"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Thursday, December 9, 2010

Economic Collapse goes mainstream, it's no longer an Alex Jones topic. CNBC: Pentagon Prepares for Economic Threats to US National Security

I have reported on this in the past, citing interviews of Jim Rickards.

From CNBC, the Pentagon, through wargame series "Unified Quest 2011" is acting out various scenarios and their implications to national security.  Some include:

"Army studying implications of large scale economic breakdown."

"Would force the Army to maintain domestic order amid civil unrest."

"Army to deal with fragmented global power and drastically lower budgets."




Remember when Ben Bernanke said the issue of subprime was "contained?"  This is not just a subprime issue, it is not just a national budget issue, it is not just  a trade imbalances or currency issue.  It's all of them combined together and more.  And how does such a perfect storm come to be?  It all boils down to the long term implications of debt based fiat paper money.  We are witnessing the end of a global monetary system.  I will soon begin a new series of posts on the real-life implications of the end of such a monetary system.  Such a monetary system creates large distortions in economies, and ultimately, those distortions self-correct on their own.  It's simple mathematics.

6 comments:

Fauvi said...

History is written before our eyes and most of the people take no notice of it.
I have no idea how hard is it going to come upon us in Europe but as I hope we will get rid of the debt paper money and growth terror, I can hardly wait for it. The events today in GB will spread all over the world and we’ve quite prepared. I don’t care if I have to live in drastic austerity and under the radar for a while , that too, we have prepared for a while.
A nice article:
http://www.thenational.ae/thenationalconversation/comment/a-vindication-of-asians-faith-in-the-value-of-gold
and a second one: : http://www.thenational.ae/business/economy/gcc-urged-to-boost-gold-reserves
We can see the system day by day falling apart.We are soon touching the apex of Exeter Pyramid, actually we are already there quite for a long time, it only has to break through, which it does (German bunds!)
I really think it is evolving into Freegold.

Misthos said...

Fauvi, you're in GB? What do you think of the student protests and the attack on the rolls royce carrying Prince Charles and the Duchess? It looks to me like the far fringe, but such movements gather steam as the general population sees their living standards drop while others prosper. What does the average/common law-abiding person say or believe in England?

Here in Greece, many protesters (not all) have viable complaints, but the fringe anarchists tend to drown out serious discussion. I remember when the protests began in 2008, people said it was all about the anarchists. That is not the case anymore. It's not a greek protest thing - it's a global reaction to an ongoing collapse and the banksters' attempts to profit from it.

I don't think the elites have taken into consideration the societal consequences of a collapsing monetary system. I can see a day when protests become so common and violent, that they spook the markets.

I agree with you about gold. And it is only recently that I have come to believe that Exter's Pyramid represents a process that can take quite some time to play out. The current monetary system, thru double entry book-keeping can slow down the process with QE and buying up every and any security (paper wealth) they can. The problem is, it's the mathematics that get in the way. Things stop adding up at some point.

Real Estate values in the US continue to fall as gold rises. German Bunds, as you bring up, are also a sign.

Fauvi said...

Misthos,

No, I don’t live in GB, I’m in Germany but I quite understand the mentality of the youth in GB. They don’t give a damn for the royalties, they see the misery coming upon them, their parents and the unsure future. Ergo they react. When you think about the 70ies the Brits were
frequently demonstrating, riots were usual and therefore I think it’s a revival which will gain even more steam because this young generation will not remain alone, many more will join in.
The cuts need to be felt and they will be painful. Some British pensioners travel all day long by bus as they don’t have enough money for heating.

I believe the elites knew/know perfectly well how ppl would feel, they have special ears and eyes for the internet. They need the crisis (Rahm Emanuel: don’t waste the opportunities…) in order to bring down this no longer viable monetary system . Order out of chaos. I only hope we agree to the adjustment, that it is going to suit not only us, the prepared, but also accommodate the great majority. Would it? An interesting link: http://www.difc.ae/press-centre/press-archive/2010/09-december-2010/ What’s your take on this?

As for our current monetary system and its remaining shelf life, well, I’m not so sure. It may be my eagerness to see it dissipated, it might be your positive bias that it can be prolonged for longer time than we expect, of course it’s maths but half of it is psychology, trust. You cannot impose the dollar with a gun permanently, some day enough is enough.
I also see some preparations, it’s over a year ago that Robert Fisk has written his much attention receiving “Independent” article about the dollars demise. Now the conditioning in the US, even these TSA actions are part of it. I’ve read that the Bernank has given some trillions to some hedge funds to short the euro. This is still working as the European finances are also in shambles. But the US is even worse and the world knows that. Of course we don’t know exactly what’s happening in China, how far is SCO, the tension at LBMA (silver in backwardation),JPM and its CDS on bonds, you name it. But even if the foes of the dollar have their own reasons too to kick the can down the road, the question is can they wait longer? I don’t think so.

Misthos said...

I see no organization for the elites. The world is increasingly fragmented. Think of the inception of the monetary system at Bretton Woods in 1944. It was an Anglo-American model dictated to the rest of the world, and the rest of the world either followed, or barely participated.

Then in 1971, when Bretton Woods ended and trade was conducted with irredeemable debt paper - a process which was once again dictated to the rest of the world by the US - China, the USSR, and India and Brazil were irrelevant. Only the Middle East pushed back somewhat, and that's when the US Middle East policy became more belligerent. Problem solved.

But today, we have India, Russia, China, Brazil, and others at the bargaining table - and they have strong voices too. It's no longer an Anglo-American and Western Europe plus Japan game. The game is global, the players are more in conflict with one another, and reaching consensus is nearly impossible.

It's elites vs. elites. They are worried not only of competing elites from different nations, but of their own restless populations.

Thus, chaos is unavoidable.

I saw the link - interesting, but something similar (minus gold) was discussed earlier this year when the IMF and Swiss Bank hosted a meeting. The Triffin dilemma and exorbitant privilege were both discussed. World Bank President Zoellick also floated this gold trial balloon - and then recanted.

Here's the problem with the SDR - the SDR is a way to share power. But if the underlying currency is troubled - so too is the SDR. How can the SDR - even with gold, succeed when four of the constituent currencies: the US Dollar, the Euro, the Yen, and the GB Pound all come from essentially (on paper) bankrupt nations?

Without resolution of the Western world plus Japan debt issue, the SDR can not proceed. Unless, of course, gold backs currencies once again and at a revaluation that most wont expect.

The global ship of international finance has no steering wheel, and no rudder, and a storm approaches.

I fear that the elites don't have a master plan they can successfully execute - there are too many disagreements. They're focusing their energy on access to the lifeboats. Every man for himself. Play the game while you can, and head for the safety when the SHTF.

Nick said...

Hi Misthos,

once again, thanks very much for your work. Will say something more constructive (including comments on the student protests in GB) as soon as I get some spare time.

Greetings from the troubled Kingdom :)

Nick

Misthos said...

Nick - hope all is well with you.