- Is there a coming economic collapse?
When will this happen? How will this affect us?
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- Many wonder what the future is for the
global economy. Over the last few years economists have been expressing
increasing concerns about the direction the global economy is going in,
and the possibility of a worldwide depression. They have been warning about
the growing global imbalances in the world economy, and the consequences
if not corrected.
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- Yet we live in a time where the global
economy is booming, especially in the Anglo-Saxon and Asian economies.
Consumer spending is up. House prices around the world have risen
dramatically. Unemployment remains low. The global economy
has experienced the longest period of sustained economic growth in recent
history. The US$ continues to remain stable.
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- Why has the global economy experienced
such strong growth? Will this growth continue? What does the
future hold?
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- Interestingly, some of the stimulus for
the growth the global economy has recently experienced is a result of decisions
made following Sept 11th. Already, prior to Sept 11th the US Federal
Reserve was maintaining a loose fiscal policy in an effort to stimulate
economic growth in the US economy, which had slowed down following years
of strong growth during the Clinton administration. Then along came
Sept 11th, which threatened to destabilize the American banking system.
To prevent this happening, the Fed injected billions into the banking system
to provide sufficient liquidity to prevent a run on the dollar and the
banks.
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- Meanwhile, Japan since the late Eighties
had been wrestling with a stagnant economy, deflation, and a rising currency.
The Bank of Japan was already printing money prior to Sept 11th
- to support its own debt-ridden banks
and to stimulate the domestic economy, and has continued with this policy
ever since: printing yen to purchase American dollars. Japan has
been able avoid inflation through having high domestic savings, and by
investing heavily outside the country. This has kept the Yen
from appreciating against the dollar, enabled Japan's export sector to
remain competitive, and kept interest rates at near zero. As much
of Japan's external investments have been in the USA, it has resulted in
Japan holding assets worth trillions of US dollars, many of which are invested
in US Treasury Bonds and Mutual Funds.
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- Printing money to solve a nation's economic
problem can never be sustained. Eventually, it will lead to the debasing
of a nations currency and run-away inflation. Yet for a short period,
it can create an artificial prosperity, deluding the masses into believing
this new prosperity can be sustained. The long-term consequences
of inflating their money supply will spell disaster for America and Japan,
and have dire consequences for the global economy.
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- The rapid increase in the money supply
of US dollars is the number one reason America's wealth has shifted from
the US to Asia and Europe. In particular, China has benefited enormously
from the inflow of dollars which has financed the rapid growth of its economy,
providing the capital to develop their competitive export sector.
The Asian economies high rates of personal savings have financed their
domestic growth as well as finance the US deficits. This has continued
to allow the USA to maintain its privileged position of retaining the $US
dollar as the world's reserve currency; and allowing it to retain its global
military and political dominance.
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- It has become popular by American politicians
to blame China for the decline in America's production base. This
is totally unfair, and shows both their ignorance and a failure to accept
responsibility by the American leadership. Actually, it is through
China being able to supply America with cheap consumer goods, and lend
the capital to purchase these goods which has allowed the US to contain
inflation, benefiting the American consumer. Germany, which is now
the world's number one export nation and which has a wage structure higher
than the US, has had to cope with a rising currency, but has still been
able to expand its exports between 10-20% per annum, and continues to have
an expanding large trade and current account surpluses. German manufactures
also have to compete with their Asian competitors just as those from America,
yet have a 160.5 billion trade surplus.
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- The reason why America has such large
trade and current deficits is because of the expansion of its money supply,
without the corresponding expansion of its productive capacity to produce
the wealth to sustain the increase in money in circulation. The lack of
domestic savings to provide the investment capital into new manufacturing
capacity is also a contributing factor. The cost of maintaining a
large military establishment and the decline in the social fabric of society
are also significant contributing factors, both of which consume resources
that should be invested in the manufacturing sector for a nation to remain
internationally competitive.
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- So it would appear in the short-term,
the loose monetary policies of America and Japan appear to have benefited
everyone. Expanding the money supply has provided the capital to support
the growth of the expanding Asian economies, especially those of India
and China. Inflation (if you exclude property) has been contained
(normally a consequences of a loose money policy) because of China and
India being able to produce consumer goods and services cheaply for the
global markets, preventing manufactures in the Anglo-Saxon economies from
raising their prices.
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- The increase in the supply of US dollars
has been able to finance the growth in global trade. It has also
provided the liquidity to finance the trade in oil, even as its price continues
to escalate.
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- But what are the long-term consequences
of such fiscal policies?
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- 1 The rise in property prices.
The value of property is one of the first commodities to rise in value
when the supply of money increases rapidly. In the short-term this
makes property owners believe they have suddenly struck it rich, but in
reality it is the decline in the value of their money. It also places
an increased financial burden upon the population, who end up paying an
increased percentage of their income on housing, unless their incomes also
rise. The burden of servicing this new mortgage debt is riskier today,
as much of the capital to finance the growth in mortgage debt has come
from short-term borrowings through the banking system from Asian investors,
with the interest being remitted back to these lenders, rather than retained
in the local economy. The real danger is that if the Asian investors
withdraw their capital from the Anglo-Saxon nations, it would cause a collapse
of the property sector and threaten the survival of their banking system.
