The Coming Economic Crisis


Perhaps you’re thinking it’s already here, so what do I mean “coming”?

I finished reading Peter Schiff’s book Crash Proof on Dec. 26, 2008. Based on Schiff’s analysis, which seems irrefutable, things are going to get much worse! Apparently we can expect the US dollar to come to nothing. Incidentally, Schiff wrote the book in 2006, though it was published 2007, and he was right about the real estate debacle).

There are a number of factors that Schiff speaks about to support this prognosis. The underlying problem as I understand it, is basically the US consumerist lifestyle. The US for a while now has been acting like a guy who came into an inheritance and then went all out to use it entirely on partying. The money ran out sometime back, but the lifestyle became ingrained into the culture, which led to massive borrowing to continue the prodigal path. The US went from the largest creditor nation to the largest debtor nation between the 1980s and now!

What seems obvious is that the US simply cannot repay its debt. Its society hardly produces anything that can be exported, and has a certain disdain for saving. Instead, it keeps borrowing more to spend on unproductive imported goods. However, the world still accepts the US dollar as the reserve currency. But once nations like China realise that the US will be forced to start printing money to finance its debt, the dollar will quickly lose its lofty status. Inflation will soar.

Eventually the major nations that export to the US and then reinvest the money in US treasury bonds will stop sending back the money into the US. This of course will have a very negative global impact. But the US will suffer a culture shock too hard to imagine. The dollar will come to nothing, and too many things will become expensive.

What this means for the people of the US, and those who are attached, is that your money will become close to worthless. Think Zimbabwe. Unless you do something soon to preserve your buying power, you will lose it.

In other posts I’ll talk about things we can do to prepare for the coming crisis. I’ll also try to give more specifics as to the problems of the economy the way it has been running for sometime now.

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