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What Happens Next?

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February 10, 2009 – Comments (6)

TMFSinchiruna's amazing recent post about America's flirtation with banking armageddon got me thinking (oh boy!). So I called my fiance and we discussed it at length (after, or course, running down the recent happenings on the trashy reality TV shows we enjoy..... thank you VH1!!!). She's pretty savvy, but not thoroughly enlightened on monetary policy or Zimbabwe School Economics (aka Keynesian Economics) so we tried to walk through a few different scenarios.

What would happen if the banks did collapse? According to the reports, we were 24 hours away from complete global economic collapse. What would that entail? To be honest, I don't have any answer for that.

What would happen to honest homeowners like her she wanted to know? She owns multiple properties, with outstanding credit and steady rental income. But the banks really own those properties, and she understands that. What if those banks went under overnight? What would happen to her property? I don't have any answer for that.

I bring this up, because even though disaster may have been averted in September, it was probably just postponed. The real economic collapse could happen literally any day now. I think even the most naive Keynesian proponent has to acknowledge that, or so one would think. I assume that massive civil unrest would follow. How would government respond? Is Martial Law a possibility?

So what are some scenarios? It disheartens me, but I realize that most recently laid off workers blame free markets and greed for our current situation. We have pointed this out ad nauseum, but I'll restate the obvious: if free markets caused our problems then we should be able to note which free markets are at fault, but we can't. This is because the markets that failed are not free markets: housing, banking, investment banking, energy, money creation. All of these are either government controlled or government mandated cartels and monopolies that support the political elite.

Sad to say, but few Americans get it. We stand on the very precipice of disaster, and yet, the political elite / banking elite that created the disaster is going to get more power and control over our lives as a result. Very sad.

The question my fiance and I keep asking each other is: What Happens Next?

We're small potatos. We've got some coin stashed away and a little bit of property and equities, but we're insignificant. What about the productive people who are about to lose everything they've ever made for themselves?

What happens if the troops come home because America is broke? I suppose the politicians will attempt to cut VA benefits before anything else. Despite popular propaganda, Veterans have never been very high on the food chain of the income tax payer.

What if the government has to slash troop levels or bring everyone home in the middle of massive inflation and unemployment? What would they do with all these warriors? An easy solution would be to employ them to suppress the populace that will certainly be revolting. Scary thought, but logical. Just shuffle them off to the Department of Homeland Security. Put em to work looting whatever is left of the country while suppressing any resistance.

Please share with me your thoughts about What Happens Next. I'd love to hear what you think. I welcome all discussion.

Final note: As I have said repeatedly, the only important thing in this world is what you do with the brain you are given. If we continue to fill it with knowledge there is no government in the world that can stop us from living a productive life, unless they resort to violence. I was a Libertarian when I was broke, and I'll be one no matter how big or small my bank account gets. I am a Libertarian because of my disabled father, who lost his leg in Vietnam, yet never asked for charity and became a highly paid and decorated logistics officer for a Fortune 500 company precisely because he filled his head with knowledge and never wanted a handout. And I will be Libertarian forever, always hoping for the day that people will realize that the parasitic politicial class is a completely unnecessary farce.

David in Qatar 

6 Comments – Post Your Own

#1) On February 10, 2009 at 1:49 PM, russiangambit (29.49) wrote:

What would happen in a financial collapse? It will be something like the Asian one in the 90s. There are plenty of countries that have experienced financial meltdown in the past.

Banks would freeze, you could not get your deposits out. You could not pay for anything. Currency would collapse.You woudln't get your salary for  few months. Government would have to institute some sort of system for people get food on credit at the stores. Companies would have to barter things. Manufacturing will stop. The immediate mess will take weeks to unwind. Then the lights will start slowly coming back on. But staggering amount of wealth will be lost in the process. All of us will be much more poorer.

Or, and regarding the rental properties, the rent won't be paid because people won't have money. And the rents as the cost of everything else will have to come down significantly after the crisis is over.

 

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#2) On February 10, 2009 at 3:15 PM, USRevolution (< 20) wrote:

If we do nothing, a financial collapse will create an entire wellfare state or Communist.  Obama and the houses of Congress are pushing for this.  What will happen is the stupid American (as opposed to the few smart ones) will look for a savior and find one in BO. 

 The majority of the Americans, as you said, think this current financial struggle is the fault of the free market.  This is the fault of the government.  Remember Sarbaines Oxley?  Mark to market started this downfall by degrading what banks and others were able to show what assets they had on the books. Dodd and Cox pushed it the rest of the way down by way of government imposed "fairness" in mortgages. 
Banks and lenders most likely jumped on board with fairness because they had to back the lost assets in the SOX legislation, which could be done by extended lending.

