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For decades, the economic relationship between China and the United States has been one of deep interdependence. China has served as the world’s manufacturing hub, while the U.S. has been one of its largest consumers. From smartphones and medical supplies to industrial components and rare earth materials, Chinese goods are woven into the fabric of American daily life.

But what would happen if China suddenly stopped supplying the United States?

Donald Trump was the first modern U.S. president to openly challenge this consensus.

Rather than treating China as a benign trading partner, Trump framed the relationship as a strategic risk. He argued, often against fierce political and media opposition, that America had become dangerously dependent on a geopolitical rival for its essential goods.

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America’s Dangerous Dependence on China

China is not simply another trading partner. It is the central node of global manufacturing, controlling production or processing in industries that underpin modern life. The United States relies heavily on China for:

• Consumer electronics and components.
• Pharmaceuticals and active drug ingredients.
• Medical supplies and personal protective equipment.
• Rare earth minerals used in defense systems.
• Lithium-ion batteries and electric vehicle components.
• Solar panels and renewable energy hardware.
• Industrial machinery and electrical equipment.

During the COVID-19 pandemic, Americans saw firsthand what happens when Chinese factories shut down and their exports slow down. Hospitals scrambled for protective gear, supply chains collapsed and inflation surged. But that crisis was accidental, so a deliberate cutoff would be far more severe.

President Trump consistently argued that no serious nation should outsource its industrial backbone to a strategic competitor. Most of his supporters understood this and the Republican Party is fully on his side in this endeavor. 

The Immediate Shock

If China were to significantly reduce or halt exports to the US, whether through sanctions, or export controls, the effects would be swift and would mainly affect the day-to-day consumer.

Actually, American factories would not suddenly switch suppliers. Even many products labeled “Made in America” rely on Chinese subcomponents at some stage of production. If those products were suddenly unavailable, manufacturing would slow across multiple sectors, with assembly lines forced to reduce output or shut down altogether. 

Moreover, automotive production would likely stall, while electronics manufacturers could struggle to meet delivery schedules as key components disappear from supply chains. Defense contractors, particularly those dependent on specialized materials, may face growing shortages that raise serious national security concerns. 

Retailers would also begin to feel the impact within weeks, as store shelves thin, backorders grow, and shipping delays extend from days into months.

The assumption that the United States could simply “buy elsewhere” overlooks a basic reality of modern manufacturing: China’s dominance in scale, speed, and production capacity across multiple industries cannot be replaced quickly or without significant cost.

When this happens, there will be a transition period until our country gets back on track. In such a scenario, the most important thing you can do is learn to be self-reliant, no matter your age. You can learn new skills, return to traditional methods or learn the Amish lifestyle, or take advantage of today’s technology to make life easier.

This is one way to do it:

Inflation and the Cost to American Families

The most immediate consequence for ordinary Americans would be a surge in inflation, driven by a familiar but unforgiving dynamic: when supply collapses while demand remains, prices rise.

The aftermath would be that electronics, appliances, vehicles, clothing, and everyday household goods would become more expensive in a matter of weeks. At the same time, pharmaceutical shortages could push healthcare costs higher and energy prices may climb as batteries and grid components grow harder to obtain.

Inflation, however, functions as a hidden tax on groups with the fewest options to shield themselves from rising costs: working families, retirees, and small businesses. Republicans have long warned that inflation hits hardest at the bottom and middle of the income ladder, a reality that becomes impossible to ignore during a supply shock.

For years, Trump’s critics argued that tariffs and trade pressure would raise prices, but they ignored the much bigger risk of depending so heavily on a geopolitical rival. Paying a little more today to rely on domestic or allied production is far less costly than being forced to absorb sharp price increases later, when alternatives are limited and control is lost.

Manufacturing Decline and Economic Contraction

As shortages spread through the supply chain, the broader economy would begin to slow down. Manufacturing output would fall, but not because Americans stop spending, but because companies could no longer produce what consumers were trying to buy. This kind of slowdown, called a supply-driven contraction, is especially difficult to reverse, since it cannot be fixed simply by stimulating demand.

