It has now been officially reported the total of US government, the federal deficit, is now 19 Trillion dollars. This news has been greeted with a collective yawn by the powers that be, the oligarchs, the media and the sheeple. I have been writing about economic issues since 1998 over at www.gold-eagle.com In all that time, although we came close in 1998 with the Russian debt default, the global debt based system has hung in there. Mr. Magoo, my name for Alan Greenspan and his 20 year reign of terror at the Federal Reserve, engaged in a policy of insanity, followed by Bernanke and his zero interest rates for another ten years. The result was the debt implosion I have long expected, as well as predicted has been held off for the last 29 years. I think I got the trend correct, but my timing was clearly off.
I have been thinking quite a bit about the historical Titanic, the “unsinkable” ship that hit the iceberg in April of 1912, and then sank two hours later. My opinion is what happened with the Titanic, the oral testimony of the 705 survivors, out of a total 2200 or more, is relevant to what I will call our situation with the economic Titanic. The powers that be, the media, the politicians, the corporate oligarch types, have been able to convince the general population the economic growth model based on unlimited issuance of new debt, a policy that has been in place since the creation of the Federal Reserve in 1913, is sound and effective policy. Of course it is not, but the spin has worked.
I won’t call myself an expert on the sinking of the Titanic. I will say I know enough of the process to make some shrewd statements between what happened then, and what is happening now. The first thing you need to make any comparison with the actual sinking, and my metaphorical economic Titanic sinking is there were several distinct phases involved. We know the initial strike on the iceberg was not held to be a big deal by the crew. They were entranced with the idea their ship was unsinkable, because they had been convinced it was. Actually, it wasn’t, as became clear within the next two hours or so. At any rate, the initial hit on the iceberg caused a level of severe damage that was not noticed at the time.
I believe the entire global debt based economy is now in the post iceberg hit phase. The economic strike has already happened. It happened between the 1998 Russian debt implosion, the one that took down Long Term Capital and nearly crushed the derivative markets, and the TARP bailouts by the Federal Reserve of Wall Street. I firmly believe that those two events may be compared to the time frame, in the historical sinking of the Titanic, from the initial strike, the initial flooding, and followed by the fatal flaw in the Titanic design; namely, once the walls had been overwhelmed by the inrushing water, it was all over. It is known that once the water overflowed the first series of barriers there was nothing to stop it from flooding the entire ship. Likewise, our debt is now well over the initial barriers and running everywhere in the entire economy. We have so called “debt crisis” in sector after sector of our general economy. We have student loans in default, we have foreclosure issues, general real estate debt issues, and finally, we have a federal government some 19 Trillion dollars in debt. All of this is similar to the situation on the Titanic between the time it took to flood the ship, and the time it took to actually sink. Again, there was a sixty to ninety minute period between the time they hit the iceberg, the time it took to figure out the ship was doomed, and the actual sinking around 2:20 am.
In fact, I think if you look at how people behaved, and what happened, you can draw a direct line from the Titanic sinking, to my economic version. It is a fact that most of the passengers stayed in their cabins, blissfully unaware of their danger they were really in. After all, the crew either didn’t understand what was going on, or had been told to use their public relations skills. We know the band kept playing until the end. We know the lifeboats kept launching, of which there were only enough for one third, some 700 actual passengers, until close to the end. We know the lights stayed on, and we know that a general atmosphere of calm prevailed, at least until people figured out the lifeboats were full and rowing away. All accounts indicate that at that point, once people figured out the ship really was sinking, and the lifeboats were full, a hysterical panic broke out.
In terms of my economic Titanic I would say we are now in the period between what John Galbraith calls “organized reassurance” in his book on the 1929 stock market crash, and the point where the people figure out not only is the ship sinking, but the lifeboats are sailing away. I would also say the crew of my economic Titanic knows what the true situation is. They know the global debt is not able to be paid off. They know the supply of lifeboats does not match the number of passengers. They know the panic will eventually break out when the sheeple figure this out. They know what the result will be. They are already taking steps to preserve their personal butts, just like the White Star executive did. The links between what actually happened on the Titanic in 1912 and what is going on in the economic arena are uncanny in my opinion. The ship is somewhere in that period and I don’t know precisely where, between the initial iceberg strike and the final departure of the lifeboats. We know what happened historically; we know what will happen this time too. Consider yourself warned, blog readers.
Although the lights are still on, and the band is still playing, we can see the lifeboats sailing off from our sinking economic Titanic. We know what will happen next.
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