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May 24

Economic Slavery and Economic Collapse

Interesting video, and while I can’t say I agree with all of the points made it’s still worth the watch.

Once you understand that the money banks loan out isn’t really an asset but is in fact a piece of legal fiction it should be clear that you are working for these banks for free. This is a cleverly disguised form of slavery, if you manage to make your monthly payments than you are a successful slave and you are allowed to keep the material comforts that come with that status.  But if for some reason you fail to make those monthly payments, than the bank or the IRS comes to take your house, your car and anything else you have of value. And if somehow, even with this enormous financial advantage the banks still get themselves into trouble, you the taxpayer will be forced to bail them out.  No matter what, the banks win.

Additionally I wanted to share a comment made on a recent article I read over at prep-blog.com.  The author maintained that total economic collapse was one of 5 least likely TEOTWAWKI scenarios.  Here is the response by author John Ragan.

It appears your opinion of financial collapse is based on life experiences and not on a financial analysis of our current situation. This is understandable given the poor financial education Americans receive (even at the graduate level) and the difficulty in finding reliable data on which to make an informed opinion.

I cannot provide a detailed list as it takes me an hour just to present the financials in front of a live audience, but I can provide a couple of facts that show it is mathematically impossible to avoid a financial collapse.

The unfunded liabilities of the social insurance programs is enough to sink our ship. Using trustee report estimates that understate inflation and overstate income give us a figure of over $120 trillion. Prof. Kotlikoff uses the Alternative Fiscal Scenario from the CBO in his annual update which now stands at over $220 trillion. Either figure is more than all the money in the world.

These are present value amounts meaning that given the expected income and expenses, this is what we would have to invest today, earning interest (the minimum rate appears to be 5%) in order to pay our promises in the future.

At this point most people think we can fix this by just raising taxes to cover the promises. The problem is that (depending on which number you want to believe) it would take $6-$11 trillion a year just to keep the unfunded liabilities from getting worse.

This brings up the second point, we cannot even keep from going further into debt. We might stand a chance if we eliminate the social insurance programs now, but doing so would likely start civil unrest destroying the country anyway.

Based on IRS stats (2008 for business and 2010 for personal – the most recent available) we have a total income of about $9.2 trillion. As you can see if we use the more reasonable estimate of our social insurance liabilities, we couldn’t even keep the liabilities from increasing if we taxed 100% of ALL income.

Currently (all levels of) government spends $6.6 trillion a year and rising. Even with historically low interest rates, we spend over $3 trillion just on interest on our collective private debt (the public interest is included in the government spending).

That’s right, government spending and interest alone amounts to more than our collective income. That leaves nothing for fixing the social insurance programs, paying anything against our collective national debt of $60 trillion, Obamacare, the un and under funded liabilities of public an private pensions, and little things like food and shelter for the population.

If our wage and salary income were TRIPLED, and we maintain the same 100% tax rate, that would just give us enough for government spending, interest, and keeping the social insurance programs from falling further in the hole (assuming the additional funds were invested and not spent).

When the Great Depression started, most of our money was still backed by gold and silver, and we had about 20% of Americans working in agriculture (and many more with their own gardens or chickens). Today we have money backed by imagination and maybe 1% working in agriculture (and most of our farmers are over 50). People no longer know how to raise their own food and most of those that raise our food do so with a lot of assistance from technology and a working global supply chain.

When it becomes clear that pieces of paper (and their electronic equivalent) are backed by imagination and nothing else, I believe the global just-in-time supply chain will collapse. The results will be catastrophic. What we see happening in Europe is just a foreshadowing of what is to come.

If you have a solution, please offer it up. I believe if such a solution exists that it would be deserving of a Nobel Prize. Otherwise, to say a total financial collapse is unlikely is just wishful thinking.

John R Ragan, MBA, MS

Author, The Financial State of the Union

 

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1 comment

  1. The Maj

    Anyone that dismisses the probability of economic collapse, pretty well throws their own credibility out of the window at the same time in my book. Some people choose to bury their heads in the sand over the “economic issue” but it is becoming the most likely event every single day in my opinion.

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