The Great Collapse Has Officially Begun

Pakalert August 22, 2011 3

From Zero Hedge

Submitted by Phoenix Capital Research

I’ve been warning of this for well over two years. My primary warnings were:

1) That 2008 was just a warm-up
2) That the REAL Crisis had yet to unfold
3) That the REAL Crisis would make 2008 look like a picnic

Well, the period I’ve been warning of is now here. What’s happening right now is not just a market crash, bear market, deflation, or any other item related to just one asset class.

Instead, this is a collapse of the entire US monetary and political system and the mentality of spending one’s way to wealth.

For 80+ years, the US has operated under a crony capitalist system in which politicians dole out political and economic favors to the chosen few whose bribes/donations funded their campaigns.

This system was aided and abetted by the US Federal Reserve, which dealt with any and all economic issues by printing more money. Whether it was the Asian Crisis, Long Term Capital Management, or the 2008 Crash, the Fed dealt with the issue by opening the floodgates and flooding the financial system with liquidity.

Aside from making moral hazard (the notion that those large firms who screwed up were never actually allowed to fail) the bedrock of the financial system, the Fed also blew a credit bubble which in turn funded bubbles in virtually every asset class: bonds, stocks, real estate, emerging markets, even some commodities.

Indeed, the vast majority of US economic growth over the last 40 years has been fueled by the Fed’s loose money policies. Bill King, an analyst and investor whom I admire, shared the below chart with me a while back. It charts US GDP growth in nominal terms (the dark blue line), the performance of the Dow Jones Industrial Average (the black line), and REAL GDP growth or growth that accounts for inflation (the light blue line).

As you can see, when we account for inflation, the US economic “miracle” of the last 30 years is in fact not all that miraculous. Take away easy credit and Fed funny money and the US GDP has barely grown at all since the ’70s When your entire financial system is built on debt eventually you hit a brick wall. We did this in 2008. The Fed barely held the system together by going “all in” and funneling over $11 trillion in bailouts, backstopping the major US banks, and transferring north of $2 trillion in garbage debt to the public’s balance sheet (these are just the moves we know about).

This effort has now failed as the world collectively realizes that the Fed cannot hold the system together. This began to become clear when QE 2 spent $600 billion and the US got at mostthree months’ worth of improved economic data (while inflation exploded throughout the global economy, leading to riots, coups, and more).

In simple terms, we’ve now entered the Real Crisis, the END GAME, for our current monetary system. Before the dust settles on this mess, the US and its political, economic, monetary structure will look very very different.

However, before we get there, we will see riots, civil unrest, possibly martial law, for certain a Government shutdown, bank holidays, a debt default/ restructuring, the re-instatement of the Gold standard or something like it (possibly a basket of commodities), food shortages, and more.

We will also see trade wars, possibly another World War, a temporary backlash against globalization, a de-consolidation or fragmentation of corporate America, and other items.

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  1. Amir Murtaza August 23, 2011 at 3:37 pm - Reply

    I predicted in 2004 when i started doing research on Interest. As Islam forbid it more than 1400 years before but we Muslim fools kept on fallowing west.
    Two reason for the downfall 1) interest 2) Fiat currency.
    Get ready for a world war as USA always saved its economy by starting a WAR else its day of dominance are numbered. Many say US is not fool I say their dominance is at stake and this so called civilization has corrupted the world as a whole.
    This decade will end the capitalism era and result in emergence of new system called ISLAMIC SYSTEM KHILAFA.
    You like it or not king of the east are coming and what will happen to u WEST will be because of ur deeds as warned by Bible.

  2. Tony N August 22, 2011 at 11:27 pm - Reply

    Why wasn’t the S&P President arrested for plotting to destroy the US dollar and the US Monetary system back in 2009 in front of Obama SEC chair ?

    Was it all their plan to create their perfect Utopia ?
    Actually they are Tanking the supply-side economy on Purpose……UN Agenda 21 ICLEI , NGO’s


    Didn’t Obama swear an Oath to defend the US Dollar against all Enemies Foreign or Domestic ????

    Who Drove the S&P Agenda?

    Jason Schwarz shed light on this question in an article on Seeking Alpha titled “The Rise of Financial Terrorism” , . He wrote:

    [A]fter the market close on Friday August 5th, we received word that S&P CEO Deven Sharma had taken control ,

    , of the ratings agency and personally led the push for a U.S. downgrade. There is a lot of evidence that he has deliberately tried to trash the U.S. economy , . Even after discovering that the S&P debt calculations were off by $2 trillion, Sharma made the decision to go ahead with the unethical downgrade. This is a guy who was a key contributor ,;article=124696;title=APFN , at the 2009 Bilderberg Summit that organized 120 of the world’s richest men and women to push for an end to the dollar as the global reserve currency. And Obama SEC Chairwoman Mary Schapiro plus several Administration Heads were at this Meeting and they are all under Oath to defend the US Dollar , right ??? so why did they for 2 years allow this S&P CEO Deven Sharma to go un challenged on his claims against the Dollar and all this talk of a New World Currency that they all KNEW was Being agreed on ??;article=2366
    this quote by the S&P guy in 2009 in front of Obama heads of state should have been a summons to Put the S&P president into custody !!!!!! ;
    S&P Quote : “””[T]hrough his writings on “competitive strategy” S&P CEO Sharma considers the United States the PROBLEM in today’s world, operating with what he implies is an unfair and reckless advantage. The brutal reality is that for “globalization” to succeed the United States must be torn asunder” ……. HELLO This Treasonous quote By the S&P President should have summonsed Obama SEC and FBI to take into Custody the Threat of this destruction of the US Dollar and Monetary System in 2009 , so why did Obama and his Administration Heads wait ?? Why did they wait for over 2 years and allow what they knew was the plan to unfold to now , and not pass a US Government Budget , and instead run massive deficits instead of a clear plan of both budget and stimulus that would direct the money we the people appropriated for economic recovery that all we heard 2 years later was this quote out of Obama ; ” OH I guess there was NOT as many Shovel Ready JOBS as I thought ” , COMMON , who is going to take this CRAP to the HIGH COURTS ???????

    Pulled from this site Ellen Brown VIP Lawyer .

  3. GJS August 22, 2011 at 8:11 pm - Reply

    Yes, I cannot debate the logic behind your statement, I unfortunately agree with your hypothesis entirely.
    What infuriates me is that they must have known just how all this reckless spending & showering of gifts to the chosen few would turn out. If they have indeed done this to justify war, which seems more & more likely, we MUST ensure they don’t succeed, it is total madness & will only punish the people who had no input into creating this, the people responsible will be hiding like worms in their 20 years bunkers while we all pay with our lives.
    I’ve never been an overly violent person but I will truely make an exception for these parasites.
    My best to you all & good luck.

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