The coming economic crash caused by world debt
I actually wrote this article in 2000 and I have been updating the debt figures and also inserting new information along the way but it is now 2011 and what I said about what would be coming has now partly taken place but it is far from over (It will get worse). Since this article is read by thousands each month I think I owe my readers a update on the economic crises. The original article follows this update.
Debt is at a point in Europe where there will either be a full fledged debt write down that will bring a full fledged depression or where governments just prints more money for bailouts of the banks causing hyperinflation. Which one happens is hard to say, it may be out of our control and it makes little difference anyway. Either path will bring the worst living standards in modern times to most of the developed world.
There is no easy answer to the problem because many people and nations have been living beyond their means for many decades amassing debt and entitlements that cannot be sustained with aging populations. So now the chickens have come home to roust. The credit line of many nations are maxed out and the young cannot support all the entitlements that the baby boomer generation demands.
In the U.S. we cannot keep living like we have twice the income that we really have. Just trying to throw more money at the problem like our government has been doing will just make matters worse in the long run because this nation cannot afford to take on more debt. Passing the costs of this downturn to some future generation is simply not possible. No future generation can possibly pay this huge rapidly increasing debt and soon nobody will be stupid enough to continue to finance our increasingly risky debt at abnormally low interest rates.
The more risk of default or currency devaluation the more we are going to be charged in interest to finance our debt. We may be able to pay $20 trillion dollars of debt at 3 percent interest with some pain but at 6 percent interest or above for any extended period of time it will cause total economic collapse.
If the spending beyond our means for decades has not been enough, many people in our nation were and still are gambling with your investments. They take your money and use it as security to leverage investments worth thirty times that amount. In 2008 the bubbles burst and many that were gambling lost. Some financial institutions got bailed out and some still did not learn their lesson, they are still gambling.
Other big corporations and financial institutions could not pay their debts because of the severe downturn. So they either went bankrupt or were declared too-big-to-fail by the government and government bailed them out and took on their debt hoping that someday the paper and the corporations that they took over will regain their value.
Things got so bad that since 2008 that most will not lend anymore on commercial ventures, instead they are either still gambling on markets or they are sitting on their money. Nobody want to lend for economic development because they are afraid that they will never get paid back. Many others businesses that could expand will not because they are afraid of higher costs in the future through government taxation and regulation. That is one reason for the high unemployment.
Another reason for the high unemployment is that the government cannot institute a policy to buy American or they risk a trade war with other nations in the global economy that are also living beyond their means. The trade war probably is coming anyway because unemployed people of nations will demand that their government do something to protect their jobs and all thier government can do to keep jobs at home is to allow protectionism.
That happened in the 1930′s and it made a bad recession into a decade long world depression. That now seems to be our future and along with the deflation depression or hyperinflationary depression that is bound to come, it will allow the rise of populist demigods who will convince people that they have the answers. In other words, we are now repeating the same mistakes of the 30′s that led to the nationalist socialistic movements and the start of World War II. It will not be different this time except the stakes for the world will be much higher.
If I have a sure message to people who are listening, it is this – Learn to live on an income that is less than half of what you were living on in your good times. Within less then a decade your income will be far less and/or it will buy far less goods and services. Also prepare for big government trying to manage and run every aspect of peoples lives. Certain people are going to think the only way to handle this is through forced government control and then rationing. Do not be surprised if there is civil breakdown and even Balkanization’s when the people get fed up. It has already started in some nations. It is going to get much worse than most anyone imagines.
Try to network with mature astute conservative Christians who understand these issues. It is going to be a tough time for everyone and those who stand alone will have little support. More spending beyond our means is not going to solve a problem that was caused by spending beyond our means. It will only make things worse in the future. The coming decade for the U.S. and the hard choices it makes will determine if it even survives as a nation. God be with you all.