Preparing for Global Collapse – by Vasko Kohlmayer

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“Société Générale has advised clients to be ready for a possible ‘global economic collapse’ over the next two years,” reported the UK Telegraph in a recent story.

Headquartered in France, Société Générale (SG) is one of Europe’s largest financial services companies. One of the oldest banks in France, it is also a quintessentially mainstream institution whose leadership is largely blind to the shortcomings of the world’s current monetary regime. As so many other mainstream outfits, SG failed to see the coming of the current crisis and had to be rescued to the tune of billions of dollars. Much of it, paradoxically, came from the American taxpayer via the AIG bail out.

One can get a good sense of how bad things must be if an institution like this is preparing its clients for the possibility of a “global economic collapse.” Given the present state of affairs, the bleak outlook is more than justified.

To begin with, many governments currently find themselves on the verge of bankruptcy. Having tried to spur economic growth through vast injections of new money, they have contracted immense public debts. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” concludes Société Générale in its report.

Leading the way is the United States which posted a deficit of nearly 10 percent GDP during the last fiscal year. The Obama administration projects that America’s national debt will exceed its annual economic output in the 2011 fiscal cycle. It will then continue expanding as far as the eye can see, reaching 107 percent of GDP in 2019. It should be remembered that these are the administration’s own figures, which almost always tend to be too optimistic. The reality is likely to be worse.

The deep indebtedness of western governments raises serious questions about their financial viability. Ambrose Evans-Pritchard, the Telegraph’s International Business Editor, puts it bluntly: “Almost all western governments are insolvent… we are bust.” Evans-Pritchard is correct. The level of indebtedness is unsustainable. Unable to squeeze much more from taxes, sooner or later western governments will have to start defaulting. The default will very likely take the form of high inflation as governments will try to print away their immense debt burden. This will, of course, have dire economic repercussions.

Dire as Société Générale’s report is, it still does not do full justice to the dept of our predicament. When discussing America’s fiscal plight, for example, it fails to take into consideration the biggest drag of all – entitlements. Estimated at more than $100 trillion, this astronomical figure represents the largest financial obligation in the history of the world. More than one and a half of the world’s current economic output, entitlements are a millstone that will pull America down into financial ruin. Needless to say, the rest of the world will also be caught in the vortex. With Social Security going into the red perhaps as early as this fiscal year, the “global economic” collapse may occur sooner than later. Western government officials, however, appear unconcerned about the black clouds on the horizon. Rather than trying to rein in spending, they blithely pile on even more debt. Oblivious to the impending financial crack up, they instead worry about the non-existent anthropogenic global warming.

Meanwhile, the banksters managed to pull off another one, this time in the United Kingdom. On Tuesday last week it was revealed that Britain’s central bank – the Bank of England – had extended in October 2008 secret loans to two large banks. The amount involved was £67 billion, which is roughly $100 billion. The news provoked a furor across Britain with the public, politicians and commentators outraged at the secretiveness in which the transaction was executed. But the outrage has prevented people from seeing the more fundamental issue. So far no one has asked the most important question: Where had the money came from? Obviously it did not come from the government’s budget as such a huge expenditure could not have gone undetected.

The secret loan was an extra budgetary transaction by the Bank of England. But how did the Bank of England get all this money? It simply created it out of thin air and then pushed it to those in trouble. The ability of central banks to create new money at will is really nothing other than  legalized counterfeiting. Whenever the monetary elite needs to bail out their friends in some troubled economic sector, they simply send some freshly minted cash their way. But these huge inflows of new money dilute the existing money stock thus decreasing the value of the money that is held by the general public. The result is inflation. And although it may not be immediately reflected itself in the Consumer Price Index, it will sooner or later show itself somewhere. The current rise in prices across investment asset classes such as gold, equities, commodities, etc. is to some extent due to the inflationary monetary policies of governments across the globe. To put it differently, currencies are losing value in relation to tangible assets.

Everyone should be able to recognize that it is not possible to solve real problems by contracting ever more debt and by printing ever more money. And yet this is exactly what governments have been doing. This game cannot last forever and the house of cards they have built will sooner or later come crashing down. The “global collapse” of which Société Générale warns is a real possibility. Those who choose to ignore such warnings do so at their own peril.

