Skip to comments.The Economic Collapse Is Not A Single Event
Posted on 06/12/2012 10:46:39 AM PDT by blam
The Economic Collapse Is Not A Single Event
June 12, 2012
Many people hype "the coming economic collapse" as if it is some kind of big summer Hollywood blockbuster. Many people out there write about it as if it is something that will happen in a single day or over a few weeks and that it will suddenly change how the entire world functions. But that is not how the financial world works. The financial world is like a game of chess - very slow and methodical. Yes, there are times when things happen very quickly (like back in 2008), but even that crisis played out over a number of months. Sadly, most Americans are not used to thinking in terms of months or years.
These days, most Americans have the attention span of a goldfish and most Americans have been trained to expect instant gratification. They are simply not accustomed to being patient and to wait for things. Well, despite what you may have read, the economic collapse is not going to be a single event. It is going to play out over quite a few years. In some ways we are experiencing an economic collapse right now. When the next major financial crisis occurs, many will be calling that "an economic collapse". But if you really want to grasp what is happening to us, you need to think long-term. We are heading for a complete and total nightmare, but it is going to take some time to get to the end of the story.
Yes, there will certainly be times of great chaos. The financial crisis of 2008 was one of those moments.
But the financial crisis of 2008 did not completely destroy us.
Neither will the next crisis.
I think it is helpful to think of what is happening to us as a series of waves.
When you build a beautiful sand castle on the beach, the first wave that comes in does not totally destroy it.
Rather, the first wave weakens the castle and it is destroyed by subsequent waves.
Well, that is what is happening to us.
The financial crisis of 2008 was a wave.
The epicenter of the next great financial crisis will be in Europe and that will be another wave.
For many, the next financial crisis will feel like "the end of the world" but it won't be.
There will be waves after that one that will be even worse.
Yes, the waves are going to start coming more rapidly and will start becoming more intense.
In that way, they will kind of be like birth pains.
But these problems did not build up overnight and they are not going to disappear overnight either.
A lot of people that write about the coming economic collapse seem to suggest that we should just let it happen so that the "recovery" can begin.
Unfortunately, it is not going to be so simple.
It took decades to build up a national debt of almost 16 trillion dollars.
It took decades for American consumers to build up the greatest consumer debt bubble in the history of the world.
It took decades to gut the economic infrastructure of the United States and ship millions of our jobs overseas.
These problems are going to plague us for a very long time.
Sadly, a lot of people out there seem to wish for an economic apocalypse. They seem to think that if the global financial system crashes that the government is going to disappear and we are going to start fighting with each other using sharp pointed sticks.
Well, it simply is not going to happen.
The U.S. government is not going to help you survive when things hit the fan, but it is not going to disappear either.
In fact, the federal government will probably try to grab more power than ever in an attempt to "restore order".
The governments of Europe are not going to disappear either. In fact, in the long run Europe is probably going to end up more "federalized" than ever even if the euro breaks up in the short run.
A lot of people out there seem to think that when the old system collapses that it will give them an opportunity to help put in a new system.
Sorry, but that is not going to happen either.
The powers that be are going to have their own ideas about what needs to happen.
They never like to let a good crisis go to waste, and they will certainly try to use every crisis to shape the world even more in their own image.
The coming economic collapse is going to play out over a number of years and it is going to be absolutely horrible.
Billions of people will deeply suffer because of it.
It will be unlike anything any of us have ever seen.
Personally, I believe that it will eventually be much worse than the Great Depression of the 1930s.
The United States is going to get hit particularly hard. The United States is going to lose its position as the leading economic power on the globe and the U.S. dollar is going to lose its position as the default reserve currency of the world.
If you thought that the unemployment crisis during the last recession was bad, just wait until you see what is coming.
We are heading for a complete and total unemployment nightmare in the United States. Unemployment is eventually going to soar well up into the double digits.
The U.S. government will try a wide variety of measures to try to "fix" things, and some will likely have some limited success.
But the debt-fueled prosperity that we are all enjoying now is going to come to an end.
Many communities all over America will degenerate into rotting cesspools.
There are going to be riots in our major cities, crime and looting will be absolutely rampant and it will seem like society is coming apart at the seams.
The U.S. government will likely respond by becoming more authoritarian than ever, and that will truly be frightening.
But all of this is going to play out over time.
Right now, things are not as good as they were five years ago.
A couple of years from now, things will be even worse. Many of us will look back and wish that we could return to the "good old days" of 2011 and 2012.
We are on a decline that is not going to stop. There will be little false bubbles of hope like we are in now, but they won't last long.
But just because the economy is falling apart does not mean that your life is over. Many that are busy preparing right now will be greatly blessed even in the middle of all the chaos.
And it is when things are the darkest that the greatest lights are needed.
Make the decision right now to be a light during the times ahead.
You can choose to let the times that are coming destroy you, or you can choose to make them the greatest adventure of your life.
The choice is up to you.
