The "easy credit" economy we live in today has only been around since WWII. But it is all most of us know.Unfortunately, it now turns out that there was a systemic problem that built up, and is finally causing the system to irrevocably collapse.
And the two post-WWII remedies for economic downturn, inflation and growth, will no longer work to fix the problem. Neither US presidential candidate are aware of this yet, so are proposing the traditional remedies, which won't work.
On the plus side, what we are facing is not necessarily economic catastrophe, but the complete reordering of our economy back to the pre-WWII "pay as you go" economy.
The title for this will be "The Collapse of the International Credit System." For the government, it will mean the end of ALL deficit spending. If they don't have the money, the US government cannot pay for it. A balanced budget constitutional amendment will be unnecessary. No one will loan the government extra money to spend.
For individuals, it will mean that all credit cards will be canceled. All transactions will have to take place with either debit cards, paper money, or for a while, bank issued personal check. Except for the very few businesses that have instant electronic check debit, however, checks will soon no longer be accepted by businesses, because there will be a flood of overdrafts, so the banks will have to cancel personal checking as well.
Most retail business in the US will have to be done with debit cards. This is because less than 5% of our currency is "backed" with paper money. But since many transactions cannot be done with debit cards, the end result is that cash will be worth far more than its face value. That is, even if something priced a dollar will still cost a debit card dollar, you will be able to buy it for a dime, in cash.
And the US mints are already at 100% capacity production. Therefore, there is no physical way the government can print more money to reverse this astounding cash-only deflation, within six months to a year. High denomination bills will also have to be printed, but these will be closely controlled and monitored for only business to business transactions.
International trade, except in exchange for paper money, will come to a halt. However, because the US exports vital food to other countries, we can sell them food in exchange for inflated debt relief. That is, a bushel of wheat sold for $100 in US national debt held by foreigners, or for only $10 if they have cash.
The end result of this will be a return to the old saying "We will only give you a loan if you don't need it." Nobody, no individual, no company, and not the government will be able to get credit unless they put up *more* than 100% collateral.
This is as it was before the war, and this is how it will be again. The "easy credit" economy was great while it lasted, but it is impossible to sustain beyond its 60+ year old life. At least we already know the rules to the old way of doing business, so we have an economic system to return to.
But the days of credit are rapidly drawing to a close. Recommend you have more than the usual amount of cash on hand at home. If it's only on a computer, you might be boned.
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Complacency was bad, yes, but then America has had a strong conservationist voice in its ranks since the 60's, before almost any other nation. It was just drowned out by trailer park breeders for the most part.
We'd always had our toe in the shiate. See Nixon. See the Reagan years and subsequent Punk scene. Bush just burst out with it to the Rove degree. While Nixon and Reagan raked in mere billions with dirty national deals in Panama, Nicaragua et. al. Bush came bursting out of the closet, flaming with imperialism to the tune of trillions.
We had cheap gas because we had cheap loans. Our GDP was high enough that NO ONE wanted to see us stop. The last eight years have seen America cease to be productive. Why? The same massive propaganda blitz that divided the nation in half and made two terms of GW possible froze us in our tracks. We are a polarized nation. Racism, sexism, homophobia, and stupidity are at an all-time high. Our public schools are a joke. We have failed to progress...
...at a crucial time in history.
With technological and industrial growth increasing globally at an exponential rate, religion and Fox news have turned non-issues like gay marriage and stem cell research into our retarded Achilles heel. The best and brightest in America? Gut shot with stupidity.
And for the last eight years the rest of the world has fukked, sukked, and laughed its ass off while advancing at an alarming rate.
And we have gone back to church. Enjoy your third world. You voted for it. Apparently.
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2 comments:
First off, I don't think it'll go that far. There are some solutions such as cutting back on currency printing to up the overall value of the dollar, returning to the Gold standard, etc.
Secondly, because the globe is so interconnected and invested (pardon the pun) in the fate of the American economy, I'm sure there will be some solution amounting to the U.S. asking for help with its tail between its legs. Perhaps this is how China or other growing economies will bargain for geopolitical power.
It could be that the third world war, isn't fought with guns, it's with bank accounts.
If it's with bank accounts we're fooked. :/
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