The long-term costs of our profligacy will be borne by them (and yes, us) for decades:
I have no faith that the policy-makers will ever balance another budget again or stop with their phony extend and pretend political games; however, reality is inevitable and time is running out on the debt-sponsored global Ponzi. Once we hit the inevitable Minsky Moment, the illusion-formerly-known-as-the-economy will collapse for good.
Below is a rough approximation of what 30+ years of debt accumulation is going to cost in the long run:
The U.S. in 5-10 years:
1) The U.S. and most of the world will be in hyperinflation, following history's most severe bout of credit/price deflation i.e. policy-makers, under extreme duress, will print currency
2) The stock market will have lost 80% of its real (inflation adjusted) value. Wall Street will no longer exist in its current form - it will be a shadow of its former self.
3) Gold will be at >$4,000 off of a low of $250. The speculators and hedge funds of today will have long ago cashed in their gold to buy bread
4) 80% of foreign born immigrants will have left (or forced to leave) the U.S.
5) The U.S. unemployment rate will be 50%
6) 80% of overseas troops will be brought back to the U.S.
- there will be troops patrolling every major city in the U.S.
7) The majority of men between the ages of 18 and 30 will be in the military, in prison, or dead
8) The average life expectancy from birth will have dropped by 20 years
9) Over time, the economy will recover based on small-scale farming and small business
The Rest of the World
1) Japan will be decimated. The 2xGDP debt = "we owe ourselves" delusion will end; global trade barriers will kill the export-driven economy and the demographic (ageing) crisis will delay recovery for decades
2) Oil will fall below $10 and then rebound well above $100 as hyperinflation takes hold
3) The Middle East will be taken over by the Taliban and dozens of other factionalized Islamist Groups
4) There will be coordinated attacks against Israel, leading to nuclear escalation
5) Pakistan and India will go to war
6) China's economy will be decimated, but similar to the U.S. in 1932 will begin to slowly recover; on a relative basis the Chinese economy will recover faster than most as the Communists/Fascists reassert their control; China will assert its military dominance across South East Asia - unopposed.
7) Russia will collapse; the commodity sector will be decimated; the country will revert back to Stalinism, but will be a shadow of its former self
8) The European Union will disintegrate and fall into deep depression, similar to the U.S.
9) South America will fall into depression - but on a relative basis will be the best hemisphere on the planet in which to live; Cuba will be the least impacted country on the planet
10) Australia and Canada will be decimated; these two countries have benefited the most from Globalization and 2008 was a minor bump in the road; overinflated housing markets combined with collapsed commodities markets will decimate the economies. 'Fortress' Canadian banks will be nationalized, as Canadian depositors will discover the limitations of 'fractional reserve lending'.
11) Africa will descend into Dante's Inferno. Collapsed commodities markets combined with greatly reduced Foreign aid will leave the majority at risk.
Summary:
Any of these above scenarios can be debated and/or fine tuned, but in a world where credit and lending no longer exist, it's not hard to imagine that the biggest part of what we call the 'economy' will no longer exist.
As far as timing, I have no doubt the vast majority believe that the above could happen, but well into the future. Basic mathematics would argue otherwise.
The above scenario will be bad certainly, but over time, the coming 'reset' will force the U.S. and world to create a more sustainable path to the future.