I give this a C -. Not one word on what to do when the collapse comes. And not a word of credit to the sci fi stories and films that already spell this scenario out.
He is right in some things, and wrong in others.
Even the word “collapse” has serious problems, because it implies an acute event. Instead, think of an extended recession, even a depression, as a whole collection of economic pluses and minuses, that “trend” in one direction or another. Nothing too dramatic, or very fast.
However, it is punctuated by lesser acute events that push the trend in one direction or another.
Yet the other axis of this is time. An actor once said the stock market is like Nielsen ratings of a TV show. Big jumps one way or another don’t matter. What matters is a slow decline, which means your show is dying, and you’d better do something or you are going to fail. But the slower the decline, the more time you have to do something.
What most people fear are “bursting bubbles”, such as Barney Frank’s subprime housing crisis. Yet if you think about it, most of the people who got burned only did so for one reason: they thought they could get something for nothing.
Still, many of them are sympathetic. So compare them to a far less sympathetic group, who *also* try to get something for nothing.
Derivative traders, many of whom are playing games, essentially gambling, with multiple billion of dollars. In a market that *theoretically* deals in more money that exists in the world. Yet they are playing “heads I win, tails you lose”, thinking any losses they experience will be payed by government taken taxpayer money, not them.
Guess again. The US and EU governments could just up and say that derivative trading is no longer lawful, and all derivative trades, current and past, are null and void.
Imagine the tears of blood shed by multi-billionaires, that their trillions of dollars of winnings at the poker game have been confiscated by the police.
Does anyone else care if such people crash and burn for their arrogance?
And yet, doing this to the derivatives market would be a huge acute event, rattling other markets, many of whom are just as guilty. The overall effect to the man on the street, however, is a big “meh”.
When that happens, the unofficial economy becomes the primary one. Actually, the crash comes when the official economy and the real one get out of synch. The official one crashes, and the real one re-asserts itself.
People will have to be much more entrepreneurial than maybe they have ever been. Prepare, sure, have some food and cash stored so you can make the transition. But the crash isn't over in a month or a year, it is generational.
So as important as it is to have food and silver coins stashed, while people have to be prepared to defend themselves in the absence of an effective police department, they also have to understand that the way back is to rebuild the real economy. That means taking resposibility for your family, but it also means building relationships, networking, all the usual entrepreneurial skills. To feed your family you'll have to build a business from what you see around you. You'll trade your skills for a living just like you do now.
If you've seen how honorable people survive in a third world country, thats what a crashed US looks like and thats how you survive it. And its over when the numbers of honorable people reach critical mass again. Because the kind of economic rot we see is reflective of a deeper moral rot and the cure is obvious when you understand it for what it is.
Who says? The ones leading up to this could be the mild tremors and the next could be a supervolcano.
There are way too many variables for people to make definitive predictions like this author has. This collapse could play out over the course of years. It could also happen very quickly. No-one knows. Trigger events can occur anywhere, and are by their nature, unpredictable. A widespread bank run in Europe could occur without warning, and could cause European banks to fall in short order. By contrast, we may just as easily see a slow migration of money out of Europe, into Japan and the US, that drags on for years. Similarly, we may be looking at negative yields on the 10 year in the next year or so. But there are also circumstances that could leave us with a currency that nobody wants any part of.
This is an unpredictable situation. There are too many big forces pulling things in opposite directions. (Is China the next superpower, or a hopelessly flawed economy that will fall under its own weight? Is the US dollar a bastion of strength, or will it lose its place as the world’s premier currency? Will printing be able to overcome the strong deflationary forces (here, and elsewhere)? Will Japan be able to continue with astronomical debt, even while their population ages, and export markets dry up?)
History is a fairly good guide that, under these circumstances, events become unpredictable. The scenario he lays out is certainly possible. But by no means is it the only possible outcome.
Honestly, this article could IMO be paraphrased as “I am predicting doom and gloom, but I don’t want to be seen as a doom-and-gloomer, therefore I am going to definitively state that certain things won’t happen.”
His belief that a collapse will take time to occur, could prove fatal for some. He may be right, but I suggest getting your preparations finalized now, while there is time and the things you need are still available and somewhat affordable.
The September 2007 bank run was a singular event. Of course, it has all but been deleted from history.
I agree with you, disagree with the author.
He states that things take time to occur. He is correct in this statement. What he neglects is that these smaller steps have already happened, and have been happening for a very long time.
He is looking at the situation as “The process is going to begin shortly”. And then calls those who can see, Blind.
It’s already begun. Any doubter has been quickly enlightened by first understanding the numbers we’re dealing with. Next time someone expresses this doubt, it’s helpful to demonstrate what a “Trillion” looks like.
It’s a very large number. In fact, it’s an “Astronomical” number. Trillion is something that we simply can’t recover from. There are factoids out there about “$70,000 or so” debt being owned by every single American. This is a conservative figure.
