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How close are we to the Systemic collapse of the Global Financial System?. Meltdown How close are we to the Systemic collapse of the global financial system?. Oil is the fuel on which the Global Economy runs and credit is the grease.

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How close are we to the Systemic collapse of the Global Financial System?

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How close are we to the Systemic collapse of the global financial system?


Exponential growth of World population and economy coincided with the Start of the use of fossil fuels and fractional reserve banking

the hydra with five heads
Thehydra with five heads

Debt Mountain

Population growth

Pension time bomb

Peak oil

Climate change

the hydra with five heads1
Thehydra with five heads

Head I

Global Debt Mountain

the debt mountain
The Debt Mountain

Someday soon all this will be yours

post war economies
Post War Economies
  • Government debt high
  • Government benefits paid out comparatively small
  • Relatively simple financial system
  • Business Profits funded expansion
  • High personal Income, spending out of income, saving high
  • Personal debt extremely low

Then, over decades

  • Personal debt grew, saving fell
  • Computerisation of Banking system
  • Delusion that creation of debt = the creation of wealth
  • Public sector mushroomed
  • Less prudent banking practices evolved
bottom line who has caused the national debt mountains
Bottom Line….Who has caused the National debt mountains
  • Promises made by politicians over the past century pledging unsustainable future benefits to be paid by later generations.
  • The willing cooperation of the Banking Sector to fund these promises, using Fractional Reserve Banking and electronic fiat currency, incentivised by short term bonus structure
what causes financial crises
What causes financial crises

Some inter-related oft-quoted systemic causes……

  • Easy credit, causing credit bubble
  • Low interest rates
  • Asset bubbles
  • Weak and fraudulent underwriting
  • Predatory lending
  • Deregulation
  • And…………..
what causes financial crises1
What causes financial crises
  • ……Increased individual debt burden
  • Financial innovation and complexity
  • Incorrect pricing of risk and poor risk models
  • Failure of economic models
  • Managers' capitalism
  • Failure of rating agencies
  • Creative accounting procedures, mark to market, extend and pretend
  • And……
what causes financial crises2
What causes financial crises

Some human and non systemic causes

  • Greed, lust for power, lying, fraud, lack of accountability, the complete disregard for the rule of law and subsequent exposure
  • Change of public perceptions
  • Changes in social attitudes
  • Transparency… financial state of Bank becomes public knowledge
  • Insider whistle blowing and leaks
  • Loss of confidence
but fundamentally what is really causing this financial crisis
But fundamentally what is really causing this financial crisis

The real systemic causes that are rarely discussed …

  • Fractional reserve banking system
  • The rising price of oil during economic growth
  • Financial innovation and complexity
  • Investors (e.g. pension funds) who want high yields to pay benefits to a burgeoning baby boomer population
  • Payment of interest on debt requires economic growth, which requires more energy
  • Future income insufficient to pay interest on debt and leave enough to pay retired baby boomers
  • Financial illiteracy of general public
  • Changes in social attitudes about debt
  • The interconnection of Global Financial risks
  • Powerful vested interests wanting to maintain the status quo

Nothing has been done to address these issues

the importance of money
The importance of money

Money is the foundation of the economy and society

'Money has no motherland; financiers are without patriotism and without decency; their sole object is gain‘

Napoleon Bonaparte

quotes about bankers and banks
Quotes about Bankers and Banks

Henry Ford……“It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -

who creates money
Who creates Money

Coins and Bank notes are produced by the Central Banks

These account for 3% of the total money supply . Where is the rest of the 97%?

fractional reserve banking
Fractional Reserve Banking
  • In a speech on October 25th, the Governor of the Bank of England, Mervyn King said “of all the many ways of organising banking, the worst is the one we have today.

“To work, this financial alchemy requires the implicit support of the tax payer.”

He said that possible remedies included not just breaking up banks, but also “eliminating fractional reserve banking”

fractional reserve banking2
Fractional Reserve Banking
  • Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of digital money is created
  • Only a fraction (8% or less) of a bank's demand deposits (cash and other highly liquid assets) are kept as reserves available for withdrawal
  • Due to the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank.
fractional reserve banking3
Fractional Reserve Banking

When a bank makes a loan, it increases the amount of money in the hands of the public, by increasing total amount of electronic bank deposits….. And vice versa, when a loan is repaid or written off, money is destroyed

Interest must be paid with more $’s, ie more debt

Fiat Money is Debt

fractional reserve banking4
Fractional Reserve Banking
  • Why does the Government support this “alchemy”? Because the Government needs far more money than that raised by taxes, so they borrow it
  • Consequences…… new $’s dilute value of old $’s in the economy, prices go up…….inflation
  • Who are the gainers?… the Government and the Bankers. Government can tax without people understanding they are being taxed. Bankers collect perpetual interest on nothing…. A river of unearned wealth
  • Who are the losers?… the citizens and future generations of taxpayers
quotes about bankers and banks1
Quotes about Bankers and Banks

“Give me the right to issue and control a Nation’s money and I care not who governs the Country”

Meyer Rothschild, International banker(1774 -1812)

quotes about bankers and banks2
Quotes about Bankers and Banks

Sir Josiah Stamp, Director, Bank of England, 1940….. “Bankers own the earth; take it away from them but leave them with the power to create credit; and, with a flick of a pen, they will create enough money to buy it back again... If you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit. Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.”

