World Trends

I wrote this article about the inevitable collapse of world economies in mid-2009. However, as the US government stimulus took effect, there was increasing optimism and an article like this seemed untimely. Here it is now, slightly updated.

I am not an economist and I have little interest in statistics. This is an instinctive view.

The most rigid structures, the most impervious to change will collapse first.

ECKHART TOLLE, A New Earth

A compassionate perspective–For ten thousand years, since the advent of agriculture, and possibly even before that, mankind has developed an ego, individually and collectively. An ego is the image of who we are in thought, and the beliefs we create around the image. Humanity’s collective ego has propelled a continuing program of control, through religion and culture and spirituality and technology and ecology and economy and social institutions.NASA GOES-13 Full Disk view of Earth May 28, 2010
Creative Commons License photo credit: NASA Goddard Photo and Video

Humanity’s rigid structures are burgeoning at the seams, and perhaps the most troublesome are economic trends.

Economic Trends: In short, the heaping piles of IOUs far exceed the monetary base in most sovereign nations. The economic options for nations are to increase taxation and reduce spending, or  print money or borrow money. This means high volatility over the next few years. Economies will rapidly shrink, with intermittent temporary reflationary surges.

Institutionalized dukkha–Buddhism’s first noble truth says dukkha, dissatisfaction, is inherent in the individual and collective human mind. Economically, this manifests as the feeling of lack—the lack of money and the lack of things. And so we always want more. Consumers have to consume more, corporations must grow in size and profits, institutions must grow in power and reach, economies must scale, debt must always grow, the GDP must always grow. The goal is always to get more.

The ultimate tragedy is that everything that is life is devalued into a means of maximizing material value. “Everything” includes the earth and her natural resources, the biosphere, human life (labor, wars), beings (cruelty to fellow animals), society (continually adapting to the economy), religion as means of control, and even spirituality which is often commandeered for achievement and validation.

A Short History of Money –  There have been various means of exchange: barter, gold and other precious metals, credits, IOUs, seashells, and representational money. Representational money is the system we have now. Money represents bank credit. It has no inherent value; it is valuable only by consensus. This is called fiat currency.

Debt-driven economy: In old Europe, as villages prospered, they gave their gold to the local goldsmith for safekeeping. People often came to him to borrow gold and paid back with interest, which he shared with depositors to incent more deposits.  The goldsmith soon discovered that he can loan money by simply giving out promissory notes, instead of the actual gold. These promissory notes became a means of exchange. Then he got even a bolder idea and decided to loan out more money in promissory notes than he actually held in gold. And it worked! It would continue to work until everyone demanded all their deposits back at the same time—this is called a run on the bank. It might have made sense to outlaw the practice of loaning money that didn’t exist, but at the time of European expansion, it was so profitable that it was instead regulated and legalized.

The Federal Reserve in US, for example, is a private, for-profit bank, not a government institution, which loans out money that doesn’t exist.

Money is debt. Money is not created by the market. Money is created when a bank makes a loan. If all loans were called in at the same time, there would be just enough money in circulation to pay back the loans, but not enough to pay the interest, and so the money supply must always grow to cover the debt and interest, and the debt must always grow to increase the money supply. Money is always chasing itself.

Money is money by fiat. Money was backed by gold for a long time. In 1972, the US removed the gold backing. Now, in the US money is a fiat currency; that is, it is money by decree. There is nothing backing up money except the social consensus that it has value.

American hegemony in decline:

  • The US has a national debt of 12 trillion dollars, and unfunded liabilities of 106 Trillion, against a GDP of 18 Trillion. (Each US citizen owes $40,000 and is liable in the future for $360,000). Every year, The US collects 2 Trillion in taxes, and spends 3.5 Trillion. The yearly deficit of 1.5 Trillion is borrowed through US Treasuries and bonds.
  • The US GDP consisted of 70% consumer spending, much of it financed from home equity loans and expansion of easy credit card debt. With market value of real estate down, credit very tight, and high unemployment, it is unlikely that that consumer spending will balloon to these levels again.
  • In an absurd trade spiral, the US voraciously consumes goods from China, and borrows the money for the consumption also mainly from China. Essentially six Asians work hard to keep one American fat, and loan him money so he can pay them.
  • The US is holding back unemployment (U-6 number) at 17% (it was 25% during the Great Depression)
  • Almost all states and local governments are bankrupt or underfunded.
  • The problems in the residential real-estate market will be exacerbated by increasing foreclosures and problems in commercial real estate market.
  • Even with the massive injection of money stimulus and 0% loans, there are increasing signs of deflation and decreasing confidence.

