PART THREE: POTENTIAL TRIGGERS OF ECONOMIC COLLAPSE
Indiana Jones often found himself caught in deadly traps. But the ghastly contraptions that threatened Dr. Jones were just movie props with scripted escapes. Until now, like Indiana Jones, the U.S. has faced many difficulties and emerged safely on the other side. We all want to be optimistic and ‘believe in America’. But what we’re being asked to believe in at this point is not the America of our founding fathers. We were put on this destructive Keynesian/Fiat path in willful disregard of our constitution. A constitutional America can be reborn, but we will have to go through a period of potentially great distress and then willfully choose to return to our roots.
|
|
It remains to be seen whether modern Americans can rise to this occasion. In the meantime, the financial nightmare we currently face is no movie prop. It is unfortunately quite real and looks to be inescapable. Laws of the marketplace are as real as the law of gravity. They can be suppressed and manipulated to create artificial economic ‘lift’ for awhile, but when the artificial effect wears off, economic gravity sets in. We find ourselves, like Wile E. Coyote, off the edge of the cliff, facing an imminent drop that is brought on by our own making. |
|
When nations ignore fiscal responsibility and become financially unstable, their economies will reset themselves to balance in harmony with economic laws. This will happen either voluntarily, or involuntarily, but it will happen. Typically, an economy ‘resets’ through recession and deflation, brought on by rising interest rates. This process cleanses financially weak elements out of the economy just as a forest fire eliminates accumulated underbrush. But because our debt has grown so large, we have to keep interest rates artificially low. Raising interest rates at this point would throw us into instant insolvency because we would not be able to pay the interest on the debt. The stupendous size of our debt and the global interconnectedness of economies means that we are now in danger of a financial disaster the likes of which the world has never seen.
About half of the U.S. debt is in short-term bonds which will be quickly impacted by a rising interest rate. If the interest rate rises to just 7 percent, the U.S. government will find itself spending more than a trillion dollars per year on interest alone on the national debt. Trying to solve this problem by taxation would be crippling to the economy. As Rep. Paul Ryan has pointed out, even if you taxed all the money of the wealthiest Americans, it would sustain the government only for about four months. There is just not enough money to be taxed, and, of course, to impose onerous taxation simply drives the wealthy out toward fairer shores. Our crucial need is for the economy to gain traction with productive growth. But the socialist-oriented policies of recent years impede rather than impel free-market confidence. If we can’t tax our way or grow our way out of our debt problem, then we will eventually hit the point where our interest payment is beyond us. At that point we will have only two options left: 1) Defaulting on our national debt, which would mean instant and disastrous economic collapse, or 2) Printing money to pay our bills, which will inevitably debase the value of the dollar through increasing inflation. This could happen over some period of time or give way at any moment to a state of hyper-inflation.
|
|
We are now on an inevitable collision course with economic collapse in one form or another. The only questions left are when and how it will happen. At some point we passed the last fork in the road that would have offered any possible turn around. We are on an irreversible path that is an accelerating descent toward a bridge-less financial chasm. Some out there seem to truly believe that this Keynesian-Fiat system can go on and on with only periodic adjustments. Others say that Keynesians are buying into a mass delusion, keenly monitoring the daily data, but not understanding the underlying nature of our financial problems. |
As this picture comes clearer, many are drawing the conclusion that the powers at the controls of the cockpit are now primarily concerned about sustaining public confidence and preventing panic at any cost. They have to know we will hit the mountain. A fiat financial system ultimately rests only upon public acceptance and confidence. Whatever else happens, that confidence must be maintained as long as possible. The direness of our situation means that the government will feel increasingly pressed to avoid the truth and continue manipulation of the stock market, interest rates, prices of precious metals, the actions of other nations and all statistics. But there will come a point when neither words nor actions can stop the consequences. When that point comes, it will be too late for American citizens to take steps to protect themselves. How and when we reach the drop-off point could be triggered by the following obvious factors, not to mention that history has a way of springing unexpected and unpleasant surprises on us. Any one of the following events could trigger a financial meltdown of the U.S. economic system at any time.
|
a. Global interconnectedness -- The massive interconnectedness of the global economy creates a vast minefield of possible trip zones. The economic failure of some nation or some significantly large institution could start an unraveling process that inevitably leads back to the U.S. economy |
|
b. Hyper-inflation -- The non-stop printing of our currency will cause an inevitable inflation that could easily spiral out of control into hyper-inflation, which means that our currency will dramatically drop in value. From the point where we went on fiat currency status in 1971, the purchasing power of the dollar has dropped by 80%. Thirty-two nations have had their currency collapse into hyper-inflation in the last 100 years, including Germany, Zimbawe, Romania, Brazil, Argentina and Angola. |
|
c. Loss of confidence -- Any set of circumstances that causes widespread loss of confidence in the U.S. economy or currency by Americans, or by the nations that are holding our debt. The BRICS (Brazil, Russia, India, China, South Africa) nations, among other countries, have begun pushing for trade to happen in their own currencies rather than the dollar. China is clearly laying the groundwork to gain world reserve currency status. The IMF (International Monetary Fund) has signaled the desire to move away from the dollar and toward a truly global currency. Central banks around the world are buying gold and seeking to retrieve their stores of gold that are held in the U.S. These are all signs of concern about the U.S. debt level, its debasing of the dollar through excessive money printing, and general fiscal mismanagement.
