The article was first published on the 18th of October, but since it was rewritten I requested it to be republished.
This is an article I’ve been planning to write for about a week. After some consideration on how to present this subject to the dear reader, I suppose I am able to make a compelling argument why many national currencies are collapsing throughout the world as I am writing this article. This process isn’t being highlighted in the media, quite the opposite actually, aside from a few minor outlets politics is currently dominated by drama and double talk. In point of fact, no major outlet is willing to cover a possible economic downturn until just before the market collapses. We have seen this already taking place in 2008 when analysts and the media alike were painting a quite positive outlook about international markets just months before the 2008 financial crisis.
After the long radio silence, the signaling of a new, much deeper than ever before economic crisis in the mainstream media has been ongoing since November, last year. The signs which were presented by the media has been, of course, very obvious since before the 2008 crisis, while the spirits of the public were kept intentionally high with inflated GDP numbers and unemployment statistics among others many people still observing the world through a deceptive pair of glasses.
The current central banking system, as I have covered in one of my previous articles titled “Rising FED rates crashing Stocks and Dreams of the 1%“, allows for artificial booms and busts by granting central banks the monopoly on money creation, one which was always closely tied to the sovereign (king or emperor) or to the state itself and was historically recognized as the grandest power for over a millennia.
Let’s examine first the economic history of the United States taking a closer look at the said booms and busts over the past century.
The current situation is obvious, we will see a major economic downturn during the next 5 years creating many opportunities for those who have the cash in hand in the right amount.
As already stated by Patrick in the video, cunning investors during these times can buy up companies for 30-40 cents on a dollar expanding their portfolio immensely. This is exactly how JP Morgan during the Panic of 1907 bought up 10-12% of the American industry pre-positioning himself and his fellow bankers to press the issue of the Federal Reserve in the U.S. political system (source).
European economies are currently unstable
Deutsche Bank has been bailed out two times, one time by Chinese and another time by Qatari businessmen. As the result, a Chinese group has become the biggest shareholder of Deutsche Bank, the leading bank group of Europe. China has secured a very strong position for itself in Europe, it owns new multiple major banks. Similar changes have also happened to Citibank group recently (source).
The German banking system, for now at least, is fairly secure, however, the situation in countries like Greece and Italy is troubling.
The current global monetary configuration is now being challenged by even countries such as Germany (Germany wants to dump the dollar and quit the SWIFT system) many countries genuinely considering moving away from the U.S. dollar and embracing local and regional currencies instead. Should the U.S. dollar lose its reserve status it will make imported goods much more expensive putting an end to the consumer-driven economy in the U.S. shaking American living standards with it. However, it will give the American industry a chance to compete with other economies.
The breaking of the hegemony of the United States dollar is everywhere including in unlikely places such as Germany, while others are actively creating alternatives already. That includes China, the Russian Federation, India, Venezuela, and Iran. Small European countries trying to adjust in the process like Austria (Vladimir Putin dances at Austrian foreign minister’s wedding), Hungary (Putin visits Hungary to watch judo competition with PM Orban), the Czech Republic, Croatia (Meeting with President Kolinda Grabar-Kitarovic), and Italy are building strong connections and close ties with the Russian Federation while, for now, not giving up their ties with the United States.
Italy’s huge national debt coupled with slow or no growth at all pushed the country, and with it much of Europe, to the brink of economic collapse (source). Italy’s national debt compared to its GDP is currently 131%, many analysts are rightly concerned about a global financial meltdown on the backs of a European one. Italy has already pledged to give up on exiting the European Union due to its debt bondage.
The situation is similar in Turkey, where the government by spending big and the central bank by low interest rates tried to stimulate the Turkish economy. Turkish inflation surged to nearly 25% in September from a year earlier, the highest in the last 15 years (source).
the European Union vs. the United States
There is a big rivalry between the European Union and the United States which has been clearly visible by everybody paying attention during the last 5 years. It materialized in new EU privacy regulations against companies like Google, Facebook, and Twitter; U.S. sanctions against European-made cars, Mercedes, BMW, Audi, Porsche, the military industrial complex – Lockheed Martin vs. the companies which will produce new equipment under the PESCO treaty; and the total destruction of hundreds of billions of euros of German, French and British investments in the Iranian economy by the U.S.
