How Will The American Economy Die?

by Russell D. Longcore

I have been writing about secession now since May of 2009. One of the constant themes of my writings is that secession is not going to happen in America until and unless the economy collapses. AFTER it collapses. A lot of what I’ve written has been perception, conjecture and prediction based in reason. But much of that conjecture and many of those predictions are now coming true. Tick. Tock. It’s not a case of “If,” like there was a possibility that America could avoid collapse. Now, it’s simply a countdown to inevitability.

The following is a plausible and likely scenario of the death of the American economy.

First, the money goes.

The world economic system is built upon two things: (1) fractional reserve banking and (2) fiat money. There is not one nation on earth that has a commodity-based money and currency. Keynesian economics, taught in nearly every college Econ curriculum, is so ubiquitous…so ingrained…that it is like the dye colors in your shirt. No amount of washing gets the dye out.

Is there a banker on earth that does not use fractional reserve banking? Money is created out of thin air and pumped into the world economy. It would be impossible without fiat currency…the currency considered to be money because some government says that it is. When your currency is backed by “the full faith and credit of” your government, and nothing else, and your government goes broke…your currency is not far behind. In the regular world, issuing paper money with nothing behind it is called “Counterfeiting.”

The power in Washington is built on those two things above and add a third: the US Dollar is the world reserve currency. Being the world reserve currency was brought about back in the early 1970s when Nixon negotiated a deal with the House of Saud, in which Nixon guaranteed the Saudis that he would protect their kingdom from their neighbors if they agreed to (a) use only the US Dollar to settle oil payments, and (b) use their surpluses to buy US Treasury debt instruments. Over time, the Dollar became the currency all nations used to settle all kinds of commercial transactions. This reserve status gave the USA a tremendous advantage over all other nations. The blowback of unintended consequences is that many foreign nations own trillions of US Debt, and that gives those nations leverage over Washington. For a good look at who owns US Debt, CLICK HERE.

Right now, in real time, Washington is making plans to make war upon the nation of Iran. They are using the excuse that they must keep Iran from possessing nuclear weapons. The reality behind the scenes is that Iran started an oil bourse (a commodity exchange) on Kish Island in 2008, specifically to begin trading their own oil in currencies other than the US Dollar. That is a grave threat to the reserve currency status of the Dollar. Previously, Iraqi President Saddam Hussein announced that Iraq was going to begin accepting payments for oil in Euros, not Dollars. What happened to him? Muamar Gaddafi of Libya was buying enormous quantities of gold bullion with the intention of creating an African dinar, a gold-backed money for all of the African nations to use. Where is Gaddafi now?

“But so what?” you may ask.

The only thing that maintains the purchasing power of the Dollar is its world reserve status. You already know that the Dollar has no precious metals backing it. The Dollar only has the “full faith and credit of the United States” behind it. But Washington is many dozens of trillion dollars in debt. Some estimate that the US has over $100 Trillion of debt. Just a week ago, the United States current Federal budget debt limit reached $15 Trillion, and that is equal to the Gross Domestic Product (GDP) of the entire nation. So we owe more now than we take in annually.

Any action by any other nation that threatens the world reserve currency status of the US Dollar panics Washington. They must snuff it out by whatever means necessary. Even war.

But they cannot.

Iran has powerful friends around the globe. Just last week, Iran inked a deal with India to sell them oil for gold. Iran will do the same with China. Russia will pay with gold and rubles. And, because Iran sits on an ocean of oil, and many nations rely upon its oil for survival, Iran will defeat Washington and its allies who have set up embargoes against Iran.

The whole world does not have to forsake the Dollar all at once to send shock waves through Washington. But more and more nations are rejecting the terms of the DC/European embargo against Iran. On Thursday, Turkey announced that they would not participate in the embargo. Turkey is a very crucial ally to DC. One at a time, nations will find that they can do business around the world in their own currencies or in gold.

