The Smell of Collapse is in the Air – Part 1

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Read The Smell of Collapse is in the Air – Part 2 and Part 3.

The U.S. stock market is near all-time highs, while politicians and economists are blathering about recovery, low inflation, and good times, but instability and danger are clearly visible in our debt based monetary system. To the extent we rely upon the fantasies of ever-increasing debt, money printing, and credit bubbles, we are vulnerable to financial collapses. Perhaps a collapse is not imminent, but it would be foolish to ignore the possibility. Consider what these insightful writers have to say:

The Fantasy of Printing “Money” To Solve Problems

Bill Fleckenstein:

Money-printing cannot solve problems. It doesn’t really give us much gross domestic product growth, as we have seen. It hasn’t really helped on the employment front either, as job growth is meager (of course, it is also hampered by other government policies). What money-printing has accomplished is to push the stock market high enough to cause people to once again become delusional in their expectations.”

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Egon von Greyerz:

“Debt worldwide is now expanding exponentially. With absolutely no possibility of stopping this debt explosion, we will soon enter a period of unlimited money printing leading to a total destruction of paper currencies. The consequence will be a hyperinflationary depression in most major economies.

Andy Hoffman:

“No, Larry Summers won’t be able to save the day… The damage is already done; and thus, NOTHING can turn the tide of 42 years of unfettered, global MONEY PRINTING – which as I write, has entered its final, terminal phase.”

Bullion Bulls Canada:

“So the ending is already clear. The U.S.S. Titanic is about to be intentionally sunk (again), and B.S. Bernanke’s ‘fingerprints’ will be planted all over the crime scene.”

Credit Bubble in the Global Economy Will Eventually Collapse

John Rubino:

“…nothing was fixed after 2008, just as nothing was fixed after the housing, tech stock, and junk bond bubbles burst. The response has been the same each time, only progressively more aggressive and experimental. That the financial, economic and political mainstream think that the system has been reset to ‘normal’ because asset prices are back where they were just before the 2008 crash is, well, crazy. With financial imbalances bigger than ever before – and continuing to expand – the only possible outcome is an even bigger crash.

Bill Holter:

“THIS is where THE REAL BUBBLE is! The biggest bubble in all of history, (larger than the Tulip mania, South Sea, the Mississippi Bubble, 1929, current global real estate and global stock bubble combined then cubed) is the current and total global financial system. EVERYTHING EVERYWHERE is based on credit. In fact, over 60% of this credit is dollar based and ‘guaranteed’ by the U.S. government. The minor little problem now is that we have reached ‘debt saturation’ levels everywhere. There are no more asset classes left able to take on more credit (air) to inflate the balloon. The other minor detail is that the ‘asset’ that underlies the value of everything (the dollar and thus Treasury securities) is issued by a bankrupt entity. What could possibly go wrong?

Discussion

Growing and healthy economies mean more people are productively employed. It appears that much of the “growth” in the U.S. economy over the last five years has been in disability income, food stamps (SNAP), unemployment, student loans, welfare, debt, and government jobs – none of which are productive. Examine the following graph of Labor Force Participation Rate – the actual percentage of the populace that is employed. Does this look like a healthy economy experiencing a recovery or a collapse in productive employment?

The damaging effects of 100 years of Fed meddling in the U.S. economy, many expensive wars, 42 years of unbacked debt based currency, and unsustainable growth in credit and debt have left the Western monetary system in a precarious position.

Using common sense, ask yourself:

  1. Can total debt grow much more rapidly than the underlying economy which must support and service that debt? FOREVER?
  2. Can government expenditures grow much more rapidly than government revenues? FOREVER?
  3. Will interest rates remain at multi-generational lows? FOREVER?
  4. Will a fiscally irresponsible congress rein-in an out of control spending system that our fiscally irresponsible congress created?
  5. Is another and larger (than 2008) financial collapse likely and inevitable?
  6. Do you still believe in the fantasies of ever-increasing debt, printing “money” and credit bubbles? Are you personally and financially prepared for a potential financial collapse?
  7. Have you converted some of your digital currencies into real money – physical gold and silver? Is it safely stored outside the banking system and perhaps in a country different from where you live?

