two possible paths with the same endpoint

By Staff
2.12.2010
EarthBlog News©

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As we move forward into 2010, it is becoming increasingly apparent to many observers that the financial breakdown which started in 2008 is by no means over.  We are seeing increasing investor concerns regarding the solvency of not just individual corporations, but entire countries. In 2009 Iceland went bankrupt and in 2010 concerns are emerging regarding Greece, Spain and spreading across all of Europe. The long term viability of the Euro is even being called into question as I write this essay today.

What we are seeing is the result of an ever increasing and now unpayable amount of debt which is spreading like a terminal cancer across the entire western world. There have been many fiat currency systems devised throughout history, and they all have one thing in common. They all eventually went bust, because it is human nature to want something for nothing and spend money you don’t have to spend when there is no restraint or restriction against doing so. The total amount of debt has now exceeded the capacity to finance the debt except by creating ever more debt.

The entire western world has been financially controlled and mismanaged by an international syndicate of central bankers for the past several decades. This, along with unrestrained government spending has brought us to a terminal stage of collective bankruptcy as the power and control has shifted from the many, to the few who are now desperately attempting to maintain the status quo with various financial band aids,  shell games,  and smoke and mirrors “solutions”.

The worlds financial markets are now gyrating day by day as market participants move like a flock of sheep or school of fish seeking safety by abandoning one currency after another depending on the day.  The fact is however that in almost if not every Western G7 economy, the government is technically bankrupt, with orders of magnitude more debt than can ever be repaid in constant dollars. Even moreover, there is also massive insolvency among the corporations and the populations of these countries.

Where do we go from here? There are only two possible paths, and they both have the same endpoint which is systemic breakdown and failure.

The worlds central banks can continue printing money (monetizing the debt) in an attempt to keep the western banks solvent and inflate away the unpayable debt, or they can stop monetizing the debt and watch the entire western world collapse into a complete systemic breakdown of insolvency and deflationary collapse. If there was no printing press, if we were not all on a fiat money system, this would be the only choice. With a printing press, which is the only tool they have to attempt to “solve” this problem and save themselves from collapse and insolvency, they are going to keep using it.

The point of this essay however is to argue that whichever path is taken, the end result is going to feel the same for most of the worlds citizens. Whether by deflationary collapse or inflationary depression, the citizens of the western economies are going to experience a rapid decline in their standard of living either because the money they have won’t have the same purchasing power (an inflationary depression) or because they have no money to spend (a deflationary collapse). This will come amid sustained high levels of unemployment, and increasing government authoritarianism to combat increasing social unrest and decay.  It’s not much of a prognostication, because it’s already happening right now in countries like Greece.

I feel strongly that the G7 central banks will continue to take the path they have already embarked on, which is to save themselves by printing money, exacerbating the existing issue which is too much debt. The larger point however is that regardless of the path they take, the Western World is bankrupt from a decades long party of borrowing to spend money they didn’t have to spend. I’m taking cover as the house of cards comes down.

  1. DavosShermn
    February 13, 2010 at 12:32 am

    Super read. I like the WordPress blog, especially the black font on white background, much easier on the eyes, thank you!

  2. February 13, 2010 at 2:14 pm

    A far more efficient economic system is possible

    We live in an economic system that is very inefficient. The economy does not adequately address the need of people. In times of crisis many companies go bankrupt because there is no demand, even though they make useful products. Many people will become unemployed, so demand falls back even further. Governments and central banks intervene, which disturbs the functioning of markets. This enables inefficient companies to remain in business when they benefit from government intervention and the intervention in the financial system by central banks.

    The fundamental cause of economic inefficiency is usury, which is the charging of interest on money. The following example demonstrates that interest on money is unsustainable and leads to crisis:

    If someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilograms of gold. This is 1.9 * 10^27 cubic metres of gold weighing 317 times the complete mass of the Earth.

    An ever increasing amount of debt is needed to pay for the interest on the money. At some point this leads to crisis. Economic crises and the destruction of useful capital are the result of the type of money we use. The same applies to the perceived need for government intervention in the economy. Our money is an important factor in poverty, the unraveling of social structures, the destruction of nature and the mass migration of people.

    More:

    http://www.naturalmoney.org/introduction.html

    • Frank
      February 13, 2010 at 11:22 pm

      The market will choose the best monetary system. The problem we need to solve is how to get governments out of the money business or how to get people to start ignoring legal tender laws.

  3. TimeTraveler
    February 13, 2010 at 3:29 pm

    I’m afraid you are right as to the final outcome. It is nearer than most people think. Humanity is in a very dark place, and despair has permeated the air. At this point there is no way to fix this broken holographic economic system.

