What If America Stops Consuming? 9.09
September 11, 2009
– Comments (15)
For the past year and a half, I have been documenting the shutting down of America.
Recently there are been some Fools that have gone out of the way to show this is NOT The Great Depression. Other Fools tell us we need to reset, start over, and the process will take some time to play out....
In the above instances.....it will be clear that BOTH perspectives are not only wrong....but lull the person into a dangerous position of complacency.
America today is VERY different than America in the sixties and America during The Great Depression. Today, we have built 23 square feet of retail space for every man, woman, and child....Sweden has about 3 and America had much less in the sixties and even less during The Great Depression. We have built massive amounts of office buildings and businesses to support our consumer economy and almost all of the current jobs in America today support domestic consumption or services supporting domestic consumption.
The key is the dependency on DOMESTIC consumption and the current massive amount of leverage which is basically the assets of our banking system, insurance companies, and pension plans.
In the sixties and during The Great Depression, a much smaller percentage of our economy was dependent on consumption as we emphasized manufacturing and exporting to a much stronger degree. Plus, the demands were much smaller and we had much less dependency on leverage.
Just look around you, at your friends, at your city, at your state.....how much of the world you live in simply exists to support domestic consumption....whether it be consumer, government, or health care.
Domestic consumption has become America....and we have built a massive infastructure around it with a massive amount of debt.....and without MASSIVE domestic consumption.....much of the world as we know it is over. Plain and simple.
As consumption cuts back....business will slow.....jobs will be lost......vacancies will rise.....tax receipts will evaporate.......and due to EXCESSIVE LEVERAGE this process will continue at an accellerating rate until practically everyone and everything goes bankrupt or out of business.
The structure of America is very different today than it was in the sixties and thirties...today government consumes 50% of a LEVERAGED CONSUMPTION GDP and its obligations are growing as the GDP is contracting and government receipts are evaporating.
Even at the early stages of a cutback in domestic consumption.......we have ALREADY seen massive economic deterioration despite government running a $2 Trillion dollar deficit.
As banks continue to cut off credit and raise interest rates to consumers and businesses....consumption will decline much further.....so will bankruptcies and job losses....so will foreclosures.......all leading to much lower tax receipts as the contraction moves forward.
As wages fall, a dramatic tension is forming between the needs of govenrment to consume and requirements of citizens to cut back. Even though wages are shrinking, the demands of government are rising and so are property taxes, health insurance obligations, and other large expenditures.
Further, the demands on government will grow parabolically as the population ages and more and more become dependent. At this point, OVER 100,000,000 million Americans are dependent on government spending to consume. Soon it will be much more.
With the bankers cutting off consumers and small business....it is mathematically impossible to sustain our current system and way of life. Shopping centers will shutter, offices vacancies will explode and defaults will grow parabolicly as the demands to service debt and sustain goernment will simply exceed income....especially since banks are tightening credit and raising interest rates on millions of Americans.
In the end, it doesn't matter if you are rich or poor....you are only rich right now because America consumes....and if America is not consuming....most of the assets you own are worthless or near worthless.
Right now America's bankers are on a Zombulation Policy path to eliminate or substantially reduce consumption. When you are a nation that is dependent on domestic consumption AND highly leveraged......reducing consumption has essentially the same effect of elimating consumption....when you are leveraged or have fixed expenses...when your income drops below a certain level, you can no longer meet your obligations and you are essentially broke.
A similar result occurs if government needs to tax you 100% of your income and assets to sustain itself.
Government right now is facing some very difficult choices....VERY difficult choices in trying to bridge a widening gap. Government must consume or people starve and massive numbers of individuals lose their jobs as businesses shutter.
In time of war, we are willing to give up our children....in time of economic emergency, will we be willing to give up our wealth?
Today we have a MASSIVE infastructure supporting DOMESTIC consumption......and it is all layered on a massive pile of debt. We are not Japan of the 90s... when the consumer cut back, they had no debt and exports still generated an income. If we stop consuming, America doesn't have an income and we will default on our debt.
It is interesting how the bankers are raising interest rates and cutting off credit during this time making it much more likely for defaults and failures....one wonders why there are implementing a Zombulation Policy after infecting the nation recently with so much SWAP induced debt?
Those who understand the problem, see the severity very clearly. There is nothing in history like it in scope or magnitude.....our entire economic structure of leveraged domestic consumption supporting massive government consumption supporting massive health care consumption is coming to an end.
IT IS NOT THE END OF THE WORLD...SIMPLY THE END OF THE WORLD AS YOU KNOW IT.
At the end of The Great Depression, an attack on Pearl Harbor was the catalyst that moved us forward. At the end of the Dot Com Bust, it was 9/11. This time, we are dealing with a much bigger and structurally difficult problem......
Whatever is coming...mathematically it will likely be BIGGER than anything we have seen before and the outcome will result in a change that few can anticipate.
You should be now prepared....9.09 is here.....let's see how it plays out as government needs everything we have and we don't have enough for government for governments needs.
RSS Headlines
Fool UK