Industries most exposed would include:

• Automotive and aerospace.
• Defense and national security manufacturing.
• Healthcare equipment and pharmaceuticals.
• Energy and infrastructure.
• Advanced electronics and semiconductors.

When production declines, financial markets would likely react with sharp selloffs, driven by uncertainty and weaker corporate earnings. The damage may also extend into areas you wouldn’t expect. Retirement accounts and pension funds would take hits, while smaller manufacturers dependent on imported components could be pushed to the brink of bankruptcy.

But the consequences may hit much closer to home than you expect and you could feel them as soon as 2026:

President Trump’s Strategy

Unlike previous administrations that treated economic dependence as an acceptable tradeoff, President Trump confronted the issue directly. His approach rested mainly on preparation and leverage.

Trade Pressure as Strategic Leverage

Trump’s 2025 tariff strategy was aimed at correcting a long-standing imbalance in the U.S. – China trade and reducing concentrated supply-chain risk.

The tariffs increased the cost of importing certain Chinese goods, particularly in sectors where China held overwhelming dominance. This did not stop trade, but it changed the cost calculations companies used when deciding where to manufacture and source components.

For many firms, higher tariffs made it less attractive to keep all production in China and encouraged them to explore alternatives, including moving parts of their supply chain to Mexico, Southeast Asia, or back to the US. In some industries, companies began splitting production across multiple countries to avoid over-reliance on a single supplier, even if that meant slightly higher short-term costs.

Although Trump’s tariff strategy faced strong criticism when it was introduced, many of the tariffs on Chinese imports remain a central part of US trade policy. Our country has maintained historically high tariff rates on Chinese goods throughout 2025, even after periods of negotiation and temporary truce agreements.

Supply Chain Diversification and Reshoring

Trump openly encouraged American companies to leave China. He promoted manufacturing shifts to Mexico, Southeast Asia, and back to the United States. His main goal was to reduce single-point failure. This “friend-shoring” concept is now widely accepted, but was ridiculed when Trump first proposed it.

But the consequences may hit much closer to home than you expect and you could feel them as soon as 2026:

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Securing Critical Materials

Another major focus of the President’s approach was to make sure the USA is not dependent on foreign rivals for materials it cannot function without.

Government reviews during his administration showed clear weaknesses in areas such as medical care, military equipment, energy systems, and everyday technology.

To address this, the administration used executive orders and federal reviews to push for more production at home and to reduce reliance on suppliers tied to adversarial countries.

This included steps to support rare earth mining and processing in the US, encourage domestic drug manufacturing, and secure supply chains that directly affect military readiness. The goal was not to shut down global trade, but to make sure the country would not be left exposed during a crisis.

The thinking behind this was simple: cheaper sourcing may work in normal times, but it becomes a liability when access is disrupted. Trump’s strategy treated these materials as strategic necessities, not just another line item in a corporate supply chain.

Market-Driven Industrial Revival

Instead of heavy government control, Trump focused on tax cuts, deregulation, and incentives to bring investment back to the United States. The idea was straightforward: once companies understood that rebuilding supply chains was a national priority, the market would respond.

With more time and consistency, this approach would have left the U.S. in a much stronger position to handle a major supply disruption from China.

How Likely Is a Supply Cutoff?

A complete and immediate cutoff is unlikely without a major conflict, such as a war over Taiwan. However, partial and targeted restrictions are highly plausible.

China could restrict exports of:

• Rare earth minerals, such as neodymium and dysprosium, used in missile guidance systems, fighter jets, radar, and advanced electronics.
• Battery components, most importantly lithium compounds and graphite, are essential for electric vehicle batteries, drones, military equipment, and grid-scale energy storage.
• Medical supplies – including active pharmaceutical ingredients (APIs) for antibiotics and painkillers, as well as PPE like masks, gloves, and syringes, which U.S. hospitals still source heavily from China.
• Defense-related materials – rare-earth magnets, tungsten, and specialty alloys, used in missiles, aircraft, armor-piercing munitions, and military electronics.

