Tuesday, May 26, 2015

“Countdown to Global Financial Collapse?” Part 2

“Countdown to Global Financial Collapse?” Part 2
by Raymond Matison

"If indicators show that the economy is still slowing or declining, the need for extraordinary efforts start. First, one easy way to convince the public that things are really better than they seem intuitively is to simply fudge that statistics. In our current cycle this is borne out by the downward revision of previous economic statistics. Another way is to manipulate the markets in a way to increase stock or bond prices which make the public feel wealthier, and more inclined to spend. Yet another method is to create capital controls such as limiting or eliminating offshore bank accounts from which more taxes may be squeezed. Talk will arise reducing the repatriation tax rate of corporate foreign profits. When things get truly serious, central bank will purchase the low rated bonds held by banks in order to issue Treasury bonds which are counted towards a bank’s reserves, and its solvency. Foreign military interventions may be precipitated in order to focus the public’s attention away from the real crisis towards a manufactured one. All of these efforts are made to increase economic growth, which can be taxed. Note that we have already experienced each of these progressive steps in the U.S. towards eventual collapse and reset.

Over the last several years, many sovereign leaders have announced economic growth as an objective. Most have in mind increasing the money supply as a means to reduce the value of their currency thereby facilitating foreign trade. But creating growth is not the panacea of such a system. The real reason growth is mandatory is because of our false currency and banking system, whereby money is created by first issuing debt, and congenital weakness of governments not living within their intended limited means. It is for this reason that such systems grow to bulbous dimensions, blow up, collapse and are reset to start its next cycle. 

If the currency used had not been created by issuance of debt, growth would not be a necessity. It is obvious that the natural tendency of an economy is to reflect the size of its populace, and advancement of its society as measured by its capacity to produce. Thus, if a country’s population is growing, it is likely producing and trading more products, and there is a legitimate need for a concomitant, but not inflationary, increase in the money supply. History shows us that absent monetary inflation scientific innovation has always decreased the use of human labor and the price of consumer products. This has been true in agriculture for food supply, in manufacturing, and very demonstrably for electronic gadgets and computers over the last decades. All of these trends would promote a deflationary bias in an economy.  Since deflation reduces gross national product, it also reduces the amount that government can collect in taxes, and therefore its ability to maintain its size, or to service debt. Because our currency system is created through debt, government and a central bank always promote growth and inflation. If a government did not spend beyond its collected tax, within a system of debt based money, the requirement for growth would be more limited, and the cycles between collapse would be longer.   

So it is noteworthy to observe that in the U.S. we have already advanced in this GED life-cycle process to the point that increased taxation schemes have been implemented by government, the use of corrupted financial data is presented to show a false vigor in our economy, financial repression of the public in all its variants including depressed interest rates,  purchase of tainted bank-owned assets at full value by the FED, the QE money printing, suppression of foreign bank accounts for citizens, limitation of the use of cash in transactions by limiting the size of our paper fiat currency in circulation with the $100 bill  – all indicating the we are well past the midpoint and closer to the end of this enumerated cycle. Recent clarification that saver bank deposits are considered as an extension of credit and could be seized by the bank for its next bailout shows the increasingly drastic steps the system is taking to preserve itself.  Indeed, the prospects of banks to charge savers via negative interest rates (as they already do in Europe), and to eliminate paper currency completely, clearly shows the desperate considerations of a panicked system.

This overall state of our economy, banking and currency system is corroborated by the observed financial frailty of many of our large cities and states by downgrades in state and municipal investment agency ratings. It is similarly corroborated by the severe turmoil in the European Union mirroring problems in countries around the world made worse by its financial global interconnectedness. And lastly that corroboration comes from the estimated $1000 trillion of counter party risk of derivatives, all out of reasonable proportion to global economic activity. In other words, so much money and credit has been created over the last decades that it can find no place to be traditionally invested and it sloshes around the world in a speculative frenzy. It is a veritable bull in the china shops of small and developing nations around the world, leaving destruction in its wake.

The policy of many countries to devalue their currency seems similar to the childish game of “follow the leader” or “monkey see monkey do” where everyone is learning from the “big gorilla”.  Rather than blaming other countries for manipulating their currencies we could more correctly see this as other countries copying the actions of U.S. policies. Some countries surely followed the U.S. example respectfully tying their currency to the U.S. dollar; some were forced to do so because of trade balances, while some are blindly copying our own destructive actions of money and credit creation. In this competition for export advantage there will be no winner, as everyone races to reduce the value of their own currency. It is a mania following the global leader to more rapidly bring about global currency collapse.

The militarization of our police, and random training exercises by the military in our domestic cities, heralds the very late stage of this cycle, and the government’s likely response to increasing citizen dissatisfaction and manifest anger. Conversely, the growth in the popularity of “preppers” programs in the media suggests that there is an acknowledged and increasing lack of faith in our government and financial institutions by a growing portion of our citizens, also a late lifecycle event.

What remains to happen is for the faith of the common citizen in government to decline further and eventually to shrivel to a point where there is no confidence in our politicians and the government bureaucracy to improve people’s economic conditions. Foreign countries would no longer finance our debt at low interest rates due to the loss of confidence, and force them to rise dramatically, as our bubble bond and stock markets will melt rapidly and dramatically, and our housing market will decline once more. With that additional loss of faith, the confidence in the currency evaporates completely, collapsing businesses and banks, precipitates the default of individual, corporate, state, and sovereign debt, and brings forth very high rates of inflation. Such events ravage all those on previously fixed incomes or pensions bringing them to famine and poverty. The supposed large debt that “we owe to ourselves”, which government officials claim is not important, will suddenly have relevance as government pensions can no longer be paid, or their value has dwindled to nothingness. This stage itself can take several years through which the populace barely survives, with widespread social disorder.  Eventually, even infinitely patient citizens revolt, which will require bringing those past secret military training exercises in our cities as preparation for real life events.

