Tag Archives: Economic collapse

The Mother of all Economic Crises, by Ron Paul

Posted on December 13, 2022 | Leave a comment

We’re looking at the greatest debt implosion in history, because the world has never been this indebted. From Ron Paul at ronpaulinstitute.org:

Nouriel Roubini, a former advisor to the International Monetary Fund and member of President Clinton’s Council of Economic Advisors, was one of the few “mainstream” economists to predict the collapse of the housing bubble. Now Roubini is warning that the staggering amounts of debt held by individuals, businesses, and the government will soon lead to the “mother of all economic crises.”

Roubini properly blames the creation of a debt-based economy on the near-or-at-zero interest rate and quantitative easing policies pursued by the Federal Reserve and other central banks. The inevitable result of the zero-interest and quantitative easing policies is price inflation wreaking havoc on the American people.

The Fed has been trying to eliminate price inflation with a series of interest rate increases. So far, these rate increases have not significantly reduced price inflation. This is because rates remain at historic lows. Yet the rate increases have had negative economic effects, including a decline in the demand for new homes. Increasing interest rates make it impossible for many middle- and working-class Americans to afford a monthly mortgage payment for even a relatively inexpensive home.

The main reason the Fed cannot raise rates to anywhere near what they would be in a free market is the effect it would have on the federal government’s ability to manage its debt. According to the Congressional Budget Office (CBO), interest on the national debt is already on track to consume 40 percent of the federal budget by 2052 and will surpass defense spending by 2029! A small interest rate increase can raise yearly federal debt interest rate payments by many billions of dollars, increasing the amount of the federal budget devoted solely to servicing the debt.

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This Implosion Will Be Fast – Hold On To Your Seats, by Egon von Greyerz

Posted on July 4, 2022 | Leave a comment

Things fall apart much faster than they’re put together, and markets go down much quicker than they go up. From Egon von Greyerz at goldswitzerland.com:

The massive money creation in the 2000s has led to a debt and asset bubble, which is about to burst. Investors will be shocked by the speed of the decline and won’t react before it is too late.

The massive money creation by central and commercial banks in this century has resulted in a growth of global assets from $450 trillion in 2000 to $1,540 trillion in 2020.

DEBT TO GDP GROWTH

As the chart below shows US debt to GDP held well below 25% from 1790 to the 1930s, a period of almost 150 years. The depression with the New Deal followed by WWII pushed debt to GDP up to 125%. Then after the war, the debt  came down to around 30% in the early 1970s.

The closing of the gold window in 1971 ended all fiscal and monetary discipline. Since then, the US and much of the Western world has seen debt to GDP surge to well over 100%. In the US, Public Debt to GDP is now 125%. Back in 2000 it was only 54% but since then we have seen a vote buying system with a money printing bonanza and an exponential increase in debt to 125%.

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Blue and Red Do Have Something in Common. They’ve Both Been Ripped Off, Repeatedly, by Matt Taibbi

Posted on June 22, 2022 | Leave a comment

When the same people always win the game, the game is fixed. From Matt Taibbi at taibbi.substack.com:

Our “transitory” inflation disaster and looming market crash mimic past bubble disasters, which all had the same feature: a few insiders won, and everyone else got creamed

“Putin’s hiking prices right now, from under this lectern!”

Good, honest, hardworking people, white collar, blue collar. Doesn’t matter what color shirt you have on… People of modest means continue to elect these rich cocksuckers who don’t give a fuck about them. They don’t give a fuck about you. They don’t give a fuck about you… It’s called the American dream because you have to be asleep to believe it. — George Carlin

On June 14th, in Philadelphia, President Joe Biden gave a speech before leaders of the AFL-CIO. This is the role Joe Biden was hired to play, the hardscrabble “Scranton Joe” persona who gets the common working person. He addressed an issue very much on the minds of ordinary folk:

I’m doing everything in my power to blunt Putin’s gas price hike.  Just since he invaded Ukraine, it’s gone up $1.74 a gallon — because of nothing else but that.

