Global Economic Reset

[TheRobin]

I just found this little video on youtube. 16 Minute long argument about how a economic reset is gonna happen. As a economic newb I'm not sure how accurate this is, so i wonder what other people think of it.

 

 

https://www.youtube.com/watch?v=ICSoWW7pBeQ

 

 

Do you think he's about right? Also, if so, do you think it would be worthwhile to invest a bit in the yuan as part of savings/investment?

[Sal9000]

With hindsight, you can see that he was wrong with Step #2. There were no attacks on Syria or Iran (with a bit of luck though). There are other scenarios that predict a crash in China.

[cobra2411]

"They want the dollar to fail ... that's how you take over a country, you debase the currency..."

 

They've been doing this for 30+ years; ever since they started playing debt games. Money, that is your stored past productivity, and debt are fungible, they are interchangeable. When you buy a pair of shoes or a chicken dinner it doesn't matter if you pay with money you saved or debt that is a promise to pay later. By adding debt without any backing you are debasing the currency because you are for all intents and purposes counterfeiting. If the economy only had two things, $100 and 100 bushels of corn then a bushel of corn would be one dollar. If you print up another $100 then guess what; each bushel will be worth $2. Now, if you're the one printing you get the advantage of spending that money before it loses half it's value and that's the skim. That's why you and I can't counterfeit money but the banks can. They do this by creating the money out of thin air by placing an "asset" on the other side of the sheet. problem is most of those "assets" are simply dog crap labeled fine chocolate and nobody's has bothered to taste it to see. In fact they go to great lengths to hide what they're doing from the light of day. Government and it's selectively enforced regulations to the rescue...

 

There are a couple problems here though. At first it gave a nice boost to GDP as it pulled forward demand. However, mathematical laws state that two exponents, over time, will move away from each other. So to get the same boost in the economy it takes more and more debt, which of course debases the currency and drives prices up which eats into the progress. There will come a time where it is impossible to buy progress. We're there now. Once enough people figure out it's not mood lighting their seeing, the curtains are on fire, they'll head for the exits. It happened in 2008, it happened in 1999, it has happened time and time again. The problem is we have never had this level of debt outstanding. 

 

"They want to enslave as many people as possible"

 

Look at Detroit's bankruptcy. 

 

"Step 2, more wars"

 

I don't think that because we haven't invaded Syria or Iran yet doesn't mean he's wrong with Step 2, it's obvious they want to start wars. The prison and military complex in the US is big business and there's lots of skim available. 

 

"Step 3, goldbug crap"

 

This is an unbelievable red-herring I don't know why it still persists - the idea that gold is some perfect currency. It's scarce, it can be cornered and it can be controlled. Take a look at history and those in power and influence would ease access to money for a number of years only to quickly snap it back in. Same as today, lure people into debt, withdraw liquidity and mop up the assets that have been pledged when people default. As in War Games, the only way to win is not to play. In a fractional reserve banking scam, there is never enough money to pay principal and interest. Someone always loses. It doesn't matter what's behind the currency, if you can create an artificial environment of scarcity then you can lead people to the slaughter. A better solution would be a currency linked to the GDP output of the nation. Want more money? Increase GDP. It would force efficiency. However, given that no banker or politician has been jailed or even charged with fraud or any of the other crimes they regularly commit there's nothing really stopping them from abusing that system too. What we really need is a strong "or else" that is actually enforced. 

 

"China's urbanization"

 

Build it and they will come? I find it hard to follow his logic that China is doing what the US did in the 50's because the US didn't build massive cities and forcibly relocate it's population there. I'm sure they'd like to create consumers for all the crap that the US isn't going to be able to buy in the future, but it's a failed idea as it requires exploitation of workers and exploited workers can't afford to buy that crap. Pay the workers a wage where they can afford the crap and you can't sell the crap for that price and once again it becomes unaffordable. But simply consolidating them into cities will cause magic to work and they'll be able to work as slave labor yet afford to buy all the US consumer crap. 

