The next financial crisis is coming

I found this MarketWatch article today and marveled at how succinctly it nailed many of the serious problems in our economy that are leading to a worse crisis than what we’ve already seen. Brett Arends gives 10 excellent reasons, which I will summarize further here: we never understood or fixed the problem that caused the previous crisis, and it’s getting worse.

The main problem is the financial system being reliant on ceaselessly expanding levels of debt, and a real economy unable to sustain the load. Where the problem last time was worthless mortgage derivatives bankrupting the banks, the new and more threatening problem is governmental debt, much of which has been newly created to merely shift the problem away from the banks. There is no way the United States can ever repay or even stop increasing the debt under current conditions.

The US dollar is effectively the reserve currency of the world; the last resort to store wealth when other assets are failing. We’ve already explored how the dollar exists as debt; if repayment of American debt falters, the dollar will become worthless as a reserve currency. At that point there is no asset large enough to store the value of the world’s wealth, and the world financial system will become insolvent. All business will grind to a halt when trade becomes impossible. The bankers precipitating this crisis are already acquiring real property and commodities, so like in the previous crisis, they will not be the ones suffering.

As I posted before, this situation is inevitable in a system where money exists solely as debt. The only way to pay back debt is with more debt, and the system will become unsustainable every time. The solution is to change money into something not based on debt, which would require a completely new financial and banking system.

About American Socialist

History major turned engineer
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