Tuesday, August 6, 2013

1995 An American Collapse

Another rainy morning, sigh. I had a few errands to run, namely to pick up a few things from the hardware store for repairing yet another picture frame for my mother and beginning work on restoring that old plow. So since I had to go into town anyway the boy and I car pooled and I dropped him off at class. I knew this would mean a good hour or more of sitting in the car waiting on him after I ran my errands but at the gas prices these days it was worth waiting around.

On my way out the door I grabbed an old friend that I hadn't read in 20 years. It was a book about the financial collapse of the US which was predicted as occurring as far back as 1995.

God has it been that long?

I remember the premise of the book which was written by a CEO of some blanket company that included Rawlings Sporting goods under it and an economist from Arizona State University. This was back when educated people with degrees and teaching positions somewhere besides Harvard, Yale or Princeton meant something.

The premise of the book was that around 1995 the interest on US debt would grow past the point of tax revenue to pay for it. I am only about halfway through it again so I haven't weighed the entire thing yet to go back and see exactly what what went wrong and how the FED and government managed to grow revenues to the point that the predicted collapse didn't happen but I am going to assume here that it was the housing bubble that averted it by and large. I am also going to bet the authors did not fully comprehend the power of the Petro-Dollar either.

Lastly I think one important aspect the authors missed was the willingness of the Chinese to allow us to get in way over our heads in debt. From the beginning the authors assumed a kind of capitalistic value of wealth and figured no one would sacrifice their money in the way I at least believe China did. In the end it was cheaper to destroy us with televisions and bonds than tanks and bombs.

It's simple really had what was once the largest single holder of US debt not been willing to risk that capital we would have had a major crisis in 1995.

I will go back to that particular topic more after I read the book again completely and look for more clues as to what happened. However one interesting part of the book was the opening chapter that briefly defined the changing living conditions the authors foresaw as happening to an average family when things began to collapse.

In truth it could have been written today with things like bank closings and holidays, job loss etc. Like so many predictions we have seen things are beginning to happen as they said it just takes years longer than they thought.

I hope to finish this book once again within the next few days and expand on this post but my key question is going to be just what has kept us going this long?

Keep Prepping Everyone!!!


  1. "...what has kept us going this long?"

    The momentum of the strongest economy the world had ever known, although that is now slowing rapidly.

    1. Rp - I am sure that is part of it. When you really get right down to it this debt issue did not begin to get bad (by today's standards) until Reagan. As much as I loved his Presidency he was already saddled with Johnson's great society and the uncuttable social entitlements. He tried to pay for it and the cold war from the same trough and couldn't. After that it just get's worse with each President.

  2. Replies
    1. Sandy - At the time it was. These days it's more for research. Why didn't their prediction come true?

      That's the question.

  3. Maybe the government is just making more notional money. I used to think they had to print it, even if nothing covered it. But some fellow told me they don't even do that anymore, they just hit a button on a computer, zap! There is more money in their accounts, and they pay bills with it. I don't know if this is true, I'm no economist but it sounds like Washington.

    1. HF - I don't think that is a maybe at all, we know they are. The thing is someone out there has to know they are taking a loss in dollars anyway. Maybe not so much in actual value however and that maybe the key.

      We know the dollar has lost some 95%+ of it's value in the last 100 years. To the Fed of course the dollar means nothing really so although they are trading in Trillions now and maybe taking a loss on the 85 Billion a month they are pumping the question is are they really taking a loss?

      If no one else is buying our debt then theoretically speaking the US is really only shorting the FED in interest rates. So the FED is really hurting themselves by keeping interest rates low. Or are they? What they are really gaining is land either that purchased by the government or land that sits in foreclosure.

      If you really think about it nothing the FED buys in their pumping costs them a dime but the government owes them money in interest.

      The real key to all this is what keeps the foreign powers using the dollar? At this point only they can cause the collapse because it is their trust in the dollar that keeps it floating.

      Or so it seems to me.

  4. The first time I ever heard about a potential US or world financial collapse was in the book Crisis Investing by Douglas Casey in 1981. I read it and was really interested, but it hasn't seemed very likely until the last couple of years.

    1. Jane - In doing my research tonight I did notice an interesting trend. The interest on the national debt has decreased almost every year since 1995 without fail. I think there was in fact one exception. Even though public interest rates have fluctuated government interest has only decreased. Something is fishy about that.

  5. The people who get the most power from the current regime, are also the ones who will be the most screwed when it all falls apart. Never underestimate the determination of desperate men. Ultimately, I think that is what is holding it together; there is never a good day to face the gallows.


    1. Dan - You maybe right. Fear may be making these guys much more creative and willing to do things they normally wouldn't. If I were as guilty as them I know it would work with me :)

    2. Guilt has a way of making people cover up their crimes. I don't think any of the POS's in DC wish to hold anything together except for the facade that everything is going to be okay.

      Yeah right.

      White Mom in VA


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