Part
I
of this series was a wake-up call. Many readers know that we are headed
toward an economic cataclysm, the cumulative result of decades of political
corruption and willful self-destruction. What few (yet) understand is that what
lies ahead is historically unprecedented in economic terms.
A collection of bankrupt governments are
about to experience the most severe economic collapse in the history of these
nations, simultaneously. The preceding installment provided
some of the reasons why this will be the
most horrific economic event in history.
We have historically unprecedented levels
of debt
. That is a house of cards waiting to collapse. We have historically
unprecedented asset bubbles in terms of both their number and their magnitude.
That is another house of cards waiting to collapse. But it gets much, much
worse.
The currencies of our nations are
worthless. The authority for this is none other than former Federal Reserve
Chairman,
B.S.
Bernanke
:
U.S. dollars
have value only to the extent that they are
strictly limited in supply.
But Bernanke did not “strictly limit” the
supply of U.S. dollars. He engaged in the Bernanke Helicopter Drop, the
most-reckless dilution of a major currency in history. In four years, he
quintupled the supply of U.S. dollars – quintupling a supply accumulated over
the previous 80 years, combined.
Other Western currencies (and the yen) have been
similarly debauched. The
paper
currencies
being pawned off across the Corrupt West are worthless, with the
exception of the Swiss franc.
The wealth which people unwisely hold in
this paper in one form or another will be extinguished as soon as this paper
acquires its actual value. The bonds of these governments will be doubly
worthless: the debts of bankrupt regimes, denominated in worthless currencies. Another
house of cards.
However, as noted in the previous
instalment, these are far from the only economic diseases which now afflict our
societies. Both
unemployment
and poverty
are now at historic extremes, at a structural level. What is meant by that is
that we have previously had
episodes
of extreme unemployment and/or poverty. But we have never had permanent levels of unemployment and
poverty
at the levels they are at today. Historically unprecedented.
In North America alone, there are more than
50 million permanently unemployed people. People who will never be allowed to
work. The occasional few who manage to escape the permanent unemployment trap
will simply displace others into this ever-growing demographic.
How do our corrupt governments deal with
our massive, permanent/structural unemployment problem? They pretend that most
of the unemployed don’t exist. Their bogus “unemployment rates” only include
people actively looking for employment.
We live in societies which produce few new jobs
that provide more than minimum wage (a below-poverty line wage), and even fewer
which provide a wage substantial enough to support a family. Where is the
incentive to look for a job (if you can find one) where you work hard all day
and still
require
charity
just to survive?
People who have given up looking for jobs which don’t exist have effectively
become “non-persons” in our societies. Their economic plight is no longer even
dignified (by our corrupt governments) with the term “unemployment”. They are
simply forgotten.
Less than half a century ago, not only did
our societies provide
full employment,
but most of those jobs paid wages which allowed a middle-class standard of
living – from one wage-earner. Today, most families are forced to have both
spouses work, and even then, couples often struggle to avoid the debt-trap.
This is because real wages have been in a
downward spiral for more than 40 years. Ever since the bankers removed their
own
Golden
Handcuffs
by assassinating the last vestige of our gold standard, they have
been diluting our currencies at an historically unprecedented rate (except for
Germany).
Real wages have fallen by more
than 50%
. A two-wage family of today does slightly less well than a
single-wage household of 45 – 50 years ago. This translates into a drop of more
than 50% in our standard of living. Household debt levels are also at historically
unprecedented rates: mortgage debt, auto debt, student loan debt, credit card
debt, etc. etc.
Naturally, with debt levels at historic
extremes, savings levels are at historic lows. People with plenty of money in
the bank (
real money) don’t do a lot
of borrowing. At the household level, even those lucky enough to live above the
poverty line have never been more economically vulnerable. Low wages. Sky-high
debts. Very little savings – just the illusory “wealth” contained in one of our
many asset bubbles.
Then there are the crippled economies
themselves. A healthy economy doesn’t drive a nation into bankruptcy, because a
healthy economy generates sufficient tax revenues to keep the government at
least close to a balanced budget level. Healthy economies don’t produce unprecedented
levels of poverty and homelessness. Healthy economies don’t produce
unprecedented levels of permanent, structural unemployment. Healthy economies
are
not minimum-wage
economies
.