But here’s another unintended consequence, and a potential trigger for the collapse of the Dollar. As nation after nation decide they do not need the Dollar, they will do what they can to rid themselves of American currency and American debt. Nations around the globe have purchased US Treasuries. Now they will have no need for the bonds, and will want to sell them. Questions come up: Who will buy them? And what are they worth?

What happens when you offer bonds for sale and no one buys them? You have very expensive wallpaper or toilet paper. What happens when you CAN sell them, but at pennies on the Dollar? You take staggering losses.

One other problem is timing. In order to reclaim some value for US Treasuries, your nation’s bond traders must have perfect timing to offer enough bonds for sale but not so many that it triggers a bond market collapse. Then to find buyers at acceptable prices? It is not reasonable to believe that every nation will find buyers at all, at good prices and not create a bond market crash.

So, built into the global process of forsaking the US Dollar as the world reserve currency are the seeds of the Dollar’s collapse. Either the bond market collapses as nations get out of the Dollar, or getting out of the Dollar causes the value of the Dollar to collapse. Keep in mind that if the Dollar were as “good as gold,” no nation would want to jettison the Dollar.

Dear Readers, there is no third choice that prevents the collapse of the Dollar.

What Does Collapse Mean?

There can only be one meaning for the word “collapse.” Hyperinflation is that collapse. Think about it. Inflation is the loss of purchasing power. Inflation that occurs over decades is like death by a thousand cuts. Americans for the last 80-plus years are used to inflation and the loss of their purchasing power. In hyperinflation, what took perhaps 40 years to lose a certain amount of purchasing power can easily happen in 40 days…or even 40 hours. There will come a day soon here in America when the Dollar will not be accepted between buyers and sellers for even the simplest transactions. It happened in Zimbabwe. I presently own 160 Trillion in Reserve Bank of Zimbabwe currency, and I paid six dollars for it.

The American Dollar has purchasing power…value…now because the world uses it. And the nation with world reserve currency status that is inflating its money will continue to pay its debts with fiat currency, which is losing more and more value. Once an unknown number of nations stop…or even just slow down…using the Dollar for international trade, the value of the Dollar will evaporate. I say “unknown” because it’s not just the number of nations that is important. It is the economic might of the nations that stop using the Dollar. If the BRIC nations…Brazil, Russia, India and China…arguably the four strongest non-USA world economies…continue the process of weaning themselves off the Dollar, it will have drastic and sudden repercussions for the Dollar.

Also remember how this world turns. The business day in Berlin, Rome or Athens is six hours ahead of the American East Coast. A bond market collapse could start in a European bond market at 9:00 am in Berlin while it’s 3:00 am in New York. The Dollar could get hammered on foreign markets for six hours before the banks open in New York, or the New York Stock Exchange opens for business at 9:30 am. Americans will be completely defenseless against the collapse.

Washington’s Response

The politicians in DC will be powerless to stop the financial carnage because they cannot control the value of a currency that others refuse to use. The Federal Reserve may pump additional trillions of greenbacks into the American economy, but at some point, wheelbarrow loads of paper money won’t buy you a loaf of bread. This will cause the Federal bureaucracy to grind to a halt as Federal union employees refuse to work for worthless money. And how will Washington pay its military personnel? How will state governments pay their law enforcement officers and prison guards? Society will collapse at that time. It will be The End Of The World As We Know It.

You see, when the VALUE of the American Dollar ceases to exist, our bubble society will also cease to exist. This is why I hold the position that once the economic system in America fails, Washington will be entirely unable to stop secession. And that only the collapse of the Dollar will trigger the desire for secession.

Here is the mental picture I want you to form when thinking about the world economic system. Blowing soap bubbles. You dip a drinking straw into the bubble liquid and begin blowing on the dry end of the straw. Hundreds of bubbles of many sizes will form, expand and then pop. For a hundred years the world has experienced economic bubble after bubble…boom, bust, recession, depression, real estate, housing, tech stocks, mortgages but to name a few. But don’t miss this! When fractional reserve banking and fiat money run the world, ALL ECONOMIC ACTIVITY IS A BUBBLE that must eventually burst.