|
d. Loss of dollar’s special status -- Loss of the World Reserve or Petrodollar status for U.S. currency will unplug its ‘props’ and dramatically weaken the dollar. This is now happening. A number of nations recently signaled their intention to establish alternatives for both. Seven of the ten major Asian economies have taken steps to move away from the dollar and toward the Chinese yuan. In addition, China’s trade with Russia, Vietnam and Thailand is now being settled in Yuan.
A 'renminbi (yuan) bloc' has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan --- a major signal of China's successful bid to internationalize its currency." |
e. Exposure of inadequate precious metal reserves – Should there be a call upon any of several major banks for physical gold or silver that they cannot produce, this would provoke an instant crisis. Precious metals have been leveraged to the point that an exposure of lack of supporting collateral would spark an extensive financial collapse. Foreign central banks are now asking for their gold back. Secretiveness surrounding the holding and accounting of stockpiles of physical silver and gold have raised suspicions that these supplies have been drained and/or over-committed in paper stocks. This in itself is insolvency, but the problem is compounded by the extent to which existing stores of precious metals have been leveraged. Discovery of inadequate supplies of gold and/or silver will have cascading effects on the world financial system in the same way failing sub-prime securities did in 2008. Countries that have asked for their stores of gold to be returned to them from the U.S. include Venezuela, Germany, Ecuador, Romania, Holland and Switzerland. Their ranks are sure to increase. While the supplies of gold are shrouded in mystery, we know that the U.S. had a 60-year supply of silver that it began depleting in 1991 in an effort to keep down the price of silver. This supply is now exhausted, while demand for both gold and silver is escalating rapidly.
|
f. Interest rate rise -- An interest rate rise that is caused either by market dynamics or by downgrading of the U.S. credit rating could quickly make the U.S. unable to meet its interest payments, since about half of the U.S. debt is in short-term treasuries, mostly held by other nations. The U.S. credit rating was down-graded in August 2011 for the first time in history, and subsequent warnings have been issued. |
|
g. Crisis event -- Any sufficiently jolting event to the U.S. or world economies, whether from natural disaster, treacherous sabotage by another nation, or otherwise.
|
h. Breaking point -- Reaching by inevitable exponential growth, the point at which the U.S. is not able to meet its interest obligations on its debt. |
|
Each one of these items represents a section of a huge
dam that is holding up the unprecedented debt-load of the U.S. and the
world. In reality, cracks have already begun to appear, portending an
inevitable and potentially imminent collapse. Some find it astounding
that the system is still holding together. Most of the economic
mistakes and potential trip-wires we’ve mentioned are events far beyond anything the average American can do anything about. But what does this mean for us? Does this leave us helpless? In fact, no. But we are in a stupor. We have grown highly dependent upon this ‘system’. For those who are now alive, the current American economic system is all we have ever known. We naturally assume it will carry on as we have always known it. As this system has mushroomed in technological sophistication, it has become termite-infested in its structure. It has undermined individual initiative, responsibility and sense of purpose. It has gutted its production base and squandered its true wealth. This is NOT the American system envisioned and founded by our forefathers. We need to awaken to that fact while there may be hope of reclaiming our authentic heritage.
|
|
Our constitution was established to provide the maximum possible INDIVIDUAL FREEDOM. We began as a nation of pioneers, homesteaders, merchants and tradesmen who settled in close-knit local communities, taking responsibility for our own well-being. We started as a nation of CITIZEN-KINGS, who had taken the crown from the throne of England and split it up among ourselves. In taking our piece of the crown, we were taking the rights to freely live our own lives. But in those days we understood that our piece of the crown included not only privileges. The king was able to maintain the stability of his government only by wisely managing the responsibilities of rulership.
We must man-up to carrying our share of that responsibility once again. Without realizing it we have been corralled. We have become a herd. We have grown dependent upon and intimidated by the ever-increasing assertion of federal power. We have been cowered into believing that the national government has far more by way of rights and good sense than it does. It is always tempting to take the easy way out --- to just find a groove in the system and coast along with it. That is the easiest way, but it is also deadening. The only helpful course of action left to us is INDIVIDUAL ACTION. We must INDIVIDUALLY look to our own financial protection and provision, and re-learn how to do that co-operatively rather than collectively – in commonwealth rather than in the false promises of communism, or its baby brother, socialism. We have to quit trusting that the system is going to be there for us. This does not mean we quit trusting in America. It means we need to quit trusting in the system that America has become, and go back to trusting in what America was intended to be; to demand respect for our constitution; to think and act for ourselves; to awaken once again to what freedom looks like, feels like, smells like and tastes like. It is time to come alive. |