 We are headed toward complete Marxist dominance of the USA.  If we do nothing, your children and mine will be slaves of the state.  

 What is there that we can do, start a new revolution?  Fail just to save ourselves  at the expense of our children?

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#3) On February 11, 2009 at 3:05 AM, DaretothREdux (49.28) wrote:

What would happen?

What would happen is no different than what will happen if we continue down the path of destruction that we currently reside upon. All governments and all great nations come to an end. It's usually right about the time they think that they are "too big to fail," and it is that very pride and arrogance that takes them down.

As our government pushes us further and further away from the principles and ideas that made this country great, we will morph into something completely different. It will not occur overnight, and most will not even be aware of the change until long after it has happened.

We are approaching a breaking point, a point of no return. We seem to have two very clear choices before us. Turn back the clock to the ideas of the founding fathers and once again set up this nation to grow more prosperous and more free (the two are linked), or we can take the path that so many fallen nations have taken before us.

The other path is tyranny. It comes in many forms: socialism, monarchy, oligarchy, kronyism, communism, corpratism (i need a spell check...). And no matter what form it takes it will remove the freedoms that make us great, that allow us to thrive.

America will not cease to exist, but it will cease to exist as we know it (in many ways this is already the case). We will become one of the great empires of the past (no different than England/Spain/Rome/Greece). We will carry on with our lives, but the will be worse for it.

A total financial collapse sounds like "fear-mongering" to me. And it should come as no surprise that this particular video seemed to gain popularity and surface right before we vote on a bill that will send us down a possibly irreversable path. The gov't and it's phony money may collapse, but America would continue on (much like Iceland). Unemployment would spike and times would be hard, but the opposite choice is to have all that for a much longer period of time, and eventual failure.

If the system isn't sound, then it should collapse. If the banks are not solvent (and most aren't) then they should fail. Instead, we are rewarding people for stupidity and failure (it's like in elementry school where everyone gets an E for effort instead of an F).

Right now America deserves an F for what we have done to ourselves (and the rest of the world by proxy). Instead, our plan is to punish everyone (even those not responsible) in hopes that perhaps we can minimize the damage.

The damage is already done. There is no quick fix or reversing what is done. Only after we realize that the government is the cause of our problems and not the solution can we move forward.

Pray for peace and maybe the coming wars will be bloodless,

Dare

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#4) On February 11, 2009 at 3:51 AM, joemailman (< 20) wrote:

A return to what the founding fathers envisioned is admirable but an impossibility given the ignorance that Americans are infected with and the disconnection from each other with which they behave. Witness the Katrina disaster and other natural disasters which affect any particular part of the country. Americans either rush there to make money thinking that insurace or FEMA will cover any and all expenses they may incur for profit or they go there to profit through gouging or some other form of corruption. Even the churches have always tried to profit through handing out garbage food and verbal support. I witnessed this personally when hurricane Charley swept over SW Fla. in 2004.

Education has always taken a back seat to other American investments simply because it's returns do not materialize for at least one generation. The Chinese and the Japs learned this long ago and consequently they own this country and practically all that is in it including major buildings and major industries.

There is one investment that should be owned by everyone concerned with government power over his/her life. It is one which can be kept secret and one which has been the staple of human wealth for thousands of years. You'be guessed it! It's Gold and in the physical form only and buried where only you and your closest loved one know. Otherwise if the banks fail or major industries fail through their own sense of corruption they will take your paper down with them.

P.S. If you pray for peace you'll get no answers or results. history is the proof of that. Praying is cheap. Doing something takes guts. 

Joe

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#5) On February 11, 2009 at 1:35 PM, nzsvz9 (< 20) wrote:

A new war.

The politician will always create an enemy and go to war to distract the people in times of crisis.

Known to many as nzsvz9

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#6) On February 13, 2009 at 12:35 AM, SharpSEO (65.49) wrote:

"Mark to market started this downfall by degrading what banks and others were able to show what assets they had on the books."

Is mark-to-market really to blame? I'm not an accountant, but I don't think so. Why is it necessary for huge, profitable, dividend-paying corparations to have mountains of debt? It's balance-sheet magic, and it's retarded. If your business is mature, and it relies on ever-increasing debt, it sucks.

Why are large corporations basically fudging their assets? Why is it OK for GE to have $98 billion of "goodwill" on its balance sheet? With $500+billion in debt? Yet their current div yield is 10.7%.

I hope this meltdown is a catalyst for change and reform, but I'm not setting my expectations too high. But damn it would be nice to have an honest, efficient, non-government-intervened market to invest in.

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