 

In my opinion he's right but he's also wrong. He's right that a reset is coming but he's wrong about what's going to happen. At best it's simply one option but there's a failure in some of his logic. Exponential increases in debt end one way and only one way - they stop. That could be willingly or unwillingly, but it's going to stop. Real estate is our largest source of production in this country and when it turns so does the economy. Guaranteed. We're at all time lows with interest rates and if you look at a 30 year chart for the 10-year note you'll see that we're at the end of a 30 year down trend. Sure we can rattle around at the bottom like Japan but the games they play to juice the economy, like QE, aren't working. Today someone can afford say $1,000/mo for housing but continue to debase the currency via all the games and things like food will win out. So tomorrow they'll only be able to afford $800/mo for housing. Now when you add in climbing interest rates -  Houston, we have a problem. See, for every 1% interest rates move that equates to about a 10% move in the value of the house. In other words, for the same monthly payment if you could buy a $100k house at 4% you can only afford a $90k house at 5%. The 30 year average for mortgage rates has been around 7% or about 2% higher. So there's 20% of the value of the housing market. Also, we're not going to stop at a 20% drop... 

 

As for the time that this happens? The only thing I can say is we're closer to that moment today then we were 5 years ago. This year has been feeling like 2007 in the housing market and we know what 2008 brought. 

 

One of the problems I have with these kinds of video's is that they want to tell you "how to get yours". The problem is this is a closed system and for you to get yours, someone else has to lose theirs. People who watch these typically don't want to end the system, they want to exploit it for their gain. There's no shortage of people out there willing to exploit the information they have to help other's "get theirs". That attitude works until it doesn't. Know what counterparty risk is? Yeah, making all that money playing the Yuan vs the Dollar is great as long as you get paid. The Chinese steal anything that's not nailed down if it suites them - Royal Fellows anyone? Sure the US government is corrupt but the Chinese more so. Do you think the Chinese government wouldn't do something like say... "All Yuan must be cleared in China with a Chinese bank account. Internet accounts will be made available. All transactions will be subject to non-resident taxes and fees for everything we can think of will be added..." 

 

The only way to win is not to play. Get out of debt and get yourself into a sustainable way of living. The last couple of years I've been doing what I can and my goal is to be able to comfortable live on 25% of what I used to make 5 years ago. I'm well on my way and I'm at about 40% of that number this year. 

 

Who is John Galt. 

[surfingthoughts]

If this rat run of unsustainable debt fueled growth is to continue I can't see any country winning in the long term until all countries stop relying on debt to fuel their growth and rely on organic growth. Organic growth countries can't compete with debt fueled countries as they can't keep their citizens with the few public services affordable by organic growth without dramatically increasing tax. There will always be governments willing to take on debt to make their country look more appealing in the short run without a single thought to the long term plan.

 

The question is what happens when the USA can't afford to pay back it's interest repayments I can't see a bail out happening who could afford it and would be willing to pay it? I cant see the people who are owed allowing the USA to go bankrupt and default on its debts. I would love for people to loose faith in fiat currency's or any government controlled currencies for that matter at this point but I fear this mad system will be propped up by a war of such scale I fear to imagine. 

 

Please tell me if I am missing something as this is looking quite bleak  will enough people wake up and spot these problems before it is too late? And how would they do anything about it?

[cobra2411]

We, the US that is, could fix this tomorrow but we won't. End the entitlements and make the medical industry follow the same laws as every other business. Enforce the laws and throw CEO's and everyone else in jail when they commit fraud. None of this slap on the wrist fine only crap. There would even be enough surplus to guarantee every family a minimum family earning above the poverty level. Well unless everyone stopped working and put their hand out, but in that way it's self limiting. The more people, the less each gets. At some point you decide to work. 

 

The currency stops being debased and the people get to enjoy advances in productivity. Problem is there's nothing to skim. That and people are more than willing to step on their neighbors throat to get theirs. They want to exploit the system too, not shut it down. So I'm not holding my breath.