After U.S. markets peaked in September nearly two years after Donald Trumpâ€™s victory came with the promise (and delivery) of pro-growth policies, investors got a scare in December when several factorsÂ combined with interest rate hikesÂ by the Federal Reserve to drive down indexes.
The Dow Jones, Nasdaq, and the S&P 500 all finished the year lower than they were in September. Worse, there are predictions that 2019 could hit markets harder.Â
Bank of America justÂ polled 234 panelistsÂ who manage more than $645 billion in investments where they think global growth is heading over the next 12 months, and 60 percent said it will be negative.
On top of this potential nightmare scenario is the fact that governments around the world comprising the largest economies have nearly all become debtor nations that are one economic calamity away fromÂ global collapse.
As noted by Robert Gore atÂ The Burning PlatformÂ blog, Franceâ€™s Yellow Vest protesters may have inadvertently hit upon a way to bring about the collapse of the fiat money and debt system that is sustaining the very governments which increasingly suppress the people they are supposed to serve.
Gore notes that in recent days the French protesters â€” whom, you recall, took to the streets in response to a massive gasoline tax pushed by President Emmanuel Macron to fund Franceâ€™s contributions to combat â€œglobal warmingâ€ agreed to at the Paris Accords in 2015 â€” haveÂ advocated a run on the countryâ€™s banks. Such a run, if it occurs, could actually start a chain reaction that would spread to other ostensibly wealthy countries including the United States.
â€œWhether they realize it or not, theyâ€™re playing with nuclear warheads that could annihilate not just the French, but Europeâ€™s and the entire worldâ€™s financial system,â€ Gore writes.
â€œBecause inextricably linked to the ends of contemporary governments ? how much they can screw up the lives of those who must live under themâ€”is the question of means ? how do they fund their misrule? The short answer is taxes and debt,â€ he added.
Since President Richard Nixon took the U.S. off the gold standard in 1971, our monetary system has been based on fiat currency and debt. That matters because the dollar is considered the worldâ€™s reserve currency; nearly all nations trade in it for commodities and use it to pay bills because itâ€™s believed to be the most stable.
The global economic system is based on this fiat debt. Currencies have values that are assigned to them given certain market conditions, economic indicators, and other factors. When those are perceived to be doing well, currency values go up, and vice versa when the indicators are â€˜down.â€™
So, how does a run on a single bank in France â€œturn into a loose yarn that once pulled, unravels the whole sweater?â€ Gore wrote.
â€œThe bank tries to increase its liquid funds, drawing on whatever lines of emergency credit it may have, and to convert itâ€™s illiquid assets into liquid assets, calling in loans. This pressures other banks and financial institutions, who draw on their lines of credit and call their loans and so on until the system collapses,â€ he writes.Â
And the more indebted economic systems are, the more vulnerable to collapse in a crisis.
â€œBankruptcy is a when, not an if,â€ noted Gore. â€œDebt is the Achilles heel of the worldâ€™s governments. A widespread run on financial institutions will dramatically reduce credit availability and raise interest rates, and it will shut off credit entirely for some of them. Under those circumstances, tax revenues will shrink as well.â€
The way to undo the system, Gore continues, is to initiate its collapse â€” as the Yellow Vests are advocating â€” as a way to break the cycle of encroaching tyranny.Â — J. D. Heyes
A version of this story first appeared at NewsTarget.
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