Credit Collapse in United States
May 10th, 2013This is written in May 2013. The United States is in the midst of fighting a credit collapse that has been building since 1971. Over the past 42 years the growth in credit has risen from under 2 trillion USD to over 50 trillion USD within the US economy. That growth in credit brought forward tremendous development of infrastructure, business, and entertainment that would not have been possible under traditional capitalism.
We in the US have been living in an economic system best described as creditism since that date in 1971 when President Nixon closed the gold window and the dollar was no longer convertible to, or backed by, gold. When that happened there was no difference between credit and money. Both were just numbers on a piece of paper or digital numbers assigned to various financial accounts. Most Americans never knew things had changed and many still believe today that somehow the dollar is backed by gold. It is not. That ended in 1971. We do not have a traditional capitalistic economy. Our economic system in the US since 1971 is best called Creditism… that is different from the processes of Capitalism. We have not lived in a traditional capitalistic society since 1971.
As the amount of credit and money grew from 1971 to today, folks in the US and then around the world experienced a world brought forward to reality that traditional capitalism could never have created in so short a time. It was wonderful in many respects but there is a concern… that concern is that the growth in credit and money eventually outstripped the ability of the borrowers to pay. The average household income in the US has been declining for many years now, but the amount of credit and money in the economy has continued to grow. We reached a point where the debts were too large to pay back and the result of that is the credit bubble that had been growing since 1971 began to deflate.
That deflating of the credit bubble would have naturally lead to a shrinking economy if it had been left to run it’s course. The US government stepped in in 2008 and 2009 with dramatic efforts both monetarily and fiscally to keep that deflation from occurring. It would have led to an economic depression if that government action had not occurred.
The bad news is that the dynamics driving the credit deflation are still alive and well in the economy. The debt is still too high relative to the financial resources available to service that debt. The credit bubble wants to shrink. That means there is an economic depression that is trying to manifest itself in our economy. All those forces and impetus still exist. Do not be fooled by the rising stock market, or other cheery news such as a better housing outlook. Only the massive money printing of the Federal Reserve is making that happen. The rollover of credit to a downward phase is still very much present. The forces behind that rollover are still powerfully present in the dynamics of our economy.
We need an awesome technology breakthrough, such as the realization of fusion energy that would cut energy expenses by 90%, to change the forces that are pressing for a credit collapse. Pray we find that sort of world changing breakthrough soon.
