After the Storm (Part 2 of 2)
Last week's article examined phase one of the Greater Depression - the downward wave. This week's article will explore the upward wave - the Recovery.
By the time the breakdown of the global economic system has occurred, the currency, be it the US dollar or the Euro, will have collapsed. At this stage, will the country reach a Mad Max scenario (minus the leather outfits and interesting vehicles)? Not likely. Even if the breakdown is severe enough that roving marauders exist, human nature dictates that people in general will not devolve into a condition in which most of them drive around in a state of eternal warfare. The true nature of the majority of any people is primarily to eat, obtain shelter and protect their families.
Therefore, corrections invariably begin to appear from the ground up. New means of currency will spring up, and bartering is likely. (In the case of, say, Zimbabwe, the US dollar took over as the illegal default currency. However, such a luxury will not be available this time around, and paying for goods will require less predictable methods.) In the US, Utah has already passed legislation allowing gold to be used as currency, and nine other states have quickly followed. This is a positive sign, both in terms of foresight and in terms of states acting individually, possibly even in defiance of the central Government.
Although the Government is likely to try to retain controls on trade in commodities, a strong black market economy will appear, particularly with regard to food and fuel. Although it will be illegal, this will represent the first true beginning of a recovery.
The timeline for recovery will, I believe, be as Uncle Harry predicts - about ten years. Why? Well, on the economic side, a debt-cleansing cycle normally takes about seven years and is characteristically deflationary. To truly return to prosperity, there is no escaping this stage of the recovery, and long-term payback does not a vibrant economy make. It is slow and grim, as is deflation. It does, however, help people to get accustomed to living frugally, saving, and eventually investing. In short, it creates a mindset which is conducive to sound economic principles, which, after the recovery, will be necessary to create a return to prosperity.
The nature of the recovery, however, will depend very much on the level of collapse that has occurred in the central governments. If they have survived largely intact, it is most likely that the recovery will be longer, as the Government is likely to, first, employ techniques that salve the population, but do not solve the problem, and, second, very possibly resume the goal of collectivism in general, possibly with the UN as the centre of a One World Government with Agenda 21 as its general living plan.
If this were to take place, I think it likely that the First World would slide into a socialist slumber, possibly along the lines of East Germany in the communist era. If so, it could be many years before the rebirth of the First World, as, most assuredly, the Second and Third Worlds would not be sitting idly by. They would constitute the driving forces for commerce and development for an extended period, limiting the opportunities for the First World to reactivate itself.
However, the greater the degree of the collapse of the central governments, the greater the likelihood that the individual countries involved would come back sooner. I cannot emphasize this point too strongly.
Recovery in Europe
For Europe, this could conceivably be a return to individual countries as they were before the misguided concept of the EU reared its ugly head. (After all, the EU was created by the national leaders, for the national leaders, not for the benefit of their citizenries.)
Prior to the EU, Europe had been, for hundreds of years, a series of competing countries. If one drifted too far in the direction of oligarchy or socialism, it eventually collapsed and its people then de-camped to a great extent to the other European countries in search of work. Many sent their earnings home, which eventually led to the rebuilding of that country. In this manner, Europe enjoyed a fluid rebalancing that kept the continent, as a whole, very vital.
The EU has been constricting this organic structure, assuring that, when one went down, they all went down. It is conceivable that Europe will return to this natural format as it recovers from the depression - if Brussels has sufficiently exhausted its control.
Recovery in the USA
The same is possible in the US - a return to what the US was supposed to be in the first place - a confederation of small "states" (a word that, in the late eighteenth century, meant "country"). If this were to occur, the American states would have an exceptional opportunity for true progress. First, some states (like, say, Texas) that had been generally productive and supportive of business principles, would now be free of a federal government that took in its tax dollars and delivered them to nanny states such as Illinois or California. As a result, Texas would recover more quickly, while the nanny states would continue their decline.
With the Federal Government removed from its role as the collector and dispenser of wealth, in a short time, it would be clear to all, regardless of what political views they held, that the "working" states were doing much better than the "entitlement" states. The fifty states would have the opportunity to compare the various governmental experiments of their fellow states, each having the opportunity to borrow ideas from those that came up with the best ideas. In such an atmosphere, rhetoric tends to go out the window. The proof is in the pudding, and the best pudding would attract the most followers. Increasingly, the citizens of the entitlement states would try to move to the working states as they became converts to the clear examples of progress. A very healthy process.
The fifty states may possibly choose to remain separate; they may form a series of confederations (most likely based upon similarity of economic and political philosophies); or return to a United States. This will be, in large part, determined by whatever level of control the Federal Government continues to hold at the bottom of the depression, and how clever the Federal Government is in convincing the states that a central government is needed.
Again, I stress that the speed at which the First World recovers as a vibrant economic force will depend, in large part, upon the degree to which the central governments have retained or lost control. The more severe the collapse, the greater the likelihood of loss of control, and the better the future.