These actions would be difficult to counter quickly and would test our country. The most likely scenario is not a single dramatic rupture, but a slow escalation – export controls and strategic pressure. As a matter of fact, this is already happening through export licenses and material controls.

If China were to significantly reduce or stop supplying the U.S., it could directly affect you and your family’s well-being. That’s why, before this happens, it’s important to make sure your stockpile includes these essential products:

Making America Great Again

 Even in a worst-case situation with China cutting off supply, the US will not collapse, but daily life may become tougher and more expensive. The adjustment might be uncomfortable at first, but it can also push the country to face a problem that has been ignored for too long.

So, replacing what China supplies today will take time and steady effort. New factories need to be built, domestic production expanded, and supply chains rebuilt step by step. That kind of change does not come from government statements alone. Actually, it comes from people who are willing to work, learn new skills, and produce real goods again.

A more independent country can only exist if hard-working Americans step up. Machinists, electricians, welders, engineers, truck drivers, and factory workers will all have a role to play. Rebuilding the industrial base means valuing skilled labor and restoring pride in making essential products at home instead of relying on cheap imports.

For most American folks, this shift may open the door to more stable jobs and real opportunities to earn a living. Instead of shipping work overseas, the country can invest in its own people and skills. Over time, better wages and steady employment may help offset some of the higher costs.

Final Thoughts

The era of ultra-cheap globalization was convenient, but it left the country exposed. What replaces it might cost more, but it offers something far more valuable: control. An economy built on reliability and domestic production will demand effort and discipline, but it can also reward those who are willing to contribute to something lasting.

President Donald Trump argued that a nation stays strong when it works, produces, and stands on its own feet. Relying on rivals may bring short-term comfort, but it weakens a country over time. Therefore, higher costs and harder work are the price of rebuilding American industry and securing our future.

The latest news is shocking!!!

Experts predict that an EMP strike that wipes out electricity across the nation would ultimately lead to the demise of up to 90% of the population.

This article was first published in 2024.

According to- abcnews.go.com: Beyond the banking world, a parallel universe of shadow banks has grown in the form of hedge funds and money market funds. They’re outside the reach of conventional financial regulation, prompting authorities to plan introducing new rules to prevent the obscure sector from triggering a new financial crisis. But in doing so they risk drying up an important source of funding to banks and firms. 

In the financial world, there is a narrow divide between heaven and hell. Frenchman Loïc Féry realized this when he was 33. He was a rising star in the banking world, managing the trade in complex loan packages for an investment bank. According to his business card, he was the bank’s “global head of credit markets.” But then one of his employees gambled away about €250 million ($317 million), and suddenly Féry was without a job.

In any alternative media space, you are sure to find much talk about US dollar dominance, as well as optimistic forecasts of its imminent decline. This is also true in the radical right, where nationalists pine after an end to US imperial hegemony and the rise of a more multipolar world.

Often though, this hope is little more than wishful thinking, with unlikely challengers to US power much overhyped. This is especially true concerning US dollar hegemony, a topic that is ripe for misunderstanding at the best of times.

It’s important to keep in mind that people have been forecasting the decline of the dollar ever since it attained its status as global reserve currency. As far back as 1960, the economist Robert Triffin was warning of an “imminent threat to the once-mighty US dollar”. Understanding the reason for Triffin’s pessimism, and why it turned out to be misguided, is crucial to understanding today’s global monetary system and the enduring dominance of the dollar.

Triffin’s concerns were more informed than most: his “Triffin dilemma”, as it came to be known, highlighted an inherent problem with a country’s national currency also serving as the reserve currency of choice for the international system. The country supplying the world with the reserve currency has to produce a surplus of money, thereby creating a trade deficit. In other words, the supplier country needs to be continually losing money to fill up the reserves of other countries and make the currency a low-risk option to hold as a reserve. But if the supplier country becomes too indebted to the rest of the world in this scenario, then its currency ceases to be such a low-risk asset, and that’s the dilemma.

After World War II, the US sent lots of dollars abroad through the Marshall Plan, military spending, and the American middle-class importing lots of foreign goods. So how did the domestic US dollar get around Triffin’s dilemma? It didn’t.

