2012 Crossing

stormy times ahead for economy

See our very large YouTube section, many playlists

It’s only a matter of time before the world economy collapses under the crushing load of debt.

Borrowing money can be necessary and very useful, of course, but what’s happened in the last 75 years or so is that huge numbers of people are borrowing against an uncertain future, to satisfy short term desires for unnecessary consumer goods.     Governments around the world are doing likewise, setting up massive debt for our children and grandchildren to repay.   They will never be able to pay it back, so eventually, the whole house of cards will come tumbling down.   Right now, we in USA are paying the huge debt we inherited from previous generations, and we are groaning under the load, on the very brink of collapse.    Yet, we are still borrowing more.

It’s one thing to borrow money for a house to live in, get an education, or for governments to borrow to fix roads and bridges.   It’s quite another thing to rack up debt to go on vacation, fight a war, or support some frivolous government project.    The world has collectively dug itself into a massive debt hole, and consumer debt is now spreading all around the world to places like India, China, Indonesia, South America, and Africa.   The “modern” way of getting something today and paying for it later is a terrible addiction that will lead to disaster on a huge scale.

Buy now, pay 3 times what it’s worth later….

Most people who borrow on credit cards ( including many government officials )  do not do the math.    If you buy a 500 dollar stereo and pay 25 dollars a month on a 15 percent interest loan, you’ll end up paying around 3 times the cost of the stereo, just so you can have it today.    People do this all the time, and not just for one whimsical purchase.   They do it many, many times.    Racking up debt has become a lifestyle that’s deeply embedded in our culture.     Almost everyone does it.    This is insanity and it’s not sustainable.    At this moment in the United States, many states such as New York and California are deeply in debt and that debt is increasing daily, while at the same time there is a recession.   There is not enough tax revenue coming in to pay off the debt.    Consumers do not want any more taxes, of course.    So, what do these governments do?   Borrow more money, of course.    This gives the temporary illusion of solvency, but it’s passing the debt to future generations.

You don’t have to be a genius economist to figure our that sooner or later the whole thing will crash.   That should be quite obvious to anyone.    This is exactly what is happening right now around the world, and it will get much worse in the next decade.     You won’t hear a lot of politicians telling you this, however.  It’s not politically correct.    If the chairman of the U.S.A. Federal Reserve bank told the truth, the financial collapse would occur very fast.    So, he hides the truth, and the economy collapses more slowly.     Smart people should take a long, honest look at the facts and start living differently.

How on earth could the world economy NOT collapse  under these circumstances ?    To pay off these massive government debts we would need a lot more revenue, coming from taxes of one kind or another, and that’s not going to happen.   Politicians run for office on a platform of low taxes, but lots of government benefits.    It’s so silly, but it’s tragic.   That’s like saying you can have all you want, but it won’t cost you anything.   How stupid can you be?   Yet, that’s exactly what is happening.

If governments around the world are in financial trouble,  how do you think the average person is going to make it?

One way to fight this trend is to buy, whenever possible, used products. Our world economy has created uncounted billions of products that often last a long time, but are quickly discarded into landfills that will last for hundreds, or thousands, of years.    For example, television sets.   A good TV will last a long, long time.   I have  one that is over 20 years old, still works fine.    And, when our large screen TV failed after only 3 years, instead of buying a new one for 800 USD, I bought a smaller, used one for 10 dollars.    I hardly notice the difference.   My quality of life and personal enjoyment has not decreased at all.    Yet, manufacturers build new models of many products every year in an effort to satisfy the insatiable demand for the latest gadgets.   The same happens with cars.   A well made and maintained automobile can last 20 to 30 years, or even longer in some cases.   Nevertheless, millions and millions of them get discarded and crushed up each year.   Countless other products will also last a long time if taken care of.     So, as often as possible, buy USED consumer products. That frees up your money to pay down debt, buy other things you need, like food, or simply work less hours.   Working less means having more time, and time is priceless.

Paper money…..worth its weight in paper.

A huge amount of so-called “assets” on the books of large corporations is entirely theoretical.   It’s based on the changing value of things like derivatives, stocks, and other financial “products”.    We have recently seen just how dangerous that is.    This problem has not gone away.    In fact, far from it.    After a lot of outcry and attempts to reform the system, it’s still going strong.    In addition, “assets” that are actually loans with interest payable to the company are entirely dependent on the ability of a person or other company to pay.   If the person supposed to pay has no income, that “asset” is basically worthless.    It may look good on a balance sheet, but it’s not real value;  it’s THEORETICAL value.     As the economy declines, more and more of these “assets” will get revalued, and those who own them will see a rapid decline of wealth.     Soon, what will matter more is not how much “paper” wealth one has, but how much food, tools, and other useful goods one has.    Think that can’t happen?   Think again.   It HAS happened many times before during various wars ( WW 1 and 2 ), and is happening right now in many parts of the world.   In some places interest rates for basic loans is 15 to 30 percent !    People have to fill a suitcase with money to buy groceries.

What has real value?

In a pinch, if you have tools, food, housing, vehicles, and other tangible goods, PLUS knowledge and skills and a network of cooperating associates, you’ll fare much better than someone who has a pile of money in a bank but is isolated and delusional about their “wealth”.     Gold may be good for trade as a form of accepted currency, but it has little practical value except to industry.    Tools, vehicles, fuel, food ( or ability to produce food ), housing, and useful skills will become increasingly valuable as time goes by.