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One day, a seemingly random piece of bad news -- perhaps a negative report by a rating agency -- will make the headlines during an otherwise quiet news cycle. Suddenly, it will be not just a few policy wonks who worry about the sustainability of U.S. fiscal policy but the public at large, not to mention investors abroad. It is this shift that is crucial: A complex adaptive system is in big trouble when its component parts lose faith in its viability.
Over the last three years, the complex system of the global economy flipped from boom to bust -- all because a bunch of Americans started to default on their subprime mortgages, thereby blowing huge holes in the business models of thousands of highly leveraged financial institutions. The next phase of the current crisis may begin when the public begins to reassess the credibility of the radical monetary and fiscal steps that were taken in response.
Neither interest rates at zero nor fiscal stimulus can achieve a sustainable recovery if people in the United States and abroad collectively decide, overnight, that such measures will ultimately lead to much higher inflation rates or outright default. Bond yields can shoot up if expectations change about future government solvency, intensifying an already bad fiscal crisis by driving up the cost of interest payments on new debt. Just ask Greece.
Ask Russia too. Fighting a losing battle in the mountains of the Hindu Kush has long been a harbinger of imperial fall. What happened 20 years ago is a reminder that empires do not in fact appear, rise, reign, decline and fall according to some recurrent and predictable life cycle. It is historians who retrospectively portray the process of imperial dissolution as slow-acting. Rather, empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.
Washington, you have been warned.
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Those of living in reality in this blog have known this for years. Now its happening. And one day in 2010, the shift will come and the economy will collapse, as will the dollar.
ReplyDeleteBetter prepare...
8:05 .. sorry, no it will not. You really thing they will let it collapse? It's just not going to happens. Buy Buy Buy!
ReplyDeleteAnd...a bunch of Americans defaulted on their subprime mortgages because...deregulation of the financial industry, which is a direct result of the way politicians get elected in this "democracy".
ReplyDeleteHow is the government or the Fed going to stop it?
ReplyDeleteMore bailouts?
Print more money?
Start another war? Iran, Pakistan?
America's troubles are a result of outsourcing more and more of its manufacturing overseas.
ReplyDeleteLow interest rates were an attempt to cover up this growing menacing. They created a false service economy based on binge buying. Now the binge is over and the false economy it afforded is withering away.
Without this fake binge economy, government revenue falls like a rock and is unable to support growing debt and future liabilities, such as Medicare and Social Security.
Yes, the economy IS doomed unless Government reverses Globalism and begins rebuilding America's industrial base very soon.
To say that the stock market will keep rising under current conditions is pretty much indicative of such a person's intellectual capacity.
Bottom line: if the Dow continues to go up, it is 1) being manipulated to do so, and/or 2) this is a result of currency devaluation (inflation).
US is not exactly collapsing but will deflate like Japan for the next two decades.
ReplyDeletewe need to tax services in order to meet current obligations that come with aging and prosperity, and accept that a service economy is in the cards: our demographics. we cannot compete with asia, nor latin america before that, due to wage differentials. world markets should remain open, keeping inflation tamer than what it is.
ReplyDeleteThey already tipped their hat in 2008 when they stated they will declare Martial Law if congress didn't pass that bailout package. Stock up and prepare and figure out how to survive under Martial Law, not a lawless society like Rawles' preaches.
ReplyDeleteIf your life savings is in the dollar, it could vanish fairly easily, but not so if in a commodity like silver, or gold. Expect to "need" 1 - 2 ounces of silver per day for as long as you think the crisis will last. 1 year? 2 years? That means 365 ounces to 1460 ounces. Probably less if you have year supply of food and other important rations, as well as self sustainability. Gold is nice but who has change or can afford to deal in gold at that time? Are you going to buy a house with it? Silver is your daily living money and IMO, 1 to 2 ounces a day is about right.
Even so, I'm not sure I agree with the theory that collapse will come "overnight." A lot of doom and gloomers wish it would, as that would ease their anxiety to get it over with. BUt I think it will be more painful than that, and will be a slow motion disintegration of less and less income and benefits, less and less government income and benefits, and ever increasing prices. Getting by will be like trying to cut through a cinderblock with a spoon, as I stated before.
Everytime you think life couldn't take anything more from you, it will. And then it will do it again. And then again. And again. Death by a 1,000 cuts.
A sudden collapse would be more humane, but is less probable in my opinion.
3:52 I agree with you. However I wish it would happen fast so that by the time grandson is my age he will have it better. I know there are people on here that can see the future and believe that the whole world will be Madmax in no time and it will digress until we are all eating each other, but I don't. Civilization does not just disappear overnight unless there is nothing to sustain life like what was represented by the book "The Road." I believe that there are certain things that could set us off for a fast decline, or overnight. Currently .41 cents of every dollar the feds spend is borrowed money. That means that our soldiers pay checks are almost half paid by the Chinese and other countries that loan us money. When the loans stop we print more money. When we print more we devalue. It is going to be ugly.
ReplyDeleteWe will definitely print more money.
ReplyDeleteKids on the street now photocopy money.
3:52....you might want to consider some fractional gold, maybe some 1/10th, 1/4 ounce even some 1/2 ounce eagles, or maples. Sure the premium is a little more but they might come in handy for a slightly larger purchase should you come across something you can afford even if the SHTF. Also, you might be able to barter it easier than say a full ounce of gold, or more.
ReplyDeleteDon't assume when you hear barter it means the SHTF. You can barter today if you want to, as long as the other party is willing. Most don't know the value of pm's but they will if it gets bad enough.
people photocopy money like crazy in las vegas, it is everywhere there are people are using it, even bank tellers are putting it in their drawers and giving it to customers and pocketing the real money, it just happened at a bank of america the other day
ReplyDeleteI rarely comment, however after browsing a great deal
ReplyDeleteof responses on this page "America Could Collapse Overnight".
I do have 2 questions for you if you do not mind. Could it be simply
me or do a few of the remarks look as if they are coming from
brain dead individuals? :-P And, if you are posting at other sites, I'd like to keep up with anything new you have to post. Would you list of all of all your public sites like your twitter feed, Facebook page or linkedin profile?
My blog post: ideal waist to hip ratio
google law firm
ReplyDelete