“Global Systemic Geopolitical Dislocation”?

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“GEAB” is a European think-tank that’s followed the U.S. and global economic crises for some time, and offered analyses that are credible and, so far, accurate. On February 24th, GEAB published “Global Systemic Geopolitical Dislocation” which, of course, inspired my comments:

“Back in February 2006, Global Research estimated that the global systemic crisis would unfold in 4 main structural phases: trigger, acceleration, impact and decanting phases. This estimate enabled us to properly anticipate events until now.

“However, due to the global leaders’ incapacity to fully realize the scope of the ongoing crisis (made obvious by their determination to cure the consequences rather than the causes of this crisis), the global systemic crisis will enter a fifth phase in the fourth quarter of 2009, a phase of global geopolitical dislocation.

“This new stage of the crisis will be shaped by two major processes happening in two parallel sequences:

“A. Two major processes

“1. Disappearance of the financial base (Dollar & Debt) all over the world.

First, note that GEAB expects the “stuff” to “hit the fan” in the “4^th Quarter of 2009”. I hope they’re right in this respect: If there’s going to be a collapse, I hope we have that much time before a systemic collapse. I’m concerned that the system might collapse in 2^nd or 3^rd Quarter of this year.

Second, it’s no surprise that the current economic crisis may cause the dollar to disappear. But GEAB’s assertion that the “Debt” may also disappear should surprise most people.

Q: How can all or even most of the Debt disappear—especially a total American debt of $75 trillion?

A: Easy—such debt can be extinguished by the simple truth that “What can’t be paid, won’t be paid”. A debt that can’t be paid no longer exists and therefore disappears.

Remember, a debt is not a fact; it’s not an “asset”. A debt is a relationship that consists of one creditor and one debtor and some amount of “money” that’s due from one to the other. If either party to the relationship drops out, the debt relationship dies. If either the debtor or creditor dies, the debt itself can expire. But beyond dying, a debt can still be extinguished by a mere change in financial capacity. I.e., a debtor is not simply someone who owes money. A debtor is someone who not only owes a debt, but is able to repay that debt. When a person’s circumstances change so that he can no longer pay his debts, the debtor-creditor relationship disappears and so does the debt, itself.

GEAB’s prediction that not only dollars, but even the debt will “disappear” is consistent with my fundamental observation of last July: What can’t be paid, won’t be paid. I.e., the total American debt of $75 trillion ($250,000 for every American man, woman and child) is too great to ever be repaid in full. As a nation, we can’t pay our debts; not all of ‘em; not even most of ‘em. We are bankrupt.

The great problem is that Americans have come to treat our debt instruments as facts, as assets, when they are only conditional promises. We’ve been tricked and conditioned into thinking that a debt (paper promise to pay) is as “good as gold”.

But that’s simply not true. When you hold a gold coin in your hand, that’s a payment; an asset. We can debate the value of that particular coin, but not its nature—it is a tangible asset. But debt instruments (like a stocks, bonds, bank accounts, pension funds, or even paper dollars) are only promises to pay—not payments, not real assets.

If the promise to pay is kept, then the creditor may later use the repaid paper cash to acquire a tangible asset. But if the promissor/debtor becomes unable to keep his promise, the paper promise to pay (debt instrument) becomes worthless. Unfortunately, most people in the Western world have been bamboozled into believing that paper debt instruments are assets. We’ve therefore come to keep our wealth in the form of debt instruments. We’ve come to accept the irrational idea that debt is wealth.

As a result, individuals are currently holding debt instruments with a number like “$10,000,” “$100,000” or “$1 million” written on them and believing that those pieces of paper are assets actually worth their declared face value. When the total debt is substantially repudiated (as must happen; what can’t be paid, won’t be paid), those holding the paper promises to pay (debt instruments) are going to suffer enormous losses.

As with individuals, nations which treat paper debt instruments as if they were tangible assets will also be impoverished when it’s finally admitted that those debt instruments (our apparent wealth) are worthless. So, when GEAB warns that both the Dollar and the Debt will disappear, they’re predicting a loss, a “vaporization,” of virtually all kinds of intangible “wealth” from our economy.

