THE TERMS OF TRADE FOR THE US ECONOMY HAVE BEEN SO BAD FOR SO LONG THAT IT IS EASY TO FORGET THAT THIS IS NOT SUSTAINABLE...AND IS A DISASTER OF THE FIRST ORDER...
TO VIEW THE CURRENT SITUATION IN ONLY CREDIT MARKET TERMS IS TO AVOID THE REAL ISSUE...WHICH IS THE EXCESS LIQUIDITY THAT THE FED HAS INJECTED INTO THE GLOBAL ECONOMY....
THE FED WAS IN EFFECT FINANCING EVERYBODY AND EVERYTHING FOR YEARS...PERHAPS DECADES...
THERE ARE SEVERAL SHOES THAT HAVE NOT DROPPED YET...
WHAT IS GOING ON IN PUBLIC SECTOR PENSION FUNDS...AFTER ALL, FOR A WHILE IT LOOKED LIKE THE TEACHERS' UNION PENSION PLANS WOULD "OWN THE WORLD!"
AND WHAT OF CHINA'S EXPOSURE TO THE "TOXIC DEBT" FROM THE US...BUBBLE ECONOMY...?
CLEARLY SOMETHING IS ENDING...THE DOLLAR BUBBLE REALLY...
AND SOMETHING NEW IS BEING BORN...
THESE ARE DANGEROUS TIMES...THE LAST TIME SOMETHING LIKE THIS HAPPEN WAS 1932...WHEN THE UK POUND COLLAPSED...THROUGH IMPERIAL OVERREACH...
BUT THIS CRISIS ALSO HAS ELEMENTS OF 1922 IN GERMANY...WITH THE UNFUNDED DEBT STRANGLING THE REAL ECONOMY... YES, I MEAN HYPER-INFLATION!! IF NOT NOW...WHEN?
ANOTHER SIMILAR SITUATION OCCURRED IN FRANCE IN THE 1720s WITH THE SOUTH SEAS AND MISSISSSIPPI BUBBLES... THESE BUBBLES WERE "GOVERNMENT SANCTIONED" PONZI SCHEMES...TO HELP FINANCE FRANCES MANY WARS AND ADVENTURES IN THE NEW WORLD...
SOUND LIKE ANYONE WE KNOW...? LOOK AT 1720 AND 1922 FOR GUIDANCE...
I SUSPECT THAT 1932 IS NOT THE BEST ANALOGY TO WHAT IS CURRENTLY HAPPENING...
