Crisis Window

The next five years (2011-2016) have a high probability of a national if not a global crisis.  The globe is headed towards an economic cliff and the challenge is that no one knows “when” we will arrive.  Those in power simply do not know how to fix the economic problems and are now beginning to admit this reality.

The Federal Reserve is committed to inflation.  They will print as much money as possible to keep deflation from occurring since there is no gold standard to hinder them.  This will increase the price of commodities priced in U.S. Dollars.  Other countries will defend themselves by printing more of their own currencies.

“The U.S. is bankrupt, neither spending more nor taxing less will help pay its bills”  The real debt of the U.S. is 22 times the official debt declared by the government.  In order to survive, we must radically simplify our tax system, healthcare system, retirement system, and our financial system.  Tax revenue is currently  14,,9% of our Gross Domestic Product (GDP) and to survive, we must double the tax revenue on a permanent basis.  Is it possible to do this without collapsing the economy?  No!  The alternative is to immediately cut spending.  There are about 80 million baby boomers in the U.S.  When they are fully retired (within 20 years), the government is committed to paying them about $4 Trillion per year in Social Security, Medicare, and Medicaid payments.

There are three ways to deal with this issue: heavy taxation, decreased spending by reducing benefits, and printing more money thus devaluing the currency.  Those is power will do all three.  Other countries will suffer as well since they are interconnected with the U.S. economy.

Complexity allowed our financial system to become corrupt.  It is riddled with fraud and and those assets have been classified as “toxic assets”.  The government knows it, the banks know it, and the public knows it, but nobody wants to really admit it.  Living out this illusion will prove to be one critical aspect of the coming crisis.  The “too big to fail” policy is simply a “get out of jail free” card.  Independent verification of appraisals, income statements, and disclosures did not occur.

We need a new system.  Taking from the young and giving to the old is a ponzi scheme.  When the life span of the elderly was much younger, this was not a problem.  However, increased life spans has brought this scheme to light.  This scheme is now in its latter stages where the money runs out.  When will it crash?  That is the $202 Trillion question.

A complex system hides the fraud and the truth about our fiscal situation.  If we don’t simplify our system and expose the truth about our issues, we will surely experience a disaster and collapse.  Will we take our pain early?  The current generation is pretty immature and will probably try to delay the solution as long as possible.  This will cause the crisis to be more severe.

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