Guest Post: Economic Collapse? We’re Soaking In It!

Tyler Durden's picture

Submitted by Brandon Smith from Alt Market

Economic Collapse? We’re Soaking In It!

A rather unobservant or at the very least “unlucky” man strolls across a faulty bridge; weathered, termite ridden, and over-traveled. He hops and skips and jumps about like a brain damaged orangutan without a care in the world. He does this not only because he is oblivious to the fundamental physics behind the workings of the bridge, and the structural signs of a bridge that is on the verge of collapse, but also because numerous highly paid “experts” on bridges have told him it is absolutely safe to do so. The bridge, of course, crumbles right under his feet, and he falls.

Now, if the ground was relatively close to our unfortunate freefalling dupe, the sudden collapse and the painful shock of smacking into the rocky floor would be an understandable surprise. Given only moments between the failure of the bridge and the ultimate conclusion of the spine crunching granite bottom swan dive, one could hardly ponder the situation at all. However, in this event, the ground is not close. In fact, the ravine is dark, and the fall is long. Perhaps three or four years long. In this case, a man has plenty of time to think through the circumstances of his predicament, and realize that eventually, he WILL meet the future like a warm pancake smacking cold linoleum at 200 mph.

If such a man is unable to discern the problems he faces, or to even acknowledge the fact that the ground has given way beneath him, after such a long stretch of time, it becomes very hard to feel sorry for him. But then again, we were all like this man once…

Since the derivatives and housing market implosion of 2008, America and the rest of the world has been spiraling down a chasm some in this country still refuse to take note of. The question has never been whether there “will be” a full scale financial disaster. The end to that chapter of this story was already written years ago. Rather, the real question has been “when” will this inevitable event culminate? Sadly, speculation on the matter has met an irreconcilable road block. The fact is, all the necessary elements are in place to bring down our fiscal shelter not in five years, not in one year, not in six months, but today. That’s right…..the economy as we know it has the potential to derail completely before you wake up for your morning poptart.

Some skeptics might shrug off this statement as mere sensationalism for effect. I wish that were the case. Frankly, I would enjoy writing a little fiction for once. The truth is far too bizarre and disturbing lately.

In the case of economics, traditional views and standards have gone completely out the window in a way that I and probably every other analyst in the field have never heard of or encountered. All expectations are now null and void. Manipulation of the marketplace is no longer a subversive and secretive process, but open government and central banking policy! Who could have guessed five years ago, for instance, that U.S. taxpayers would be saddled with bailouts of the EU? Who could have predicted that global stock market psychology would be dominated for over a year by the debt drama of a country as economically insignificant as Greece? And, who could have foreseen that destructive fiat stimulus policies would soon be common knowledge events amongst the citizens of various faltering nations?

Liberty Movement analysts have been sounding the warning alarm for a long time on the possible consequences of Federal Reserve actions as well as government expansion, but to witness the scale of the fraud being unleashed and the brazen manner in which it is being implemented is something else entirely. Even now, the sheer scope of the systemic collapse is breaking into territory that may not be fully understood for decades to come.

That said, no one with any common sense or eyes to see can deny that the bridge has indeed given way. What awaits us when we finally hit bottom is hard to say, but it doesn’t take a soothsayer to predict an unpleasant outcome.

As the process of destabilization unfolds, the best we can do is stay attuned to political and financial shifts that often go underreported in the mainstream media. This gives us the ability to gauge the nature and speed of the crisis so that we can move to guard ourselves effectively when the time comes. Even the smallest morsel of information can have incredible significance. These holes in the fog are brief, but they reveal much. Some of this data signals a new and powerful wave of change on the horizon, a startling chapter which may be the last for the ailing economy as we know it…

Rise Of The Asian Union

Back at the end of 2008, a China reinventing itself as a consumer hub for the Asian-Pacific region announced a “proposal” to introduce cross border trade of the Yuan. Only a couple Western news sources covered this story, burying the information in their pages on Christmas Day. Now, cross border trade of the Yuan is launching the fiat unit towards reserve status in the Pacific and is hurtling China towards inclusion in the IMF’s new global currency; the SDR.

