WHY THE US ECONOMY WILL NOT RECOVER?

For some years I have been writing about the impending economic collapse of the USA and the Anglo-Saxon nations.  This economic collapse is now unfolding.  What will be the impact on the global economy, and can it be saved?

The key reason why the world is facing this economic crisis is that some nations have been spending far more than they earn, while others have been accumulating large surpluses that can be invested in productive enterprises providing a genuine return on capital.  These imbalances have created major distortions in the global economy with which the world is now coming to terms.  While thousands of words have been written by economic analysts, this is the bottom line:

The fundamental cause of the current global economic crisis is that for many years the Anglo-Saxon nations have been living way beyond their income, relying on borrowing money from their creditor nations to cover their trade and current account deficits.  Our leaders have failed to warn their people that we could not live on borrowed currency indefinitely, and eventually we would be required to pay back the borrowed currency.  Yet still they fail to face up to facts and tell the people that the Anglo-Saxon nations cannot continue maintaining their extravagant lifestyle financed by borrowing from the rest of the world. 

Our political leaders seldom mention the reality of having to earn export income to service their international balance of trade deficits.  They have convinced themselves that our trading partners will continue to accept their printed money in return for their goods and services purchased. With the global economy now slipping into a deeper recession, the prospects of the Anglo-Saxon economies being able to trade their way out of their current economic morass grow bleaker by the day, as the export markets for goods and services from the Anglo-Saxon world disappear, making it impossible to repay their foreign creditors with anything but depreciating paper money.

Recently, Britain, the USA, Australia and New Zealand governments have gambled by guaranteeing bank deposits to prevent a run on their banking systems…and partly to maintain confidence with their overseas creditors. They have created currency though the banking system to maintain adequate liquidity for the financial markets to remain operating, and have been willing to advance capital to the private sector to finance loss-making companies and financial institutions.  What is not mentioned is that creating fiat currency to solve their immediate economic problems will not solve the long-term financial problems their nations face – it is like throwing fat on the fire, and will only lead to a more serious collapse of their currencies and economies.

These governments approach the current crisis by encouraging the consumer to spend more to create demand for goods and services.  Yet already many people are already struggling with the cost of servicing debt, and the only way out is to increase real incomes – something that is difficult in a contracting market, with rising costs.  For governments to encourage their people to borrow and spend is like taking an alcoholic to the bar, and paying for his drinks, telling him to get drunk.  As a result, they now run the risk of national bankruptcy, defaulting on their international debt obligations.

Why has the world gotten itself into this economic crisis?  Can the Anglo-Saxon nations recover from this financial train wreck?  The media is filled with countless reports on the current economic crisis, what has caused it, and what the solutions could be.  Yet none of these modern-day seers have been able to accurately answer the following questions:  What are the causes of this economic crisis, what are the solutions, and what will happen?

Many are hoping that there will be a recovery in the markets that will save us from a global economic collapse.  Nearly all nations are desperately trying to stimulate economic activity through a mixture of government spending, borrowing, printing money and creating bank credit.  Yet nothing appears to be working as the economic news around the world continues to worsen.

Meanwhile several nations, especially Japan and China have put in place measures in an effort to stimulate their domestic economies.  Those countries, which have the reserves to do this, may need to withdraw their investments from their Anglo-Saxon debtor nations to prop up their domestic economies. This will greatly affect the English-speaking nation’s ability to revive their economies, which have become dependent on the inflow of capital from Asia to finance their banking systems.  This would result in the collapse of the Anglo-Saxon banking system, unless they are nationalized by the governments who have guaranteed the deposits.  The Western Governments themselves run the risk of becoming insolvent, and will be dependent on their Central Banks to create more credit for their banking institutions, resulting in debasing the value of the currencies.

Many governments around the world have increased the supply of their currencies in a desperate attempt to save their economies from unraveling, resulting in massive unemployment, corporate collapses, government insolvencies, and personal bankruptcies.  Will these measures work? While to date there is little sign that this government intervention has had any success, the amount of currency injected into the banking system is expected to have some short-term impact in the New Year.  This will inflate paper asset values to prop up the collateral for the banking system. However, the biggest impact will be on the value of currency.  Increasing the money supply without a corresponding increase in goods and services will result in debasing the value of that currency.  Hyperinflation will quickly set in.

