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If The Debt Machine Was Turned Off, The U.S. Would Immediately Plunge Into A Horrifying Depression

Michael Snyder
September 2nd, 2019
The Economic Collapse Blog
Comments (23)

This article was originally published by Michael Snyder at The Economic Collapse Blog.

A new study has discovered that we are far more dependent on America’s great debt creation machine than most of us would have ever dared to imagine.  Today, debt is involved in most of our major transactions.

In order to purchase a home, most of us go into debt.  The same thing is true when most of us buy a vehicle.  Total credit card debt is well over a trillion dollars, and total student loan debt is now over a trillion and a half dollars.  Corporate debt has more than doubled since the last financial crisis, state and local governments are absolutely drowning in debt and unfunded pension liabilities, and the federal government is more than 22 trillion dollars in debt.  The Federal Reserve and the “too big to fail” banks are at the core of this insidious debt-based system, and it has been systematically destroying the bright future that our children and our grandchildren were supposed to have.  But if we suddenly turned off America’s great debt creation machine at this point, our entire economic system would totally collapse because we have become so dependent on it.  In fact, a study that was just conducted by Bloomberg discovered that “gross domestic product per capita would plunge into negative territory” if the ability to borrow was suddenly removed…

The nation’s health as measured by gross domestic product per capita would plunge into negative territory without its dependence on borrowed money, according to data compiled by Bloomberg.

In fact, the U.S. would fall almost to the bottom of a ranking of 114 economies by GDP per capita. Only Italy, Greece and Japan would fare worse. That’s a seismic shift from America’s comfortable No. 5 spot on a list based on conventional measures.

Our massively inflated debt-fueled standard of living is completely and utterly dependent on the continual creation of more debt.

In essence, this study found that without debt we wouldn’t have much of an economy at all.  In fact, Bloomberg says that U.S. per capita income would collapse from $66,900 a year to “negative $4,857”

To get this somewhat dystopian measure, Bloomberg took each economy’s 2020 GDP as projected by the International Monetary Fund as a starting point. We then adjusted the number by removing the ability to borrow, while adding reserves to create an alternative wealth measure.

U.S. per capita income of $66,900 would be slashed to a negative $4,857 using this measure. That’s a total loss of almost $72,000 for every man, woman and child.

So the only thing keeping us from complete and total economic collapse is the fact that debt is flowing like wine.

But what would happen if some sort of major national crisis erupted someday and all of a sudden everyone was afraid to lend money?

That is something to think about, because such a scenario may be a whole lot closer than many people might think.

As it stands, we appear to be on the precipice of the worst economic downturn since the last financial crisis, and our trade war with China just went to an entirely new level as the month of September began

The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The Chinese knew that these tariffs were about to go into effect, and so they were ready and waiting to retaliate just one minute later.

Of course, many U.S. companies will be hit extremely hard by these tariffs that the Trump administration just implemented.  The following comes from CNBC

That means that when an electronics company imports a TV, or a smart speaker, or a drone from China starting September 1, it will have to pay a 15% tax to the U.S. government.

Eventually, this will end up raising prices on gadgets and other products for people in the United States, said Bronwyn Flores, a spokeswoman for the Consumer Tech Association (CTA), a trade group that represents 2,000 different companies in the electronics industry, including brands like Apple and LG and retailers like Walmart and Best Buy.

Basically, people are not going to be able to buy as much stuff during the holiday shopping season, and overall economic activity will be slower than it otherwise would have been.

Meanwhile, President Trump continues to sound hopeful that trade talks with China will bear fruit

President Donald Trump said trade talks with Beijing are still planned for September after a new round of tariffs went into effect on Sunday.

“We are talking to China, the meetings in September, that hasn’t changed,” Trump told reporters Sunday on the White House South Lawn after returning from Camp David.

These sorts of comments helped stabilize the financial markets last week, but if there was any hope that a trade agreement was imminent we would not have seen both sides impose new tariffs on Sunday.