    This system is backed by nothing but air, and is not real! One reality is ending for the human race, and one is beginning. The only safeguards against total subsurviance by the Elite, is to form communities of like minded self reliant people who know how to get by when the system breaks and there is no help from society.

    I believe the G7 economies are on the brink, it will not take years to have a major collapse, it will be in months. That is why you are hearing talks of a major war between Israel and Lebenon and possibly Iran. There may be a false flags incident here on US soil. It is the only way to install more fear in the human populace to take their attention off the collapsing economies.

    Martial law will be required soon, as the Fed’s are preparing for the collapse, as is a bank holiday. Preserve your wealth with gold and silver, it will be the only way of surving, along with bartering for goods and services. This is no game, as most Americans watch their reality shows and sporting events. This is life and death!

    If enough of humanity consciously believes in their heart that we can turn this corner of greed and corruption, then we can transform this reality into a new beginning, where war, killing, and this phony economic system will be a bad dream, and a new way for humanity to exist will begin. Think of a world where your children aren’t watching TV shows that envolve killing and murder, and the news doesn’t envolve wars and political turmiol or the incesitive politicians who are bought by the corporations of the world.

    This will all evaporate soon. The time for change is hear, not the change Obama pledged, but the total change for human existance as we become one with this planet and the universe. where knowledge and wisdom prevail over the madness of this reality.

    • billyjoebobway
      February 14, 2010 at 2:07 pm

      You are right time traveler…it is a lot closer than you think…I would really be surprised if we make it to the November elections…the Govt is lucky to have the weather on thier side, but when the warm weather and hot summer coming, cities and towns will go crazy … it is not a time to sit back and say “I have time…”, you dont…prepare yourself and your family.
      God Bless everyone reading this…we need God again very badly!

  4. D. Brown
    February 13, 2010 at 4:38 pm

    The federal reserve, ben bernake, tim geitner, goldman sachs etc., is the tribe that needs to go away forever. These pigs have been doing this since Christ kicked them out of the temple!

  5. don kempen
    February 13, 2010 at 4:39 pm

    you have said it all thank you

  6. Fur Trader
    February 14, 2010 at 12:17 am

    Time traveler, your statements are so true, I hope that you are as prepared as you make it sound. Batten down the hatches because it is going to be one hell of ride. Peace to all.

  7. Endangered Servant
    February 14, 2010 at 7:06 am

    This video reinforces OP’s point about economic collapse due to fiat currency and too much debt.

  8. Lars Hansen
    February 14, 2010 at 1:52 pm

    I am curious what your definition of “taking cover” means as the house of cards come down. I could agree with your analysis of our GFC more. You make it clear the CBanksters have only one choice, P1 (Path 1) of Qe (Quantitative Easing) which means hyper-inflationary depression, but it seems more likley to me that we are a bubble floating in a sea of pins, all it will take is a one or several sovereign or large corporate defaults to to start a chain reactions with mutates into an unstoppable collapse. It is hard to see give current world conditions that inflation could build quick enough to send everything into a death spiral, although Germany 1923 would refute my statement.

    If I understand you, you bet would be on the side of holding precious metals but no cash?

    L Hansen

  9. February 14, 2010 at 7:17 pm

    THE AVERAGE INDIVIDUAL CANNOT OR WILL NOT EXCEPT THE EVENTUAL COLLAPES THAT IS BAKED INTO OUR FUTURE…..THESE EVENTS ARE BIBLICAL AND UNAVOIDABLE….I WOULD LIKE TO BELIEVE TIMETRAVELERS OPTIMISTIC VIEW OF THE FINAL OUTCOME OF PEACE AND ORDER BUT THE FACTS ARE THAT THE MARK OF THE BEAST IS WAITING IN THE SHADOWS TO CONTROL YOUR BUYING AN SELLING AND THE DARK DAYS OF A GESTAPLE TYPE POLICE STATE IS AT OUR DOOR STEPS AN ONLY REQUIRES SOME TYPE OF CATASTROPHIC EVENT ORCHESTATED BY THE CONTROLLING ELITES TO BRING THIS NEW WORLD ORDER INTO OPERATION…..THEY ARE READY…..QUESTION IS ARE YOU…..SEEK THE TRUTH THROUGH THE WORD WHICH HAS FORETOLD THESE EVENT THOUSANDS OF YEARS AGO…….HARD TO BELIEVE HUH…..ASK GOD FOR WISDOM AN READ REVELATIONS.

  10. Old Farmer
    February 15, 2010 at 1:29 am

    Unfortunately ‘two possible paths w/the same endpoint’ is as simple as is it true. I’m growing weary of trying to convince family & friends to make basic preparations.
    Guns-Gold & Gardens! Why am I the Lone Ranger? Am I nuts or are they just content with their heads in the sand? I’m afraid life in America has just been to easy for most folks that missed out on the 1st great depression to contemplate meaner, leaner times….