  • USMCSniper

    Alan Greenspan, at one time a defender of the gold standard and economic freedom, abandoned capitalism long before he accepted the job of economic dictator as Fed chairmen. In a capitalist system, one in which markets are totally free of government coercion, the government’s sole purpose is to protect individual rights. An economy hamstrung by thousands of government regulations, cumbersome legislation like Sarbanes-Oxley, and of course, a central bank that controls interests rates and the money supply – is by no means a free market. Alan Greenspan abandoned reason, egoism, free markets, and honor. Consequently, he became one of the chief architects of the economic collapse.

    How did this start? The belief in centralization and micromanagement persisted, making its way into the hands of Fabian socialists of the late 1800s and 1900s, whose members included John Maynard Keynes. The Keynesians dealt not with individuals but aggregates and abstractions, usually expressed in mathematical terms. They emphasized not individual choice but state power. According to them, business cycles are part of the warp and woof of capitalism. When recessions occur, the state must step in and stimulate demand with more easy credit through deficit spending and through money creation and credit expansion by a central bank, because the market can’t be trusted.

    Politicians, naturally, find this school of thought attractive. It tells them what they want to hear, and justifies what they already want to do, which is to grab for more power.

    Thus the Keynesians have been in charge since the 1930s. They control the economics profession in the Western world, which is one of the reasons Fed policy is so seldom questioned, while those who support laissez faire capitalism have often found themselves dismissed as “fringe” elements. Such ad hominem retorts aren't making much headway these days. Not a single Keynesian, after all, foresaw the economic meltdown of 2008, while protégés of the Austrian school had seen it coming for some time, especially since the government’s response to the bursting of the tech bubble did not amount to stepping aside and letting the market extinguish the malinvestments, but rather continued the same practices with the easy-credit policy that inflated the housing bubble.

    Keynesian policies have continued to this day under the Obama administration, as should be clear from this past spring’s “economic stimulus” package, as well as the repeated utterances that the federal government’s huge expenditures of the Fed’s fiat money are leading, however slowly, to an economic recovery. All of this is just propaganda.

    The economists are already telling us that it will be a “jobless recovery,” a mantra we heard back in the early years of the present decade when Fed inflation of the money supply prevented the market from clearing out the malinvestments created by the tech bubble of the late 1990s. This time, the public is more suspicious. It is no accident that gold has more than tripled in value from around $350 an ounce to nearly $1200 an ounce – and will go much higher!

  • Wayne

    ” Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” John Maynard Keynes is today and has been for decades the most influential economist on the planet. His economic ideas have presided over the destruction of the remnants of the so-called free world and as always the intent of committed socialists is the destruction of capitalism — its removal from the face of the Earth. So have the ideas of Keynes been successful in achieving the ends to which they were intended — bringing about the collapse of capitalism while blaming capitalism itself?

    Keynes himself was a card-carrying charter member of the British Fabian Socialists whose goals were exactly the same as the Marxist Bolsheviks — George Bernard Shaw and Keynes were overt in their support of Lenin and Stalin — they only disagreed with the method to achieve the ends which the October Revolution achieved for Lenin and the Bolsheviks. Fabian Socialists believe those ends should be gained through “gradualism” — infiltrating the political, social and educational systems to get that same result.

    With the forecast global economic economic collapse, does that mean we have arrived e do know this Keynes is now the defunct economist of which he himself spoke decades ago.

  • http://drugwars.110mb.com/ David Weinstein

    When President George W Bush spent 3/4 trillion dollars to save the economy, he was spending money that we didn't have. When Barack H Obama spent 3/4 trillion dollars (plus) to create jobs (the stimulus) he was spending money we don't have. When politicians create entitlements, they spend money we don't have. For instance, a quick search on the internet tells you that “The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today's dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.”.
    There is something wrong with our system of government, which has allowed this to happen.
    The Founders of this country did not design a system that could prevent the incentives that politicians have to spend money that does not exist.
    This could well be the end of Democratic Capitalism. It could mean poverty and desperation for all of us.

  • GJTryon

    In that “house of cards” are many political mansions: liberalism, sociaism, militarism, immigration, welfare, etc. May they all come toppling down as well!

  • LucyQ

    Excellent column, as usual. I appreciate the fact that you stick to the facts instead of playing the blame game……'it's all the right or left's fault.'

  • Jonathan

    USMC Sniper!

    Your awesome comment is a bullseye; just what I would expect from a USMC sniper. I'm glad you are on my side. Semper fi.

  • WFB2

    “This could well be the end of Democratic Capitalism.”
    ***
    That's the whole idea. The long-sought Socialist Utopia is nigh. Heaven on Earth at last.

