The Economy: "Death Watch"

"The past has condemned us. Only the future can save us. We live in extraordinary times. Poised between the past and the future, never has the present been so uncertain. But, when certainty comes, it will be in the form of a scythe and ducking will be the only option.

In March 2007, when I presented my analysis of the US and global economy, "How To Survive The Crisis And Prosper In The Process," to Marshall Thurber’s Positive Deviant Network, I predicted real estate prices would fall 40-70 %, stocks would fall 70-90 %, and another depression was coming. At the time, the global economy was still expanding. It is no longer. Today, the opposite is true, the global economy is contracting. But the predicted crisis, decades long in the making, is now underway and has entered a new and different phase, one far more dangerous than that which preceded it. The world economy is now on the verge of a total systemic breakdown. The mechanism underlying the present credit-based system is now broken; for its two critical underpinnings, banks and government are not just broken - far more importantly, both are now literally flat broke. "I'm broke, no bread, I mean like nothing", from "Busted", lyrics by Ray Charles.

Prior to the Great Depression, the collapse of the 1920s bubble unleashed a cascade of defaulting debt that buried lenders and borrowers alike. Then, governments were not bankrupt; today, governments are as broke as those they are attempting to save. The siren’s call of credit lured both the innocent and greedy alike to wager what instead should have put aside for a rainy day. This is the conundrum central bankers cannot solve. Deflation, the collapse of demand that follows in the wake of defaulting debt has been loosed from its shackles and, soon, the conundrum of bankers will become the nightmare of all - a deflationary depression worse than the 1930s.

After the Great Depression, mainstream economists, monetary poseurs who graduated from Harvard, Princeton, the University of Chicago, etc. (schools where the dark arts of “I” finance are taught), convinced themselves that they had solved the problems that had plagued fiat systems in the past. They were wrong and society is about to pay the price for their hubris. The so-called great moderation, i.e. the apparent containment of inflation, turned out to be but a monetary abnormality that led not to inflation but to enormously destructive asset bubbles that have now collapsed.

Central bankers have revealed themselves to be not masters of finance but the co-conspirators of investment bankers who looted government treasuries for the benefit of Wall Street’s parasitic plundering. Today, the banker’s plundering of productivity is almost at an end, but not because of societal awareness, resistance and opposition but because governments today are as broke as the banks; and, their collective bankruptcy will hopefully prevent both from destroying what little savings and few freedoms are left. No matter how respectable their appearance, the greatest enemies of society and freedom today are central banking and centralized government - the twin towers of monetary Mordor.

Today, we are witness to a most absurd spectacle: Bankrupt nations with collapsing and contracting economies planning to re-spend themselves back into prosperity on borrowed money - at least, that’s the plan. The US, England, Japan and others are trapped in a sinkhole of defaulting debt and deflating demand, the combination of which broke global economies in the 1930s and is in the process of doing so again today. It is ironic and appropriate that England, the US, and Japan are following the same path at the same time; for the three together comprise the historical lineage of credit and power in this epoch, credit which built and whose consequent debt is now about to destroy all three. This time the deflationary depression will be accompanied by an extraordinary global currency crisis. Government attempts to reflate their deflating economies will instead give rise to additional massive economic distress.

Just as low 1 % interest rates reflated economies in 2002 but also caused property prices to balloon then collapse in 2006, today’s even lower 0.25 % rates coupled with today’s unprecedented monetary creation will create an unmitigated global currency disaster that will destroy money as we know it. To stimulate deflating economies, so much fiat money is being printed that money will eventually become worthless. Throughout history this is how all fiat currencies have ended, in the uncontrolled printing and circulation of increasing amounts of increasingly worthless paper.

Last month, M-2, the monetary aggregate in Japan increased at a rate even greater than 100 % annually. The printing presses are now being run as never before in the US, the UK and Japan in the desperate hope that it will save them from the overwhelming gravitational pull of deflation, an economic black hole of immense inertia. The borrowing, printing and circulating of excessive amounts of fiat money has been done before and does not work. Doing so is a recipe for disaster; albeit a time-honored recipe that has been tried in the past always with the same result. It will be no different this time. If you think otherwise, just wait and see.

The term quantitative easing disguises the incredible absurdity of governments borrowing from themselves. The practice first emerged in the 1990s when deflation forced the Japanese to do so in order to keep its vulnerable economy afloat. It is no coincidence that quantitative easing is now being adopted by the US and UK nor is it a good sign that it is being done. Quantitative easing is a sign that deflation has reached a level where governments cannot survive unless extreme measures are implemented. "…when a government resorts to quantitative easing, it shows that it has run out of other means to finance its endeavors. It has reached the end of the line," "The Meaning of Quantitative Easing," Michael S. Rozeff.

We are now witness to otherwise bankrupt nations with contracting economies planning to re-spend themselves back into prosperity on borrowed money - money to be borrowed from themselves. The US, the UK and Japan - the economic troika of the living dead - are all engaged in quantitative easing and are now in the last stages of capital destruction and economic collapse. Banks and governments - especially the US, the UK and Japan - have reached the end of the line; indeed, we have all reached the end of an era. The bankers’ game of debt-based capital masquerading as money in order to indebt and profit from the productivity of others is now in its final stage. The bankers’ resultant debts are now so large, they can no longer be retired, serviced, sold, or even rolled over. That governments have announced they will guarantee all bank deposits and increasing amounts of public and private sector debt when they themselves are broke is a sign of the times - the end times.

Two weeks after the historic August 2007 credit contraction froze global credit markets, I spoke at Session II of Professor Fekete’s Gold Standard University Live in Hungary. The last segment of my speech was titled, “The Path To The Future Is A Cliff”. In May 2009, it is clear that we have now fallen off that cliff. The recent rebound in global stock markets indicates only that we have not yet hit the bottom. We will. Just wait and see."

- Darryl Robert Schoon, email: info@drschoon.com,
website: www.drschoon.com, website: www.survivethecrisis.com

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