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The Global West Reaches Economic Adulthood

The Global West matures. Not only in demographics. Also in economics. Growth is over. Decline is knocking on the door. This reality is far from acceptance. The current mood is still the narrative of the past: growth.

But this narrative lacks an analysis of the main driver of economic ‘growth’ in the Global West the last 30 years: that was not rise of productivity (as everybody still thinks), but that was credit growth. Of course a rise in productivity had something to do with it. Of course there was a peace/détente dividend. Of course globalization contributed. But the main driver was credit. Credit is pulling consumption from the future to the past. Meaning credit is over emphasizing of consumption today at the cost of decline payment power tomorrow.

When an economy is for 75% based consumption and only 25% based on production (like the US economy) you know that this is not economic sustainable and will derail sooner or later. Only nations that has been able to promote their currency as the global reserve currency can operate such a non balanced economic model. By the grace of the acceptance of the world of their currency as global reserve currency. Quiet an fragile foundation for a nation. Too much monetary tail wind doesn’t guarantee a good/solid/sustainable economic future.

This monetary advantage applies only to the USA, for as long as it lasts (as bilateral currency swaps that bypasses the $ are getting mainstream at fast pace). When this advantage disappears the US economy will decline as a mathematical certainty: retracting to normal currency driven levels. It will lead to hyper inflation of the $. Why? As the government a) has budget deficits that must be financed and foreign demand is dead, plus b) has financed the most of its longterm federal debt (stupidly) in short term loans which need to be refinanced very quickly. Endless QE is than the only option (as is done as we speak: as foreign demand for US debt has fallen to almost zero). The problem is that this monetary change and the hyper inflation in the USD it delivers (in a running for the exit scenario or in a gradual decline scenario) will erase all financial assets in denominated in $ (making them worthless) pulling both the European as Japanese as Middle Eastern financial system with it down.

This is why the USA will response 'pre-emptive' (does this word rings a bell?) and try a) to let some other nation default (triggering a huge rise of interest levels in the Global West, as risk suddenly comes a debt pricing facet again) before they hit hyperinflation (this probably will be Japan, as getting an European nation defaulting was not possible by EU/ECB intervention) and b) to huge this other party default to design a new financial system in the US advantage again (as is done in 1944, 1971-1973 and in 2000-1014). The EU and JP will accept that US leadership (as their financial systems are undermined by $ exposure). The BRICS and the rest of the Global East and Global South will not accept this, both RU and CN consider the Global West as their friends anymore, a huge foreign policy debacle of the Global West. The US, the EU and Japan will form a new monetary union with erasing all state debt and by that all pensions. It will be a monetary union with no political union and therefore build on quick sand. Efforts to make it a political union will succeed, but will also be build on quick sand. At the end the USA will dissolve in separate states, as will Europe will be reshuffled along the language lines. Social security nets will have been abolished along this road. City nations will emerge/thrive.

To get back to the ‘developed world’ (nations with well developed large economies) at large: Credit is not that innocent as it is sold/marketed/advertised by its industry. Not for the EU and JP and the other nations of the world. Credit for production equipment is mainly good. Credit for maintaining consumption is mainly bad. It’s about living today and to hell with tomorrow. Fogged by the myth of endless economic growth (trees that grow into the heavens). Amortization free credit for housing is a prevention system for saving money out of the financial system. The financial industry not only want to issue credit to people, they also want the savings of people. Eating out their margins on both sides. Holland is an example of a nation where the population has a ‘long balance sheet’: on the one side house prices are very high and people can’t invest their pensions into their houses, on the other side there are very high mortgages ratios. Add to consumption credit, car credit and the coming student loan credit boom and people’s life and purchase/spending power is highly seized by the financial industry (reducing spending significantly). Add to this a retracting government that demands from people more savings as the social security safety nets are rolled up more and more.

To conclude this analysis: there is too much debt, too much future consumption has been pulled to the front earlier by credit. This all went well as long credit could grow. The music stopped when that was no longer possible in 2007/2008. Now the debts have to been paid/amortized with interests on top of it. That eats out consumption big time. Add to this higher income taxes and higher sales taxes that both eat out even more payment/purchase/spending/saving power. Add to this that people wisely start to build reserves again. Add to this the aging demographics (with most of their pension eggs in the $ basket, a basket that could be lost as described above very soon). Add to this that when money is created by the banks, only the principle is created, not the interest, the interest had to come from growth, growth that’s no longer there: the financial system is a soufflé in the oven and the oven is put off: guest what the soufflé will do now: most of the financial assets will vaporize. Add to this the wars neo-imperial wars the Global West is fighting around the world (damaging the trade relations they need to solve the problems). Add to this the end of Global West driven globalization and the rise of bilateral development by bilateral currency swaps and bilateral trade partnerships. And add to this the fact that the economic sun is no longer shining at full strength in the Global West. Other parts of the world now enjoys 5 till 10% economic growth, the Global West has no economic growth anymore. Forget all the cooked statistics on western economic growth: it’s plain propaganda: there is no real economic growth since 2007 in the Global West.