A recent meeting of the Asian Pacific Economic Cooperation (APEC) has led to a predictable clash of philosophies between the U.S. and China. Make no mistake, though, this conflict is a ploy. A soap opera designed to distract us as well as prep us for a trade war to end all trade wars.

The talks focused on progressive trade agreements and multilateral policies designed to shield Pacific nations from the poisonous debt cloud forming over the EU. These agreements rely, of course, on centralization tactics and the removal of protective export and import barriers. Both U.S. officials and Chinese officials WANT more centralization. Do not be fooled. The notion that American people have been fed, however, is that China wants a weak currency and export dominance for selfish ends. The notion the Chinese people have been fed, is that America wants to have its cake and eat it too; demanding a larger piece of the export market while at the same time expecting ultra-cheap goods from overseas. On the surface, they are both right, but go deeper, and you will find the tides of engineered globalism at work.

Ultimately, there is no APEC, at least not one that includes the U.S. There is only the ASEAN trading bloc, which is about to become the Asian Union. That’s right…they are ready. In a barely reported announcement from China, a proposal has been announced for the formation of an ASEAN central bank, designed much like the European Central Bank (ECB), which includes South Korea and Japan as stakeholders. Remember how cross-border trade in the Yuan started as a mostly ignored “proposal” back in 2008? This is not a proposal, this is a promise:

“The bank will also settle China-ASEAN trade in yuan, a step in China's long campaign to make the yuan, also known as renminbi or people's currency, a regional currency...”

http://www.reuters.com/article/2011/10/27/us-china-asean-financial-idUSTRE79Q2F520111027

Its official, folks! The U.S. has just been replaced as China’s go-to trading partner, and a new multinational economic union is about to be formed. There is absolutely no incentive anymore for China to continue investment in U.S. debt or the dollar. Everything between the U.S. and China has been leading to this. All that is left is the spark of trade aggression from either side to seal the deal. This leaves the U.S. to flounder without a life-vest, or to be swallowed by the leviathan otherwise known as the IMF.

Fall Of The European Union

After endless months of hearing about Greece, finally, world markets are starting to realize that there are other more financially important countries to worry about, like Italy, for example. With the replacement of President Silvio Berlusconi, and the budgetary shortfalls of the government in the media view, attentions are beginning to wander over to the EU as a collection of nations all in their own particular brand of trouble, instead of being sidenotes or dominoes in the Greece debacle.

The EU Growth And Stability Pact dictates that EU member states must maintain a national deficit of 3% or less, and a debt to GDP ratio of 60% or less. More than half of EU economies have far exceeded these limitations.

Italy’s “official” debt to GDP ratio stands at around 120%, but the true size of its liabilities may never be known. Greece’s debt to GDP ratio was cited at around 142% by government officials while analysts who use total debt to GDP calculations place it closer to 200%. Germany, France, and the UK all stand at around 80% of GDP (official numbers, again):

http://edition.cnn.com/2011/BUSINESS/06/19/europe.debt.explainer/index.html

The situation is so bad in the EU, that some, including German Chancellor Angela Merkel, want to end the current EU charter by 2012, and either shrink the number of members drastically, or restructure the agreement to allow more centralized control of member nations and their political policies:

http://www.reuters.com/article/2011/11/13/us-germany-eu-charter-idUSTRE7AC0KM20111113

What this means, essentially, is that there will not be a “collapse” of the EU in the traditional sense but, as we discussed here at Alt-Market last year, there will be enough chaos to frighten still sovereign minded Europeans into giving up certain economic and social powers and freedoms. A new EU will form, on the argument that it was “state sovereignty” and a lack of cooperation that caused the crisis to begin with.

This is total nonsense of course. Central banking policies and insane Keynesian borrow and spend strategies around the world are what caused this nightmare, some would say by design (including myself).

