Consider it Fair Warning
Such quasi-apocalyptic talk is not necessarily hyperbole. Consider it more in the territory of "fair warning."
Modern government economic policies from the US to Europe to Australia, are built upon tens or hundreds of $trillions of imaginary capital and wealth which does not actually exist in the real world. This "phantom wealth" resides mainly within the imagination. It is an article of faith and economic belief systems.
Whether there is a catastrophic and bloody economic collapse depends largely upon the psychology of the herd -- and what it might take to collapse the belief system and set off a stampede.
The combination of exponentially growing debt with an ongoing demographic collapse of core populations, casts ominous spells over the futures of most of the nations of the developed world. There is still time to change course and correct past mistakes -- but there is no political will to do so. And there is not enough "grit" in most modern populations to turn toward sustainable demographic and fiscal policies, even if a few politicians at the top had the backbone to promote such changes in policy.
The US is on a suicidal economic course to disaster. This is not a new finding, but the rate of economic decline has accelerated significantly in recent years, and is likely to accelerate even more over the next few years.
It takes almost $10 in new US government spending to achieve $1 in new GDP growth. That "return on investment" has been falling steadily as the type of new government spending changes away from the "infrastructure" category, inexorably over to the "entitlement" category. The same dead end trend is taking place from Australia to Europe to Japan to Canada.
As spending for entitlements overruns and overwhelms all sources of revenue, government borrowing to pay for both infrastructural and entitlement spending -- plus the interest on pre-existing debt -- explodes through the roof. Eventually lenders -- both foreign and domestic -- bail out of government bonds and notes. The government will no longer be able to borrow on open markets, and will be forced to print money to pay its debts and operating expenses.
Any student of history worth his salt understands what happens to the empire when it runs out of "gold," or whatever is perceived as real wealth to pay its bills and the salaries of its centurions, clerks, and PR flacks.
The Obama administration was given a magnificent gift in the form of the "fracking revolution." The economic growth that has occurred and will continue to occur as a result of this unexpected "gift horse" will help cover up and take the edges off the near term decline.
But the Obama administration's thick-headed and reactionary economic policies are poison to the economy as a whole. Real unemployment remains at historically high levels, dependency on government benefits continues growing to record levels, and there is only so much happy talk that the media can spread around to cover up what is essentially a crappy economic outlook.
Here is a brief summary of the "Ponzi Finance Scheme" that underlies the economies of modern developed nations.
Argentina has gone through this cycle multiple times, and is approaching the critical stage of yet another dysfunctional populist economic cycle. It is easy to sit back in one's easy chair before a fire in Munchen or Victoria, and "tut tut" over Argentina's perennial dysfunction and economic dunderheadedness. But when the dysfunction reaches your front doorstep, if you have not made preparations you will have a few other choice expletives forced from your lips.
It is never too late to have a dangerous childhood.
Labels: economic depression