The current situation reached a new high earlier
Emerging markets vs. the United States
Emerging markets are experiencing instability and geopolitical issues. The four largest emerging and developing economies by either nominal or PPP-adjusted GDP are the BRIC (Brasil, Russia, India, and China) countries. Russia is being sanctioned with no end in sight, China can expect more U.S. tariffs, Brasil’s growth (along with that of South Africa) is turning into recession (source) and India struggling with 10.97% inflation this year (after news about higher oil prices and a stronger dollar) wanting to start trade talks with Trump immediately before sanctions by Trump would be considered (source) (India-Russia S-400 deal). What all of these economies have in common is that they are being attacked by the U.S. shattering investor confidence while their currencies are getting weaker compared to the U.S. dollar making imports more expensive and dollar-denominated debts harder to pay back.Emerging-Market Rout Is Longest Since 2008 as Confidence Cracks
The Fiat ‘money’ system
How does this
“Debt is just a number”
Don’t be ridiculous. Debt is not just a number, it will have to be paid back one way or another. The stagnation of the U.S. economy can be easily explained, it simply cannot grow under this ~400% debt compared to its GDP. The normal circle of business is expansion (taking loans) and contraction (repaying loans), however contraction is de facto not allowed. This is a global issue, the global GDP has been suffering because of this.
China has a similar debt problem to that of the United States. Total debt in China is about 250% of the annual Chinese GDP.
China is by far the largest creditor of Washington with more than $1.17 trillion of the U.S. federal debt planning to use it as leverage. We are probably going to see new rounds of U.S. treasury selloffs if Trump enacts new tariffs against China (China, holding Treasuries, keeps ‘nuclear option’ in U.S. trade war). Russia sold the grand majority of its U.S. Treasuries, while China symbolically dropped some.
The United States is at the moment an existential struggle with China in the fields of innovation, production and foreign investment which will define the structure of the world in the following decades. China has proven that it could innovate by itself utilizing modern science and using schematics of American products made in China. The Chinese smartphone and chip industry has proven in the last couple of years that the country is able to design and manufacture quality products en masse outcompeting larger, well-established U.S.-based corporations. China is already investing in the next phase.
The White House is concerned that China’s ‘Made in China 2025’ plan. “China has targeted America’s industries of the future, and President Trump understands better than anyone that if China successfully captures these emerging industries of the future, America will have no economic future” – source
As the United States aims to make China technologically dependent (tariffs on chips) and geographically ‘contained’ (South China Sea), China desires the same thing,
Global U.S. Infamy
Many of the new market of political origin have been originating from Washington D.C. with no end in sight alienating potential geopolitical partners on a global scale. Escalating tensions with with every notable partner is going to backfire. Surely the motto to “protect the American worker”, and “Make American Great Again” should not have let the country sink this low where it is now. The total incompetence in terms of U.S. foreign policy of the Trump administration seems to be more obvious than ever.
“The United States and its traditional allies are on the brink of a full-scale trade war after European and Canadian leaders reacted swiftly and angrily to Donald Trump’s decision to impose tariffs on steel and aluminum producers.” (US on brink of
During the years of the Trump administration any economic challenge has also became a “national security challenge” essentially giving the U.S. casus belli on anyone questioning its unilateral dominance.
Worthless Treasuries, Junk Bonds
, and imploding Petrodollar
One of the biggest
Saudi Arabia is at the moment building up its $2 trillion sovereign wealth fund in an effort to diversify the economy away from oil, under a plan known as ‘Vision 2030’ (source).
Iran has already announced that they are selling their oil in euros, yuans, and in any currency or commodity other than the U.S. dollar while Venezuela took a crpyto route. Venezuela is known to have the biggest oil reserves in the world while Iran is a big regional power with a huge population in the Middle East.