This followed remarks he’d made in Los Angeles a week before, at the 9th Summit of the Americas:

The COVID-19 pandemic hit our region particularly hard… Twenty-two million more people fell into poverty in just the first year of the pandemic. Inequity continues to rise. Global [inflationary] pressures… made worse by Putin’s brutal and unprovoked war against Ukraine… are making it harder for families to make ends meet. 

Watching Biden on the stump these days is heartbreaking. He combines Ron Burgundy-style slapstick teleprompter-dependence (one half expects him to end a speech soon with “Go fuck yourself, San Diego”) with the terror of a man who can see the bright light coming. Both effects are worsened by the fact that he’s peddling an insane, indefensible lie, i.e. that America is suffering through “Putin price hikes,” and not the inevitable consequence of yet another transparent state-aided ripoff scheme to soak the middle and lower classes on behalf of the 1%.

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We Are In So Much Trouble, by Michael Snyder

Posted on March 29, 2022 | Leave a comment

It’s hard to argue with Michael Snyder on this one. From Snyder at economiccollapseblog.com:

What we are witnessing is truly the beginning of the end.  In recent months I have focused a lot on the economic implosion that is now taking place, but what we are facing is so much broader than that.  Our society is literally falling to pieces all around us, and now World War 3 has begun.  Many regard the war that has erupted on the other side of the globe as just a conflict between Ukraine and Russia, but the truth is that it is really a proxy war between the United States and Russia.  And since neither side seems much interested in diplomacy at this point, this proxy war could eventually become a shooting war between the two greatest nuclear powers on the entire planet.

Before the war started, events were already starting to accelerate substantially.  Inflation was out of control, a new energy crisis had flared up, and global food supplies were getting tighter and tighter.  But now we are truly in unprecedented territory.  If you doubt this, just look at what is happening to the price of fertilizer.

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Posted in Banking, Business, Collapse, Debt, Economics, Economy, Energy, Eurasian Axis, Financial markets, Foreign Policy, Geopolitics, Governments, History, Politics, Propaganda, War

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2022: The Year of Breakdown, by Charles Hugh Smith

Posted on January 1, 2022 | Leave a comment

Charles Hugh Smith is the mechanic who knows the car with the misfiring engine spewing blue exhaust will break down soon, although neither he nor anyone else can give you the exact time it will happen. From Smith at oftwominds.com:

In other words, our economy and society have been optimized for failure.

If we look at the fragility and instability of essential systems, it’s clear that 2022 will be the year of breakdown. Let’s start by reviewing how systems break down, a process I’ve simplified into the graphic below.

1. Regardless of whether it was planned or not, all systems are optimized to process specific inputs to generate specific outputs. Each system is pared down to maximize efficiency as the means to maximize profits. This efficiency in service of maximizing profits requires trade-offs that only become visible when some key part of the system fails.

The system that ships containers around the world offers a useful example. Shipping containers revolutionized shipping and reduced costs by commoditizing containers (all standard sizes), container ships (specifically designed to carry thousands of containers and container ports with specifically designed cranes, docks and truck lanes / queueing.

It’s possible to load a container on some other craft with a jury-rigged crane, but the efficiency of that is essentially a fraction of the optimized system: the jury-rigged crane will only be able to load a handful of containers, the ship will only be able to carry a few containers, and the likelihood of the containers shifting increases.

The infrastructure and labor are both highly specialized. Calling out the National Guard to speed up container offloading is a useless gesture unless the Guard can deliver more cranes and experienced operators.

The greater the optimization, the greater the fragility as the breaking of any one link brings the entire system to a halt. Throwing in equipment and labor that the system isn’t designed to use will fail.

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We Don’t Talk About Collapse To Revel In It, We Talk About Collapse to Prevent It, by Charles Hugh Smith

Posted on November 26, 2021 | 1 comment

At this point nobody is going to prevent collapse, but it’s good to talk about it to understand how it happened and how to prevent it in those communities that emerge from the rubble. From Charles Hugh Smith at oftwominds.com:

If one possible result of the current system is collapse, realizing the system itself must be changed isn’t doom-and-gloom, it’s problem-solving.