Read: The Reality of Gold and the Nightmare of Paper
Read: What You Think is True Might Be False and Costly
Read: The Smell of Collapse is in the Air – Part 2

GE Christenson
aka Deviant Investor

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6 thoughts on “The Smell of Collapse is in the Air – Part 1


  1. Money is “a promise to complete a trade”. Promises are debt. So money is naturally debt and that’s no more a bad thing than making a promise. What is bad is “not” keeping a promise.

    The money being printed now is going to pay government workers, suppliers, contractors, dependents, and graft. The government is promising to repay that money (i.e. keep their promise) through tax collections. It has never done this. Another way it keeps (abrogates) its trading promises is with INFLATION. The Fed has served up INFLATION at the rate of 4% per year for 100 years. The Fed gives 20% of that to the government and keeps 80% for itself. That’s the fraud.

    But the government still comes up short, so we’ll have hyperinflation and then collapse. When collapse comes, the people holding the promises (i.e. bankers with their notes) will foreclose and own everything. Then they’ll institute a new money and in a month everything will be back to normal … except everyone will be starting with a clean slate … i.e. they’ll have nothing. We have a perfect model in Weimar Germany.

    The solution? Proper management of the Medium of Exchange (MOE). This means observing the relation: INFLATION = DEFAULT – INTEREST. It means the MOE manager freely backs all trading promises and monitors for DEFAULTs. DEFAULTs are then immediately countered with INTEREST collections, recovering the circulating media. Responsible traders pay zero interest. Traders who break their promises occasionally pay commensurate INTEREST as a class. And deadbeats have to go to pawn shops for money (i.e. to get their trading promises backed … the marketplace won’t do it).

    It’s a natural feedback system that guarantees zero INFLATION at all times and in all places. It has never been tried … and it won’t be tried this time. Why? Because it would drive governments (the most irresponsible traders) to 1/10th their current size or smaller. And the politicians and bureaucrats just won’t have that. The fix will require an amendment to the Constitution.

    Todd Marshall
    Plantersville, TX


    • I agree. I think you have described it perfectly. And what you described would eliminate much of the financial world, so it is an understatement to say there will be resistance from Wall Street and the millions of people they have “bought off.”

      GE Christenson
      aka Deviant Investor


  2. You write, To the extent we rely upon the fantasies of ever-increasing debt, money printing, and credit bubbles, we are vulnerable to financial collapses.

    I comment that regional governance will arise out of the failure of nation investment as well as out of the collapse of the US Dollar and the Rise of the Petro Yuan.

    Nation Investment, EFA, is now peaking. Yet out of a soon coming Financial Armageddon, a global credit bust and worldwide financial system breakdown, foretold in Bible Prophecy of Revelation 13:3-4. regional governance will rise as leaders meet in summits to renounce national sovereignty and pool sovereignty regionally, for regional security, stability, security and sustainability.

    Zero Hedge reports Canadian Billionaire Investor Ned Goodman in video report relates The dollar is about to be dethroned as the world’s de facto currency. The President and CEO of US $ 9.6 billion Dundee Capital markets sees the end of the US dollar as the world’s reserve currency with the rise of the Petro Yuan, as China is replacing the USD with oil being traded in the Renminbi, that is the RMB, or Yuan, CYB. Dan Collins in Financial Sense writes Rise of the PetroYuan. No more King Dollar.

    US Dollar hegemony accelerated when massive money printing took place after 2001. As the U.S. government began buying its own bonds with money it printed to keep interest rates low for the domestic market, it dropped the bond yields of countries like Saudi Arabia and China, reinforcing the petro-dollar as a means of global growth and trade.

    Now, history is being written in the East, and the petro-yuan will be a driving factor in the rise of the king of the east, who presented in Bible prophecy, will come with a 200 million man army to the Battle of Armageddon.


    • Thanks for your comments. Yes, I think the dollar’s days as THE reserve currency are numbered, but I think the transition to something else, such as the petro-yuan, will be traumatic.

      GE Christenson
      aka Deviant Investor


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