    • Bud Wood
      February 15, 2010 at 5:45 am

      I really don’t want to believe that the endpoint is upon us. I’m in denial. I’m into my 90th decade of living on this planet and I want the situation to continue to be comforting. That said, I have real apprehensions that the end of the “American Dream” is upon us simply because of our collective “need” for more. I can’t say that I’ve seen it all, but I have watched the slow disintegration of the USA. Sure wish we could hold on for a few more decades, but that’s probably not in the cards.

      I guess the suggestion of guns, gold and gardening is about the only rational future that I can see from where I sit!

  11. February 15, 2010 at 10:56 am

    The deflationary depression may look that way now, but it certainly will not in the next 6-24 months (after another market sell off). Higher interest rates and huge inflation are also on the horizon. As with all aspects to investing, the big question is “WHEN” they’ll cause it to happen? For that, check in with the BIS, IMF, World Bank, Fed/US Treasury/Goldman Sachs, BOE and the other inept banksters who run the world’s finances.

    http://www.cashsmart.ws (FREE TRIAL!)

  12. Bill
    February 15, 2010 at 1:59 pm

    I like the way this is thought out. With everyone arguing about depression or hyperinflation, I think most people are missing the point you made that it’s going to feel more or less the same for the average person regardless of the path. I agree that the actual path will be inflation. They have to inflate away the debt.

  13. Cytek
    February 15, 2010 at 6:52 pm

    On Friday October 10, the UK was hours away from a total banking collapse, the IMF intervened. We also know if the FED did not intervene in the banking system and AIG this would have taken the entire system down. What they did was only avert the collapse for a season in order to prepare for the next phase. The FED almost had the FIRST ever bond auction in the history of the U.S. last thursday,February 11 almost FAIL. I have to agree with most posters above, warn you friends and family. Get commodities, like gold, silver, food, water and things to barter with. Learn how to be self sufficient and FAST… you only have a few months to a year at the most. Get out of the city if you can. Or buy lots of guns and ammo. Martial law isn’t fun. I remember it in the late 60’s. But this will make those riots look like a walk in the park. The tipping point has already happened. All it will take is one domino to fall(like a country to default on their debt) and that will be it. Mark my words and pray to God that this doesn’t happen.

  14. alchemisteve
    February 15, 2010 at 7:27 pm

    The end point will be the same either way in the sense that all debt must eventually be discharged, but the question is, what happens then, and this is path dependent. If we take the pain up front (deflation), we will bounce back fairly quickly, as the debt will be cleansed much faster. It we take the inflationary road, we may defer the pain, but the result will be a ‘crack-up’ boom, which will destroy everything seemingly overnight and the resulting devastation will be permanent. China will emerge as the only world power and the US will be at the bottom the the ‘third world’, never to rise again. Could this be the plan?

    • February 15, 2010 at 7:38 pm

      Good point. If there were no printing press, we would have already had a deflationary collapse, the too big to fails would have failed, the system would have been cleansed. Although it would have been a brutal collapse, we could have started fresh. Instead, through the printing press, I think it’s most likely for us to experience an extended period of decay which will end up being as bad as a deflationary collapse, it will just take a lot longer. I’m on the record with EarthBlog subscribers as saying I think they turned a rapid collapse into a period of grueling extended decay that could last one or two decades, leaving us at the same point as collapse. In many ways, it’s a much more difficult situation to deal with.

    • Davidus Romanus
      February 16, 2010 at 4:06 pm

      “the resulting devastation will be permanent”
      “US will be at the bottom the the ‘third world’, never to rise again.”
      Nothing is permanent. Lots of countries rise again. It may take years or decades, but we will come back eventually. That is the nature of humans. Just look how fast the Germans and Japanese came back from WWII. If anyone told you in 1945 or 1946 that they would be the most powerful economies on their continent in a few years, you would have laughed at such a notion. History is replete with such examples. Yes, we are in for a world of hurt, and sooner rather than later, but eventually the ablility of humans to adapt and overcome will reassert itself. I hope I live through the troubles to see it.

  15. keith
    April 14, 2010 at 12:47 am

    Craig, this is your best statement to date. All of America needs to hear what you state with clarity and honesty, something seldom witnessed. The situation described and viable options are now before us. We should all face reality and get ready for the 40s, for here they come. I’m also taking cover. thanks

  16. December 2, 2010 at 4:53 am

    By a long shot, one of the best article l have come across on this valuable subject. I quite go along with with your assumptions and will thirstily look forward to your future updates.

  1. February 14, 2010 at 12:36 am
  2. February 16, 2010 at 3:38 am

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