The Collapse of the Next Economic Bubble

We are in the age of bursting economic bubbles. Since 2000, three have already exploded. The first was the technology bubble, according to which we will all lead our lives on the Internet, therefore every silly start-up is worth tens of millions. This assumption inflated the stock prices of start-up companies, yet its bursting was almost overlooked compared with those that came afterward.

The second was the real-estate bubble. This was a bubble of home prices, created when people were convinced prices will only continue to rise more and more. This bubble was backed with loans and mortgages, because in order to buy an apartment, you leverage yourself, and the bank takes the risk. The air started coming out of this bubble in mid 2007 with the sub-prime crisis. Shortly after, at the end of 2008, the financial bubble burst, which was in fact what created the real-estate bubble to begin with. Banks, and especially investment banks,

gave out more and more loans without supervision or restraint. Three bubbles, and we haven’t finished counting yet.

There is another one, larger than the previous bubbles, which will burst in the future. This one is called the U.S. Treasury Bill bubble, and these days it has inflated to monstrous proportions. Yet again, most investors around the world are turning a blind eye.

As a result of the financial market’s collapse, the world got frightened. When people are frightened they run to the safest place they know, which in the monetary world is called ” U.S. Treasury T-bills,” what is considered in financial

lingo “risk-free” or “AAA,” the best of the best. Why? because the United States has never gone bankrupt. Or it should be noted: hasn’t gone bankrupt yet.

But the American government is continuing to do two very problematic things: it constantly prints dollars, and it is dumping these dollars, at an equally fast pace, on financial skeletons that have collapsed. All this in an effort to save something from the old world that has been destroyed, at least until they figure out what to do differently.

The trillions of dollars that are being allocated every week to all sorts of collapsed companies and financial institutions, together with Barack Obama’s optimistic plan to improve the power infrastructure of the U.S., must be coming from

somewhere. This money is U.S. dollars, yet the Americans are not producing enough of it to finance the party, and so the place it ends up coming from is the U.S. dollar printing machines. Moreover, the gap between taxes paid by

Americans and the government’s expenditures is called a deficit, and it is about to explode to a sum of 1.75 Trillion dollars this year. That is an insane number, and it will get even worse.

When the tide of money flowing to the United States goes down- and it will go down- it will trickle down to every economy on the face of the planet. Inflation in the United States, which is nonexistent today, will skyrocket, the dollar

will collapse against other currencies and the government will have difficulty raising money because the interest rate offered by the markets will be extremely high. This might be the bursting of the next, and largest bubble of all. The bubble of the financial power backing the American dollar and T-bills.

It was enough to hear Clinton’s recent plea to the Chinese: buy our T-bills. She knows why she is asking for their help- because there are no buyers left. They are slowly dwindling away, but the Americans continue to print money and issue debentures. This is why the dollar will not be a safe haven for the year to come, unless the Americans snap out of it and begin with quick and sharp budget cuts.