole game is rigged. It’s ready to go down, and Dr. Paul Craig
Roberts believes it’s ‘Bonds Away’ in 2013 as the bond bubble explodes
and brings about a financial disaster even worse than the Great
Depression.”
Eric King: “He’s saying here it’s a road to financial collapse that we are going to head down when this thing bursts.”
Celente: “It is. Because the whole world is being propped up by these
phony bonds and it’s going to collapse. It has to happen. Interest
rates are going to start going up, and when they do the bond bubble
explodes. You cannot keep interest rates at zero for this amount of time
and expect anything other than disaster to follow.”
For much more on all this, you can listen to another excellent interview with Gerald Celente
right here.
Our politicians just assume that we will be able to borrow trillions
upon trillions of dollars far into the future at super low interest
rates, but that is a very dangerous assumption.
As I noted
the other day, the average rate of interest on U.S. government debt was
2.534 percent at
the end of November. If that number just rose to where it was about a
decade earlier we would be in a massive amount of trouble.
Back in the year 2000, the average rate of interest on U.S. government debt was
6.638 percent.
If we were at that level today, the U.S. government would be paying out
more than a trillion dollars a year just in interest on the national
debt.
But our politicians just keep borrowing and spending as if we could do this forever.
From the time that George Washington was inaugurated (1789) to the
time that George W. Bush was inaugurated (2001), the U.S. government
accumulated about 5.7 trillion dollars of debt.
During the
first four years of the Obama administration, the U.S. government accumulated about 5.7 trillion dollars of debt.
How can anyone support this kind of insanity?
You can see an excellent video demonstrating the vastness of our national debt
right here.
In the end, all of this debt will absolutely destroy the U.S. dollar,
our economic system and the bright futures that our children and our
grandchildren were supposed to have.
As if all of that was not enough to be concerned about, there is also
the threat that Wall Street could implode at any time. Most Americans
have no idea that Wall Street has been transformed into the largest
casino in the history of the world. The “too big to fail” banks are the
ringleaders, and the
derivatives bubble hangs over our financial system like a “sword of Damocles” that could fall at virtually any moment.
Everything will remain fine as long as the spiral of derivatives that
our bankers have constructed remains perfectly balanced. But if
something happens and it becomes unbalanced and starts to collapse, the
consequences could be unlike anything we have ever seen before.
A recent Zero Hedge article entitled “
1000x Systemic Leverage: $600 Trillion In Gross Derivatives ‘Backed’ By $600 Billion In Collateral” detailed how there is barely any collateral backing up the hundreds of trillions of dollars of derivatives that are out there…
But a bigger question is what is the actual collateral backing
this gargantuan market which is about 10 times greater than the world’s
combined GDP, because as the “derivative” name implies all this
exposure is backed on some dedicated, real assets, somewhere. Luckily,
the IMF recently released a discussion note titled “Shadow Banking: Economics and Policy” where quietly hidden in one of the appendices it answers precisely this critical question. The bottom line: $600 trillion in gross notional derivatives backed by a tiny $600 billion in real assets: a whopping 0.1% margin requirement! Surely nothing can possibly go wrong with this amount of unprecedented 1000x systemic leverage.
Our entire economy has become a giant pyramid of debt, risk and
leverage. At some point there is going to be a giant crash. When that
happens, people are going to become very desperate.
When people become very desperate, they often accept “solutions” that they were not willing to consider previously.
We need to learn some lessons from history. This is exactly the kind of thing that happened back in the 1930s.
For example, an elderly woman
named Kitty Werthmann is telling audiences what life was like in Austria back in the late 1930s…
“In 1938, Austria was in deep Depression. Nearly
one-third of our workforce was unemployed. We had 25 percent inflation
and 25 percent bank loan interest rates.”
“Farmers and business people were declaring bankruptcy daily. Young
people were going from house to house begging for food. Not that they
didn’t want to work; there simply weren’t any jobs.”
The Austrian people were really hurting and they were desperate for
answers. When Hitler came to them with “solutions”, they were ready to
embrace him with open arms…
“We looked to our neighbor on the north, Germany, where
Hitler had been in power since 1933.” she recalls. “We had been told
that they didn’t have unemployment or crime, and they had a high
standard of living.”
“Nothing was ever said about persecution of any group –
Jewish or otherwise. We were led to believe that everyone in Germany was
happy. We wanted the same way of life in Austria. We were promised that
a vote for Hitler would mean the end of unemployment and help for the
family. Hitler also said that businesses would be assisted, and farmers
would get their farms back.”"Ninety-eight percent of the population
voted to annex Austria to Germany and have Hitler for our ruler.”
“We were overjoyed,” remembers Kitty, “and for three days we danced
in the streets and had candlelight parades. The new government opened up
big field kitchens and everyone was fed.”
Sadly, America is already starting to go down the same path in many
ways. If you doubt this, you can read the rest of her account
right here.
Right now, things are still relatively good in America. Yes, there are
a whole host of economic numbers that look really bad, but what we are experiencing right now is nothing compared to the horrific economic pain that is coming.
When our economy finally crashes, nobody is going to be able to press
a button and restore things to how they were previously. We will be
told that we have to “adjust” and consider “new solutions” to our “new
challenges”. Someday we will look back on the good life that we were
enjoying in 2010, 2011 and 2012 and wish that we could go back to those
days.
So enjoy the relative peacefulness and prosperity of these times
while you still can. A horrific economic collapse is on the way, and
once it strikes none of our lives will ever be the same.
British households are facing financial strain