If the paper dollars and the paper Debt instruments suddenly “disappear” into the black hole of worthlessness, what’ll be left? Other than catastrophe, violence and death—there’ll be food, tools, land, guns, and gold and silver coins.

GEAB continues and predicts:

“2. Fragmentation of the interests of the global system’s big players and blocks.”

In other words, without common interests to bind them, the global system’s “big players” will no longer act in concert. Without concerted action, the “global system” of global free trade, one world government and New World Order will disintegrate. Military, political, and economic alliances will shatter.

For example, will an impoverished or bankrupt U.S. be able to maintain the separation between North and South Korea? Will a bankrupt United States be able to prevent mainland China from capturing Taiwan? There’s even a strong possibility that a bankrupt U.S may be incapable of continuing to support Israel. Without American support, Israel will become increasingly vulnerable and a Middle East nuclear war will become more probable.

What happens to the rest of the world if the Middle East erupts in nuclear war? What happens to the globe’s supply of oil? What happens to global industry, transportation, and power? How many people will freeze to death in a winter when the supplies of crude oil and home heating oil are badly curtailed?

If anyone can look at our current economic scenario and suppose that the worst is over, I can only admire his optimism. The worst, in my opinion, has not yet even begun.

GEAB continues to describe the coming disintegration with:

“B. Two parallel sequences

“1. Quick disintegration of the current international system altogether

“2. Strategic dislocation of big global players. “

GEAB predicts that the global system will disintegrate quickly. In other words, the system might look fairly viable today and be gone within a week or perhaps a month. When the final disintegration comes, it may be as sudden and shocking as the snap of a bear trap.

More, that disintegration will be total. The global system will not partially collapse or only collapse in a few places. It will collapse utterly. Why? Because the problem is not technical, but rather, systemic. We have a global economy built on a fiat monetary system that’s inherently fraudulent. Based on this fraudulent, paper-money system, the world that generates $60 trillion in annual GDP is now carrying something like $800 trillion to $1 quadrillion in derivative debts. It’s simply not possible for a man, a nation or a world to be in debt for 13 to 17 times as much as he earns in a good year.

A total American debt of $75 trillion is not hard to imagine or comprehend because the number is so great, but rather because the number is irrational to the point of madness.

Q.: How did the total American debt rise to a level of $75 trillion?

A: With paper and digital currency. The enormous, irrational and technically impossible debt that is about to collapse the U.S. global economies would not have been possible in a world where the monetary system was based on gold or silver coin.

If GEAB’s prediction of a sudden disintegration of the global system is correct, the existing global order will change radically. U.S. influence and power is bound to fall from the status of “super-power” to a mere “power”.

Other nations (like China) may grow in power, but I doubt that any true “super-power” will soon emerge from the crisis. Without one or two super-powers to hold the rest of the lunatics in line, international instability and the probability of war will increase.

GEAB continues:

“Barack Obama, Nicolas Sarkozy and Gordon Brown spend their time chanting about the ‘historic dimension’ of the crisis. But they do so in an attempt to clear their names from the future failure of their policies. In truth, they are just hiding the fact that they fully misunderstand nature of this crisis. Other global leaders prefer to persuade themselves that the problem will be solved like any normal technical [rather than "systemic"] problem.

“Meanwhile everyone continues to play by decades old rules [paper promises are as good as gold], unaware of the fact that that game is vanishing from under their noses. In the United States, Europe, China and Japan, leaders persist in reacting as if the global system has only fallen victim to some temporary breakdown, merely requiring loads of fuel (liquidities) and other ingredients (rate drops, repurchase of toxic assets, bailouts of semi-bankrupt industries,) to reboot it.

“In fact, the expression ‘global systemic crisis’ means that the global system is simply broken and almost certainly unfixable. A new system needs to be built instead of striving to save what can no longer be saved.”

(What can’t be paid, won’t be paid. What can’t be saved, won’t be saved, hmm?)

“There is only one very small launch window left to prevent this scenario from shaping up: the next four months, before summer 2009. Practically speaking, the April 2009 G20 Summit is probably the last chance to put forces at play on the right tracks before the sequence of UK and then U.S. defaults begin.”