One of the first bubbles which could set off a currency crisis is the U.S. corporate bond market, which is perhaps the biggest bubble in the American economy (source).
We are clearly looking at a currency crisis when the dollar will cease to be a safe asset and will become a risk which will make investors and treasury holders drop the dollar and flock into gold and other safe havens (currencies of exporting countries).
The recent allegations and comments about the disappearance of journalist Jamal Khashoggi made by the United States and its allies perfectly reflect this situation. (I’ve written about Jamal Khashoggi in detail here. Let’s just say he isn’t the saint he is being portrayed by the media. He was a censor and a propagandist.) It is remarkably obvious that the disappearance of Khashoggi is closely tied to the covert activities of the Saudis. He disappeared hours after he entered the Saudi embassy to get some administrative documents made while his Turkish bride was waiting in a vehicle in front of said embassy. U.S. President Donald Trump was quick to change his own story while others including Erdogan were very quick to de-escalate the situation by immediately visiting or sending an envoy to Saudi Arabia. Although different versions of Khashoggi’s story were published by the media, there is clearly no further political will to pursue the ongoing investigation being undertaken by Turkey anymore.
Donald Trump was asked about this a few days ago in the Oval Office officially revealing that Saudi Arabia will receive only symbolic condemnation and actions from the U.S. or from its
U.S. Debt: $21.5 trillion + $210 trillion = Trouble
The U.S. dollar will be broken because of U.S. aggression ultimately losing its reserve status just like the Sterling lost its global reserve status in the 1940s after the Suez Canal incident shocking the British economy with its downfall. American exceptionalism won’t mean much if anything in the eyes of Germans, Chinese, Indians, and Russians that’s for certain. Aside from the massive amount of U.S. national debt, pointed out in my article titled, “$21.5 trillion is why Modern Democracies are Dying” the United States also has about $210 Trillion dollars worth of unfunded liabilities which will be spent in the coming decades on pensions and Medicare for senior members of the American society
That $210 trillion will be spent on caring about the baby boomer generation of the U.S. population their retirement will effectively reduce the ratio of 4 working individuals per pensioner to 2.2 which will shake society to its core. This will make pensions impossible to issue for the U.S. government betraying many of its hard-working citizens. Other than making the FED print more money or straight up refusing to pay pensions, there is no escape from this situation brought out by demographic changes.
13 currencies are currently pegged to the U.S. dollar while 17 other currencies are pegged to the euro (source). China has a trading band (currently +/- 2%) around a daily midpoint that is set every day. That midpoint is always moving so that is why the Chinese Yuan is not a “true” pegged currency. This really goes to show how much the global economy is interconnected making an economic crash in one country really dangerous to others.
The recent GOP tax break increased the U.S. budget deficit by 17% to $779 billion, experts forecast that for 2019 the budget deficit will be around $1 trillion. U.S. Stock market capitalization compared to the U.S. GDP has risen to a historical 151.7%, experts citing that 70%-80% would be ideal. The United States is set to borrow $1 trillion this year, an 84% jump from last year. Within the next 10 years, the U.S. budget deficit is predicted to rise above $2 trillion. The current rate of U.S. GDP expansion is nowhere near to support the required rate for credit expansion.
The price-earnings (P/E) ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.
10-15x would be the optimal value, anything under that means that the particular stock is undervalued. Those who decide to buy there will do very well. Anything over that means that the stock is overvalued. Revenues are not growing in the pace of the growth of the stock price on equity markets. In fact, revenues are declining. This kind of overvaluation of all kinds of stocks on the stock market was only experienced just before the 1929 Great Depression and prior to the 2000 Dot Com Bubble.
This time around the FED and the U.S. government will lack the required tools to pull the economy out of the collapse or even to mitigate it. FED interest rates have been too low for too long, the current system is hooked – like a druggie – on cheap money and intends to make borrowing into its own lifestyle. The Federal Reserve has been printing money to pay back the U.S. national debt.