And now we are moving into the month that is traditionally the worst for Wall Street.  The following comes from Fox Business

Investors may breathe a sigh of relief that August, typically a volatile month for stocks, is over, but history shows that September could be even worse for Wall Street.

Since 1950, September has been the worst month for the S&P 500 Index, which has dropped, on average, 0.5% during the month, a phenomenon referred to as the September effect. According to Dow Jones market data, the average decline of the Dow Jones Industrial Average in September is 1%, while the Nasdaq Composite generally sees an average fall of 0.5%.

We shall see what this September brings.  Certainly things are really shaky on Wall Street right now, and any piece of really bad news is likely to set off another wave of panic.

Without a doubt, the market is more primed for a crash than it has been at any point since 2008, and it definitely will not take much to make this a “September to remember”…

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Author: Michael Snyder
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Date: September 2nd, 2019
Website: http://theeconomiccollapseblog.com

Copyright Information: This content has been contributed to SHTFplan by a third-party or has been republished with permission from the author. Please contact the author directly for republishing information.

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23 Comments...

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  1. Plan twice, prep once says:

    Off topic, sorry!

    Was watching the news tonight, it seems most of the counties along central Florida’s East coast are now under mandatory evacuation orders. This is like an 800 mile span with tens of millions of people.

    Have they (the gov) lost their minds? Where the hell are tens of millions of people supposed to go, for a week or more? This evacuation area covers like 20% of the population of Florida. And the storm is currently stalled and not moving. It could be days before it budges and then it could just go North East into the Atlantic.

    Just shaking my head over this one.

    • rellik says:

      PTPO,
      I pray for the safety of the people affected. Where do they go?
      To park on I-95 and I-4.

    • Montana Guy says:

      To evacuate (without a pre-planned destination with the means of support) means to risk becoming a refugee. If at all possible, NEVER become a refugee.

      • TharSheBlows says:

        Tues 9/3 10:26 Silver up .44 cents to $18.87. It hit $19 briefly today. I see $20 to $24 by the end of the year. A free layup!!! Git ya some.

        • TharSheBlows says:

          Here in Central N FL we keep getting these bands of heavy rain. Weird weather. Fully sunny, then instantly for an hour or so it turns dark out and these band of hurricane rains dump their loads. Yesterday it did that cycle nice to heavy rain 3 times. Weird. You can see the bands of the rain on the weather map.

        • TharSheBlows says:

          Oh my,.. Silver skyrocketing. Up to $19.23 today. Protect your stack.

    • asshat says:

      florida sux its a peninsula only one way out. couldnt be a shittier place to live especially for preppers. boston aint so bad. the hurricanes weaken signifigantly when they get up here due to cooler waters. i dont feel bad for florida residents. they like to rub in the snow up here sux. i will take digging out for about an hour over total property destruction. jobs pay more up here too. enjoy the bugs and humidity. this is for all the suckers who fell for the palm trees and sunshine paradise hoax. enjoy

  2. NoOneHere says:

    When things go bad, People Loose it. They go insane.
    look how people act when things are “normal”.
    Road rage shootings, robbery, nutjobs going crazy.

    Now imagine behavior of city dwellers when everything is upside down and sideways.

    Now imagine how helpless you will be if you allow liar, fear mongering politicians to take your capacity for self defense away?

    Politicians want you unarmed and docile.
    The 2nd is for self defense. Not anything about hunting.
    Never allow them to disarm you. STAND.

  3. rellik says:

    Seems like a stupid post.
    Our entire economy is debt based.
    Most our debt is held by Americans.
    The foreign debts holders could drop
    it all and we would not notice it.
    The big problem we have is Government debt.
    Most everybody else is responsible borrowers.
    Democrats aren’t.
    Democrats run the government.
    Democrats could mess up a “Wet dream”.
    A depression won’t hurt me too much.
    But I have always prepared to live
    like Democrats ran the country.
    Aloha.

    • Bert says:

      Another way to look at our money is that it is actually rented.

