Throughout the industrialized world, we now see the result of long-term cheap credit issued through central banks and the private banking system, with the blessing of our politicians. This has led to economic bubbles – housing bubbles and stock exchange bubbles – as well as unsustainable levels of debt that will eventually and inexorably lead to economic collapse.
History has shown that this tends to be followed by uncontrollable inflation: for example, in the Weimar Republic in the early 1920 century, when the Germans used their Deutsche Mark to fire in the fireplace, or in Zimbabwe in recent times, where one a hundred trillion Zimbabwe dollars for a single meal. Since debt levels are a global problem – and much worse today than in previous economic collapses – this time the collapse will be far worse and affect far more people than ever before.
Large fall height. There is also reason to believe that the collapse can be extra bad in Norway. The so-called welfare state is based on the idea that more and more taxes, fees and regulations, as well as a redistribution of creative and productive capital through a huge bureaucracy, leads to "the good society". But there is little that is so detrimental to the welfare of a society and creates as much poverty as the confiscation of working capital through taxes and fees, administered by an ever-expanding state apparatus. Without sufficient focus on entrepreneurship and productive, creative capital, Norway has misused a golden opportunity – the last 50 years of oil age – to develop a welfare state without sustainability and competitiveness. The fall height may thus be greater in Norway than in other western countries. A population soaked in welfare schemes is unable to take the problems seriously, and thus lives in the belief that our politicians and the state will fix it. Norway is like a patient waiting for the settlement with his own corrupt lifestyle. The coming economic collapse will lead to a completely different and negative understanding of what our politicians like to call "the Norwegian model".
The fall height is greater in Norway than in any other western country.
The world's first central bank. Understanding the background of the ongoing collapse helps with a look at how formerly feudal societies and recent democracies have funded social welfare reforms – and not least wars – through money printing. In 1693, King William of England was in desperate need of funds to finance a half-century war against France as well as a series of civil wars triggered by opposition to royal taxes. The solution was the creation of the world's first central bank, the Bank of England. Just like today's central banks, the Bank of England was given a monopoly to print money to finance the war, as well as to award the central bank the double amount, which the bank could then lend and earn interest on. The bank's shareholders were the king himself, as well as the nobility and members of parliament. Kings, politicians and bankers have never said no to easy money. Today's Fiat system (see fact box), where the banks create endless credit (debt) by lending your and my deposits over and over again with simple keystrokes on a PC – without letting us participate in the profits from the use of our money – represents a form of exchange or usury. When money, or rather credit, is created almost unlimited, the real interest rate or return becomes infinite (see article in Ny Tid December 2015, «The banks and the state's pyramid scheme»)
Since the creation of the Bank of England, several hundred Fiat monetary systems have been set up to finance wars and social reforms. All these pyramid schemes have, without exception, first led to growth, prosperity and economic bubbles, before they then without exception have ended in economic collapse. And it is without exception the middle class and the poorest who have ended up with the bill, through even higher taxes and fees and that money they have left in the bank disappears. With the load comes even more regulations and freedom.
It is in human nature to save oneself before saving others. It has already happened in Cyprus and Greece, and it will probably happen in the rest of Europe. This will happen as the banking system crumbles from non-performing loans and extreme exposure in derivatives markets and own portfolios in "paper products" created to enrich the banks' shareholders and management at the expense of our deposits and at our risk. Our politicians and the Bank Guarantee Fund are not telling the truth when they say that each deposit customer is guaranteed two million kroner, when the reality is that the Bank Guarantee Fund only has funds to cover about 55 kroner per account. Therefore, there is a document – well hidden on Norges Bank's website – which describes how the banks are to be rescued in a crisis situation by a so-called bail-in, which is nothing more than legalized confiscation of your and my savings. Politicians and banks fear the coming collapse and prepare the rescue of themselves and the banking system at the expense of the people. As always, they display ignorance, arrogance and disrespect to the people they are meant to serve.
