Five Things You Need to Know: I'm Finished (coming collapse of our financial system)

These are the worst of all possible times. Just ask any cab driver. The US default and inevitable currency collapse is only the tip of the iceberg. Hyperinflation, or deflation, or stagnation, take your pick. There will be no winners this time; we will all be impoverished by the banking system, slaves to the global elite. Government has never been more corrupt. Businessmen and bankers, never more villainous. Our schools are failing. College is a scam. The environment is being polluted, our children's future traded away in a maze of carbon credits and energy derivatives. Or, on the other side of the coin, environmentalism itself is little more than a clever ploy by cynical capitalists to wring out the last dollar from a foolish public only too eager to trade cash for recycled plastic plates and over-priced vinegar-based solutions branded with little green pine trees. And we are obsessed with distraction, pop culture, celebrity, bread and circuses facilitated by technology and rapid-fire communication, if one can even call it that, rewiring our brains to crave the Pavlovian immediacy of the virtual call and response, Twitter, Facebook, a vast ocean of meaninglessness which crowds out the significant, narrative broken by unbound connectivity and emergent complexity. Nothing makes sense anymore. That's one way to look at it.

LS said: Mr. Tell, I appreciate the notion that people are “maxing out credit.”

I didn't make myself clear. I meant that the U.S. government has become the source of borrowed money which is propping up the economy. Some of the people at the shopping malls are employed today simply because the U.S. is spending 1.6 trillion dollars per year that is borrowed money. To some extent, there isn't even a "lender", but just the Federal Reserve printing money.

Whatever prosperity is sending people to the malls today can be expected to disappear if the deficit spending is reduced or eliminated. Evidently 40% of federal spending is borrowed money.

I don't see how this can continue. We're either going to be inflating our currency at that rate our we will be reducing spending at that rate. The trend line has got to be toward a painful future of having some money but rapidly rising prices or having no money due to joblessness. The middle ground of reducing deficit spending to 800 billion per year simply distributes the pain differently but won't reduce the total pain.

The deficit of 1.6 trillion dollars per year is equivalent to about $20,000 per family of four EVERY YEAR. The family of four won't be getting a monthly bill, they won't see the incredible interest burden that credit cards carry, but they will be paying for it sooner rather than later. This federal annual indebtedness is in ADDITION to whatever personal debt is carried by the family.

Individuals "max out" their credit cards when the lenders refuse to lend more. The U.S. government has obviously "maxed out" its credit cards or we wouldn't be seeing the Fed buying our debt. There won't be enough federal revenue to pay the interest rates that the world will demand should the Fed stop buying our debt.

I absolutely agree---and here's the stunning paradox: I have VERY smart people in finance, one a Columbia U. prof who is one of the most published authorities on banking and finance, telling me we are headed for hyperinflation.

The other is a financial adviser, who really knows his stuff and has protected my portfolio, who says we are on the brink of DEFLATION---that housing prices are down, that wages haven't recovered, that interest rates are very low. Now, if these two pretty smart people keep coming to exactly opposite conclusions, how are poor schmucks like us supposed to survive?

LS said: "Now, if these two pretty smart people keep coming to exactly opposite conclusions, how are poor schmucks like us supposed to survive? "

"It's different this time."

Well, perhaps it is.

Over the last century and a half, American productivity has created a rising standard of living for the average person. Productivity is now rising rapidly outside the U.S. at a time when Americans have become undisciplined socialists. While our productivity is stagnant, we continue to spend money we don't have and to ignore the unfunded liabilities yet to come.

I think the key word is "undisciplined". As a nation we are going to continue doing what is easiest to do politically, morally, and economically.

This means that "quantitative easing" (money printing) will continue. Deficits on the order of 40% of the federal budget will continue. Nothing will be done about our unfunded long-term liabilities. Government policies will continue to be anti-business and anti-energy.

Some states will practically go to war against the U.S. government, but the courts will probably rule against them.

The only thing I see that will turn this around is HUNGER. If not for the bread lines in the ex Soviet Union, that state would still exist. Hungry people found themselves standing in line to buy bread that nobody had any economic incentive to create. That is our future.

We will find ourselves standing in line to renew our car registrations, wishing that the bureaucracy could mangage to take our money and renew our car licenses. We will stand in line to get whatever products manage to find their way to our local markets. We will stand in line to get vouchers to be able to buy new tires for our car.

We will stand in lines waiting for a chance to see a doctor or get new eyeglasses; to get a new dress or suit of clothes. Rationing will be justified because otherwise only the "rich" will have access to these products and services.

Already the incentives for doing business in Kalifornia are on the wane. Heard of any businesses relocating to the Golden State recently? The crews roaming the county patching the roads can't keep up with the rate at which the roads are failing.

I see nothing short of years of prolonged hunger able to turn this around. It will have to be long enough to completely exhaust the empty promises of the socialists. It will be long enough for those who think, "It can't happen here" to realize that it can.

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