Peter Shiff predicts that Trump will be blamed for this bubble and the economic situation that Donald Trump has inherited from Barack Obama and previous U.S. presidents. Due to the GOP tax break and the constant propaganda and reassurance of public that the U.S. economy is doing better than ever in the last 2 decades, without a proper executive plan, will be owned by Trump. Not just the stock market bubble, but also the economic bubble. It’s clearly not the fault of Donald Trump, however the Trump administration has already claimed ownership.
The global debt according to two experts is currently at $247 trillion. The top 3 countries being the United States, Japan, and Germany. Demonocracy has done a great job visualizing this.
The question is: Who will save the day? It is quite clear that there is no politician in Europe or in the United States and perhaps not even in the wide world who is ready to propose new tax reforms and higher tax rates in order to make paying these debts back possible. Such proposals would certainly make those politicians lose favor in the eyes of the public making reelections impossible. The voters are looking for more benefits not less. It is also clear that European economies and the economy of the U.S. aren’t growing quickly enough to enable to pay those debts back in the future.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations from the beginning of history has been about 200 years.” – Sir Alexander Fraser Tytler (1747-1813)
Declaring Bankruptcy vs Money Printing
Paying back these huge debts would mean one of the two, either declaring bankruptcy or printing money. Declaring bankruptcy this time around is not an option for most countries, because it would make it impossible to pay doctors, teachers, military servicemen, pensions, and other types of welfare bringing civil unrest and riots. Printing money and totally eroding the value of the national currency while doing it would be the preferred option.
Printing money would bring hyperinflation and consequently huge interest rates (between 40%-60% interest a year, what we are witnessing in Argentina and Venezuela) making the paying back of variable interest rate loans a real headache.
The whole system is currently drugged up. Central banks have major powers over the stimulus being injected into stock markets. If quantitive easing (QE) keeps up stock markets will continue rising. On the other hand, if they decide to do quantitive tightening (less or no quantitive easing) stock market corrections and crashes are going to follow. The balance sheets of central banks are shrinking (graphs). This is what’s happening today. Central banks worldwide (including the U.S. Federal Reserve, the Central European Bank, the People’s Bank of China, Bank of Japan, and others) reduced their balance sheets and their quantitive easing efforts. Aside from QE stock buybacks are boosting the market.
Based on previous the critical threshold of interest rates alone it should be 3 – 4.5% where we’ll see major readjustments and the beginning of a new crisis happening.
Non-Interest Bearing Debt = Money in your wallet
The money inside your wallet is being called, for good reason, non-interest bearing debt by the official document of the Federal Reserve.
When and Where will the next Crisis Start?
At this time it’s unknown when and where the next crisis will originate from. The where question cannot be truthfully answered, since it would require giving a pinpoint date instead of defining a time frame. However, factually speaking, it does not matter when it starts it only matters when it starts affecting You as an individual, or your country. Since, as already mentioned, the global debt is presumably larger than $247 trillion today it is going to lead to a systemic collapse of our financial systems.
The next global crisis could originate from many different locations and from many different reasons, just to name a few to recap some of the mentioned risks which could lead the destabilization of major powers or that of the region: declining stock prices in emerging economies, the Chinese real estate bubble, a Saudi Arabian divergence from the petrodollar, a global gold rush, a massive selloff of U.S. Treasuries by China and Japan, a debt crisis in Italy destabilizing the European Union and its euro, the 5 major U.S. bubbles (which are: the stock market bubble – tech stocks leading, the auto loan bubble, the student debt bubble, the mortgage bubble, and the credit card bubble) among other smaller bubbles, including real estate notably in the New York and Miami areas, and the great bubble of the U.S. corporate bond market. Any of these could and will trigger other risks mentioned above and is going to lead to a systemic global financial and monetary meltdown.
Some ‘experts’ are saying that the next crisis will start either in the emerging economies or in Europe and then it will make its way to the United States. However, that theory can only be considered wishful thinking at this time and should be looked at only as a possibility.