International economies on the decline: Japan will continue her austerity and devaluation of currency. Sovereign debt will overwhelm Iceland, Greece, Ireland, Dubai, Portugal, Italy, and Spain. The UK will institute severe austerity measures. The Eurozone will likely collapse. China is waking up a deluge from an housing bubble burst. There are warning signs of bubbles in Canada and Australia. India will face inflation and continued corruption.

Early 2010, wagging the dog: So, if  these insurmountable problems are real, why has the stock market rebounded, the dollar held, and gold and oil remained reasonable and even rallied? What happened?

What happened is a massive injection of money, the largest humanity has ever seen, from the government and the Federal Reserve, through holding the interest rate at 0%, quantitative easing, bail-outs, and stimulus spending. This is of course not sustainable.

The US economy will collapse in 2010 – 2015. This will cause an unraveling of the internal social fabric, and will have international consequences as the balance of power shifts.

Deflationary Depression is the likely scenario. The injection of government money should have caused inflation, even hyper-inflation, because that is what happens when the volume of money increases without corresponding increase in goods and services. However, there is no velocity to the money–that is money is not moving around. This is a sign of deflation. Prices will drop and stagnation will continue or get worse.

Other risks include: peak oil, deficit, debt, unfunded liabilities, commercial real estate risk, credit card debt risk, the US government’s decreasing ability to borrow money, underfunded State and local governments, an economy highly dependent on consumption, the inevitable end of government stimulus, the structure of the debt-driven economy itself, and rapid alterations in the social and class fabrics.

The US gets in a major war every decade—because it can. Eisenhower was prescient in his warning about the military-industrial complex. This decade will be no different. Likely areas of new wars might be the expansion of the Afghanistan war to Pakistan, war with North Korea, or war with Iran.

Fear. There will be trouble in Pakistan, Saudi Arabia, Yemen, Israel and other restive countries. Terrorism will rise. The Mumbai terrorist attacks were relatively inexpensive and “easy”—executed by a very small, radicalized, brainwashed teams of young desperate men with no special training and no special goals except to incite fear.

Humanitarian crisis: There will be desperation in the poorest and most troubled areas, such as Pakistan and the Middle East.

Backlash in the US: The trend to go big in the US will reverse. Everything about the US is too big: our bodies, houses, cars, consumption, materialism, debt, military, government, wars—this will begin to reverse in a trend to go small and local.

Survivalism will go mainstream.

We can expect political leaders to do exactly the wrong things. This is not a cynical statement about politicians. People want quick recovery and so political solutions will always be quick-fixes of spending or control. International sentiment swings between conservatism and progressiveness, but neither can address the basic failure. Pain will be addressed by stimulus spending, and any new initiative will be burdened by special-interest compromise. When the effect of any stimulus dissipates, what remains is still the same faulty economy, laden with even more debt.

Deflationists and inflationists, democrats and republicans, regulators and free market economists, socialists and capitalists will debate endlessly. People will point the finger at the unabashed greed of Wall Street and Wall Street will blame the voracious consumption of the public, and everyone will blame the government.

Governments will barely be able to contain themselves in the rush to print money. Distressed local governments may experiment with new and absurd ways to garner taxes, perhaps by levies on such things as owning pets, and pleasure items, such as alcohol and sex and nicotine, and discretionary items such as gasoline. There may be movements to bring underground economies to the legal surface so it can be taxed—areas such as barter, prostitution, gambling, and marijuana.