Since the financial crisis in 2008, the world's total debt level has risen by almost 50 percent, and what was a financial problem at the time is now an incurable pyramid scheme.
Excess Capacity. The problem with the extreme credit growth of recent decades is that it leads to surplus capacity in the economy. The result is overproduction of things we do not need. Call it a sustained inflation of goods and services, oil, coal, copper and other raw materials, which in turn has led to inflation of wages, holidays and leisure and correspondingly high cost levels that are ultimately not accountable. As little as we can live with an oil price of 150 dollars, we can live with a diluted Gin & Tonic costing 100 kroner.
Wages in almost all countries – including Greece, Portugal and Spain – are going down, largely due to the imbalance in competitiveness between the countries in the eurozone. The alternative would have been for wages and cost levels to rise by 50–75 per cent in countries such as Germany. It is the "kill" for German productivity and competitiveness and will not happen.
This can be illustrated with China as a good example. When deflation accelerates and commodity prices, goods and services fall in price, it is because China has too much of it. China has also built tremendous infrastructure with entire cities standing empty and huge modern production facilities in the industry standing idle. The same applies to the transport sector, where too many ships and trucks are built. It takes a long time for the overcapacity to disappear. In a globalized world, everyone has been part of the growth and boom, and it is completely wrong to blame China and regard this as a Chinese phenomenon, as some economists and politicians are now trying.
It is always the market that clears up this imbalance that follows from the politicians and the central bank's long-standing credit party. It's like a soaking sponge full of credit, inflated commodities, services, salaries and mispricing. In a zero-interest regime, there is no real opportunity to measure or assess risk against return, and the credit is then used to create huge bubbles in the economy, which are doomed to burst when the fungus falls victim to the economic law of gravity. Since the financial crisis in 2008, the world's total debt level has risen by almost 50 percent, and what was a financial problem at the time is now an incurable pyramid scheme.
What we are witnessing now is the desperate struggle of politicians and the central bank to prevent market forces from squeezing the last of the sponge – that is, they get rid of the surplus capacity of the economy built up with credit and manipulated low interest rates over the last 25-30 the years. Today's politicians, who, in partnership with the central banks and the private banking system, have the main responsibility for how we have behaved, will obviously not stand at the helm when the system collapses. Therefore, they also try to delay the inevitable by issuing even more "free money". The hope is that they can get you and me to buy another car, flat screen or mobile phone on credit – to keep the pyramid game going for a little while longer. Similarly, insolvent banks all over the world are crammed with fresh money to keep this system alive for a while.
Decay. Throughout history, all dominant societies or kingdoms – such as the Roman Empire and imperialism – are characterized by some peculiar characteristics before they collapse. All of these characteristics are manifestations of human decay. The last days of the Roman Empire were characterized by fashion and sex, as well as more and more gameshows of highly paid gladiators – strangely also with a great focus on cooking and the best chefs – not unlike today's social structure. Is it perhaps that when the moral, social, judicial and economic self-deception is at its greatest, that civilizations collapse?
That is exactly what we need. Companies and projects that are financed with cheap money without real survivability must be allowed to go bankrupt. The same applies to banks laden with non-performing loan portfolios, not to mention pacific welfare reforms. Bankruptcy is good because it stops the suffering and gives us the medicine needed to bring the economy back into balance. Unfortunately, politicians provide more water in the sponge – in the form of even more cheap credit through a solid counterfeiting, ie printing money. Finally, some must take into account the fact that this years of crazy expansion, especially in the public sector of the economy, has had the potential to destroy productivity and entrepreneurship. We may pay double through reduced purchasing power and repayment of tons of debt through increased taxes. Throughout history, all Fiat money systems have been destroyed, as all pyramid schemes do. As in previous occasions, politicians and bank executives blame unforeseen and unfortunate circumstances while appealing to solidarity, community and unity. Everything to save himself as the bubbles are about to burst.