The Crash Course - Chris Martenson [121]
The world has never before faced such a profound shock to its critical infrastructure. Economic growth is no longer possible, at least not in the old style, and it slowly dawns on the capital markets that growth might never be coming back. The entire future has to be repriced, leading to massive losses in the stock indexes and in long-dated bond funds as growth premiums are stripped out of their valuations. In response to concerns that whole portions of the debt markets might enter default, interest rates shoot up, crushing the economic recovery and leading to an immediate debt spiral that results in a fiscal crisis of unimaginable proportions in the United States, Japan, and other oil-dependent, developed economies that entered this period bearing massive official debt structures.
Perversely, many so-called undeveloped economies fare far better, as they are already less dependent on oil for their day-to-day functioning and have lower debt loads. Having experienced development late in the global game, they benefit from the twin advantages of modern systems built primarily around the latest, most fuel-efficient technologies and a populace with low expectations for energy usage, resulting in a far lower per-capita energy dependency.
To deal with the sudden needs of a collapsing fiscal situation that results from mounting interest-rate costs, along with the need for more and more export dollars to compete for what oil remained on the world spot markets, the United States and Japan resort to even more outright printing of money beginning in 2013. The Fed’s balance sheet swells with new acquisitions, while Europe, still fearing the inflationary demons of its past, remains far more restrained in this regard. Europe’s per-capita energy-use profile, measuring just half that of the United States at the start of this crisis, proves to be an enormous advantage.
Japan fares even worse. Importing 99 percent of its petroleum needs, saddled with more official debt than any other nation, and strained by severe demographic realities, two decades of profligate yen printing boomerang with a vengeance. The persistent efforts by Japanese authorities to debase their currency suddenly and unexpectedly bear fruit that rots before it can be savored. The yen plummets, as no one has any use for hundreds of trillions of yen from an export-dependent island nation that now lacks the fuel needed to manufacture and export a surplus of products. Japan’s internal production and consumption collapse alongside the yen. Many there look wistfully back on “the lost decade,” recalling better times.
Throughout 2012 and 2013, gold soars as systemic financial instability strikes fear into the hearts of investors and wealthy individuals. Various sovereign nations attempt to print their way out of their economic difficulties. Faith in all things paper is lost to varying degrees; nobody knows where the risks lie, which claims will be honored, or what to do. The U.S. markets, long thought to be the deepest and most trustworthy in the world, suffer a mortal blow: A number of legitimate trades that were dangerous to the financial health of a major, well-connected bank were unilaterally reversed by the stock exchanges with the blessing of the SEC, to the benefit of the bank but the detriment of all the parties on the other side of the trade.