To wrap all this up: the Global West is toasted. Not a little, but big time. The credit bubble is going to hunt the Global West. Mortgaging the future was not a too wise concept. The Global West has gone drunk and the sobering up times are coming. But what about the golden future promised by the ‘knowledge driven economy’? That’s a Fata Morgana / rainbow too. The whole concept is based on the false thesis that the people of the Global West where more smart than the rest. That thesis is not only racial bad, it’s also just not true. Smartness has no geographical boundaries. The middle class in the Global East and Global South could even proof the opposite: as they want some piece of the global action too, they are more strict parents/educators than those in the Global West. But the Global West is more better organized right? Maybe, but Singapore is not organized? But the Global West is more creative right? Never seen the rebellious/creative youth of China or Russia or Iran?

How to go from here? The Global West has to grow up. That’s a different concept than growth. We have to cope with the effects of the last 30 years of irresponsible adolescence and face the above described facts. We didn’t use the credit growth for realizing energy independence: we just consumed it. The party is over, what’s is left is that we’re still there, we have a headache, too much used stuff on the floor that need to be cleaned and the catering company is waiting with the bill. The paradigmatic moment that we sober up and start to behave as adults. The Global West reached the momentum of global adulthood. From now one it’s not about growth anymore, but about paying the bills and above all: about preventing decline.

That’s a new/other cup of tea. One we must learn to appreciate/treasure/value. Not for leftish political reasons. Not from out a green mind set. But just from out economic reality. Black dark lightness visions? No. Just reality. When we see the reality, we can address it with smartness. We can’t solve problems before we start to see them.

What are the solutions? 1) Taking the licence for money creation away from the banks: financial capitalism has proven to be parasitic and wealth concentrating: fair market based productive capitalism produces and distribute wealth by the market by wages. 2) Stop any neo-imperial war waged by the Global West: aside from the moral issues: we can’t afford them anymore and we need not to grow enemies but develop trade relations: not out of ideology, but out of need for preserving what we have and prevent further decline: we are now the arsenics of the world: delivering instability where we can: we cut the branches we (need to) sit on at fast pace. 3) Eliminate all labour taxation (which will make the Global West yet comparative on the global market) and we could do that as the money creation has been taken away from the states. 4) Redirect the money creation away from real estate towards building more energy independence by non harming technologies (like solar) on the skin of each manmade object and energy conservation: energy imports are monetary drains that harms economies structural. 5) Develop bilateral relations with each and any nation where there would be a mutual interest to maintain and serve the relation as good as possible. 6) Stimulate open technology for all sectors the same way as open source thrived the software sector: it will compensate a lot of decline by progress: patents deliver innovation dead ended streets: open technology makes building innovation on innovation possible. So six simple steps will guide the Global West calm into the 21st century, not taking them will not counter weight the destruction of the 20th century troubles we put on our accounts.

Economic Adulthood or Economic Collapse. Quiet an easy choice. No rocket science. Just 6 easy steps will deliver the Global West a bright future for the 21st century.

See also International Currency Stability
See also Europe: Diagnosis and Prescription
See also Governmental Funding Turbulence
See also Labour Taxation
See also Money Creation
See also Energy Open Finance Platform
See also Global PV Solar Energy Finance Model
See also EQE/EBS Model Summary Diagram
See also BQE: Bilateral Currency Swaps
See also Gold Backing vs EQE/EBS Backing
See also Secular Stagnation as Denial Term
See also Financial QE vs Productive QE
See also Productive Capitalism Perspectives
See also Emerging Nations - Electricity PPP
See also Emerging Nations - Solar PPP
See also Easy Instant Solarizing Nations
See also Making The Euro More Offensive
See also Structural EU/EC Boat Refugees Solution

See also Global Solar Rollout - Description - Diagram
See also Regional Solar Rollout - Description - Diagram
See also Obama Administration Energy Strategy
See also China As Global Leading Solar Energy Nation
See also Open Finance Platform for Energy Investments
See also Iceland 3.0: Geothermal and Energy as Currency
See also Addressing Economic Decline of the Global West
See also IntraContinental: Continental Rail Schedules
See also Global West Enters Economic Adulthood
See also Global East Driven Globalization 2.0
See also Financial Capitalism vs Productive Capitalism
See also CIRI (China India Russia Iran) Avoids Dollar
See also Global West Gets A Common Currency
See also What Ended Global West Dominance
See also National Economic Development Organizations
See also Desert Investment Economics
See also Ending Global Poverty (By Sea Water Irrigation)

See also Global Deserts Exploration Model
See also WaterTech and MicroCredit Merge
See also Lupin As Soy Replacer
See also Global Seed Cartels Aren't Right
See also Global Food Model: Local to Global
See also Sun / Earth Interactions
See also Telco 3.0 : Telco out of the Cloud
See also National Business Clusters Abroad
See also Scientific Education/Research Funding
See also Iran: National Economic Plan
See also Immigrants and Trade
See also Emerging Nations - Minerals PPP
See also Emerging Nations - Deserts PPP
See also Emerging Nations - Energy PPP
See also National Solar Fund Model
See also Secular Islamic Finance
See also Open Energy Finance Platform

Gijs Graafland / Planck Foundation / Amsterdam / 2014

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