Monday, April 30, 2012
If there exists a single factor that can put enough pressure on the whole of the American economy and force it to crumble under its own weight, it’s the price the average American pays for gas. Extreme up-side gas price swings have preceded seven of the last eight American recessions, most recently in the summer of 2008 when drivers were forced to pay an all time high in excess of $4.50 per gallon at the pumps. What followed this spike – caused in part by tightening supplies, rising demand, easy money and a health dose of financial propaganda – was nothing short of the most severe financial and economic crisis since the Great Depression.
Nearly four years on the country finds itself in the midst of difficult times that havetaken their toll on millions of Americans through job losses, home foreclosures, un-servicable debt, and ever dwindling retirement savings. By all accounts, Americans are worse off today than they were ten years ago, and the state of our nation, despite what Washington’s media masters report, is fiscally, economically, and socially dire.
With an estimated national debt that will approach $20 trillion in just a couple of years, some $200 trillion in unfunded liabilities over the next twenty five years, scores of millions of Americans dependent on overburdened government safety nets to survive, and a rapidly shrinking domestic economy, the key question becomes,”what is America’s economic breaking point?”
The answer to this question becomes apparent in a recent documentary from Future Money Trends, which suggests that the breaking point for the U.S. economy comes when the cheap energy we have enjoyed for the better part of a century finally dries up.
Future Money Trends is expecting the U.S. to face the perfect storm of events that, when combined, will send gas prices past the breaking point for the average American.
There are three major catalysts that will cause gas prices to reach this breaking point.
Number one, the dollar is in a state of collapse caused by a continuous increase of the money supply by America’s central bank.
Two, instability in the middle east and a potential war with Iran would great disrupt the supply of oil.
Three, the supply of cheap, recoverable oil is dwindling along with a major increase in demand.
America is built for $50 oil and $2 a gallon gasoline. The seriousness of our situation should not be overlooked. We have multiple forces that will drive gas prices past America’s $5 per gallon breaking point… Rising gas prices caused by these three catalysts will break the backs of the American consumer, spiking prices to the point where present day normalcy is no longer the reality.
Though there is evidence that the peak oil theory of physical shortages is accurate, it’s not even so much that the world will run out of oil per se, as it is that we simply don’t have the technology to extract that oil at a cheap enough cost to maintain our current way of life.
If you consider the significant pressures currently facing the United States financial and economically, it’s not too much of a stretch to suggest that even a minimal rise in the price of gas could seriously hamper the consumption habits of the majority of our population, which in turn will further reduce economic growth. As Future Money Trends‘ Daniel Ameduri notes in the above documentary, even a $1 gas price move has a significant impact with the potential to extract $100 billion from the broader economy.
With gas prices at or above $4 in most parts of the country, we’re quickly approaching 2008′s breaking point. And for those who don’t think prices could exceed those historic highs of 2008, consider that most Europeans are already paying nearly $10 per gallon.
With rising demand from BRIC nations like China and India, tensions in the middle east and unprecedented monetary expansion, ten dollars may very well become a reality. Such a swing in prices would immediately shave some $600 billion in direct consumer consumption and shrink our economy by 5% almost instantly. And that doesn’t even include the consequences that will inevitably hit small businesses and their employees in the months following.
Going into 2008 Americans felt fairly confident about their savings, their ability to find work, and their overall outlook. After four years of malaise, the majority of Americans have lost that confidence, as their ability to maintain the standard of living to which they became accustomed over decades of rampant government spending and easy money has been seriously undermined.
At this point, as suggested by Ameduri, even a one or two dollar increase in the price of gas could be the breaking point that sends our economy and global financial markets into an unrecoverable tailspin. The psychological impact of $5 or $6 gas may cause more of a panic than the price itself, because the only thing keeping the system afloat at this point is confidence in our leadership and that the best-and-brightest will be able to mitigate the crisis.
We were able to suspend the worst when governments around the world stepped in previously and let loose everything in the quiver to abate a collapse. This time, however, with our debts piling up at unsustainable levels and our lenders rapidly diversifying out of U.S. based assets, we will not be so lucky.
Whether the breaking point has been breached is up for debate, but there’s a strong possibility the die has already been cast. With trillions of dollars in capital flows, government intervention and financial machinations behind the scenes, it’s impossible to predict the exact timeline or occurrence of events, but we may well have already crossed the Rubicon.
Assuming that a breaking point is inevitable simply because of our failure to fundamentally change anything since the original crisis took hold in 2008, we should look to history as a guide as a way to anticipate the consequences that follow unsustainable governance and monetary policy.
If history surrounding such events has taught us anything, it’s that we must presume whatever is coming will be brutal, violent and it will transpire so quickly that most people won’t realize what happened until they’re walking the streets with worthless paper money in their pockets looking for morsels of food to stock their pantries – we’re talking end of the world type stuff.
The collapse of nations and conventional paradigms is never an orderly thing.