Thursday, January 13, 2011

Predicting Americas Collapse.

This post should more properly be titled, "The Collapse of the Global Financial System", where the US is the printer of the world's reserve currency. The US, China and EU are in a currency war, and it's the third world that lives on subsistence rations who are going to suffer the worst. We are living in an economic age of micro-bubbles, and it's only a matter of time before one busts and sets of a chain of cascading events that causes one of the three economic super powers to collapse, dragging down the other two. It's also possible the Fed's plan to export inflation will work, for a time.

Here's the chain of events thus far. The housing bubble caused the mortgage debt crisis, which morphed into a sovereign debt crisis, that has turned into a current currency war. Commodities inflation is going to cause a lot pain to a lot of people, who are rioting in Tunisia and Algeria (I looked, they're both on the Mediterranean coast of Africa, in a temperate climate, go figure, must be the high population density), there's still the sovereign debt issues in the EU, who are rioting in various capital cities over their government's austerity programs.

It's all those little bubbles that are the problem. Take your pick, there's local and state budgets, pension funds, but public and private, but the federal government is on the hook for the private funds, there's unemployment, a second housing decline, we never got out of the first recession, demographic dynamics that will escalate Social Security and Medicare spending, rising health care costs, etc, etc, etc.

None of these issues, in and of itself will cause a bubble to burst, but the aggregate of these almost certainly will, and we have a kleptocracy whom we continually re-elect to public office at the state and federal levels. The latter is the reason there has been no effective response to any of these issues, and in fact, is the root cause of much if it. Public spending has crowded out the private economy, causing high unemployment, wages have been stagnant in the US for thirty years, and the wealth gap is as high or higher than during the 1920's and 30's. The difficulty is marshalling an effective response to any of these issues because of all the vested interests. So, are we doomed to collapse? The answer is maybe, or maybe not, if we can successfully wind down public services and federal spending. However, it's also not very likely, but the end result is going to be either an orderly decline or a collapse. Neither of which is going to sit well with constituents, because either is going to cause much higher unemployment rates.

When basic needs are no longer being met, is when civil unrest is going to occur. We're already seeing riots overseas. We could see some isolated incidences potentially on the scale of the Los Angeles riots in 1991 after the Rodney King verdict. Crime rates are almost a certainty to increase. A good description of what could happen was written by a guy named FerFal about the Argentinian collapse in 2002.

The best thing anyone can do to prepare is a number of things. The most important is keeping a 2 - 3 weeks supply of food in the house, 2 -3 months would be even better. Just look at the expiration date of items you use every day, and rotate your stock. Water filters, like the Big Berkey, and 5 gallon water cans for storage. And of course, personal defence, which doesn't have to be elaborate. Koreans in LA held off rioters with hand guns. If you can survive the first few weeks of a breakdown in civil order, your chances of long term survival dramatically increase.

Love you guys, be safe out there.

Predicting Americas Collapse.

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