The Razor’s Edge, by Don V.

“The sharp edge of a razor is difficult to pass over; thus the wise say the path to Salvation is hard.” – W. Somerset Maugham

The United States and a majority of the world stand at the proverbial razor’s edge and as most preppers realize, the road to salvation will definitely be difficult.  The coming changes may happen tomorrow or ten years from now but the grand clock is in countdown mode.  Many experts like to focus on specific issues but it is the culmination of these separate issues that will create the ultimate crisis.  Evaluating each issue allows the opportunity to see how quickly the clock is counting down. 

The elephant in the room for the US, Europe and Japan is debt.  The sovereign debt crisis in Europe is spiraling wildly with Britain and Germany desperately lending to bring it under control so it does not end up in their countries.  The PIIGS (Portugal, Italy, Ireland, Greece and Spain) are making news with riots, bailout packages and austerity measures, but the same austerity measures are being passed in Sweden, Iceland, France, and Britain.  Part of the ideal behind the European Union was to foster a closer competitive business unit and all banks in all European countries have some debt at risk in the other countries.  This is the root of the problem.  If one country cannot pay its debt, it can bring the others crashing down.

The US is not far behind.  In December of 2010, tax cuts were not only extended but enhanced, while increasing unemployment benefits while a funding bill is stalled due to earmarks.  This is not unusual for the US Government however it is while we are at a $13 trillion dollar debt.  If you put the debt on a line graph over the last fifty years, it is appalling at how quickly our debt as increased.  This does not take into consideration that municipal debt and both local and state governments are near bankruptcy which could trigger to a great US default.  Japan is at the same stage with a staggering debt and an inability to pay. With either the US or a grander European default, it has the potential of bring the other one down as well as Japan as the banks all hold debt from the other countries.

The second issue behind the debt is the devaluation of the dollar.  This is a unique issue because it could be a solely US problem.  Currently the US dollar is utilized as the international currency for trade and is also the world reserve currency due to its stability.  To explain, Europeans purchasing goods outside of Europe use dollars.  It is used largely in the Middle East and South America.  Other countries hold US dollars as a hedge against inflation or deflation of their currency.  According to the IMF, 62% of currency reserves in 2009 were US dollars.  The US in 2010 started quantitative easing which ultimately means that more dollars are being issued.  With many countries holding US dollars the sting is not so severe to those in the US as compared to other countries who print money during a crisis.  However, the small sting that Americans are feeling is felt by the rest of the world holding US currency.  Like all smart investors, they will reduce their holdings in poor investments, which the US dollar is becoming.  As more people shed their holdings, more will become poor in the USA, creating an inflationary hurricane that no amount of interest increases will ease.  This is already occurring as evidenced by the run on gold, IMF suggestions of a new world reserve currency and even prohibitions on the acceptance of the US dollar in some countries.  The fear of a sudden drop of the US dollar as the world currency is highly unlikely, but the continual reduction of holdings at a reasonable investment amount is very likely.  The reason behind this is that if any country suddenly decided to liquidate their US dollar holdings, it would create a panic and devalue them faster than they could sell.  Also it would create a secondary impact on the sovereign debt crisis as it would become obvious that all the US debts, while being paid rather quickly would be valueless.  Thus Japan and Europe will be very careful how the move on the US dollar, unless somebody like Russia or China provides guarantees. Whether our allies remain our allies or sell to the highest bidder, it will get worse for the average American as countries hold less US dollars and more reenter circulation.

We are also at an Oil Peak Production.  This is a fancy term to say that we have maxed out our ability to discover and produce oil easy and cheaply.  While global reserves may last a good long while (and nobody really knows how long) the fact remains that oil companies must drill deeper, farther off shore and other remote areas to access oil.  If oil becomes more difficult to produce and/or the amount of production becomes less, the law of supply and demand requires extensive increases in cost.  If we examine how oil impacts a single gallon of milk, we realize oil is utilized to create the carton that holds the milk, fuels and builds the truck that brings it to market, fuels the farm equipment and provides fertilizer for the grain eaten by the cows and hundreds of other tiny impacts along the way.  If oil becomes unavailable or too expensive, many of our everyday items will be very costly or simply cease to be made. 

The world is also entering a food crisis.  Russia prohibited the export of food in 2010 due to shortages.  Food is the main tension in North Korea and type in food riots in Google and you will be amazed at the hits.  Food production cannot be further increased.  Food production since 1970 was routine increased through mechanical and chemical enhancements until the mid-1990s whereupon we started to stagnate.  The promise of bioengineered and genetically modified crops did not provide the same advancements of the Green Revolution and many believe that it is detrimental.  In addition, many of the world’s fisheries are endangered with strict limits and much reduced harvests that are only allowing the loosest definition of sustainability. The ability to water crops is also becoming a significant problem, even in the USA where the traditional California farming productions is competing with individual water use. With the population continuing to grow and food production at a halt or potential decline; we are faced with hungry people.  Hungry people are desperate and dangerous.

What I believe to be the largest and most threatening of issues is the Moral Crisis.  To determine where the moral crisis has originated is difficult but the factors include a bias toward the older generations values and learned lessons and that “newer” is better, a loss of basic Christian values and the replacement of civil government as God. This has brought us to the point where people are more concerned about whether something is “legal” versus “right.”  In the US today, the majority of people live in urban areas designed as residences instead of communities.  Companies no longer hire workers but have resorted to employers and employees who are often at odds with each other.  Ultimately, a society has been created that has very little care, respect or value for its fellow citizens, aside from times of national tragedy.  This Moral Crisis could be the damnation of us all as we need leaders who will make hard and tough decisions.  This requires strong moral fiber not only of the leaders but of the constituents who demand what is right. 

Any one of these five issues is a full blown crisis all alone.  All five are nearing catastrophic potential that would change everyday life for all of us.  The scary part is that each one of them could bring the others to a head at nearly the same time.  Even if by some fortunate stroke of luck that the main thrusts of each crisis is separated by years or even decades; their impact will be dramatic and we are feeling the effects now.  Yet somehow our government has kept up this juggling act of immense proportions.  It leads to the question of what will be the trigger that brings all the balls to the ground, or the proverbial razor’s edge.  Will the juggler trip over one of the props on stage; whether it be a pandemic, a war in the Koreas, a solar flare, a natural disaster, a massive boomer generation retirement or global warming?  Or will one ball drop and distract his attention bringing down the show?  Could it be that our juggler does not have an end of show planned and is simply fatigued to the point of failure?  We hope for the juggler to collect all the balls as intended and end the edge-of-our-seat-performance with a flourishing bow.  Yet until the show ends, it takes only a single spark to burn down the entire stage.