This has been a hard article to write. The subject is one of life or death for billions around the world, and millions on our own continent. I take no joy or satisfaction in this article, save the satisfaction of knowing that some of you will read this and act to save yourself and your family.

Think. Use your brain. Do not let anyone tell you how to think or do your thinking for you. Question ALL authority. Free Your Mind.

Secession is the only hope for humanity. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

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18 Responses to How Will The American Economy Die?

  1. GunRights4US says:

    Truly frightening. Russell you’ve done a great job making a difficult topic understandable. I’ve linked to this article on my blog.

  2. [...] Russell Longcore: How Will the American Economy Die? [...]

  3. Richard says:

    Mr. Longcore’s economic projections are not whimsical conjecture. We’ve all read similar cautions and warnings elsewhere, all uttered by experts with more degrees than my garden thermometer. The fear and the portent of imminent change is past. Its just around the corner or so they say.
    Most of the worlds financial and political leaders seem to have now succumbed to a sort of mental numbness. Its similar to that experienced by a person who’s heard his doctor confirm a terminal diagnosis. The economic vessel that carries us all, like Titanic, has sprung a lot of fatal leaks and is even now slowly plunging toward the icy depths of ruin.
    What I disagree with is Russell’s assessment of secession as a possible aftermath. I don’t think its in the cards for America any more. I wish otherwise, but I have extreme doubts.

    Here’s why.

    As bad as the Great Depression hit America in the 1930′s, it hit the rest of the world worse. Civil unrest, caused by millions who had nothing to do and nothing to hope for, provided fertile ground for fascism and oppression to flourish. The result was a military upheaval the like of which human history had never seen. Sixty million human beings died and that’s a conservative estimate.

    Forward to the twenty first century…..

    In post constitutional America, the legal, cultural, and accepted way of life is now the Federal police state. There are whispers of opposition and complaint now and then, but for the most part citizens have accepted it. We move like quiet contented cattle through TSA checkpoints at airports, bus stations and rail stations. Pretty soon our travel on the interstates will have to allow for search violations of our persons, our vehicles and our travel schedules. Soon after that will be unexpected searches of our homes. Think it won’t happen here? Think again.
    Look back at the 1930′s and tell me what you see in the history books. Economic disaster resulted in fascist regimes and oppressive police state restrictions. Individual liberty vanished like smoke in the wind.
    America is already a fascist state. Corporations and private interests have more influence in congress than voters do. The president is a puppet of the military-industrial complex and the courts, well they put the seal of approval on most everything. The police state mentality is everywhere and people BUY IT. There should be rioting and demonstrations everywhere, but we don’t hear a peep.
    The last evidence of a fascist police state is violent aggressive global militarism. Yup, America is there too. Even in church we kowtow to the flag, sing the national anthem and solemnly pledge our allegiance to a striped rag. We don’t even need a general economic collapse. Another great depression will do just fine, thank you very much. Such a situation will set the cement of American fascism, not unseat it.

    All this brings me to the unsettling conclusion of asking myself whether this economic situation was contrived. But no, our leadership would never do that. They would never stoop so low. Would they?

    • dumpdc says:

      Richard-

      I agree with your assessment of world fascism. But it appears that you might have missed something I wrote. Hyperinflation will field dress the American carcass. When the Federal Reserve notes become nearly worthless or worthless altogether, how is DC going to pay its soldiers to oppress us? How are the states going to pay law enforcement personnel and prison guards? Unless DC starts paying its people with gold or silver, they will lose control of America. Might not be overnight, but it will be quite sudden. That is the takeaway from my article. When the money becomes worthless, we’re all back on a level playing field, so to speak. But not in a good way. Those that have laid aside gold and silver will have a chance at survival because they will have real money. Everybody else is screwed. And another thing. There are plenty of liberty minded people that will band together and demand secession. Millions. We’re just spread thin. Thanks, Russ

      • Mr. Eckert says:

        As to how they the “soldiers” will be paid- The DC Bandits will confiscate gasoline, food, gold, silver and the jewelry forms of same.