The temptation to expand the two wars the US is already fighting, or to use her bankrupt but still lethal military within her own boundaries will be too great. Wars prime the economy.

An opportunity for awakening: I am not minimizing the suffering that can ensue from an economic collapse, There will be desperation, uncertainty and suffering, but from these can rise the opportunity for individual elegance and spiritual awakening.

36 thoughts on “World Trends

  1. Jodi at Joy Discovered

    Very interesting article, Kaushik! Great facts and stories to support your thoughts. I liked the point on Institutionalized Dukkha and the story of the goldsmith. It is difficult to forsee any other outcome than the one you are predicting. The world seems like such a machine these days–it is hard to know how to participate in it without being part of that machine. The opportunity for spiritual growth or mass awakening seems to be the only bright spot in what will inevitably occur.
    .-= Jodi at Joy Discovered´s last blog ..Off the Shelf: Spiritual Partnership by Gary Zukav =-.

    Reply
    1. Kaushik Post author

      Hi Jodi,
      Yeah, the article is a little different from what I generally write about. I want to stress that even though there will be volatility–there already has been–it is also a time for awakening and elegance.

      Thanks, Jodi, and I hope you are very well!

      love and peace,
      k

      Reply
  2. Nitin

    Good day Kaushik,
    Wow, you have great knowledge of economy, nice explanation, learn some of unknown economical fact. Thank you.
    I have lived in Toronto since 1987, and my view about western countries especially of North America. We are here up to the limit of material wealth (not all the population) and now there are enough opportunities for these nations to distribute their knowledge of better systems & infrastructure (municipality, transportation, sewage system, etc.) to others nations, which can benefit to both sides.
    Not only system, mind set also need to change in order to see the real change in society. It’s puzzle me that, our people (Indian) has great sense of understandings of all the aspects of the life, you name it, from Kama-sutra to Vedas, Philosophy to modern science, and yet we still have bad habit of
    corruption in system, dirtiness & resistance to change for good society. Why?
    I may sound little over reacting and putting nation down, but I feel that, our politics should go to younger generation and set the examples.
    Man kind is copycat to others, doesn’t take long to copy bollywood film or Indian cricketers, can be used this tactic to change society to better one. These are my simple thoughts. Thanks for reading it.
    I enjoy your articles..Thank you.
    Nitin

    Reply
    1. Kaushik Post author

      Hi Nitin,
      I’m glad you enjoyed and learned for the article. I hesitated with this one because I don’t want to engender fear–but I do think that humanity’s systems and ideas have failed. Even religion and spirituality have failed. What can perhaps save humanity is individual awakening.

      I agree with you about India, that there is vast knowledge and intelligence in many areas. For example, we know of Yoga in the west as Hatha Yoga, the physical aspect of yoga, which is a small part of the meditative branch of yoga, which is just one of eight major systems of philosophies. What hold India back I think is rampant corruption and the clinging to ancient ideas of inequality about gender, religion and class.

      Still, it is not about ideas or knowledge or beliefs. Awakening is using the whole mind, not just the little corners of beliefs and knowledge. Many people who pursue spiritual traditions for example make the mistake of clinging beliefs and ideas and methodologies. This is still looking outside. The trick is to look inside, and let go of all the external ideas and concepts.

      Thanks for your comment, Nitin. I hope you are well!

      love and peace,
      k

      Reply
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  4. Evan

    Hi Kaushik, I think the opportunity is for co-operation and collaboration as well as individual elegance. I think our relationship to others is a part of our awakening.

    I’m glad that you are talking about these things – I think they are very important, and there are many who want to think that just closing our eyes and hoping will get us through.
    .-= Evan´s last blog ..The Pilgrim =-.

    Reply
    1. Kaushik Post author

      Hi Evan,

      Yes, you’re right, it will be individual elegance as well as our relationship to others, society, ecology, animals and earth. It is with individual awakening that we can rise above our embodied patterns of fear and conditioning.

      And you’re right, denial and resistance are what we have to learn to release, so we can open our eyes and see clearly.

