The Great Unraveling—Entering Stage Two

There has been very little recognition of the Debt/Growth Imperative that is built into our global system of money, banking, and finance. As I have been preaching for many years, the creation of money as interest-bearing debt requires that indebtedness, in either the private sector or the public sector, must be continually increased at an accelerating rate in order for the system to continue to function. When the private sector is fully “loaned up,” government must step in as “the borrower of last resort.” That was clearly manifested in the latest bubble-bust cycle with the massive bank bailouts and the assumption by governments of enormous amounts of their “toxic debt.”

The aggregate debt burden is destined to ultimately become unbearable, and no amount of government or central bank intervention can save this flawed system (such is the nature of exponential growth). The fiscal crisis that is now confronting national governments around the world signals the imminent collapse. How that will play out is difficult to assess, but it behoove us to use our available resources to enhance the resilience of our communities and build new systems that can be relied on to provide the things we need in order to thrive and build a world that works for all.

One prominent commentator who “gets it” is Chris Martenson. His recent observations (below) are worth considering.—t.h.g.

The Breakdown Draws Near

Tuesday, April 19, 2011, 12:22 pm, by Chris Martenson

Things are certainly speeding up, and it is my conclusion that we are not more than a year away from the next major financial and economic disruption.

Alas, predictions are tricky, especially about the future (credit: Yogi Berra), but here’s why I am convinced that the next big break is drawing near.

In order for the financial system to operate, it needs continual debt expansion and servicing. Both are important. If either is missing, then catastrophe can strike at any time. And by ‘catastrophe’ I mean big institutions and countries transiting from a state of insolvency into outright bankruptcy. [emphasis added]

In a recent article, I noted that the IMF had added up the financing needs of the advanced economies and come to the startling conclusion that the combination of maturing and new debt issuances came to more than a quarter of their combined economies over the next year. A quarter!

I also noted that this was just the sovereign debt, and that state, personal, and corporate debt were additive to the overall amount of financing needed this next year. Adding another dab of color to the picture, the IMF has now added bank refinancing to the tableau, and it’s an unhealthy shade of red: Banks face $3.6 trillion “wall” of maturing debt: IMF

Read the rest of Martenson’s post here.

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4 responses to “The Great Unraveling—Entering Stage Two

  1. Hi Tom, yes! I’m glad for the posts that you produce. Bill Totten reposts them to the A-List, which is where I usually see them since I am not much of an internet surfer these days.

    I would like to comment on your main thesis “The aggregate debt burden is destined to ultimately become unbearable, and no amount of government or central bank intervention can save this flawed system (such is the nature of exponential growth). The fiscal crisis that is now confronting national governments around the world signals the imminent collapse…”

    If you expand your definition of “this system” to include the successor entities as well as the collapsing entities, then there is no “collapse” in the near or medium term future. The companies, governments, banks, currencies, etc. that are going to collapse are analogous to individual members of a species. The overall system of booms and busts and wars seems likely to continue.

    “… How that will play out is difficult to assess, but it behoove us to use our available resources to enhance the resilience of our communities and build new systems that can be relied on to provide the things we need in order to thrive and build a world that works for all. ”

    I wish you had thrown us a couple of predictions, such as whether the European monetary union will be partitioned into a strong currency (for the germanys and frances), and a weak one (for portugals and greeces), or break up entirely. Or whether the dollar will be abandoned in a panic, or merely continue its slide for many years. It seems more likely to me that the dollar will continue its devaluation at an accelerated pace, thereby reducing actual debt and interest burden in the system. I predict three years of back to back inflation in the U.S. between 15% and 30%. That will do the trick. Will the world stop accepting dollars in payment for oil and imports? No. They will just keep raising prices, and Americans will wake up to find that they cannot import so much as in the past. This is OK.

    In other words things will just continue to suck, and perhaps suck worse for a while. Even if companies or nations go bankrupt, or entire currencies are laughed out of the market, and empires collapse, “the system” continues. It is just a big huge unruly mad scramble of assholes and elbows. The WHIPs (the wealthy healthy intelligent or powerful) fighting for pieces of the pie. They’ll throw communism at us for awhile, then capitalism, then fascism in various blends but it is always the same, and over centuries it seems to get a little better, but we are clearly in a period of retrenchment, headed for another world war if something isn’t done about it. One thing I will assure you: if they jerk the money out of circulation, or shut down the clearing and settlement as they threatened in 2008, the Internet will sprout with alternative currencies and settlement systems *very* quickly. Some backed by Gold/Silver or commodities. Some backed by the BRIC’s currencies– the successor entities. The banks and financial companies of the US/UK are not useful or necessary whatsoever, not even domestically. The Bush administration should have let them collapse. Everything would have been BETTER without them.

    TOdd

    • Thanks, Todd, for your comments. I have no crystal ball to predict specifics of what the unraveling will look like. The elite always have a “solution” ready to cope with any problem, but, as you say, they always take us in the same direction.
      It’s up to us to stop playing their game, to share, cooperate, and organize our own systems to serve the common good. Have we matured enough to do that? We’ll see.

      With that said, I think the PIIGS will remain part of the euro currency union so long as their political leaders can get away with accepting the austerity foisted on them. When the people become strong enough to throw them out (like Ireland?), these countries will either drop out or be thrown out of the Euro.

  2. Pingback: The Great Unraveling « Bill Totten's Weblog

  3. Pingback: The Great Unraveling—Entering Stage Two - Tom Greco at Chelsea Green

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