The Collapse

The gravy train is almost over. National and local governments across the globe are trying to prop up their economies by spending more money than they have. The U.S. government alone is spending $1.5 trillion more than it collects each year. Unfortunately this isn't a sustainable long-term solution, and economies everywhere are still stagnating.

We're between a rock and a hard place.

At one extreme we can suffer some pain now by slashing spending across the board, paying down public debts, forcing delinquent mortgages to foreclose, allowing bad banks to fail, and permitting local and state governments to declare bankruptcy.

At the other extreme we can suffer a more painful and less predictable collapse later. That's what will happen if governments keep trying to delay the inevitable by continuing to bail out everyone and nationalize everything at the cost of millions billions trillions of dollars of more public debt. In lieu of eliminating socialist programs, debt would have to be mitigated either by defaulting on Treasury bills (collapsing the bond market and taking most of our 401k's with it) or by creating boatloads of new money and high inflation, which would make our checking and savings accounts worthless.

A third alternative would be to raise taxes to pay for everything - and keep raising them until they reach 100% of income, thereby shutting down the economy completely.

No matter what choice each government makes, a great deal of illusory capital is about to disappear. One path stops the flow of money to people who take taxpayer money, like Medicare, Medicaid, Social Security, state pensions, etc. The other path will erase the life savings of those who planned ahead, saved money, and invested wisely.