Yep, it's time to visualize the US economy, if you can. Yes, it's a hard job, what with both the Government and the Banks try to out-do each other in generating smoke to puff up our hoo-hoos and to hide the facts indicating that we are in big trouble.
This article explains the dire state of the economy as well as any I've read lately, though, so go there, then come back here for the discussion.
Fresh coffee (might better have some "fortifier" in it though) is now in order, and keep the Tums handy.
Note in the article, that withdrawals of money from circulation (re-financing to lower interest rates) have certain effects, one of them being that there is a multiplier involved. This article puts that multiplier at 10, but doesn't give support for that figure, so it might be less. I remember from ECON 203 (Money and Banking Theory) way back in the early 1960s when this level of deficit spending horrified everyone with a finance education, that such multiples existed because of the interdependence of all the houses of finance. It works like this:
Financial House A makes a loan to a consumer, and then sells that paper to Financial House B. The Government backs, or guarantees the performance of the loan (didn't back when I learned this stuff, but does now). So, B owns the paper, but for various reasons which are over my head, A is allowed to show that loan on their books for a while past the point that it sold (possibly because of the legal liability involved with originating the loan). That's a multiplier. Any money on the books for either A or B is creditworthy for those financial houses to borrow against, so that's also a multiplier. The money the houses borrow then has multipliers, etc, etc. House of cards, but hey, I didn't invent this system, so don't shoot me. Suffice it to say that the entire financial world operates on the basis of this shadow money as if every penny of it existed and could be produced on demand.
The article talks about "reserves". Substitute the words "Actual Cash" for reserves. In Europe recently, reserves had been allowed to fall to below 2 percent of available credit. That's right, the banks were able to play their games on TWO PERCENT MARGIN. Bear some history in mind. The Crash of 1929 was caused, in large part, by people playing the US equities market on TEN PERCENT margin. Well, Europe is considering raising the margin requirement a percent or two, but that raise is getting bad reviews from Socialist France, which wants to print it's way out of it's current financial malaise. In the mose austere of circumstances, it is unlikely that Europe will agree to reserves of over 5%.
Then, there is the well-known factor of panic. In fact, stock market crashes used to be called "panics" in the history books. We saw a modest panic in 2008, but despite that the equity losses barely got down to 50%, it took 4 years for the market to regain those losses (the Real Estate market has yet to regain ANY losses of equity).
So, what does this mean for us, Campers?
What it means is that the entire civilized world has no financial confidence left, no confidence that the system will heal itself as it has done before. That sets the stage for another panic, and since the actual money level behind Government and Bank debt has gotten smaller, the next crash WILL be much more severe. It is likely that entire governments, and most, if not all Banks will be bankrupted in the next crash (actually, most current Governments meet the fiduciary definition of bankrupt NOW). Every government bankruptcy creates a multiplied panic, and if enough of them occur together, the world's economy goes over a cliff.
Yee-haw, free falling economies! Can it happen here? It did before, most notably in 1929, and as previously stated, the reserves were much bigger then.
The real question for YOU, Campers, is, Can you farm? Can you be responsible for your own food, shelter, health and safety?
If any part of that answer is NO, your future is as bleak as your Government's.
You know what you need to do. Get busy.