Those of us who discuss collapse are generally dismissed as doom-and-gloomers, the equivalent of people who watch dash-cam videos of vehicle crashes all day, reveling in disaster. Why would we spend so much effort discussing collapse if we didn’t long for it?

Those dismissing us all as doom-and-gloomers hoping for collapse have it backward: yes, some long for collapse as a real-life disaster movie, but those discussing collapse in systems terms are trying to avoid it, not revel in it.

If the system is vulnerable beneath a surface stability, then the only way to avoid negative consequences is to understand those vulnerabilities / fragilities and work out systemic changes that reduce those risks.

It’s not the analysis of vulnerabilities that causes collapse, it’s refusing to look at vulnerabilities because to do so is considered negative. Why not be optimistic and just go with the consensus that the status quo is impervious to serious disruption? Can-do optimism is all that’s needed to overcome any spot of bother.

The problem is humanity’s propensity to confuse optimism with magical thinking. This confusion is particularly visible in any discussion of energy. The status quo holds that every problem has a technological solution, and doubting this optimism is dismissed as naysaying: “why can’t you be positive?”

I consider myself an optimist in the sense that I see solutions that are within reach if we change our definition of the problem so we can enable new solutions. I consider myself a practical, pragmatic optimist because I understand from life experience that systemic solutions generally require arduous transformations that will demand great effort and sacrifice. In many cases, this process is mostly a series of failures and disappointments that are the essential parts of a steep learning curve.

But little of this basic awareness is visible in media descriptions of “solutions.”

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One Lockdown from Disaster, by MN Gordon

Posted on July 30, 2021 | Leave a comment

The next lockdown may well be the knockout blow to the economy. From MN Gordon at economicprism.com:

The popular economic tune being played by the popular press drones on.  You know the melody by now…

That the post-pandemic boom is alive and well.  That growth is enduring.  That blue skies are here to stay.

If you listen closely, however, several notes ring sour.

The Commerce Department reported on Thursday that second quarter gross domestic product (GDP) increased at an annualized rate of 6.5 percent.  This may sound good, initially.  But economists with Dow Jones had estimated an 8.4 percent Q2 GDP increase.  Once again, extreme fiscal stimulus, at the expense of a long term debt burden, drifted off key.

The monetary policy refrain was also lacking.  This week, at the Federal Open Market Committee meeting press conference, Fed Chair Jay Powell remarked that, “we’re some way away from having had substantial further progress toward the maximum employment goal.”

Thus the Fed will continue to hold the federal funds rate near zero and will continue creating credit from thin air at a rate of $120 billion per month to purchase Treasuries and mortgage backed securities in the amounts of $80 billion and $40 billion, respectively.  By now these damaging actions have become exceedingly mindless.  The aim for maximum employment will ultimately prove to be a shortsighted calamity.

If the economy was really strengthening, the Fed would be tapering back these security purchases and even normalizing its balance sheet.  At the very least, it would be talking about tapering.

But the economy’s not really strengthening at all.  Rather, the economy and financial markets, handicapped by extreme intervention, are entirely dependent on this monetary stimulus.

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The Three-way Squeeze, by James Howard Kunstler

Posted on June 15, 2021 | Leave a comment

Covid-19, the election, and the economy: will the chickens come home to roost on the Democrats? From James Howard Kunstler at kunstler.com:

Here is why the “Joe Biden” regime only has a few months to live: it is caught in a squeeze between some of the greatest lies in world history, and they’re all unraveling now. Anyway, “Joe Biden” is not really functioning as president of the US; he’s just the doddering, photo-op front-man for a kind of politburo centered around Barack Obama, and that group lives in terror of being found-out, which it will be, despite its capture of the traditional news and social media.

Big Lie No. 1 is actually a whole bundle of lies surrounding the Covid-19 pandemic. The chief national health official, Dr. Anthony Fauci (a.k.a. “The Science”) can’t get his story straight about whether or not he funneled US taxpayer money to a lab associated with China’s People’s Liberation Army, to engineer a virus that was turned loose on the rest of the world. An email train of evidence shows that he did.

