The Economic Collapse Is Not A Single Event

TEC ^ | 6-12-2012 | Michael Snyder

[unkus]

ping

[pabianice]

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.

[yefragetuwrabrumuy]

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”.

[marron]

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.

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.

[no-to-illegals]

The game was likened to a game of chess. Perhaps when the shooting starts it maybe will be a game of chess. Am likening the situation to a game of poker. The bluffers are folding and many countries are eyeing the pile of money in the present. Many (at the table) are continuing to bluff, and the country holding all the aces is bluffing also or has on a poker face. The end game will be when the cheaters are exposed (if that happens), and then the weapons will be drawn as the players prepare to shoot at one then another. Who wins? It may not be the one who takes money, instead it maybe will be the robber with the government badge.

(imho)

nti

[BipolarBob]

'But the financial crisis of 2008 did not completely destroy us. Neither will the next crisis. '

Who says? The ones leading up to this could be the mild tremors and the next could be a supervolcano.

[jjsheridan5]

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.”

[Errant]

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.

[momincombatboots]

The September 2007 bank run was a singular event. Of course, it has all but been deleted from history.

[Celerity]

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.

[LTC.Ret]

The most important line in this article:

“Make the decision right now to be a light during the times ahead.”

[Errant]

Yes, the steps leading up to a massive decline have been taking place for decades now.

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.

[DaxtonBrown]

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
http://www.futurnamics.com/biflation.php

[Errant]

Good point.

[mjp]

The coming economic collapse is going to play out over a number of years and it is going to be absolutely horrible.

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.

US M2 Money Supply Growth data by YCharts

[blam]

Prepper Ping.

[Kartographer]

Prepper PING!

[Kartographer]

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 don’t even know how its going to play out. We are head for some bad times, which is one of the reasons I’ve 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 don’t want to be beholden to anyone for providing what is needed for me and mine. I certainly don’t want to have to kiss some ‘gubberment’ third class bureaucratic to try and coax some help from them, I don’t 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 don’t 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 what’s easier telling your children and loved ones why you prepared or explaining to them why you didn’t?

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. They’re 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 don’t 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:

http://tomeaker.com/kart/Preparedness1j.pdf

NOTE! THIS IS A FREE DOWNLOAD. I DO NOT MAKE ONE CENT OFF MY PREPAREDNESS MANUAL!

For those of you who haven’t started already it’s 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.”

[firebrand]

The "financial crisis of 2008" was caused by one entity removing a crucial card from the house of cards. It was a withdrawal of half a trillion dollars on September 15, 2008, in an extremely short time, from money markets. If the Fed had not stopped the trading, it is estimated that the amount withdrawn would have been 6 or 7 trillion.

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.