EIGHT SIMPLE TRUTHS YOU NEED TO KNOW ABOUT 2012
by SIMON BLACK
Yesterday we discussed certain events that, in my view, are nearly mathematical certainties. Things like a restructuring of public pensions and Social Security in Europe and the US. Western governments blocking Internet and mobile networks. War. The US government being forced to issue debt in a foreign currency.
All of these events are underpinned by a simple premise:
1) Public and private debts included, most western nations are insolvent. Big time.
2) History shows that economic growth in such an environment is nearly impossible when such a large percentage of GDP must be allocated solely to interest. Most countries in this position either default or [hyper]inflate. Both have catastrophic consequences.
3) Continued political and monetary intervention in the economy is counterproductive. From ‘Cash for Clunkers’ to negative real interest rates, such intervention only serves to make the problems, and their impacts, much worse.