      Thanks for your comment. I hope you are well!

      Namaste,
      k

      Reply
  5. Eso

    Interesting, well explained, excellent attention to detail. Thank you for shedding light on an area, that most people prefer to ignore. I am also of the opinion, that what powers this fiasco, is the “sleeping masses”. Unfortunately they are used for something other than their own desires. Not because they choose to do so, but more because they are trained to do so. We have lost touch with anything greater than the “Self”, so the pain that comes from things not working out in our favour, becomes an energy used by a another level of life.

    The universe is a very skilled and economical machinery, that uses all forms of life including Man. Negative emotions and lower level thoughts, feed the lower end of the machine. Positive emotions, higher levels of thought, feed the upper end. So it is our choice, be devoured by the lower end or, the higher end. The lower end exists in continual recurrence. The higher end has the possibility of up-scale evolution. I choose to work on evolving because I hate doing the “same thing twice”, so to speak.

    To end it (the pain), there has to be an awakening to a higher consciousness level. This can be accomplished by an individual, far easier than a society. There is no material profit, in loving Greater mind, your neighbour, then yourself. So most will not accept nor engage in the real reason we are here.

    Eso
    .-= Eso´s last blog ..oops! Miscalculation =-.

    Reply
    1. Kaushik Post author

      Hi Eso,

      Yes, well said. This is a difficult area for most people to come to terms with. It affects most of us personally and globally. I’m sure we have all already experienced the pain of the economic decline, or we know someone who has. If we take a snapshot of the world today, we have the deepwater oil leak, a jittery stock market, continued unemployment, China announcing moves towards trying to avoid a housing bubble burst, ditto Australia, Israel attack, a tumbling Euro, and a dissolving Eurozone–all of this in addition to on-going recession and wars.

      What I’ve described in this article is an obvious slip to a deflationary depression, but what can also happen is a slow habituation, where people slowly get used to a new reality.

      Thanks for your insightful comment.

      Namaste,
      k

      Reply
  6. Jeff Lapointe

    You are right – when the pain is great enough – people will will surrender to change and have many spiritual awakenings. Unless we lead ourselves consciously into awakening then the world in its harmony will only help us along.

    Reply
  7. HappinessandWisdom

    I appreciate that you balance the ‘doomsday’ outlook with a focus on the individual and the opportunity for ‘awakening.’ While we cannot change the world around us and while certain well accepted aspects of our lives might change in the future, one thing we can do is focus on ourselves. If we are committed to realizing our true nature of love and happiness, regardless of circumstances, then we can find joy and opportunity in any environment.
    .-= HappinessandWisdom´s last blog ..When thinking about happiness, it’s necessary to think about sadness =-.

    Reply
    1. Kaushik Post author

      Hi HappinessandWisdom,

      Thanks for pointing that out. My intention with this article was not engender a negative outlook, but to point to a reality, and the opportunity it presents for awakening.

      Yes, with awakening to our true nature, we can find joy in any circumstance.

      Namaste,
      k

      Reply
  8. Paul Maurice Martin

    “The ultimate tragedy is that everything that is life is devalued into a means of maximizing material value.” Yep. Always “growing” the economy at the expense of the planet. One way or another that can’t go on anywhere near forever…

    Reply
    1. Kaushik Post author

      Hi Paul,
      Cycles of down-times are natural in people and nature and the economy. There has been exuberant excess in the last five decades, and it will balance.

      I hope you are doing well.

      Namaste,
      k

      Reply
  9. Janice

    Dear Mr. K.,
    I have learned a lot from your article. I am one of the American’s born and raised that came up through American schools. We were not exposed to this type of economic information and our advisors, parents, teachers, etc. did not push us to understand where our money comes from and how it channels through the system. The flow of the up and down and the dead ends.
    The daughters that I have raised are now adults. Their father and I gave them a more secure life than they are going to be able to give their children. All that work and not much to pass on to my grandkids. EXCEPT, as you and your friends remind me. I can give them things that I how am learning, concepts and understanding that you write of everyday. That life is in this moment, that we really are enough, that with understanding and love of ourselves we can make a difference everyday in how we treat ourselves and others.
    Have a wonderful day,
    Janice

    Reply
    1. Kaushik Post author

      Hi Janice,
      This information is out there but not easily available. We get a narrow range of news from the mainstream media. But I am sensing now that this is becoming more and more apparent.

