What Happens When Several Global Crises Converge at Once?

To say that the world is at a crossroad at all levels - financially, economically, politically and culturally - is an understatement. We have a sovereign debt crisis, a currency crisis, a banking crisis, a financial crisis, a political crisis, a confidence crisis, and an economic crisis all at a global level and all converging at the same time.

We have several wars, major unrests in several countries and perhaps even identity crises in some countries and societies, including the United States of America. There is a lot of uncertainty at all levels, not only about where to invest but also about the future. It seems as if the sky is falling. Is the sky really falling and has this happened before?

According to history, the long “Winter Cycle” has been upon us since 2008-2009 (some estimate 2005) and will last for twenty three years or so (until 2031-2032). Numerous fundamental changes will take place at the global level during this Winter Cycle. Winter will be long and hard with severe howling winds where the sky will indeed seem to be falling - but hopefully the sky will fall only on those who need to go. And, yes, this has happened time and time again throughout the recorded history of mankind. But the “Spring Cycle” will follow bringing with it new (true) leaders, new political systems, a new era full of vibrant generations, and we hope, a new global monetary system based on true wealth and prosperity. Indeed, the next twenty years will be difficult but they will pass and we will witness a fundamental transformation of the world and the emergence of a new world that happens only once every one hundred years or more. So, fasten your seatbelts and watch history unfold.

Why the world today is in serious trouble is simply because it has monumental debt problems that are not solvable, at least not using the same old approaches of printing and creating more debt out of thin air. The main problem that the world faces today is that it has been unable to shoulder the additional debt necessary to keep the system alive. Virtually every individual, every institution and every government around the globe is in debt, large debt. More debt has been accumulated than can ever be repaid.

In the past thirty years or so, large financial institutions started a world-wide campaign to encourage borrowing and made borrowing money too easy by relaxing standards beyond what was prudent and reasonable from a business standpoint. Even an untrained layman could see that a crisis was looming when teenagers were handed multiple credit cards and anyone could obtain a 100 per cent mortgage loan by lying on application forms that were never checked for their accuracy. These practices became pernicious, infiltrating virtually every society and brilliantly creating a culture of borrowing and instant gratification. People around the world, poor and rich became so addicted to the convenience of buying today and paying tomorrow. This is all fine and good as long as the economy is healthy and can keep up with jobs to pay back the borrowed money. But when the economy falters, troubles begin.

The global economy has now faltered and by now, everyone is so addicted to this culture of instant gratification and spending and borrowing and has gotten so used to the “I want, I get” mentality. Many find it very difficult to cut or even curb their spending habits during these economic troubles. This is true both at individual and government levels. However, it is one thing when individuals overspend and get themselves in financial troubles, but it is a completely different matter when governments overextend themselves and get themselves in financial mess. And when this occurs at a mass scale with virtually every government, and when the largest economy in the world becomes the largest debtor of the world to a point of no return, followed by other large economies and many countries in the Euro Zone, serious troubles begin.

The question is who is benefiting from this massive sovereign debt? The answer is investment banks and large financial institutions. Because of debt, and in addition to the trillions of dollars they have accumulated over the years since they began their campaign to encourage borrowing, financial institutions and large investment banks now own entire countries. And because of debt, large investment banks also have so much direct and indirect influence on governments and often dictate to governments what they can and cannot do. Even in large and powerful countries like the United States and Great Britain, it is becoming more apparent that large investment banks have a great deal of influence as well. In the United States, for example, their political contributions can sometimes determine presidential outcomes. They also have a tight grip on all power structures throughout the world - a grip that is nearly impossible to break free from.

This is in a nutshell where we are today - sovereign debt at a mass scale. The sovereign debt problem is so monumental. It is also unsolvable under the current global financial system. There is no way out of this global financial mess short of a complete collapse of the entire global financial system. Unfortunately, such an event does not come without trouble, serious trouble, perhaps large wars at every continent. History confirms that this is what usually happens. But history also indicates that the trouble will eventually pass and a new world will soon emerge. Indeed, it is time for a new world, a new era, and new generations.

* With contribution from Bruce H. Pugesek, President of Voyageur Research

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