Look at Switzerland. More than 90% of the
workers make the equivalent of more than $25/hour (USD). Switzerland has low
unemployment, a high standard of living, and (compared to its Western neighbours)
is relatively low in debt.
Mindless economists, with their extreme
right-wing biases tell us “we can’t afford” to pay our workers a decent wage.
Wrong. We can’t afford
not to pay the
workers a decent wage.
An imbalance between rich and poor is the oldest and
most fatal ailment of all Republics.
-
Plutarch, Greek philosopher (46
– 120 CE)
For more than 40 years, wages have spiraled
lower. For more than 40 years, our economies have gotten sicker and sicker and
sicker. Coincidence? Right. How long will it take for these right-wing
sock-puppets to acknowledge they were wrong?
IMF:
Wealth Inequality Harms Economies
In 2008; the right-wing governments which
controlled most of the Corrupt West chose to save the Big Banks (i.e. meet
their extortion demands) and sacrifice their social safety nets. In 2008;
Iceland
sacrificed its Big Banks and saved its social safety net. Today Iceland’s
economy is (in relative terms) strong and healthy while the rest of the
low-wage/low-social program, Corrupt West plunges toward cataclysm.
Coincidence? Right.
What do our corrupt governments do about
the collapse in real wages? They lie to us about the real rate of inflation to
try to hide the collapse in purchasing power of our banker-diluted currencies.
What do our corrupt governments do about the collapse in our economies? They
lie to us about GDP, and pretend that these train-wreck economies are
“growing”.
Regular readers now understand the inflation/GDP
charade
. If you lie about inflation, then for every percentage point you
understate the rate of inflation you overstate GDP, since all GDP calculations
must be fully deflated by the current inflation rate. Our governments grossly
understate the real rate of inflation. This means they grossly exaggerate real
GDP. Our crippled economies are not growing, they are shrinking.
Our mushrooming asset bubbles hide this
sickening economic decay, but they cannot conceal it completely. Housing
developments grow and sprawl all over the urban centers of our worst real estate
bubble markets. But how many new shopping centers are being built? There hasn’t
been a new, major shopping mall built in the United States in more than a
decade.
We live in consumer economies. We’re told
that these consumer economies are growing and growing. But we don’t need any
more stores to meet all this “growth”? Even with the increase in on-line
shopping, it still accounts for only a small percentage of overall retailing.
Our consumer economies are not “doing their shopping online”, we’re simply not
shopping.
The ultimate barometer for the endemic
sickness of our economies are our
ultra-low
interest rates
. Never before in history have Western governments had their
interest rates set below 1% for any significant length of time. Setting
interest rates at below-normal levels is what governments do to try to
stimulate a sick economy. What does it
say about our economic health with our interest rates permanently frozen near
zero?
Today, after the U.S. economy has
“recovered” for 8+ years, the Federal Reserve is still afraid to raise its
benchmark interest rate back to the lowest level in history – because the U.S.
economy is
too weak to withstand paying
interest on all its massive debts. It’s virtually the same across the rest of
the Corrupt West.
Along with all of our economic diseases, we
have a plethora of social diseases. Indeed, unemployment, poverty, and
homelessness are just as much social diseases as they are economic diseases.
The growing demographic of poor,
unemployed, and homeless creates other undesirable consequences. To start with,
people in the lowest economic brackets don’t do nearly as well at maintaining
their health. It’s not because these people don’t want to live healthier, it’s
because they can’t afford to do so.
With our aging societies already straining
the capacity of our healthcare system, we’re creating a large-and-growing
demographic of people who are guaranteed to be in poor health as they age. The
same societies which condemned these people to poverty cannot ignore their
afflictions when they get sick. The poor-and-sick will overwhelm our healthcare
system.
Sick economies. Sick societies. And these
socio-economic diseases are on steep, downward trends. With our nations heading
towards an unprecedented economic cataclysm,
our economies and our societies have never been less-prepared to meet
such a crisis
. How did our once-prosperous economies and once-healthy
societies descend so far, so fast?
This will be the subject of the third part
of this series. We have seen a dramatic devolution in our political systems and
a dramatic devolution in our legal systems across the Corrupt West. Part III
will deal with a different form of cancer afflicting our nations – as the tidal
wave approaches.
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Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.
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The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
