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:]
- 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:
- national governments, and even
- the world’s financial systems.
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.
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.
The ‘workforce elite’ in America today are public sector employees and they, led by state and municipal unionized workers, are now in open revolt to preserve their special status, and the status quo. Wisconsin is the current case study in what happens when the government, a monopoly service provider, confronts the fact that the taxpayer is tapped out and can’t take it anymore – and there simply isn’t enough money anymore. Those realities are going to result in major adjustments in worker incomes, future pensions and benefits and their overall standard of living. Let me explain. Words: 2137
The charade is over. American taxpayers finally seem to be aware that they are the servants, not the masters, of government at all levels. Government-employee unions have played a key role in causing bankruptcy in most American states, and their pleas for more bailouts financed by endless tax increases are finally ringing hollow. Words: 1192
A new financial policy initiative known by the label “Financial Repression” may soon become our worst nightmare. ‘Repression’ rhymes with ‘depression’ which could be what we have to look forward to as rampant price inflation and permanently lower living standards take hold. Get ready to be conscripted into a citizen army assembled for the greater cause of saving the nation from being swamped by a tsunami of debt. Let me explain. Words: 1585
Our empirical research ( Growth in a Time of Debt) on the history of financial crises and the relationship between growth and public liabilities shows that burdens above 90% are associated with 1% lower median growth – and the United States’ debt level is currently hovering around 90% on a gross basis and 60% netting out assets. Politicians like to argue that their country will expand its way out of debt but our historical research suggests that growth alone is rarely enough to achieve that…[given] the debt levels we are experiencing today…[As such,] we need to be cautious about surrendering to the “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past. [Let us explain why.] Words: 1175
One of the things that’s being lost in the welter of rhetoric around the debt crises of sovereign nations is that these are not normal debtors, and government debt is not the same as personal debt. If you or I are in debt we are obliged to fulfil the terms of our repayment obligations or to go bankrupt or to pretend to die and go off and live on the life insurance. A country in the same situation has a range of other measures available to it…[Let’s explore their options and what their implications would be for the country and its citizens.] Words: 1145
Financial Repression is a form of wealth confiscation and redistribution that is in some ways as effective as taxation – but the government never directly calls it that. It never appears in the budget (directly), and while it is dependent on a comprehensive network of laws and regulations – none of those go through the legislature with a stated intention of creating Financial Repression. So while the economic net effects are similar to a huge and comprehensive set of investor taxes being used to pay down the national debt, the “taxes” are never a campaign issue because voters and investors don’t understand what is happening – they only feel the results. [In this article I lay out for you what is slowly developing and expected to escalate dramatically in the next few years.] Words: 5800
Get ready to be financially conscripted into a citizen army assembled for the greater cause of saving America from being swamped by a tsunami of debt as a new policy initiative known as “financial repression” takes hold. ‘Repression’ rhymes with ‘depression’ and that is what we may have to look forward to as rampant price inflation and permanently lower living standards take hold as a result. Let me explain. Words: 1797