So, before the end of 2011, we have seen the formation of an Asian Union, and the first steps towards a more tightly dominated European Union. What’s next?

American Default: One City At A Time

If you thought the derivatives debt game had leveled out in the U.S., and that the worst was over, think again. The bankruptcy of MF Global, a far larger company than Lehman Brothers, has signaled a new resurgence of bank weakness. However, the real danger behind the MF situation is not necessarily its failure, but how it has been hiding its failure.

Not only was MF making risky bets with borrowed money without disclosure, and “window dressing” their quarterly reports to fool investors, but they have also been caught siphoning capital from client accounts to pay off the massive liabilities they have accrued:

http://www.reuters.com/article/2011/11/02/us-mfglobal-exchanges-idUSTRE7A00LG20111102

These kinds of activities are what we usually call “fraud”. But with a company like MF Global, whose reputation was once considered sterling, a much more important and terrifying question arises; how many other banks are doing the same exact thing?

My guess is all of them.

MF Global’s implosion places doubt on all major banking institutions and the legitimacy of their reported health, which means Americans have a lot of soul searching to do as far as where they actually choose to put their savings. But the return of the credit and derivatives specter only hints at the issues ahead…

After the historic credit downgrade of the U.S. by ratings agency S&P, most investors absorbed the shock, then ignored the peril, and began throwing around cash with wild abandon yet again. What many of them have not taken into account, though, is that the downgrade is not over. S&P has stated it will extend the downgrade of the U.S. AAA rating to thousands of municipal bonds after Federal Budgetary issues are decided by the so called “Super Congress”:

http://www.bloomberg.com/news/2011-08-18/municipal-bonds-may-face-downgrades-following-final-u-s-budget-s-p-says.html

These decisions are supposed to be announced by November 23rd; only weeks away. After the 23rd, S&P will begin examining state and city debt ratings on a case by case basis. The likelihood of multiple rating downgrades of numerous U.S. cities and counties is very high. These downgrades could lead to explosive levels of municipal bankruptcies. Being that some areas of the country have already filed for bankruptcy without S&P’s help, like Harrisburgh, PA, and Jefferson County, AL, the signs are not encouraging:

http://money.cnn.com/2011/10/12/news/economy/harrisburg_bankruptcy/index.htm

http://www.reuters.com/article/2011/11/10/us-usa-alabama-jeffersoncounty-idUSTRE7A87WW20111110

If you were wondering what the trigger would be for the next round of Federal Reserve quantitative easing, here it is; a combination of bank failure resurgence, along with city and state defaults leading to a clamoring for Federal funds just to stay in operation. Fiat injections in light of this event will dwarf previous measures. In fact, we may long for the days of TARP after the Fed has finished annihilating the dollar in order to plug thousands of ongoing municipal leaks in the hull of our sinking ship.

Make This Time Count

Everyone in the Liberty Movement is tired of dealing with the reality of economic disaster. Hell…I’m tired of writing about it. We know what’s coming. We know each scene of the play as if we had written and performed it before. And yet, we still at times find ourselves surprised, or even staggered, by the violent turning of events. Knowing that a train wreck is coming, and actually seeing it happen, are two very different things. Always keep this in mind…

For many others in this country, there is no frustration, because there is no awareness. This brand of “bliss” carries with it a terrible price; shock and awe at the closing of the curtain. A crushing despair and a haze of financial and emotional trauma. I (and most others) would never wish this feeling on anyone. And so, we continue to point a light upon the dark corners in the hopes that others will see what is there, and in their horror, decide to do something about it. This is the job of every Liberty Movement activist; to share the truth, even if it hurts.

Most will ask for solutions, and there are in fact many, far beyond the scope of this article. But the first and most important is that of dedication, and determination. This time, the time we have from the moment we wake up to the existence of the danger to the moment the danger strikes, is not a time to passively wait, a time to apathetically reflect, or a time to selfishly waste; it is a time to act. Remove your fears and frustrations from the equation and press forward, starting with the people closest to you. If you will not help them to awake to the fast approaching ground below, then who will?