How close are we to economic collapse?Submitted by Shamus_McMises on Tue, 09/17/2013 - 21:19
We have everything today that any keynesian could ask for to achieve their dreams of steady inflation and continuous full employment. All hard currency has been phased out and replaced by an elastic world reserve currency whose value is universally accepted, and all nations are required to use it in transactions by threat of force. In any other scenario, interest rates could only be held down for so long, a money supply could only be inflated so much and reserve lending ratios held so low before a crash would cleanse the system of the insolvent banks and businesses. The more frugal banks and businesses would survive to bring about a healthy economic revival. Currently, banks have what modern economic theory would conceive to be a system by which money supplies could be increased indefinitely without being confined by competition from hard currencies and sound business practice.
The problem is that instead of a steady rise in prices accompanied by robust economic growth and high levels of employment, we have a stagnant economy, with an unemployment rate unable to drop below seven percent and a worker participation rate lower than any seen in thirty years. And this is all that keynsianism will ever give us. Even under a system in which there is no competition amongst banks to force interest rates up and encourage a contraction of the money supply, the money manipulators can still not produce economic prosperity or anything better than the most modest growth. They over look the damage that has been done to the capital structure and have no conceptual understanding of the malinvestment created out of their low interest rate policies. The paradigm guiding our wise masters has brought us to a point that we can now observe as the farthest travel of a price structure from equilibrium that has been achieved in all of economic history; meaning that the subsequent crash will most likely be as violent as an economic shift can possibly be.
Any person unable to foresee the coming catastrophe must be blind or blissfully ignorant at this point. The focus of investment markets is on nothing but the activity of the Federal Reserve and its Quantitative Easing program. It is remarkable that we even get to watch something so absurd as the downward movement of the market on days in which positive economic statistics are unveiled and upward movement when the statistical economic outlook is negative. Investors are afraid that if the economic forecast is good then the Fed will start to scale back its bond buying program, sending rates up and the bond market down in a tail spin. Interest rates have already begun to rise even though the Fed continues to purchase $85 billion a month. With today's announcement that the Fed is committed to slowing their bond buying program some time this month, which should be taken with a grain of salt because it is highly unlikely, the question must be asked; How prepared are you for an economic collapse?