When future scholars and historians come to examine the events that shaped the latter part of the 20th Century and into the early decades of the new millennium, much of their attention will no doubt focus upon causes of the impending economic implosion and collapse that is currently in train and is becoming ever more irrevocable with each passing day. A confluence of factors has conspired to send the global financial system to at least the precipice (if not already beyond), with such momentum that it seems mathematically inevitable that a crash of unprecedented severity and proportion will occur in the not too distant future. It seems we have reached and now likely surpassed the economic “Event Horizon”, beyond which no external force can be applied to prevent or alleviate or redress the total system failure that must inevitably occur.
Even discounting the inherently Ponzi nature of Fractional Reserve Banking at the outset, with many arguing that the current events merely reflect the inevitable conclusion of a flawed and inherently corrupt system dating back to 1913 with the establishment of the U.S Federal Reserve, it is apparent that many other factors have acted in concert to threaten to bring down the mighty edifice of the global financial system as it currently stands. These include, admittedly from a purely layman’s point of view:
A) The failed experiment of globalization which has helped to seriously erode the economies of the U.S, the various member nations of the E.U and, to an as yet lesser extent, countries like Australia by out-sourcing production to emerging economies while maintaining disproportionately high consumption of these goods. This trend has only served the interests of supranational corporations, who have greatly enhanced their wealth at the expense of the lower and middle classes principally in these Western democracies,
B) Keynesian economic strategies of Central banks emulating the excessive money printing (euphemistically known as Quantitative Easing) of Weimar Germany, hoping in vain to inflate away their debt by endlessly deferring it,
C) The egregious deregulation of the financial sector such as repealing of the Glass-Steagall Act (the four provisions of the Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms), thereby facilitating a massive derivatives bubble of catastrophic proportions through regulatory negligence,
D) A complicit mainstream media with journalists who have abrogated their duty to impartiality and investigative rigor in favour of distortion, propagandizing and obfuscation to perpetuate an unprecedented level of delusion and unreality among the taxpaying populace,
E) The relentless massaging and manipulation of economic data (GDP, Unemployment, Inflation, etc) by governments to obscure real trends, being so heavily distorted and using altered parameters over time so that they fail absolutely to give a clear and unexpurgated view of the current economic situation in historical perspective, thereby completely misleading and yet simultaneously undermining the confidence of the public at large regarding the true state of health of the economy,
F) A corrupt, nepotistic and incestuous relationship between government economic advisors, the Central Banks, the main US investment banks (Goldman Sachs, J.P.Morgan Chase, Bank of America, etc.), and the politicians (up to and including the U.S President) who are meant to hold them to account. The politicians have then effectively co-opted the taxpayers around the globe to act as de-facto guarantors for corrupt insider trading and speculative practices of these same investment banks, who can avoid the consequences of their culpability in propagating the largest credit bubble in history. This is achieved through the mechanisms of open-ended bailouts and zero percent loans, so that those “too big to fail” are free from any obligation to self-regulate or modify their practices,
G) The dependence of most Western economies upon unsustainable debt-fuelled consumption,
H) A failure to understand the vital importance of cheap fossil fuel energy in driving our current prosperity. In our collective zeal to embrace impractical and unworkable renewable energy sources (which at the present time fail to either be reliable or economically feasible), we have undermined much of the impetus that propels our various economies to remain vital and ultimately viable,
I) A decoupling of trading in the financial markets from actually investing in productive industry largely on the basis of merit and profitability.
While I’m certain these factors are probably a far from complete summary of the factors involved in the complex economic maze that is the global financial system, I think it is important to attempt to evaluate events in an objective fashion, even with the knowledge that far more economically literate analysts than myself are making similar (albeit possibly more comprehensive and insightful) observations contemporaneously.
From an outsider’s point of view, the global financial system appears to be a hopelessly fractured and terminally wounded one, and deferring the inevitable through the Keynesian machinations and manipulations of the Federal Reserve, seems likely only to increase the magnitude of an already unimaginably huge and fatally unsustainable financial bubble. The consequent force of this credit and derivatives bubble’s likely implosion, and the subsequent economic ramifications produced by these financial weapons of mass destruction, are destined to have a devastating effect upon the quality of life and even the viability of all but a select few of the very upper echelon of Western society. The effect of this “Economic Armageddon” will be wealth concentration on an unprecedented scale, and produce misery and suffering possibly beyond our immediate comprehension, if one extrapolates the most pessimistic reading of this tragic, yet I believe wholly predictable situation.