That was bad enough. Then Dr. Fauci (and most of the nation’s medical bureaucracy) worked hard to suppress cheap and effective treatments that defeated the virus and cured patients if used in the early stages of infection, namely, Ivermectin, Hydroxychloroquine, Vitamin D, and Fluoxetine. (Fluoxetine, or Prozac, used “off-label,” modulates brain inflammation.) The suppression actively continues to this day. Dr. Fauci & Company promoted the use of a PCR viral testing system run at excessive cycle thresholds that flooded the medical system with false positive tests. The test’s inventor, (Nobel Prize winner) the late Dr. Kary Mullis,said the test was never meant to be used as a diagnostic tool.

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Is the United States on The Same Calamitous Path as Yugoslavia? by Brandon Smith

Posted on June 6, 2021 | Leave a comment

Imagine living in a country where prices doubled daily. From Brandon Smith at alt-market.com:

This article was written by Brandon Smith and originally published at Birch Gold Group

Of all the inflationary disasters in modern economic history, Yugoslavia’s is the one most ignored by the mainstream. To be sure, the collapse of the Eastern European nation was a slow burn, but with a big explosion at the end. Most people are familiar with the Serbian/Croatian war and the genocide that followed, but few people are familiar with the economic crisis that led to the conflict.

I am not here to present an in-depth analysis of the eventual breakup of Yugoslavia, only to examine the conditions that triggered it. I believe there are some interesting similarities to burgeoning conditions within the U.S., along with some distinct differences.

The First Stage: Inflation

President Josip Broz Tito led the nation in various capacities from 1953 to 1980. He used two powerful tools to clamp down on unrest in the ethnically-diverse nation: large-scale repression of dissenting voices using both police and military forces, and allowing regional foreign borrowing. The latter might not sound particularly important. According to the CIA’s 1983 national intelligence document Yugoslavia: An Approaching Crisis?:

Although self-management in theory permits workers to own and manage their enterprises, in fact the leaders in the six republics and two provinces… became the dominant economic decision makers. They grew increasingly protectionist and isolated from each other in pursuing local interests. Ignoring national economies of scale and ultimate profitability, they built redundant enterprises, blocked competition on the “unified market,” and granted unrealistic price increases and subsidies to favored industries. Thus, by the early 1980s inflation in the 30- to 40-percent range became chronic…

Yugoslavia’s inflation troubles were ever present, with up to 76% in price increases annually from the early 1970’s to the early 1990’s. In fact, the Cato Institute’s Steve Hanke calls it The World’s Greatest Unreported Hyperinflation.

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The “Wait and See” Economy’s Moment of Truth, by Charles Hugh Smith

Posted on March 10, 2021 | 1 comment

The economy was faltering before Covid-19 and virtually everything that’s been done in response to the outbreak is guaranteed over anything but the immediate short-term to make it that much worse. From Charles Hugh Smith at oftwominds.com:

The “wait and see” economy is about to face its moment of truth, and one truth is the $1.8 trillion being passed out like candy is already spent.

The defining phrase of the U.S. economy for the past year is “wait and see”: every enterprise impacted by the pandemic that didn’t close immediately has been in “wait and see” mode, clinging on to the hope that once the pandemic ends then everything will roar back to life, bigger and better than before.

With the promise of herd immunity fast approaching, the moment of truth for “wait and see” is also fast approaching. The conventional view is that the trillions of dollars in stimulus kept business as usual alive and ready to soar back to the good old days. The almost $2 trillion injection of financial smack currently in progress will ignite the afterburners and the economy will rocket higher than anyone can imagine.

The problem with this rosy view is the economy was on fumes before the pandemic, as Gordon Long and I highlighted in our 53-minute presentation, The Coming Deflationary Tsunami. Interest rates had been falling for 40 years and there was little leeway for more of the magic of falling rates. The spending of the upper middle class had already rolled over as the awareness that the longest expansion in U.S. history was faltering seeped into financial decisions–and no wonder, since every trick in the book had been required to keep it alive: zero interest rates, quantitative easing galore, tax cuts, massive deficit spending and speculative bubbles in every asset class.

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