There is talk in many sectors and countries about a financial meltdown, but will this happen and what does that mean for the global population? The collapse of our economy, the failure of the financial system, and the devaluation of currency are all very possible. With the current conditions that are seen many investors are running scared or hedging against the potential risks. Many nations are facing huge deficits, and few are cutting spending and trying to rectify this problem in any effective way.
In the USA things have gone from bad to worse. The housing numbers and employment statistics flip flop from one month to the next. Investors are not using capital freely and consumers are not spending the same way that they were a decade ago. Homes may sit on the market for months at a time, and few individuals can even qualify for a loan unless they have exceptional credit. Stimulus measures, bond buying, toxic assets, and other concerns have caused everything to slow down. Governments discuss a recovery but they seem to be the only ones who see it. A majority of the population in America and many other countries are still struggling and little seems to have improved.
Recent calls to audit the Federal Reserve have caused alarm among some in the administration and banking circles. Since the gold standard is no longer applied much of the currency is not backed by anything, and is basically worthless paper except for the perceived value that it is seen to offer. The Federal Reserve has been buying up certain instruments by using accounting gimmicks and at the most basic creating currency out of thin air. Few understand this, but if that changes and people actually realize what is going on this could have disastrous results.
There are many who expect a run on the banks, and the eventual occurrence of currency devaluation. When money is worthless few will be able to afford the supplies and services needed just to survive and continue with the same standard of living. There will be panic and looting, and many may end up dead or on the street without anything of value.
A complete financial collapse could still be avoided, but it would require some serious measures. Changes in the monetary and banking systems would need to be put in place, and the leaders in Washington and other nations would need to get serious about cutting spending and eliminating waste. Few expect that this will happen though, and if we continue on the same road then society as we know it could change drastically very soon.
What is the fiscal cliff and what does it mean for the US and global financial systems? This is the term that has been created to describe the events that are scheduled to occur in the United States on January 1, 2013 if there is no action taken to reverse them. Some predict that the imminent collapse of the economy on a global scale will happen, and the time line for this varies from one analyst to the next.
The fiscal cliff refers to the reversal of many tax cuts and the enactment of automatic spending cuts that cover every area of government. The United States has already suffered a credit downgrade, and this was the first time ever for this type of change. The deficit amount is an astronomical number and is growing exponentially. In the last few years the deficit amount has more than doubled, and this growth is expected to continue unless the elected leaders change course and start to control expenditures while keeping taxes low.
What happens if Congress does not act in time, and the economy is driven off of this proverbial ledge? The consequences could be disastrous. If nothing is done then almost all Americans will see a tax hike in the new year that could amount to thousands in additional liability. Businesses will not create jobs or invest in expansion because the successful will be penalized for their wealth and effort by being charged a higher rate.
If the automatic spending cuts are not averted then most businesses and sectors in the USA could be impacted. These reductions are designed to get the national debt under control, and they were scheduled when a bipartisan committee provided recommendations but both of the major parties would not agree to the provisions. As an alternative the can was kicked down the road into the future, but that time is arriving quickly. Now America and the rest of the world can only sit back and wait to see what will happen, and whether a deal can be made in this area to utilize other possible options instead.
There is no disagreement from anyone that the level of debt in this country is excessive. The tax codes are in serious need of an overhaul. Entitlement spending and government waste are excessive, and taxpayer dollars are being squandered instead of preserved whenever possible. If this is not changed now then the financial system may not hold up and the population may soon face even more severe hardships and difficulties.