China owns a lot of our debt. Not all, but a good chunk of it. And we are already seeing a tyrant simply take a company (GM) and hand over the labor and profits to China. That right there was big enough to make people take to the streets in riots.
The most important line in this article:
“Make the decision right now to be a light during the times ahead.”
Things happen slowly at first and then all at once.
I hope he is right about the worst parts taking years to get here; my gut tells me it's on our doorstep.
Part of the problem is that Keynesian theory is embedded in the way we look at economic statistics. The GDP, for example includes government boondoggle spending, creating a feedback loop. People still talk in terms of stagflation - which is unexpected high unemployment with high inflation. What we are really in is a long term biflationary depression caused by both M and V being out of whack in the GDP=M*V equation
Large increases in the money supply are not sustainable if one wishes to avoid hyperinflation. When the growth in the money supply slows down, or fails to accelerate sufficiently, or actually begins to decrease there will be a contraction phase. When interest rates begin to rise and when credit tightens, money becomes tight, and there will be a contraction phase. When the contraction phase results in increased bankruptcies and failures of a few large banks, there will be a domino effect of more and more bank failures which results in deflation and more and more bank failures.
Deflation of the money supply leads to decrease in demand which leads to decrease in demand for labor which leads to lower average wage rates and increased unemployment.
Over the past few months, money supply growth has stopped accelerating. Under these conditions, Europe could easily be the catalyst that starts a chain reaction in the US.
What a world we live in when the corner three card Monte dealer is more honest than most of the Too Big to Fail banks and investment houses. And face it the Monte deal who scams a few hundred is a thousand times more likely to go to jail that the banksters that are stealing millions.
The game is so rigged now that the fraudsters dont even know how its going to play out. We are head for some bad times, which is one of the reasons Ive been sounding the alarm. Its time that you either prepare to stand on your own beholden to no one or accept that you will be a serf dependent on others to provide your basic needs.
As for me I dont want to be beholden to anyone for providing what is needed for me and mine. I certainly dont want to have to kiss some gubberment third class bureaucratic to try and coax some help from them, I dont want some jack booted thug herding me in line and telling me where to stand, sit, eat or sleep. And last but not least I dont want to be shut up with a bunch of zombies and have to worry about not only trying to get basic necessities but having to fight to keep what I manage to get.
Some seem to think that prepping is foolish, so I ask you whats easier telling your children and loved ones why you prepared or explaining to them why you didnt?
But if any provide not for his own, and especially for those of his own house, he has denied the faith, and is worse than an unbeliever. 1 Timothy 5:8
But then someone has to stand on the bridge waiting for FEMA to bring them a bottle of water, an MRE and a warm blanket so as to provide the Network Anchors their background Money Shot. I wonder how that will workout for them?
I am not saying that things will turn Mad Max/Book of Eli, (With the possible exception of a brief time in a few of the larger big blue cities) but things could easily breakdown for 30 to 60 days during which basic supplies, goods and services stop, banking stops (No checks No Credit Cards, No Debit Cards so on...) now how many people do you think are ready for such?
And between those not ready and those who have always had the gubberment hand them everything what do you think the reaction will be?
Their reaction I think can be summed up in one of my favorite quotes:
Quark: Let me tell you something about Hew-mons, Nephew. Theyre a wonderful, friendly people, as long as their bellies are full and their holosuites are working. But take away their creature comforts, deprive them of food, sleep, sonic showers, put their lives in jeopardy over an extended period of time and those same friendly, intelligent, wonderful people... will become as nasty and as violent as the most bloodthirsty Klingon. You dont believe me? Look at those faces. Look in their eyes. Star Trek: Deep Space Nine: The Siege of AR-558 (#7.8) (1998)
For those who are just starting or are old hands at prepping you may find my Preparedness Manual helpfull. You can download it at:
NOTE! THIS IS A FREE DOWNLOAD. I DO NOT MAKE ONE CENT OFF MY PREPAREDNESS MANUAL!
For those of you who havent started already its time to prepare almost past time maybe. You needed to be stocking up on food guns, ammo, basic household supplies like soap, papergoods, cleaning supplies, good sturdy clothes including extra socks, underwear and extra shoes and boots, a extra couple changes of oil and filters for your car, tools, things you buy everyday start buying two and put one up.
As the LDS say When the emergency is upon us the time for preparedness has past.
Or as the bible says: A prudent man sees danger and takes refuge, but the simple keep going and suffer for it.
NIV Proverbs 22:3
Lastly this for the doubters and the scoffers.
There is no greater disaster than to underestimate danger.
Underestimation can be fatal.
Of course the house of cards shouldn't have been constructed in the first place. It was Keynesian policies magnified by "tulip mania" practices.
And we still don't know who did it.
The book The Secret Weapon calls it financial terrorism and speculates that it was one of our current enemies.
The fact that it was an election-time surprise supports this.
Too bad we couldn't have solved these problems gradually and prevented a lot of the suffering that is now going on.
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