We have seen that predicted events usually take much longer to take place in managed or more appropriately stated centrally manipulated economies. For example, there have been highly regarded economists who predicted a collapse of the Japanese yen more than ten years ago, but to date it has not happened. The yen printing continues at a financially suicidal rate, yet the economy continues to hobble along without the expected and unavoidable collapse.  With the single mindedness of a powerful government bureaucracy to avert a crash and stay in power, it will take longer than any estimate for the beginning of a currency, banking, and economic collapse to initiate and develop. It will also take longer for it to evolve to its ultimate nadir, and for its subsequent resolution.  The decline and collapse from overspending and excessive money creation can be postponed by proactive power of government bureaucracies, but it cannot be corrected by additional money or credit creation, or seizing of public savings, nor can it be eliminated.

Our definitive signal of economic crisis came with the market crash in 2000, followed by the housing and stock market meltdown in 2008.  Since that time no credible fundamental actions have been taken to correct the systemic distortions – only the creation of more debt, money, and credit, and miniscule interest rates for savers. It appears ill considered that an economy that can no longer service its debt without issuing additional debt is stimulated by taking on even more debt. This can only be understood as a proper response to a system of money creation that is based on debt and must be continued in order to avoid contraction at any cost. Seven years have passed since this last near collapse, yet our elites, politicians, and FED policies have not corrected a single fundamental problem – ironically, excluding arming our police with military style weapons. 

In the meantime, countries opposing the single polar world are forming their own communications and money clearing systems and their own infrastructure investment banks to become immune to our economic sanctions and financial warfare in the future. The West will yield to include the renminbi in the IMF’s SDR this year, acknowledging the ascent of China’s currency and the relative retreat of the US dollar in world calculus, or the descent of the petrodollar will simply take place by the rest of the world trading more without the use or demand of the dollar. The new world order will become multi-polar, as the dollar’s time to rule singularly has come and passed. Sadly, this will have been brought about by the collusive forces of government’s lack of fiscal discipline embracing socialism, central bank self interest, and singular corporate focus on profit regardless of public benefit. These powerful events make possible that the global financial reset could start anytime, and certainly between now and the end of the current year.

The coming U.S. presidential elections in 2016 will raise debate about our economy, as  it will be abundantly clear to all, that employment, wages and family incomes and consumer spending are not growing; debt of families, states and federal government are too high to be paid down or even serviced for interest, the FED is accommodating government having reduced interest rates to a minimum eviscerating income on public savings and further impoverishing the middle class, and printing money;  our ill-conceived government spending in military misadventures have caused trillion dollar increases in our national debt solidifying unity of our potential adversaries and even raising the resistance of our allies to reject our desperate actions to remain the singular leader of the world.  These debates during 2016 will clarify that the emperor has lost some of this clothes, and this public realization is likely to precipitate a more rapid decline in our currency, markets, and economy. It hardly matters which political party candidate wins, for in one case the socialist policies will become recognized as unaffordable, and in the other voters will recognize that the huge government we have allowed to emerge over decades, regardless of its priorities is just too intrusive and oppressive for the nation, business and people to thrive. Under this scenario the reset could take place before or shortly after the national elections in 2016.

With liberation of information on the internet, even common folks will soon recognize the ruse of government supported, FED promoted inflation as a means to reduce the purchasing power of people’s incomes, savings, and assets. It will become recognized for what it is –theft. Their reaction will be to reject such corrupted leadership, either by demanding changes, or failing to achieve such changes by peaceful means seek alternatives. The currency crises then loops back to cause an increasingly dire economic crisis, and a catastrophic economic crisis creates impetus to change government and governance.  A historic reading of such events past in other countries is not inspiring nor comforting.

Given the events that have occurred over the last decades in terms of bubbles and market crashes, financial meltdown of 2008, recent explosion in our national debt, persistently destructive FED policies, upcoming elections, organized resistance by other countries to global U.S. policies, their preparations to offset future dollar hegemony, failures in the European Union, concerns about China’s fit and engagement into global eminence, and taxpayer increasing rejection and inability to subsidizing and socializing a major part of our populace, it appears that given the confluence of these events, a high probability of the  global reset, likely starts sometime between June 2015 to July 2017. By mid 2017 more of the points enumerated in the lifecycle in the GED will have taken place, and there will be no doubt that the reset (global collapse) has started.

For humanistic considerations, it would be comforting to be proven wrong!  However, the downside of being proven wrong is that a further delayed reset would be harsher.”
Related:
"‘Limits to Growth’ Vindicated: World Headed Towards Economic, Environmental Collapse”

"The BAU scenario results in collapse of the global economy and environment (where standards of living fall at rates faster than they have historically risen due to disruption of normal economic functions), subsequently forcing population down. Although the modelled fall in population occurs after about 2030—with death rates rising from 2020 onward, reversing contemporary trends—the general onset of collapse first appears at about 2015 when per capita industrial output begins a sharp decline. Given this imminent timing, a further issue this paper raises is whether the current economic difficulties of the global financial crisis are potentially related to mechanisms of breakdown in the Limits to Growth BAU scenario. In particular, contemporary peak oil issues and analysis of net energy, or energy return on (energy) invested, support the Limits to Growth modelling of resource constraints underlying the collapse."

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