    • Kevin2 says:

      rellik

      I’de feel a whole lot more secure if the economy was based on manufacturing and productivity rather than debt based consumption from people not employed in the aforementioned. The economy is predicated upon the indefinite continuance of the USD maintaining world reserve currency status. When wars are fought to maintain it the writing is on the wall that its time is numbered. Rather than a hemorrhage its, “death by a thousand cuts”, slowly, methodically, reducing said dilution pool.

  4. Bert says:

    Why print a story that begins with IF?

    The US Government will and must expand the economy in order to cover future liability shortages. Some say $100T by 2060.

    One can’t have $100T future liabilities and only a puny $21T annual GDP and a M0 of just a $3T.

    Big huge expansion coming. Because it will and it must.

    WWIII, asteroid or end of fossil fuel are the black swans. Even the collapse of China won’t hurt the USA. USA and North America can easily produce all the junk that comes from China, just as cheaply.

  5. “The average decline in the Dow Jones Industrial Average in September is 1%…”

    What’s that…about 260 points? Head for the bunker…

    There will not be a collapse until there is not enough energy available to back up today’s system of ever increasing debt. All credit/currency/money is created as debt at the point of the loan. They then add compound usury to the principal. The constant, exponential growth of compound interest is what makes the growth of debt an absolute necessity in order to keep the system going. If all debt were paid off, there would be no currency in existence save a few old coins and some paper notes. Debt IS the system and has been since at least 1971. Maybe it always was. The grand daddy of central banks, the Bank of England, released a white paper in 2014 that describes exactly what I outlined above. They have admitted that the worldwide monetary system is loaned into existence as debt and destroyed when paid off. They get paid with.the compound usury they pocket for conjuring up “money” from thin air.

    Nice gig if you can get it…

  6. Anonymous says:

    Snyder said the economy would absolutely collapse by the end of 2015. The real miracle for him is that sites keep publishing his “articles”

  7. Old Guy says:

    The heck with a puny recession. I want a full blown depression. Inflation steals the value of everything.

  8. Anonymous says:

    Falls under the heading of “no shit Sherlock”.

    Everyone be like “why don’t we get out of the Middle East” over and over and over again. Well here’s a hint. Most people don’t go around doing egregious shit like that because they are big on dying and killing. I’m just saying.

    So if it’s not masochism… what’s that leave?

    • Mike Mike Whisky says:

      Comments being censored here on Massive Scale.
      But I read and see this post from HP.

      Tyrants don’t like sheep communicating.
      Tyrants don’t like armed sheep.

      You will be silent.
      You will be compliant.
      You will take those vaccines and flu shots, contaminated with only God Knows.
      You will be washed with constant radiation from satellites and 5g.
      You will be unarmed.
      Or you will be fired, red flagged, fusion centered. Your social credit score will be zeroed.

      How do you like your “new freedom”?
      You like your new Amerikka?

    • Plan twice, prep once says:

      Honeypot, I can’t see you…… You are like the homeless guy at the Train station who screams I’m invisible. And everyone pretends they can’t see him……. Just joking, I see you.

      They keep recycling bad economic news, but the market just keeps recovering. 25,000 seems to be a point of resistance. The market just won’t go lower.

      Insiders (CEO’s etc) are moving to cash. The rats are fleeing the ship.

      Rumors are strong Trump is taking down the FED, its financial war with the ancient evil money trying to stay in power. If the ancient powers stay in control, they will put us in a depression as punishment. If Trump wins we go to a basket of precious metals as our standard, not just gold, there isn’t enough in existence. Expect gold, silver, platinum, poladium, and rare earths combined to be the new standard.

  9. Anonymous says:

    Then we have fake “prosperity”. It’s all a house of mirrors. Many know that and many have known that for a long time–since they live it and have lived it for a long time.

  10. Anonymous says:

    “…Gross domestic product per capita would plunge into negative territory” if the ability to borrow was suddenly removed….” Not if the people reject money and use barter with each other instead of buying anymore “Made in China” stuff from government-protected big business.

  11. That Depression is coming, no matter what, the only question is when.