Passing The Point Of No Return

In business you know that you may be passing the point of no return when you cannot meet your bills as they fall due.

Where an economy is concerned, it is possible to print more money to fill the funding gap.  The problem is that by increasing the money supply, you reduce the value of the existing currency in circulation.

I only listen to a handful of commentators on the economy.  Any economist tainted by politics is not worth listening to because they will have a hidden political agenda.  We also know that politicians will change the basis on which statistics are calculated to try to hide their shortcomings.

One of the commentators I respect is not an economist at all.  He is a wealthy businessman and student of economics – his name is Robert Kiyosaki, the author of ‘Rich Dad, Poor Dad’.

Robert reports that he has just attended a conference held by the Austrian School of Economics.  They have calculated that an economy passes the point of no return when total debt as a % of GDP exceeds 73% and debts as a % of exports exceeds 230%.

In the case of the US, the percentages are currently at 96% and 748% respectively.  In other words, the US economy is well past the point of no return.

Even more frightening is that in the UK total debts are at a staggering 450% of GDP, a lot of that built up over the last decade!  In other words, the UK has also long since passed the point of no return determined by the Austrian School of Economics.  This means that if either the UK or the US defaults, then the other will almost certainly be brought down too – together with many other over-leveraged currencies.

Robert goes on to report that prior to the hyperinflationary collapse in Germany in 1933, the German people had no idea that the economy was on the brink of collapse – the stock market was doing well and everything seemed OK.  Disaster and panic struck quickly as the true position of the economy dawned on them and they immediately started dumping cash for tangible assets – the price of those tangible assets rose.

They started using wheel barrows to carry around their cash. So much cash was needed to make even the most basic of purchases until eventually they even dumped their cash because the wheelbarrow was more valuable than the cash it contained.

The Federal Reserve in the US is now more important than the President, simply because it has the power to create money.  Greenspan, the principal architect of America’s downfall, has recently said that even the Federal Reserve has now lost control because it is now unable to prevent a financial crisis.

This news is hardly surprising when you consider the startling fact that the US has printed more money in the last year than the entire first 200 years of the existence of the US!  (Surely that statistic alone is enough to ring your alarm bells.)

Robert Kiyosaki admits that he doesn’t know how all of this will play out.  The only clues can be gleaned from history.

Historically, crisis gives opportunity to dictators and despots – people like Hitler, Mao Tse Tung, Napolean and Robert Mugabe.  Ideologies such as Fascism, Socialism and Communism take over.

The State looks to increase its control. Robert points to the nationalisation of General Motors, banking, airlines, medicine and education in the US as evidence that this is already taking place.  In the UK we have all observed the rise in spending and power of the public sector under Gordon Brown.

So the seeds of impending disaster have been sown and we are entering an era where our paper currencies will likely be rendered as worthless if hyperinflation takes control.  Here in the UK we have already seen a 30% devaluation in sterling and 25% devaluation against the worthless dollar!

To hedge this risk, I am moving my savings into tangible assets such as well-located property and gold and silver.  If you think I am crazy then I suggest you go to www.shadowstats.com and read John Wilson’s report on ‘Hyperinflation’.

You make think these forecasts are too terrible to contemplate.  However, positioning yourself to survive and thrive is possible if you plan early enough.  Huge opportunity will arise – fortunes will be made (and lost).  If you want to research this more, go to The Ludwig von Mises Institute

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