2009 update to Don Koenig’s coming economic crash article written in 2000
The coming economic crash caused by world debt
2009 update- I actually wrote this article in 2000 and updated some debt figures and inserted a few comments along the way but it is now 2009 and what I said about what would be coming is now taking place as I speak. Since this articles is read by thousands each month I think I owe my readers a update on the crises. The original article follows this update.
We are now at the point where we will either go into a full fledged depression or where government bailouts will cause hyperinflation. Which one happens is hard to say it may be out of our control and it makes little difference anyway. Either path will bring the worst economic depression in living standards in modern times.
There is no answer to the problem because many people and nations have been living beyond their means for many decades amassing debt. So now the chickens have come home to roust. Our credit line is now maxed out. As a nation we cannot keep living like we have twice the income that we really have. Trying to throw more money at the problem like our government is doing now will just make matter worse in the long run because this nation cannot afford to take on more debt.
Passing the costs of this downturn to the future is simply not going to work. First, there is no future generation that can pay this huge rapidly increasing debt. Second, nobody is going to be stupid enough to finance our debt at low interest rates. The more risk of default or currency devaluation the more we are going to be charged in interest to finance our debt. We may be able to pay $15 trillion dollars of interest at 3 percent with a little pain but at 6 percent it is a major problem. Taxes would have to be raised causing a further downturn. If interest rates go higher than that which is extremely likely, we would either have to default on our debt or just create money and then find ourselves in a situation like what is happening in Zimbabwe.
We soon will all have a lower standard of living because spending beyond our means is not sustainable forever. Worse than that we have amassed and are increasingly amassing huge debts that we can never pay off or even finance. That means the Fed will just create more and more dollars to pay our debts. Nobody has ever done that with causing hyperinflation. It is basic economics. You cannot put more and more dollars out there and expect prices to stay the same. Those holding the surplus dollars will soon bid up the prices of goods and services paid in dollars causing hyperinflation.
Trying to stop the inflation would bring further downturn and default on our debts. When that happens major nations would no longer take U.S. dollars and imports of products would stop. What do you think that would do to your standard of living when you go to Wal-Mart and the shelves are nearly empty and what they do have costs three times as much? Or you go to the gas station and gas is $50 a gallon, if you can even get it at all?
Date posted: Tuesday, February 10th, 2009 5:18 pm | Under category: Financial collapse, dangers
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Well our nation turn its back on God and worship material things. Public schools teaches atheistic/humanist worldview. God will turn His back on this country and this country will crumble. I would not be surprise to see a increase in heinous crimes, women and men prostituting themselves and so forth. Here is a segment on Fox News Channel when they interview Gerald Celente, the head of The Trends Research Institute… http://www.youtube.com/watch?v=46MEqEgdLTg
Here is Celente website. http://www.trendsresearch.com/index.htm
He predicts that America will be a undeveloped country by 2012
An interesting read, Don. I liked your point about living on half your income. Wise words.
It is a very bleak outlook. We have certainly not learned our lessons from history and seem are going down a path which will lead to tyranny. In their arrogance, our leaders seem to think that these actions didn’t work in history because not enough money was thrown at it. It’s crazy I say!
The real question is what does a person do to protect themselves and prepare? I would start with:
1) Be realistic and acknowledge that this economic situation is a freight-train out of control.
We could..maybe… see a bit of a turnaround, but only temporarily and definitely fabricated. If this is not the big one, we’ll be hit later down the road. Prepare now!
2) Get your debt down and live modestly.
3) Be as self sufficient as possible. Rely on the govenment for a little as possible.
4) Garden and learn to preserve food. Begin to store food up for when the store shelves empty and you are waiting in line for a pitance like the soviets did 20-30 years ago.
5) Learn a skill that will be valuable to people in tough times and can be traded for goods and services.
6) Primarily, trust God and seek His wisdom. And hang tight with your brothers and sisters in Christ. In the end, He’ll see us through.
Any thoughts or perhaps an article you posted with more details how one should prepare?
Good advise, it says much the same as what I said in the following article I wrote.
http://www.thepropheticyears.com/comments/preparing_for_the_last_days.htm
That’s what I was looking for.
I highly suggest others read the article also. Excellent points to ponder and ways to prepare.
Kev
And for those who want to learn much about more about real survival issues. I suggest this Blog.
http://www.survivalblog.com/
How plausible is a total deflation or inflation of the dollar in light of how much China has in its holdings….both in actual dollars as well as in debt repayment? Aren’t they just as interested in ensuring the dollar won’t collapse as we are? They are not necessarily going to come for the bill b/c they know what it will do to their reserves, right? Just curious…
China could just throw us under the bus if we dictate to them what they must do. They are already very angry that we are telling them to revalue their currency at a time when their exports and jobs are drying up. They also can gradually move away from dollars as some nations are saying they will do. They also are going to have to spend much of their dollars reserves to take care of their own internal problem by the world downturn. This is happening in Russia right now due to the collapse in oil prices.
The real issue is that we need foreign nations to buy up at least 2 trillion dollars of NEW debt each year for the at least a few years because of our bailouts and stimulation programs. China will not be able to buy anywhere near that amount of dollars even if they were so inclined to do so and they won’t be.
Neither will any other nation. The obvious move after the immediate crises will be away from dollars. Nations are now dumping dollars for gold. That is the real reason in a time of deflation that Gold is soaring. So it looks like the Fed will have to just create trillions of dollars out of thin air to pay our debt or raise interest rates to a level that will make our economy worse. One way is a path to hyperinflation and the other path leads to a great depression.
Watch England and their current fiscal problems and you will see the fate of the dollar. The Brits resisted taking the Euro as a currency. Now, they are rethinking their position because of the economic crisis. The Pound will go they way of the Franc probably within 2 years once the Euro is touted as a solution for their problems. The same will eventually happen in America. Politicians love a crisis as it is an their opportunity to effect change and implement their worldview.
As Rahm Emanuel, Obama’s newly appointed chief of staff, put it: “Never waste a crisis.”
’nuff said.
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