The definitive guide to Britain's success in the twenty-first century
Summary
The dollar is based upon an economy that owes 18 trillion dollars. The world economy is linked directly to this currency. If (when?) the dollar crashes, what will happen to the world economy? Where are the plans to deal with such a nightmare scenario? (See the solution at the end).
Eventually, everything catches up. This is a pre-requisite of the universe. Over the last 80 years or so the USA has been borrowing and printing more and more dollars. The US national debt stands at around 18 Trillion dollars (Dec 2014). The true debt is more than twice this as hidden debt for future social security needs and health care.
Recent borrowing for vehicle sales alone has now reached over a trillion dollars - when the interest rates finally go up guess what happens?
Humans are tricky old things. We have the ability to carry on regardless, ignoring the obvious facts. If people around us are doing just the same then to step outside this social norm is forbidden territory, so we all conform and get on with our day to day lives.
CST has an eye to the future, and we can see the light at the end of the tunnel. But, before this ‘future’ arrives, there are the GAP years, through which we are now navigating, (badly). Unfortunately, these GAP years may continue for quite a while yet, maybe 30 years or more.
In the meantime, the world teeters on a tightrope. It is clear that our money systems are out of control and all we can do is paper over the cracks. Part of this issue is that few economists will outwardly agree that they have no idea of how to predict or control future conditions. The other failing is that governments cannot afford, (literally and practically), to tell us what the real situation is. They are sucked into the lie because there is no way out – for us or for them.
Now, while the US negotiates the tightrope with clever little steps and by swaying with the economic wind, the financial world keeps turning. Unfortunately, since much of the world is effectively directly linked to the dollar and its underlying value, we are all dependent upon it not falling into the abyss.
Recently we have seen a precipitous fall in the oil price, to over a 50% drop, throwing the markets into confusion. We have seen the Rouble do the same. This sort of unforeseen market behaviour demonstrates that prices and values can change overnight without any reason. And when they do, the lack of any reasoned explanation exacerbates the change.
Maybe the USA can sustain this tightrope trick until we are through the GAP years. If not, then the consequences of the dollar in free-fall are nightmarish. The world has no contingency plans for this – and on the balance of probability it has to be likely before the end of the GAP years.
Most economists do not even see any light at the end of the GAP period, so for them this catastrophe becomes almost a certainty. Yet they give us few warnings and even fewer solutions. The world has tied itself to the value of something that has no intrinsic value. The world economies are so interrelated and so dependant on this ‘something’ that if it fails the likely effect is that commerce and globalisation will fail with it.
As fickle humans, the unthinkable remains unthinkable until a switch is thrown. Then the unthinkable becomes not just acceptable but becomes our normalised behaviour. We see this today, in areas of the world where once stable communities now fight un-winnable wars without reason. We saw it in two world wars, and unless the world’s leaders get off their bottoms and put into place robust plans against such possibilities the world has a graveyard awaiting the fall of the great Greenback.
The ‘great and the good’, of course, will not suffer the extremes of this economic failure, as always it is you and me that will bear the brunt of this stupidity.
A world currency that can be used as a basis for trade when dollar or other currencies crash.
The World Currency would be based on a Basket of the reserve currencies (US Dollar, Yen, GBP, Euro, Canadian Dollar, Australian Dollar, Swiss Franc, Chinese Yuan). It should include the value of Gold and perhaps some other rare elements.
The Word Currency (the WC, which is an apt name, as it comes into play when the US Dollar goes down the pan), always maintains a value of one. The makeup of the WC is dependent on the relative strength of the reserve currencies. Since these tend to balance each other out, this should be relatively stable, even in the event of a major economic disaster.
As an improvement, if such a currency existed, it could be referred to (as a legally binding requirement) in all larger transactions. Contracts could state the conditions that trigger the reversion to the value of the WC and denote which currencies the contract could be paid in if the dollar (or other denominated currency) failed.