(After this article was written the GDP of the U.S. was readjusted upward the result being a nearly flat .1 percent growth rate. Although this means the U.S. was not technically going in reverse the last quarter it was effectively doing so. This is because the U.S. needs over 2% growth just to keep up with its population, .1 does not even come close. This means despite the readjustment the article remains essentially correct!)
Economics is a tricky thing, no matter how much it seems you can evade its laws you can’t. The truth is that in the end the piper must be paid no matter what. This is a lesson that politicians and the world’s central banks never seem to learn. Last quarter the U.S. economy shrank despite all efforts by the Federal Reserve to prop it up; just as alarming the EU economy also contracted. Japan on the other hand is in its third quarter of recession and may be on its way to a depression. Even Wal-Mart, the great discount giant, is now taking a beating as the world’s great economies starts to slow again.
From all appearances the collapsing of the so called recovery seems to be happening before the world’s eyes. It is not a wholesale collapse yet, but the signs are unmistakably there. The fact is the foundation for much of the economic growth seen has been based on the shifting sands of central bank printing presses. Instead of creating real wealth based on mutually beneficial trades central banks have been using cheap cash multiplied by fractional banking to create an illusion of wealth. For those not familiar with what is being referenced just imaging an economy based on the free trade of IOUs instead of products and services. That is what has been being used to prop up the world’s most advanced economies.
This is not to say these economies are down for the count just yet but they are in very serious trouble. Much like a staggering man slowly dying of thirst in the desert, no one can predict which stumble might be the last. What is certain is the world is going to pay a high price for the anti-business climate and unsound monetary policies of the world’s economic powerhouses. [Not to mention the mountains of debt they have been accumulating]
Of course not all the news is bad, yet. Some companies are actually doing well and even hiring. Wall Street, for its part, is still chugging along with its normal ups and downs. The third and developing world also has its bright spots of strong real economic growth as well. Then there is China, it grew at a blockbuster 7.9% last quarter. All of this is to be expected, economics is a web not a monolith. Even so, the economic tremors shaking the marketplace are unmistakable.
There is little doubt that the possibility of avoiding economic collapse is quickly disappearing, if it hasn’t already. The prelude to the tragedy is already playing across the globe. To paraphrase a well known idiom, the fat lady may not be singing but you can sure hear her warming up. There can be little doubt that the world’s great economies are running on borrowed time. The shortsightedness of their politicians has been multiplied by the arrogance of their central banks with disastrous results. Not only is the future prosperity and those alive today being sacrificed, so are their children’s and grandchildren’s. Crucified for thirty pieces of silver to a group with bloated egos and small minds.
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