There may well be a sharp but short recovery in the New Year as this flood of newly-created fiat currency finds its way into the consumer’s pockets.  Sadly, this recovery will only be short-lived as inflation takes hold and these paper notes depreciate in value.  The American dollar as the world’s major reserve currency will no longer be  accepted in that role once inflation gains momentum and international creditors lose confidence in the US economy. The dollar will quickly spiral downwards in value to rival that of the Zimbabwe currency. The collapse of the dollar will result in the disintegration of the American society.

There has been a failure on the part of the Anglo-Saxon nations (with the exception of Canada) in regard to addressing the cost of servicing their large and growing external debt and current account deficits.  Inflating their currency supply will make it easier for those with dollar debts to repay them, but in the process it will destroy the confidence of their creditors who will suspend lending credits to cover their deficits.  This will see the collapse of the US dollar along with several other currencies which run parallel to the USD in the global economy.

What is occurring globally is a realignment of the major world economies with a shift in wealth away from the crumbling Anglo-Saxon economies to the Eurozone and the emerging Asian nations.  What will this new economic order mean to the world?

The Eurozone will be the region that will recover quickest. This region is the world’s largest economy, and is able to create sufficient volume of trade internally enabling it to recover more quickly from the current recession than other economies.  While most of the EU members are creating stimulus packages, Germany is adopting a more conservative approach, reluctant to inflate their money supply without an increase in productivity, having lived through the consequences of hyper-inflation in the past.  It is Germany, the largest exporting nation in the world and the largest economy in the EU, which is sitting on generous foreign reserves.  By taking a cautious approach, it will be in better position to provide the pillars for a strong Euro.

There is no doubt that the export driven Asian economies will be severely affected by the collapse of the US economy and will take some-time to readjust by shifting to greater emphasis on trade within Asia and developing their domestic infrastructure.  Increasing expenditure on the military is one option for those countries which have the resources to do so.  In particular Japan, Germany and China may well decide to expand their defense budgets to create employment in their manufacturing sector to replace income from their declining export markets, to enable them to maintain their manufacturing base.

The outcome will be a new world economic order, dominated by the Eurozone, lead by Germany.  The new European power block will replace the dominance the Anglo-Saxon nations have held on the global economy for the last 200 years. The Euro is the only currency large enough to replace the $US as the world’s reserve currency.

Modern-day economists who believed that they could defy natural economic cycles through central bank and government intervention will be shown that their theories have failed.

The Bible has given us specific economic laws that will ensure prosperous, sustained communities where the wealth is shared with equity and prosperity and can be in the reach of all mankind.  In brief, these laws require debts to be written off every 7 years, interest not to be charged within domestic economies, investors to take equity investments rather than lend money, and if land is used as collateral it is to be returned to the original land owners after 50 years.  Government and welfare to be funded with a flat tax not exceeding 14% of income.

These economic laws have been provided to ensure we would have prosperity and equal distribution of wealth.  It would mean that the parasitical banking system we have today would not be necessary.  Institutions that have emerged such as hedge funds, future trading, derivates, and currency speculation would not have been able to develop under such laws.

There will emerge a new world economic order from this crisis.  There will emerge a new EU based World Central Bank (modeled along the lines of the ECB), which will restore global economic prosperity and order.  This new institution will replace the World Bank, the Bank of International Settlements (BIS) and the IMF with the authority to regulate the global economy and direct capital into productive infrastructure ventures, rather than the Anglo-Saxon market-driven model that allowed capital to have the freedom to speculate rather than produce.

This will mean a much more regulated economy than that with which we have become familiar, and many of the personal freedoms we now take for granted will be denied.  In particular the debt-ridden Anglo-Saxon nations will be subjected to many regulations which will mean that the people will be subject to virtual slavery.

The suffering of the people of Britain and the USA following their economic collapse will be sudden and far worse than many can imagine.  Our people, who have had so much in the past, will find it very difficult living in third-world poverty, where they do not know where their next meal will come from, where there is a total break-down in law and order, and there is a complete social anarchy.  The curse being bought upon the Anglo-Saxon people is a direct result of their rejection of the Law of God.

The events now unfolding have historic significance.  We are seeing the emergence of a new world order that will enforce the promulgation of a global economy, with one reserve currency.  It will mean the end of many of the freedoms we now take for granted.  It will be a time of great suffering for the Anglo-Saxon people as their economies collapse, and they face starvation, poverty and wide-spread disease.  It will be the precursor for the time the Bible describes as the Great Tribulation.  

Bruce Porteous

1 Jan, 2009

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