financial innovation asset backed securities
Financial innovationAsset backed securities
  • Mortgage loans, home equity release loans, home equity lines of credit(Before the crisis, Moody’s Rating agency, had given AAA ratings to 42,625 mortgage-backed securities, the same seal of approval U.S. Treasury bonds get. Of those rated in 2006, 83 percent have been downgraded)
  • Student loans(In US, student loan debt has now surpassed all outstanding credit card debt )
  • Credit cards debt
  • Car loans
  • Aircraft leases
  • Royalty payments
derivatives are weapons of mass destruction
Derivatives are Weapons of Mass Destruction
  • Trans-national play of derivatives is US$ 1.4 Quadrillion
  • Global size of the derivatives bubble is US$ 206k per person-on-planet.
the relative scale of the world s financial engine
The relative scale of the world's financial engine
  • 1. The entire GDP of the US is about USD 14 trillion and falling.
  • 2. The entire US money supply is also about USD 14 trillion with rising Quantitative Easing in trillions.
  • 3. The GDP of the entire world is USD 45 trillion and falling. USD 1,4 trillion is 31 times world GDP.
  • 4. The real estate of the entire world is valued at about USD 65 trillion.
  • 5. The world stock and bond markets are valued at about USD 70 trillion.
  • 6. The trans-national universal model financial institutions own about USD 150 trillion in derivatives.
  • 7. The population of the whole planet is 6.8 billion people. So the derivatives market represents about USD 206,000 per person on the planet.
the hydra with five heads2
Thehydra with five heads

Head 2

Population growth


There are now 6.5 billion (6,500,000,000) people in the World, all becoming more and more addicted to oil

world population
World Population

Every second, 7 babies are born, 4 people die, 3 extra humans in the World

Every day, there are 250,000 extra humans in the World

That’s the population of New York every month

70 million every year

the hydra with five heads3
Thehydra with five heads

Head 3

Pension time bomb

growing population of baby boomers born between 1946 and 1964
Growing population of baby boomers, born between 1946 and 1964

Over 23% of Florida’s Population is over 60

Global Pensions 01 Dec 2010

The pension plans of the world’s largest multinationals have fallen further into deficit despite record company contributions, new research shows.

The European Pensions Briefing 2010 report by consulting actuary LCP, found the aggregate accounting deficit stood at €160bn ($209bn) at the end of September 2010, up from €150bn at the end of last year.

bottom line
Bottom Line
  • Anyone who does not work will not survive unless they are supported by someone who does work. This has always been what happens. People who don’t work include
  • Retired, receiving occupational, private and state pensions
  • Children
  • Sick
  • Those at school and university
  • Unemployed
  • Very wealthy who have sufficient investment income
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

Kenneth Boulding, economist 

the hydra with five heads4
Thehydra with five heads

Heads 4 & 5

Peak oil

Climate change

so what is peak oil

So what is ‘Peak Oil’?

• Consumers are only interested in delivery flows

• Many commentators talk of reserves and forget flows

• Reserves are only useful as flows

Peak oil is the point when worldwide production of conventional crude oil peaks

world population growth
World population growth

Climate change

  • China's oil consumption is expected to grow by 7.5% per year for the next 20 years

4 fold

why will the 2 epicentres of collapse probably be usa or eurozone
Why will the 2 epicentres of collapse probably be USA or Eurozone

US economy represents 25% of global economy

European Union also represents 25%


Baltic dry index

This index indicates that global shipping is now one sixth of what it was in 2008

ongoing us financial crises
Ongoing US Financial crises

1. The mortgage debt crisis

2. The sovereign debt crisis

3. The bank failure crisis

4. The city and state debt crisis

5. Dependency on foreign oil imports


Much of Old World infrastructure predates the invention of the internal combustion engine. Communities were connected by walking and riding horses. Here is a typical English village as it is today

Playing field

Most of New World infrastructure has been built after the invention of the internal combustion engine with cheap oil

You can’t go anywhere in the States, or Canada, or Australia, or New Zealand without a car

the us housing market
The US Housing Market

The world’s largest single asset class in value is in deep trouble

levels of severity of financial crises
Levels of severity of financial crises

Bursting of asset bubbles such as property, stock markets, commodity prices

Collapse of large financial institutions

Collapse of shadow banking system (investment banks and hedge funds)

Sovereign debt defaults

Currency crises

Credit crunch

Major Bank bankruptcy

Series of minor Bank runs

All of the above, cause loss of paper wealth but real economy may continue. The next crisis is potentially catastrophic

some things that may happen in a financial systemic collapse of a stable state to a failed state
Some things that may happen in a Financial Systemic collapse of a stable State to a failed State
  • Internet outages
  • Schools and universities closed
  • Suspension of full banking activity for days
  • Nationalisation of banks
  • No or limited withdrawals from cash machines
  • Credit/debit cards won’t work
  • Petrol stations running out of fuel
  • Mass disorder, panic, riots
  • Martial law imposed, curfews
  • Rise in popularity of extreme political parties
  • Total collapse of old order followed by a command economy and loss of personal freedom
  • Near-total unravelling of the socio-political order.
  • Local Resource wars
  • Generational conflict
we have to learn to do 4 things fast
We have to learn to do 4 things fast
  • Learn to live without fossil fuels
  • Adapt to the end of economic growth as we have known it
  • Support 7 billion human beings and stabilize the population at a sustainable level
  • Deal with our legacy of environmental destruction

Is this going to happen?

how can we prevent another crisis in the future
How can we prevent another crisis in the future?
  • Abolish fractional reserve banking

or something completely different….

The State and corporate cartels have every incentive to maintain the status quo at all costs, so change will probably come from unconventional innovations

Unless the global banking system is radically changed, then the global crises we are all facing will never be overcome