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Momentous changes have surfaced since this time in every major economy around the world. These changes are readily acknowledged. The most profound of these is a fast growing governmental debt and a general collapse in employment and income levels, vanishing personal security, reduced profitability in industries, reduced productivity and physical production, the emergence of world-wide shortages in basic foods, the possibility of another energy crisis, and the list goes on. The major areas of growth in this period are found in crime, disease, conservatism, poverty, and stratospheric gains in the financial markets, starvation in the poorer countries, fascism in the streets and in halls of government, and wars all over the face of the planet.
The most serious of all these aspects, though they are all interrelated, is the fantastic gain in the financial markets that literally the whole world celebrates. The markets stand tall at dizzying highs in one of the longest and strongest stock market rallies that simply won't quit, until...?
Sure, the markets have gone up, and the markets have gone down. They have been at near zero, and they have reached astronomical highs. Nothing is new. It has all happened before. Indeed, is has. This is also the point that is important to notice. History tells us that with every major rally comes also a great vulnerability. The more that the stockmarkets grow, the less valuable do its aggregates become.
Oh, you don't agree! In a sense you are right. The value of the stockmarket has nothing to do with the physical reality anymore that it theoretically represents. Dividend yields matter so little today that no one cares about them anymore. All that matters is growth in share values. This is a part of the problem. The markets have become disassociated from the physical economy. They have grown in leaps and bounds while the physical economy that they represent on paper is declining and disappearing. The markets have cut themselves loose from the platform of physical production in the economy, where all real wealth is generated, and from which proceeds the society lives.
This paradox of unrestrained financial growth in the phase of physical decline in the economy reveals a very vulnerable foundation, and this not only for the markets, but for the society as a whole. By their disassociation from reality the values in the markets have become fictitious, especially so, in the financial derivatives markets that are the furthest removed from physical reality. Here, the values have become so fictional, and the profit potential so great, that the rush into these markets has created an annual global financial turnover that is pushing towards the one quadrillion dollar mark. This creates problems in the markets and for society.
One part of the problem is, that the profits from fictitious values are fictitious, too. This creates a problem for society when these fictitious profits are applied as claims against the physical economy, as though they were real. To a certain degree this actually works, but the process falls apart the moment that all the vast claims of the fictitious profits can no longer be reconciled with physical wealth generated in the economy, except, perhaps, by force. Such 'force' is already being applied in the arena of debt-service collection. This 'force' literally robs the physical economy by demanding from it wealth that has never been created in terms of physical production.
This interlocked relationship tends to collapse completely when the wealth demanded to satisfy financial profits exceeds what the physical economy can produce. When this occurs, debt is created.
The second part of the problem is that the fictitious system needs to be fed with ever greater inflows of real money, because it will collapse if it cannot be kept growing. This requires the nation to commit itself to constant increases in the money supply, which increases the debt. Furthermore, the ever increasing demand for market capitalization draws into the markets all traditionally existing investment funds that would normally support the physical economy The result is an accelerated economic collapse that leads to more debt.
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