Somethings Got To Give! - The Ugly Economic End Game

Edvard Munch, The Scream

It is very possible we are moving towards an economic Armageddon that will shake the world to its core. The numbers simply don't work. When the markets succumb to the fact that current economic policies have failed all will collapse. Following the onset of such a collapse central banks will be forced to unleash huge massive amounts of new currency into the system to combat the scourge of deflation. This mind staggering shift will in effect clear the deck of deadwood through hyperinflation. It will also, most likely, pave the way forward to introduce a new or a "batch of new" currencies.

Call it a multi-generational "re-alignment" if you wish, but in reality, it is the recognition that our path was an unsustainable illusion. By declaring "that a new start" has been deemed the best path out of the legal morass that contagion and collapse has rendered those in charge of such things can throw the common man under the bus. In such a situation, the debts that are not written off will become a moot point in that most will be devalued and paid off in worthless paper. The important issue will not be fairness but how to get from here to there with the least damage to the institutions and wealth those in power seek to protect. Sooner or later all great Ponzi schemes must come to an end.

We are but pawns in the giant game known as the global economy. Please excuse the tone of this article, it is rooted in the idea that on occasion it is good to vent or say what is on our mind. Sometimes we have to simply concede things are what they are and find solace in the thought that things could be far worse. You can expect promises to be rewritten and broken. Rules will change as we go through the wash. Most people will see their assets rinsed away as society is put through the wringer. For example, expect the cost of living adjustment on social security to be modified reducing payments to the elderly. Adding to the woes of retirees is that many pensions will be forced to reduce payouts and break promises as the returns on their investment fail to meet expectations. Many of the guarantees and paper promises granted over the past decades will prove to be less valuable than the paper they are printed on.

Global Debt Has Surged Since 2008

Blame the Fed if you like but it does little to alter the reality or ugly road ahead. The Fed's past collusion with Goldman Sachs and the fact it has been complicit in allowing other central banks to massively expand credit has garnered far too little attention. The scheme to transfer wealth to the large banks is intact and most Americans know something is wrong but are too busy with their day to day existence to react. There is a huge revolving door between large financial institutions and government that allows former employees with connections and strong ties to policies to flow freely back and forth between the two and the conflict it raises. We need only look at the soaring national debt to see this wave of crony capitalism will soon sweep us off our feet. This is a form of government corruption that has inflicted pain upon people throughout history.

With big business increasingly exerting its power over small enterprises. We the people are trapped in a world where our options are rapidly vanishing. In many ways, those in control have paved over economic reality masking and covering a multitude of sins against the laws of supply and demand. It is impossible to deny this has also taken its toll on "true price discovery" that allows our economic system to adjust and properly function. As pawns in this game, we can either choose to sacrifice ourselves or fight. In this case, fighting means to undertake a strategy that protects what we can of the life we have created within the power we have been granted. The fact you are reading and thinking about this subject puts you in a far better position than the masses who see before them blue skies and unicorns grazing upon a hill.

As the global economy moves forward it is difficult to ignore that it is constructed on a weak foundation of imbalances, lies, and excesses. We only need to look towards China with its ghost cities and the fact its massive factories continue to crank out far more steel than is needed. Across the world, debt has exploded as wages stagnate. Countries have borrowed against the future by running up huge deficits. Good jobs based on creating and doing a real task that can be economically justified are in short supply. The situation has become dire and the numbers do not work, borrowing money to merely pay the interest on past debt and NIRP is not a prescription that leads to economic nirvana and bliss.

Make no mistake, we cannot and should not look for a white knight to come riding in to save the day, no such leader exists to lead us out of the economy hell we have created. Predictions of  "lost decades" are not uncommon as we recover and struggle to find a path forward. Here in America, we see a field of over twenty presidential hopefuls that will soon be weened down but do not expect a hero to emerge. In the end, the system we have created will ask a majority of voters to cast their ballot for the candidate they "hate the least" or in more politically correct terms the "least of two evils".  Adding to our woes is the constant reminder that even if we garner up the enthusiasm to go to the polls rather than disengaging from the process the poorly crafted electoral college will soon strip us of any illusion that all votes are created equal. In the end, a few voters in some "battleground" state will make the final decision as to our fate.

Returning to the subject of the economic end game, make no mistake, periods of rapid credit expansion always end the same way and that is in default. This translates into a major shift in wealth. Global debt has surged since 2008, to levels that should frighten any sane investor because debt has always had consequences. Much of the massive debt load hanging above our heads in 2008 has not receded or gone away it has merely been transferred to the public sector where those in charge of such things feel it is more benign. By a series of off-book and backdoor transactions, those in charge have transferred the banks loses onto the shoulders of the people, however, shifting the liability from one sector to another does not alleviate the problem. As noted earlier, the fact you are reading and thinking about this subject puts you in a far better position than the masses to weather the coming storm.