Recently by Simon Black: Is the Debt Problem as Bad as TheySay?
In the 15th century, the highest standard of living in the world belonged to China. Places like Nanjing had reached the pinnacle of civilization with incredibly modern infrastructure, robust economies, substantial international trade, great healthcare, and a rising middle class.
Across the globe, Europeans were living out short, mud-filled, brutish lives in squalid poverty, dying off by the thousands from the bubonic plague. They were practically Neanderthals compared to the Chinese, and explorers like Marco Polo wrote fanciful tales of wealth and opulence in the east.
If you had told a Chinese merchant at the time that, over the course of the next several hundred years, global primacy would shift to Europe (and a relatively unknown American continent), you would have been laughed at. It was simply unthinkable given how advanced China was over the west.
And yet, it happened. History shows us that the great things about western civilization (Industrial Revolution, technological achievement) and the not-so-great things about western civilization (imperialism, slavery, genocide) caused the tables to turn and primacy to shift from east to west.
Ironically, the tables are turning yet again, and its driven by a number of factors.
At the tail end of World War II, a new global financial system was concocted that was heavily biased to disproportionately benefit the United States. Over the subsequent decades, foreign countries would obligingly mop up US government largess and finance out of control retail consumption.
It got to the point where people felt it was a natural right of Americans to have huge homes, cheap gas, and oodles of junk, as well as a government that could buy anything it wanted without giving a second thought to fiscal discipline. Much of this was made possible at the expense of peasant workers overseas.
For years, they imported US inflation and suffered a tremendous disparity in standard of living, all because of how the global financial system was set up. This system, based on the United States as the center of the economic universe, is now completely fractured, and it’s the biggest game changer in centuries.
Is it possible that such a force can be stopped or reversed? Highly unlikely.
These huge sea changes in the global order happen slowly, like titanic ships changing course in a tight canal. The initial seeds of change were planted decades ago when the US began running consistent budget deficits in the early 1960s, and even before that when the Federal Reserve Act was passed in 1913 (which forever corrupted the nation’s money supply).
The negative momentum has been building for an exceptionally long time. Today’s debt, inflation, and unemployment crises are merely the latest symptoms of a cancer that has been growing for decades.
In total objectivity, the patient is beyond cure at this point… and the math is quite simple.