This is a monster boom bust cycle.
Inflation of real estate and western wages from 1945 to 2000 has consistently provided the increasing needed collateral and purchasing power for greater and greater debt load leverage for which the US has reached an asymptote of about 50 trillion dollars over the last 4 years.
The European Union and Euro were rolled out on a carpet of easy credit and debt issuance too good to be real.
At a 50 year pinnacle of debt creation and accumulation – without more than a few years of negative US GDP growth – real estate itself, the principle major asset for the average citizen, was used as the global speculative asset in the 2000’s. This added an enormous supplemental debt load on the existing 50 year accumulated debt load.
Without the added speculative real estate bubble, the asset debt system would have corrected the accumulated 2000 debt load at a much lower total valuation level with sizable but less disruptive societal problems.
As well, US wage earners saw stagnant wages as US companies began manufacturing partnerships with non US much much lower paying wage countries. Those western citizen wage earners buying well-hawked Central Bank Chairman cheer-leaded houses from 2003 to 2008, had their hearts cut out and families traumatized sometimes to the nth degree with homelessness. Those in the US owning a house before 2000 took on more debt to pay for vacations, second automobiles, children colleges fees, and some non essential niceties.
With the inevitable debt-asset first ‘minor’ crash in 2008 and early 09 and with the music stopping, the US wage earner was left standing, looking for a chair, while the US political system gave all the sit-down chairs to the financial industry.
The citizens were left to the care of America’s private enterprise sector supplemented by the US central bank’s QE 1 and QE2. This funding did provide a floor under the economy and certainly under the tax advantaged legislative favored equity asset class – again primarily benefiting those previously escorted and seated in the velvet lined musical chairs.
Regardless of its massive debt load the US is the current hegemony in the world of nations. Because so many countries and so many wealthy individuals own US dollars; its sovereign debt during global bad debt destruction will be a favored asset, even as the 30 year US bond reaches interest rates of less than 1. 25 percent.
As the world’s hegemony and with so many nations and individuals invested in US debt, the US Federal Reserve or its replacement can directly trade the nation’s currency for useful labor, services, and production.
After all, the ultimate measure of a currency is in the labor, services, production, innovations, goods, and societal utility elements for which it can be traded.
Does the business of lending the nation’s currency and the interest on the nation’s currency belong to the nation or to the private issuers of money and reciprocal debt?
The tendency of the private issuers of debt , epitomized by the Financial Industry, is to avariciously compete for the debtor population with abandon and imprudence – lending far too much of their reserves to too many debtors who have little probability of repaying it.
The debtor population is consumed – and saturated with debt.
Because ultimately it, the business of lending of money, is a competitve business of lending money, private competing issuers of debt will always create substantial bad debt – that which cannot be repaid- overproduced and overvalued assets, and boom bust cycles.
On the contrary when government directly issues money in exchange for the labor of policeman, teachers, fireman, energy researcher and developers, military, contractors, agriculture supplementation, those involved with water purity and delivery, sanitation, infrastructure, electrical grid enhancement, et. al., there is a direct benefit to society.
This issued money directly by the Sovereign and traded for labor maintains the society during disruptive periods that have been principally created by the private financial sector and private lending issuers by imprudently lending what the did not have in their vaults to those who could repay and creating the boom bust bad debt-asset cycles.
Wages derived from direct government issuance of its sovereign currency maintain debt repayment to private lenders, flow into the private business sector which would otherwise suffer from a huge demultiplier effect as was the case in the 1930’s when GDP dropped by 45 percent and ultimately stabilizes a system where the 0.1 percent are allowed to maintain trans-generational wealth.
During the natural accompanying chaos in the Debt-Asset Macroeconomic system’s expected deterministic and self-assembly 155 year US second fractal colossal deflationary collapse, trans-generational wealth rules may well be heaped upon the dung piles of history.
National currency directly traded for labor and essential societal functions during global economic crises ultimately mostly benefits those who have the most to lose.
US employment news, news about the Troika imprisonment bailout for the Greeks, US and European puny GDP estimations, baltic dry weight traffic, municipality bankruptcies, bank failures, MidEastern crisis news, political have and have-not diatribe polarization trifling driblets – are all true true and yet merely epiphenomena dependent variables of the self assembly one quadrillion US equivalent dollar global asset-debt saturation macroeconomic system.
The Wilshire’s third subfractal with a 7 day expected apogee begins on 8 August 2012.