        The Totenkopfs ah, I meant to say , “The employees of the Firm Formerly Known As Blackwater”, the 20,000 or so GI’s who’ve forgotten their Oaths (or who will uphold their oaths to the narco gangs from which so many have come seeking training and discipline) and the remaining Federal armed bureaucrats” will also be allowed to pillage and/or requisition supplies from the civilian schlubs they’re “protecting”..

        The Pretender’s 500,000 man Civil Defense Force is another wild card. The “Turner Diaries” is an execrable piece of racist trash, but provides an example of how this Civil Defense Force will operate. The ranks will be filled with loser psychopaths, the race of whom will not matter. Redneck meth heads are just as expendable and sociopathic as are “inner city youths”. They’ll be sent in first to deplete the Patriots’ supply of ammunition before the Praetorians are sent in to finish the job.

        The good news, is that perhaps, by then, the Sheeple will finally understand…

        Question: “Why do the Latvians and Estonians not water their gardens?” Answer: “Because it makes their guns rust.”

        Still hoping for a peaceful resolution.

      • dumpdc says:

        Mr.Eckert-

        Very cleverly written. I nearly did a spit take with my coffee when I got to the question. Russ

  4. Kevin Baker says:

    When the Federal Reserve notes become nearly worthless or worthless altogether, how is DC going to pay its soldiers to oppress us? How are the states going to pay law enforcement personnel and prison guards?

    Food and physical security for their families.

    Safety buys loyalty.

  5. triptyx says:

    Good overall, but I disagree with your analysis of Fractional Reserve Banking “creating money out of thin air”. A good analysis of what FRB does by Karl Denninger can be found at:
    http://market-ticker.org/akcs-www?post=163423

    That is not to say that the Financial Sector and Government haven’t colluded to effectively rob the people of the World – for they most certainly have (and Karl writes daily on the various instruments and vehicles used to do so). Their actions aren’t, however, directly enabled by a properly executed Fractional Reserve Banking system.

    • dumpdc says:

      Dear Triptyx: I love Denninger, but FRB cannot happen without fiat money. And when you start with fiat money, you cannot create gold. Rumplestilskin spun gold from straw, bankers aren’t that clever. Russ

  6. sum know buddy says:

    Late to the party -
    Not sure if the guests of honor have left -

    But, here’s an ethical question:

    If one had “derived” (“created” implies too much input, “discovered” too little) a “primer charge” that could cause a cascade collapse of The US Dollar (and, by simple algebra, any other “money” as recognized by any recognized government), not according to some “when the stars align” mysticism, but more like a computer virus (and, no, that’s not even close to the how of it, just that it works like “release it into ‘the wild’ and let it ‘go off’”), is it more ethical to take such formula to the grave (and hope that no one else “derives” it either), thus granting the possibility of a “soft landing” after the otherwise “inevitable” collapse, or should one actually “break the seal” and “release hell on earth”? (I’m also open to anything between the extremes, but I can’t really see any way of controlling the damage, once started.)

    • dumpdc says:

      Dear Buddy- There will be no soft landing for anyone, derived primer charge or not. The fuse has already been lit. We just don’t know how long the fuse is. Can’t answer the other ethical question, only you can do that. Russ

  7. Sebastian Bermudes says:

    I believe this scenario is probable, but the banksters are doing all they can to keep the game going. With the US government in collusion with the banksters corporations, payment service providers and media, the collapse will probably happen long before the public realizes it.

  8. David Snyder says:

    The United States economy will look a lot like those of Greece & Spain before long.

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