The Economic Precipice
There have been many prophecies of impending doom: world war, disease and plague and economic collapse. One factor that is almost certain is an impending economic collapse in the Western economy.
Many years ago money had a real value and over time gold became the choice. It
is rare and is easily malleable to form coins. However, it is also very heavy
so rather than transporting gold around it was easier to simply to pass on a bill
which was a guarantee for that amount of money. Until relatively recently, the
UK Pound notes had written on the them the words
“I promise to pay the bearer
on demand the sum of 1 pound”. This only makes sense in the context of a gold-based
economy: the note is exchangeable for its value in gold (originally 1 pound weight
of gold, but that was a long time ago). This is a bit like writing a cheque; the
cheque is only as valuable as the money in the bank. Nowadays, of course, countries
don't use the gold standard. They found that by generating enough trust in the
paper they didn't really need to have the gold in the bank to back it up. I've
compared this to a multi millionaire who writes cheques for his Christmas shopping
and the shopkeepers use the cheques as currency among themselves so the cheques
are never cashed. Later word gets around that the millionaire is in financial
trouble so the shopkeepers cash the cheques in. When he can least afford it he
finds that he has to pay out for shopping that he may have done years ago.
Countries are in the same position. So long as other countries are willing to trust the US Dollar, the US does not have to pay its debts. If countries think that their reserves of dollars are going to lose value they will exchange them for other currencies or for gold and the dollar could collapse.
USA TODAY reports that the average US household has $84,454 in personal debt, plus its share of the federal debt is $473,456. The average household has nothing like that amount of money, even considering the artificial price rises of many properties. The collapse could be sudden.
