How Long Can This House Of Cards Last?

House of cards constructed from money falling down - How Long Can This House Of Cards Last? What Can We Do?

If we constantly borrowed and spent more than we earn while debts piled up; our house of cards will eventually collapse.

Over a decade ago, P.J. O’Rourke warned:

“Alarm bells should be ringing very loudly as the United States contemplates a deficit for 2010 of more than $1.5 trillion – about 11% of GDP….

…. Empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.”

The 2010 numbers now look tame. The Committee for a responsible Federal Budget predicts:

“In light of the enactment of the year-end spending and COVID relief deal, we estimate the deficit will total $2.3 trillion for Fiscal Year (FY) 2021. …. It would be higher than any other time in recorded history outside of World War I.”

The Wall Street Journal (WSJ) reports:

“The federal debt is projected to almost double to 202% of gross domestic product by 2051….”

Dr. Lacy hunt believes the historic debt levels cause economic activity and the standard of living to decline.

Governments worldwide believe they have a Magic Money Tree spending money they don’t have.

When the house of cards collapses, it will affect us all!

The recent WHVP newsletter, “Who is scared of Inflation?” grabbed my attention. WHVP looks at things from a global perspective.

I contacted Managing Partner Urs Vrijhof-Droese for an interview.

DENNIS: Urs, let’s get right to it.

Your opening paragraph was an eye-opener:

“Central banks have a problem. No matter what they do, investors are not satisfied….

…. When thinking about the central bank’s functions you will find a variety of duties but nowhere will you find their raison d’etre as pleasing investors.

…. Printing endless money and keeping up purchasing programs did please investors. But not necessarily the general public.”

Our US central bank is owned by “member banks”; now the top brokerage firms, controlling trillions of dollars in investment capital.

Despite the stated mission, our central bank is hell-bent on protecting THEIR investment profits. One former Fed chair talked about the effect on the general public as “collateral damage”.

Is this the same everywhere? Do other central banks operate differently?

URS: Hi Dennis. I appreciate the opportunity to share our perspective with your readers.

After the financial crisis, enormous amounts of money were magically created by central banks while interest rates hit historical lows. Since this strategy helped prevent the financial system from collapsing, the central banks continued on; particularly when reacting to the consequences of the coronavirus.

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