  • Name

    What I take heart in is the fact that the free market always finds a way – even if it has to go underground. More laws and tighter regulations (the government's solution for the preventing another financial crisis) simply create holes that people are more than willing to fill. Capitalism can be contained and bridled for some time, but I believe in the creativity of people and inspiration from God that will break through those restraints in new and inventive ways.

  • tnfleming

    If “USMC sniper” is a typical marine, then there is hope for our country after all. Impressive and perspicacious analysis, far better than one can find in 90% of news outlets for sure.

  • Jonathan

    It's not surprising that the central bankers love Keynesian economics. Not surprising at all – since they are the ones who are at the top of the monetary food chain. This whole world is one big rip off.

  • Jonathan

    “The Founders of this country did not design a system that could prevent the incentives that politicians have to spend money that does not exist.”

    Perhaps they didn't. But they sure made it the LAW of the land that Congress is responsible for the money. And they warned us about central banks.

    Perhaps what they should have done is made fiat currency unconstitutional, and made some hard standard a requirement, such as gold or silver. I think the founders would have done a LOT of things differently had they foreseen the rise of socialism. They probably would have made capitalism the law of the land. And term limits too.

  • hoolad

    Islam is pure evil to the core. islam is not a religion but a political movement to achieve global dominance. Show me a churhc or a hindu temple or a jewish temple in saudia arabia. Go to Egypt and see how they deal with the Coptic Christains, the egyptians treat them like animals, burn down their chruches at every riot and they dont allow new chruches to be build, infact you have to ask permission from the president of egypt to build a church. Remind you, Egypt was a Coptic Christain Country before Islam took over with the sword and now coptic christains are a minority in their own country. I Guess the Swiss have realized the danger soon…..

    In Turkey, they have taken Hagia Sofia Church and turned it to a Mosque, then into a museum. Still they will not give back Hagia Sofia to be a church again. Muslims are hypocrates. Turkey has a mission to wipe off all churches and convert them into secular museums and thus will elimanate the christains populations.

    Christains are not allowed to be christains in middle-east, period. Now muslims shout. Give me a church, hindu temple, jewish temple, buddist temple or any other temple in the heart of Mecca or Medina and then I will voice my dis-taste for the swiss vote.

    http://www.faithfreedom.org
    http://www.thereligionofpeace.com
    http://www.thethirdjihad.com

  • LindaRivera

    PUNISHED for BEING AMERICAN

    WORLDNETDAILY.COM
    Obamacare's penalty on families
    Craige McMillan
    December 03, 2009

    Jack is married and has two children. He earns $44,000 per year. Because he has a family and things are tight, he can't afford an unexpected illness. Jack opts for the lowest-cost IRS-approved insurance coverage. The CBO estimates a family of four will pay $15,000 per year. Jack's monthly pay stub looks like this, before and after health care “reform”:

    (click on the link to see the graph! – Monthly net pay before insurance $2,854.70. Fed health insurance premium of $1,250 reducing Monthly Net pay to $1,604.70)

    It's hard to see how Jack's new paycheck does much for the economy, isn't it? Perhaps he and his family become another ward of the ever-expanding federal government, and can fill out the appropriate forms to plead for handouts and help…

    The IRS was an excellent choice by Pelosi and Reid: It doesn't give a rip about constitutional niceties; all it does is suck money out of the economy; levy fines, penalties, empty bank accounts and place liens on property.

    “The Congressional Budget Office stated on Oct. 29 that the House bill would generate $167 billion in revenue from 'penalty payments.' Individual Americans are expected to pay $33 billion of these penalties, with employers paying the rest. Former member of Congress and Heritage Foundation fellow Ernest Istook has concluded that for this revenue goal to be met, 8 to 14 million individual Americans will have to be fined over the next 10 years, quite an incentive for federal bureaucrats.”…

    Illegal aliens will be exempted from taxes and penalties, but will still be able to receive free treatment at the new Government Motors health-care facilities.
    http://www.wnd.com/index.php?fa=PAGE.view&pageI

    We are hated and to be punished for the crime of being American! In New York City and many other cities, from Jack's pay stub (family of 4) in the graph, after paying out the government health insurance, he would not have enough money to pay for his rent. There would be zero money for food, transportation and basic necessities. Elected and highly paid with many perks to represent the people, Washington Leftists live high on the hog in luxury, what do they care?

  • Will Marshall

    What do you propose be done with the people who are engineering these events?

  • Len Powder

    That government is best which governs least.