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The Crushing Weight of Loss Upheaval, and Social Unrest

Published on March 28, 2010

Part One – From Before the First Days of Panic

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The “when hope turns to fear” moment is at hand. – Ty Andros

“The signs are everywhere. The evidence is compelling. The US Government officials grow more desperate with each passing week,” writes Jim Willie. The rulers of this world of ours, the elite and their minions in governments around the world have been playing games with our heads for decades, even centuries with the clear knowledge that whoever controls and pulls the financial strings holds the keys to what happens down here on planet earth.

Currency slumps have a knack of getting out of control and turning into dangerous crashes. Money Week

The United States federal and state governments’ fiscal finances are a mess and it’s the same with many states, cities, towns, counties and other countries around the world.  For many years governments and individuals alike have thought nothing of spending what they don’t have, of committing to obligations that it can not possibly keep. We can learn quite a bit about what our future might look like as we watch developments in other parts of the world and already in certain parts of America. The period of fantasy of wealth and ease for hundreds of millions of people is ending. Certainly it has ended for states all around the country.

In just the first two months of 2010 state and local governments across the U.S. cut 45,000 jobs and this is just the beginning since budgets are still nowhere near being balanced, something that is required by law. “We’ve talked in the past about revenue declines in a recession,” said Jon Shure of the Center on Budget and Policy Priorities, “but I think you have to call this one a revenue collapse. In proportional terms, there has never been a drop in state revenues like we’re seeing now since people started to keep track of state revenues. We’re in unchartered territory when it comes to the magnitude of the impact.” By 2012, unemployment trust funds for 40 states are expected to be dry. The federal government will have to funnel in $90 billion to keep them going. States are broke and are approaching insolvency at warp speed.

Paying back Washington will put a drag on the states as they’re trying to recover – and the same on the corporations that pay for state unemployment benefits through payroll taxes. This what the Christian Science Monitor is saying about the extensions and the costs of providing the millions of unemployed with a bear minimum of money to live. There is only one problem with this scenario – there will be no recovery or even trying to recover. It is a straight drop off to hell that is waiting for these states and the people in them.

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At the same time, many jobs that laid-off workers might hope will come back – jobs in construction, real estate, financial services, and manufacturing – probably won’t. – Christian Science Monitor

Debt is a story that’s going to end very badly for a lot of people but most of the people in the first world are in denial of this reality. Almost everyone is hanging on, refusing to face the fact that there will be no new boom, no expansion to save the system and that to increase ones credit limit on already maxed out credit cards and other types of credit is just not going to do it. To survive one more year, individuals, towns, states and countries have been borrowing money, monkeying with their books, playing accounting tricks, borrowing from next year’s revenues, selling bonds–anything to maintain solvency waiting for the next boom that is not coming. Without another global bubble much of the first world is doomed to insolvency at every level, public and private.

The problem with most of the first world is that everything costs too much and more people have less and less money to buy or pay for the things they already own or need.

There are two conflicting approaches to our present dilemma. One is to step down hard on the accelerator pedal and spend and borrow ones way back to prosperity (which we have been doing heavily in 2009 through stimulus programs around the world) dramatically increasing debt as we do so. The other is to slam on the breaks and start a “cult of austerity” but the fear here is that this could make it harder to recover from the slump. Drastic budget cuts, if carried out as promised, could set off deflation, send already high unemployment rates surging and bring governments down.

American politics as a system has ceased to function, because the system has gone from representing people to representing money. The Automatic Earth

“The various bailouts and other actions taken by Washington may seem to be aimed at “rescuing” Americans from an unfortunate financial crisis, they are actually doing exactly the opposite. The elite acts to “alleviate” the problems faced by the average American, but in reality the actions taken are destabilizing and end up making things worse,” writes The Daily Bell.

“Most people are far too complacent when it comes to the consequences of a shrinking economic system. Many claim that we can easily downsize to smaller homes and smaller lives, since there’s so much we don’t really need anyway, that we will move in together and return to “good” conversations, growing our own tomatoes and all that. But that’s just not going to happen voluntarily, not on a large and wide scale. The human mind has no reverse. It doesn’t even have a steering wheel. We are built for one of two things: go forward or crash. It looks like there’s no forward left before a major crash happens first. It also looks like there are not a whole lot of people who realize this,” concludes The Automatic Earth.

Deflation, which offers a return to historical levels of real estate valuations, will bankrupt every lender and every owner with debts based on bubble valuations. State and local governments are thus doubly doomed, as their property tax revenues dry up and payroll taxes dwindle along with the job count. Governments and individuals have grown fat on endless bubbles and booms and are in no way prepared to face even a brief period of real austerity. The long lean years ahead, not withstanding a deep great depression or absolute collapse will smash against the structure and fabric of societies in the first world and it is anyone’s guess how bad things will really get.

Instead of being cautious States and other bodies of government are seeking higher returns for their pension funds, are making riskier investments in an effort to meet pension obligations. “In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a former chairman of the Texas Pension Review Board. In effect they are playing with people’s lives and when the system crashes millions and millions of people are going to lose more than their shirts.