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- 2 The shift of the productive manufacturing
base from the Anglo-Saxon nations to low-cost Asian economies. The
outflow of printed dollars from the USA to Asia has provided the capital
to allow these countries to rapidly expand their manufacturing sector,
and under-cut the higher cost Anglo-Saxon producers. Yet the increase
of the money supply has allowed the Anglo-Saxon consumer to still have
retained their ability to purchase consumer goods manufactured from Asia,
often financed through borrowing from the same Asians, even as their income
from the productive sector declines.
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- 3 The increase in the money supply
has resulted in the rapid growth in consummation of non-renewable resources
in newly emerging economies in both the Anglo-Saxon countries and especially
China and India. This growth in demand for these essential commodities
can not be sustained. Without the supply of cheap energy our standard
of living will not be maintained. Eventually the availability of energy
will become limited to only those nations with currencies strong enough
to purchase them.
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- 4 Damage to the global environment
the increase of the money supply has stimulated economic growth to
where the planet can no longer cope with the damage done to the environment.
For the sake of short-term prosperity, we are destroying the ability of
the planet to sustain life.
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- 5 It has enabled the American, Japanese
and UK Governments to finance their enormous budget deficits though borrowing
the money they have printed. In the case of America and Britain is
that they are also borrowing increasingly from nations that were their
former enemies. In all these countries the national debt has grown
to such an extent, that a tightening of the money supply resulting in higher
interest rates, could increase their budget deficits to such an extent
it would bankrupt them.
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- 6 Funding of wars America has
been able to finance its wars in the Middle East on borrowed money
printed money now controlled from Asia. This has left the American
economy extremely vulnerable and open to collapse if this money is with-drawn
for geo-political reasons. Amazingly, the US does not even include
the war in Iraq or Afghanistan in its budget.
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- 7 Increasing the money supply to the
extent that has happened, will eventually lead to the erosion in the value
of the purchasing power of the currency, and a lack of confidence in its
value.
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- But what of the long-term consequences
for the world if there is a collapse of existing economic system?
What will be the future to the global economy of the loose money policies
of the last few years? Does economic disaster now loom over the horizon?
What will trigger off a lack of confidence by America's creditors in continuing
to invest in the USA and support the $US?
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- There could be any-one of a number of
factors that would lead to international confidence in the American economy
and the US dollar such as:
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- 1 Switch from accepting payment in
oil from dollars to Euro by OPEC.
- 2 A major national disaster, such as
an earthquake in Tokyo, a cyclone in America, a terrorist attack.
- 3 A military defeat in Iraq.
- 4 A further blow-out in the US twin
deficits.
- 5 Rising interest rates in other parts
of the world.
- 6 Lack of confidence in America's ability
to service its debts.
- 7 Major economic calamities in the
US, such as run on the banking system, fall in the share-market, or a collapse
of major corporations.
- 8 A major disease epidemic, such as
bird flu.
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- The world has experienced some of the
greatest shift of wealth in recent history, from the Anglo-Saxon nations
who have dominated the global economy for the last 200 years, to Asia and
Continental Europe. This shift in wealth will shortly result in the
economic collapse of the Anglo-Saxon nations their money will become
worthless, and their economies will disintegrate into anarchy and poverty.
This collapse will also have disastrous consequences to the Asian economies,
which have become depended on exporting to the North American market to
support their domestic growth. While the Asian economies will be
severely affected from the collapse of the Anglo-Saxon economies, they
will survive and recover.
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- The region in the world which will fill
the vacuum from the coming collapse of the $US will be the Eurozone.
The Euro will replace the dollar as the world's reserve currency, propelling
the Eurozone nations into the most influential global economic power.
To support filling the monetary vacuum following the collapse of the dollar,
Europeans will have to resolve their constitutional differences and form
a political union. Those nations that accept the EU Constitution
will form a United States of Europe, but it is unlikely that all existing
EU members will agree to be a part of such a political union.
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- The future for the Anglo-Saxon people
looks bleak. The sudden withdrawal of overseas investment will see
their economies go into free-fall. Their currencies will become worthless.
Property prices will collapse. Businesses will fail. Disease
will become wide-spread, made worse without the drugs to control that many
that is now depended upon. Farmers without the money to purchase
fuel and chemicals will no longer have the ability to mass produce food.
Starvation and anarchy will prevail. There will be little governments
can do to save their people from death and destruction.
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- Meanwhile, America's over-stretched military
will no longer have the financial resources to continue its futile Middle
East wars, and to sustain its bases that circumnavigate the globe, will
be forced to with-draw back to the USA.
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- Few can comprehend of the fate that lies
ahead for the Anglo-Saxon group of nations. It will be a time of
human suffering greater than ever experienced. Two thirds will die
those who survive will be taken into slavery. After 200 years
of global dominance, their defeat will result in some of the most dreadful
suffering mankind has experienced. Yet all this could be avoided
if they had not rejected the Law of God. It is only by returning
to following God's Law and the teachings of Jesus Christ that this looming
disaster can be avoided.
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