I’ve harped since last July that “What can’t be paid, won’t be paid”. That simple maxim makes massive defaults inevitable. I’ve guesstimated for eight months that at least 80% (and probably 90%) of all existing paper debt instruments can’t be paid, won’t be paid and must be repudiated. If I’m right, the resulting defaults in paper debt instruments like stocks, bonds, bank books, pension funds, etc. will cause those holding them to lose 80-90% of their value and purchasing power.

It’s nice that GEAB thinks the almighty “G20 Summit” may somehow stop the global economic catastrophe, but how could that be done? How do you cause people to ignore or forget the fact that total American and total global debts are simply too enormous to ever be repaid? This massive debt is the tiger in the drawing room. How can it be denied? How can it be survived? Right now, the only hope we have is hope. Perhaps God will save our economies, but it’s clear to me that man can’t.

“Failing to right the global economy by April, world leaders will lose their capacity to control events, including those in their own countries for many of them. In fact, it is probable that the G20 will find it more and more difficult to simply meet, as the trend increasingly becomes ‘every man for himself.’ At the end of this phase of geopolitical dislocation, the world will look more like Europe in 1913 rather than our world in 2007.

“Because the world’s governments persisted in bearing the ever-increasing weight of the ongoing crisis, most states, including the most powerful ones, failed to realize that they were planning their own trampling under the weight of History, forgetting that they were merely man-made organizations, surviving only because they matched the interests of a large majority. It is high time for the general population and socio-political players to get ready to face very hard times during which (according to the February 14th New York Times) whole segments of our societies will be modified, temporarily disappear or even permanently vanish.

“For instance, the breakdown of the global monetary system we anticipated for summer 2009 will entail the collapse of the US dollar (and all USD-denominated [paper] assets) and also induce, out of psychological contagion, a general loss of confidence in paper money altogether.”

GEAB is predicting a breakdown of the global monetary system this summer. If they’re right and if you’re storing your wealth in paper, you’re going to be “burned”. Right now, I know of no means of storing wealth more prudent than gold or silver coins. If your wealth is not stored in a tangible form, it’s on the verge is vaporizing. You may have months or only weeks to act to protect yourself.

As I’ve said repeatedly, the most reliable formula for preserving your wealth in this crisis is simple: “SELL PAPER, BUY GOLD.”

“Last but not least, GEAB now estimates that the most monolithic, the most ‘imperialistic’ political entities [like the U.S. and UK.] will suffer the most from this fifth phase of the crisis. Some states will indeed experience a strategic dislocation undermining their territorial integrity and their influence worldwide. As a consequence, other states will suddenly lose their protected situations and be thrust into regional chaos.”

Nations like the U.S. (that seemed as every bit as “eternal” as the former Soviet Union) may suddenly disintegrate into smaller states or regions. Even if disintegration does not take place, American influence will wane and American soldiers stationed around the world will be brought home.

For example, if the U.S. is forced to withdraw from South Korea, the conflict between North and South Korea may suddenly erupt into a shooting (and possibly nuclear) confrontation. Similarly, if the major global powers that have so far helped keep Pakistan and India from “going postal” are suddenly removed from the geo-political equation, a nuclear confrontation between two nations with completely different and antagonistic faiths may erupt.

Again, what will happen to Israel if the U.S. and UK are suddenly impoverished? What will prevent a nuclear “holy war” from erupting in the Middle East?

And less anyone suppose that such “regional conflicts” may only occur in the Middle East and Asia, note that the Mexico is already in a state of “mild” civil war brought on by conflict between the Mexican gangsters who currently claim to be the government and the Mexican criminals who smuggle drugs. One source estimates that Mexican drug smugglers now command a virtual “army” of 100,000 armed men. Yes, there is dissension and conflict among the drug smugglers, but they must know that if they could act in concert, they could overthrow the Mexican government. Some analysts already predict that this domestic Mexican conflict will topple the Mexican government. What happens then? Will the flow of illegal aliens into the U.S. skyrocket? If the U.S. were to fragment, what nation would ultimately control New Mexico, Arizona or even California?

We live in interesting times and those times grow increasingly “interesting” by the minute.

You folks had best be protecting yourselves. Now. It’s not yet too late, but it may soon be.

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