America, the richest nation in history is in the final days of its glory. And so is the rest of the first world which has dug itself into a hole that not even the greatest magician can pull us out of. The world is running out of money to service its mounting debts as governments lose their ability to borrow and roll over existing obligations. Doug Casey. “The entire world’s monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There’s no way around it.” Bite down hard on that statement if you want to swallow the red pill, the one that will wake you up and bring you to the reality that is rising up like a snake to strike yet again, after already cutting the worlds economy down to size.

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress at the very end of February that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt[1] even though it has been massively doing so in 2009. Looks like a trillion and a half deficit is just about the maximum international banking interests, who impart control the private Federal Reserve Bank, will tolerate. Translated that means woe onto the government and the peoples of America because the pressure upward on the deficit is seismic. From 2008 to 2009 it exploded by a factor of four rising from around 400 billion to 1.6 trillion. That same upwardly rising steam is not going away its increasing like an atomic reaction just starting not ending. The interesting and intellectually twisting fact that this explosion in deficit and accompanying debt (destined to destroy currencies and bonds) is happening in the face of an overwhelming deflation in income and wealth.

All the monetary stimulation in the world was not enough to break the deflationary contraction of credit and money and there are plenty of people around who knew it wouldn’t. Allowing the wrong people to make decisions (people from the Federal Reserve and Wall Street) has cost trillions in the last year alone, money that will soon come out of taxpayers pockets. “Based on an accurate assessment of economic statistics, it appears that we are in the early stages of a second Great Depression. And it could be much worse than the first,” writes James Quinn.

This depression is bound to unwind the devastatingly parasitic measures FDR used to combat the last depression. – Mike “Mish” Shedlock

We have been on an unsustainable fiscal path built upon an altar of debt and credit and now face the hangman. We are currently witnessing a sudden intensification of the global systemic crisis and are at the beginning of a phase of global geopolitical dislocations. International tensions are on the increase as is a growing sense of insecurity as humanity faces the consequence of the terrible mess it has made.

“All the savings of America for three generations of Americans will be lost, and these same Americans will be saddled with horrendous amounts of debt spawned by our Wall Street controlled Treasury and the Federal Reserve. These are the bankers who have robbed you and will continue to rob you until you are destitute and enslaved,” writes Bob Chapman. The elderly and soon to be retired baby boomers are going to be drawn and quartered saddled with this debt, murdered by pension plan defaults and tortured with the agonizing downfall of the Social Security system.

The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration and now they need to start cashing them in. “Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors,” says the Associated Press. For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year but this year Social Security is projected to pay out nearly $29 billion more than it will bring in.

Who gave the United States government the right to literally steal all this money? Well pathetically the answer is the baby boomers themselves who lather themselves up with political emotions each year in elections only to see their politicians sell them out.

Inevitably the truth is revealed, setting investors on a selling frenzy. Like predators, they first attack the weakest, at the periphery of the herd. – Martin D. Weiss, PhD

“In the not-too-distant-future, that the government will be confronted with a very stark choice between defaulting on the debt or trying to inflate its way out. The former would kill off economic growth and likely launch a worldwide depression of epic proportions. Disastrous as that would be, if the alternative is chosen and Washington’s printing presses beget hyperinflation that would probably be worse. In a serious deflation, those who have saved for a rainy day can make it through okay. In hyperinflation, which unconstrained further spending could easily bring on, everyone loses,” writes Doug Hornig for Casey Research.

According to anthropologist Jared Diamond’s 2005 book, Collapse: How Societies Choose to Fail or Succeed, the Maya fell into a classic Malthusian trap as their population grew larger than their fragile and inefficient agricultural system could support. More people meant more cultivation, but more cultivation meant deforestation, erosion, drought, and soil exhaustion. The result was civil war over dwindling resources and, finally, collapse. Diamond’s warning is that today’s world could go the way of the Maya.

“The real bubble is in paper and our current monetary system. The insanity coming from every pore of those running our system is beyond what the most potent tranquilizer can manage. It is terminal psychosis that must continue until the train goes over the edge of the cliff. Trying to fight it at this stage is like trying to change some one’s mind about abortion or religion. For make no mistake about it, our paper fiat monetary system is a religion. A false one,” concludes Adam Brochert.

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  • Thanks Ty, And so life will continue on the great global bank plantation with about one third of us surviving the great war on humanity. Just the kind of contraction that is needed. The question is then, who will survive the holocaust and how comfortable will they be. How will they organize to prevent a repeat in another hundred years? Who is considering these things now? Nobody. Nobody wants to see what is coming let alone the aftermath. It will, because of no advance planning, be survival of the fittest – natural law.
    +1

  • Ed Howes

    Thanks Ty, And so life will continue on the great global bank plantation with about one third of us surviving the great war on humanity. Just the kind of contraction that is needed. The question is then, who will survive the holocaust and how comfortable will they be. How will they organize to prevent a repeat in another hundred years? Who is considering these things now? Nobody. Nobody wants to see what is coming let alone the aftermath. It will, because of no advance planning, be survival of the fittest – natural law.