      Yes, I feel the same way about my two daughters. Their lives and their childrens’ lives will be lived in volatile times.

      I love this sentence: That life is in this moment, that we really are enough, that with understanding and love of ourselves we can make a difference everyday in how we treat ourselves and others.

      Yes, exactly!

      I hope you are well, my friend!

      love and peace,
      k

      Reply
  10. Tony Applebaum

    Interesting. Ultimately I believe that the past and future are both illusions. We all get caught up in what may or may not happen, when the best time to awaken is right here, right now.

    Reply
    1. Kaushik Post author

      Hi Evan,
      Yes, very interesting article. It’s detailed and well-thought out. There are many variables and patterns and as you point out, it’s interesting to look at trends and scenarios.

      Thanks for the link.

      love and peace,
      k

      Reply
  11. Davidya

    Thanks for your thoughts on this, Kaushik. I’ve thought along similar lines. There is some energetic stuff that begins a peak next weekend through the summer that makes outcomes a little unpredictable. Spiritual teachers sometimes talk about the importance of this shift – the big issue now being how smoothly the transition takes place. It will be a big adventure to watch it unfold.

    I also saw an old video a few days ago talking about how badly we understand exponential. For example, we might think of 7% growth is fine. But 7 % means double in 10 years. And double the doubling in 20 years. When we apply that to consequences like energy consumption or waste or traffic and it quickly becomes apparent how unsustainable such a growth model is. Where do we put 4x the waste and traffic?

    Our economies are largely driven by marketing to create desire/demand and private corporations who’s sole function is making more profit. When profit = fiat money, where is the meaning in that? Where is life, purpose, happiness?

    If interested, I made some other comments about this a couple of weeks ago.
    http://in2deep.wordpress.com/2010/05/14/lost-purpose/
    .-= Davidya´s last blog ..The Reality of the World =-.

    Reply
    1. Kaushik Post author

      Hi Davidya,

      That’s interesting. This weekend is June 5/6. In economic circles, some people are predicting that sentiment will begin to shift in the second half of this year.

      It’s difficult in our linear minds to project non-linear patterns. As you point, most of us would under-estimate the impact of 7% compounding. And when we consider carefully, the waste and traffic and ecological impact has indeed been building up for decades.

      Indeed, where is life, purpose, happiness. My intent in this article was not to discuss money so much, but to point out the inevitable ebb and flow, and collapse, in a program of control, which human beings have been intent on for a long time, probably since the advent of agriculture, possibly before that.

      I remember your article–it’s very interesting. The sentiment that this is the time of a major changed is growing. Your article is reminiscent by a very interesting and large book by Charles Eisenstein called the “Ascent of Humanity.”

      Thanks for you thoughts. Very illuminating.

      Namaste,
      k

      Reply
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  18. Jays Shortt

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  19. Liara Covert

    This post offers a friendly reminder that human beings tend to view the external world through the perception of conditioned beliefs and their inner judge. To move to that place where you no longer view one situation, society or way of life, as better or worse than another, is to move beyond ego and expand one’s perspective.

    Clearly, differing views exist on human suffering. One point of view is that things are not at all as they seem. One is invited to reflect on the nature of one’s focus, and how every thought influences emotions. Choosing to feel good, choosing to sense every event is an extension of higher consciousnes, has implications for the greater good, has consequences for individual and collective energy vibration, and what is unfolding now.

    Reply
    1. Kaushik Post author

      Thank you, Liara. I was reluctant to write this particular article, and still have mixed feelings about it. What I do know is that the future of humanity depends on individual awakening.

      Always, in gratitude to your insights.

      love and peace,
      k

      Reply

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