Gold Hoarding – China is Ready
The gold hoarding is well underway for multiple years now being practiced by superpowers such as the Russian Federation and China. Germany, Hungary, Poland, Australia and others have already requested their gold back from either the United States or the United Kingdom with varying levels of success. It is currently unknown however how much gold in the vaults the United States really has. Other countries in fear of affecting the price of gold, like Norway, chose to buy shares in corporations in the business of gold mining. China reportedly only uses part of its gold reserves to back the Gold Yuan, the rest of it is kept for future use.
The recent trade war started by the Trump administration has little Chinese response. Officially China has 1842 tonnes in gold reserves, but according to some Chinese officials they might just have 30 000 tonnes of gold (full article) tucked away in order to solidify their global dominance in the post-dollar world. This is the gold which was by some families accumulated and guarded through millennia.
If truly the global debt is around $247 trillion than the next recession will put the 2008 financial crisis to shame not just destroying jobs and fortunes, but also creating a societal upheaval never seen before in the western world. The upcoming currency crash will sculpt the laws and systems of the financial industry for the following century to come.
Financial System of the Next Century
Because of the interconnected nature of our economies, the $247 trillion worth of global debt will most likely be paid back by hyperinflating the respective national currencies by the central banks. Even gold-backed currencies of today will not stick around. After hyperinflating, countries will issue new currencies under new names some of which will be backed by silver, gold or other physical assets. During at least the first couple of years, we will likely see 30-60% interest rates (keeping debt forgiveness off the table – just like in the days of the late Roman Republic).
Venezuela is already trying to issue its own cryptocurrency backed by physical commodities, for circumventing U.S. sanctions though. Venezuela’s officially sanctioned cryptocurrency named Petro, which is backed mainly by oil, partly by diamonds, gold, and silver. We will probably see mixed systems in the future where both the national physical currency and cryptocurrency could be
If however, the political, corporate and financial powers would like to take another route with the aim of “reshaping” humanity in their own image cryptocurrencies and the blockchain technology might gain big support. Many mainstream corporations expanding their investments into crypto (including the Bill & Melania Gates Foundation, IBM, George Soros, Yale, the Rockefeller-owned Venrock, and others including governments and central banks).
For governments with a strong sense of centralization and central planning, the (de)centralized ledger will not just provide a mean of exchange of goods, but will also mandate that goods must be registered and recorded on the ledger itself in the moment of production and consumption. This surreal, totalitarian system of production and consumption was first described in the book titled the “Technocracy Study Course” written by M. King Hubbert and first published in 1934 funded under the aegis of the Rockefeller and Rothschild among other foundations.
According to the book, the technocratic system was to be structured around a new monetary paradigm, one based not on dollars and cents but “Energy Certificates” representing the nation’s net energy expenditure. These certificates would be denominated in Joules and issued based on a net energy budget deemed appropriate by the technocratic state’s governing scientists. Citizens would be issued an equal share of the nation’s certificates and make their purchases with them, and the information about these purchases would be relayed back to the central planning body for analysis. By this method, the technocrats could, in the words of one proponent, “create a thermodynamically balanced load of production and consumption, thereby doing away with unemployment, debt, and social injustice.”
In the Technocracy Study Course, Hubbert laid out the exact conditions that would need to be met for this vision to come to pass. According to him, technocracy would require:
- all Energy Usage and all Consumer Spending throughout the nation to be calculated and registered on a continuous and instantaneous basis,
- a 24/7 inventory of all production and consumption,
- a complete Registry of All Products available for sale, where they were produced, how much energy was expended in their production, and where and when they were sold,
- “specific registration of the consumption of each individual, plus a record and description of the individual”.
This has been for 80 years now eagerly awaited by bankster dynasties such as the Rothschilds and the Rockefellers, and this new monetary crisis might just present itself as the perfect opportunity to put all this into practice and create a system of complete dependence and enslavement.