Economic Collapse
“The so-called global economy was not a permanent institution, as some seem to believe it was, but a set of transient circumstances peculiar to a certain time: the Indian summer of the fossil fuel era. The primary enabling mechanism was a world-scaled oil market allocation system able to operate in an extraordinary sustained period of relative world peace.”
-James Howard Kunstler-
“Your money’s value is determined by a global casino of unprecedented proportions: $2 trillion are traded per day in foreign exchange markets, 100 times more than the trading volume of all the stockmarkets of the world combined. Only 2% of these foreign exchange transactions relate to the ‘real’ economy reflecting movements of real goods and services in thee world, and 98% are purely speculative. This global casino is triggering the foreign exchange crises which shook Mexico in 1994-5, Asia in 1997 and Russia in 1998. These emergencies are the dislocation symptoms of the old Industrial Age money system. Unless some precautions are taken soon, there is at least a 50-50 chance that the next five to ten years will see a global money meltdown, the only plausible way for a global depression.”
-Bernard Lietaer-
“There is now [in 2005] a 75 percent chance of a dollar ‘hard landing’ over the next five years.”
~Paul Volker, Former Chairman of the Federal Reserve~
Our economy is both a problem and a threat. It is part of the problem because it encourages growth without regard to limits, and greed without regard to ethics. It is a major threat because both growth and greed are unsustainable and unethical and therefore any system based on these premises will eventually collapse.
The modern economic system is based upon debt, usury, fractional reserve banking, infinite growth, and the widespread delusion of US economic invincibility, and was made possible by, as James Howard Kunstler says, a temporary period of oil-wealth and relative world peace.
The United States now has a trade deficit of over $800 billion. The reason why the United States is able to do this is because foreign countries—particularly Japan and China—are dumping billions of dollars back into the US economy by buying US treasury bonds. William Engdahl writes,
“The largest buyers of US government debt have been the central banks of the Asia-Pacific. The central banks of Japan and China alone hold more than $1 trillion of US Treasury bonds as foreign currency reserves. Worldwide foreign central banks hold some 1.3 of US government debt. If private debt is added, the United States is the world’s largest debtor, with some $3.7 trillion in net foreign debt, as of the start of [2004]...(1)."
The reason why the central banks of Japan, China, and other countries are willing to spend their hard earned dollars on US bonds is because their currencies are tied to the dollar, which means that were the dollar to collapse and the US economy, so too would the economies of Japan and China, and probably the rest of the world for that matter.
Richard Heinberg calls this the ‘Achilles heel’ of the US economy: “Just as Britain in decline after 1870 resorted to increasingly desperate imperial wars in South Africa and elsewhere, so the United States is using its military might to try to advance what it no longer can by economic means. Here the dollar is the Achilles heel” (2) He explains it further with the following metaphor:
"Imagine being able to write checks and then convince the people you give them to not to cash them. Perhaps they find the checks themselves comforting to hold onto; or maybe you have a friend who agrees to sell groceries or gasoline for your checks only, and then happily stockpiles and re-circulates them. In either case, you may be tempted to write checks for much more than you have in your bank account. As long as the checks themselves are regarded as valuable and not cashed, you get a free ride. But if people stop finding your checks comforting to hold onto, or if your friend starts selling groceries for other people’s checks or for gold or silver, then the game is up. It will be revealed that your account is overdrawn and you will be in trouble."
THE PETRODOLLAR THREATENED
Further complicating matters is the fact that the US dollar may no longer serve as the exclusive currency for global oil trade. Coilin Nunan, in an article entitled “Petrodollar or Petroeuro? A New Source of Global Conflict,” writes that “the most intense economic rivalry of all has received far less media attention than it perhaps should: this is the rivalry between the dollar and the euro for the position of world reserve currency, a privileged status that has been held by the dollar ever since Breton Woods agreement nearly 60 years ago.” He goes on,
"At present, approximately two thirds of world trade is conducted in dollars and two thirds of central banks’ currency reserves are held in the American currency which remains the sole currency used by international institutions such as the IMF [International Monetary Fund]. This confers on the US a major economic advantage: the ability to run a trade deficit year after year…Were the euro to become a reserve currency equal to, or perhaps even instead of, the dollar, countries would reduce their dollar holdings while building up their euro savings…A move away from the dollar towards the euro could, on the other hand, have a disastrous effect on the US economy as the US would no longer be able to spend beyond its means…A rapid and wholesale move to the euro might even lead to a dollar crash as everyone sought to get rid of some, or all, of their dollars at the same time. But that is an outcome that no-one, not even France or Germany, is seeking because of the huge effect it would have on the world economy."
Many trends are converging that point at global economic hardship. It seems the global economy is poised for a colossal collapse of greater proportions than the Great Depression of the 1930’s. Engdahl surmises the problem writing, “The world today depends on cheap US dollar credit. When US interest rates are finally forced higher, dramatic shocks will hit Europe, Asia and the entire global economy, unlike any seen since the 1930’s.”
Between the US housing bubble, soaring US debt, market instability brought about by speculative trading (i.e. trading which has nothing to do with real goods and services which now comprises a full 97 percent of all global transactions), aging populations all over the world, declining world energy, and the possibility of a decline in dollar supremacy, the evidence for a decline if not complete collapse of the US economy and dollar (which will inextricably affect all other national economies across the world) is overwhelming. This is what has led to the unprecedented comments by such experts as Paul Volker, former Chairman of the Federal Reserve, predicting a “hard landing” of the US dollar by 2010.
While this information can be overwhelming and even daunting, don't be discouraged! There is much you and your community can do to prepare for this possibly very serious crisis. To learn more about opportunities to act now, visit our SOLUTIONS and OPOA ACTION! pages.
Also, find out how Community Currencies and other Action Initiatives by OPOA can help in the coming times of economic difficulty. Learn how you can prepare your family and community for peak oil and economic hardship at our website.
(1) Engdalh, William. “Is a USA Economic Collapse Due in 2005?” July 26, 2004.
WE NEED YOU!
Here at OPOA we are trying to transform crisis into opportunity. If you think that the mission and material that OPOA provides is useful and much needed during this coming time of crisis, we ask that you give what you can to support a truly grassroots movement to protect and defend the Earth and humanity during the coming times. With two full-time staff members, practically all funds are used exclusively to further our mission to help prepare the Ohio area for the coming times and to distribute free information about how individuals and communities can prepare for the coming times. Without your kind donations we wouldn’t be able to survive! To donate or find out more about how you can get involved please follow this link. Voice your opinions, solutions, inventions, suggestions, insights, strategies, and analyses at www.RelocalizationWiki.org.