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Even if the economy improves (it won’t in any real sense), the changes coming to this country border on the unimaginable
for both the enlightened and unenlightened. Economic events similar to what occurred during the Great Depression are not far from happening. Some outcomes will be worse than what occurred 80 years ago. [Let me explain.] Words: 563
So says “Monty Pelerin” (economicnoise.com) in edited excerpts from his original article* entitled The Future Is Determined By the Past.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.)
Pelerin goes on to say in further edited excerpts:
No bell will sound to alert you that we have entered another Great Depression. Events will unfold slowly until there is a cascading event that triggers a change so dramatic that everyone will know that “this isn’t Kansas anymore, Toto.”
Bankruptcies are a part of the process. The Federal Government has prevented many of these from happening by its aggressive money creation. Prevented is actually incorrect. Deferred is a more proper description. Ultimately the bankruptcies will occur. They are inevitable.
Cities and municipalities are likely to be among the first governmental units to begin to fall. Mish opines, attributing the cause to public unions:
“Distressed cities are finally doing what they should have been doing long ago, declaring bankruptcy to force concessions from public unions. Numbers are still a trickle, but at soon as a major city such as Oakland or LA selects that option, we will likely see a torrent of municipal bankruptcies.”
There is no doubt that public unions play a big part but even entities without unions will likely go through default. [Here’s why:]
The Day of Gold-Plated Public Sector Pensions are Numbered
Why Government Employee Unions Are To Blame for Impending State Bankruptcies
- Government at all levels and for various reasons became bigger than necessary in every respect, including salary levels.
- Tax bases were artificially inflated by the housing boom. Now the economy is returning to normal, or at least a “new normal”. It will be a normal where tax bases of all kinds are going to shrink dramatically. Housing values have not bottomed yet.
- Furthermore, standards of living are going to continue to decline. People cannot afford the level of government that government has forced on them. Nor can many afford the life styles to which they have been accustomed.
The coming bankruptcies result from the impossibility of meeting debt loads and employee promises. [Here’s why:]
- Politicians have been living high for decades. Instead of “banking” the good harvests for lean years, they spent as if there would never be a slowdown or never a tax revolt.
- We are about to enter a major and sustained slowdown, one that may last for a decade or longer.
- At this point there is no way to service many contracts and commitments. Default will be the only option in such cases.
That defaults are coming is as inevitable as the changing of the seasons. It is just a matter of time.
Such outcomes are inevitable with:
- municipalities,
- states,
- national governments, and even
- the world’s financial systems.
Conclusion
These outcomes are no longer subject to economics. Matters have gone so far that the rules of arithmetic now control outcomes.
Brace yourself for these instabilities. They will be both life and wealth changers.
* http://www.economicnoise.com/2012/04/03/the-future-is-determined-by-the-past/
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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