Enter the Eurodollar

Triffin’s dilemma was especially a problem for the US dollar because it was backed by gold. After all, what would happen when the world needed more dollars than US gold reserves could back? Much like the kind of collapse that would happen if everyone tried to withdraw their money from banks at the same time, the whole system faced implosion if the US could not keep its foreign dollars backed up with gold.

The standard story is that this problem was resolved in 1971, when Richard Nixon ended the Bretton Woods international system and finally decoupled the US dollar from gold. But by this point, private banks had already long replaced gold exchange and quietly adopted a new form of exchange, extricated from any reserves or real currency, this was a truly global, offshore economic system outside the purview of central banks. This was the Eurodollar system. In this context, “Euro” is used as a synonym for “offshore” rather than referring to actual euros. So, the Eurodollar system is the shadow, offshore money system denominated in US dollars.

No one is really sure of how the Eurodollar system emerged (more on that later), but by the late 1950s there had been a huge growth in US dollar deposits in European banks, mostly in the City of London. With pre-war practices, these deposits would have been remitted to the central bank or deposited to the banks’ accounts in the U.S., but gradually, banks began to use these dollar deposits to issue loans denominated in US dollars. By 1959, the economist Paul Einzig reported that

The Eurodollar market was for years hidden from economists and other readers of the financial press by a remarkable conspiracy of silence. I stumbled on its existence by sheer accident in October 1959, and when I embarked on an enquiry about it in London banking circles several bankers emphatically asked me not to write about the new practice.

Britain’s economic goal of making London a center for international financial capital manifested in deregulation and comprehensive secrecy protections; this gave the city a competitive edge against other European countries, and put it and its web of British offshore territories at the very centre of this emerging system.

Since the election of Margaret Thatcher’s Conservative government in 1979, Britain has undergone a great experiment. Economically, the UK became the exemplar of neoliberalism in Europe. Politically, the UK has quietly transitioned to a postnational state, undergoing one of the greatest demographic transformations in the West.

As the Eurodollar market exploded, it became the lifeblood of the global economy, quickly fulfilling a need banks had for an international currency system. Banks could now transact rapidly and efficiently across countries and continents without the need of a physical currency, an innovation that helped unleash economic activity. The Eurodollar system functioned like an early cryptocurrency, existing as a digital ledger and communications network rather than a traditional currency.

Driving the global economy is a kind of bankers virtual currency, created by and used to satisfy the demands of banks, a series of claims and liabilities exchanged between banks to meet their monetary needs. How can you travel to Indonesia and make an instant withdrawal from an ATM, withdrawing from your local bank back home? Only with a vastly complex and efficient communications network connecting the global banking system.

The Eurodollar was the emergence of this system, and central banks have little control over it. For all the scare-mongering from libertarians about “Fed money-printing”, it is international bankers — outside the regulations of the US Federal Reserve — who are the ones in control of creating the US dollar supply on international markets. Big commercial banks create Eurodollars using the offshore system without the backing of the Federal Reserve. This is done through fractional lending, where dollar deposits are used as collateral to loan out a higher amount of dollars.

Again: private banks create money out of thin air by creating debt

Discovering money creation rests with private banks is a revelation that tends to shock people and send them into a state of denial — surely the state would not outsource something this fundamental to private actors.

But don’t take my word for it, a source as good as the Bank of England wrote in a report titled “Money creation in the modern economy” that:

Most of the money in circulation is created, not by the printing presses of the Bank of England, but by the commercial banks themselves: banks create money whenever they lend to someone in the economy or buy an asset from consumers. And, in contrast to descriptions found in some textbooks, the Bank of England does not directly control the quantity of either base, or broad money. Of the two types of broad money, bank deposits make up the vast majority – 97% of the amount currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themselves.

So international bankers have created a shadow money system, with the Eurodollar system functioning as a kind of “dark energy” of the global economy, ever-present but unseen, something which the US Federal Reserve or any other central bank can do little to control. In fact, no one even knows how much money exists in the Eurodollar system, with estimates measuring it in anything from tens to hundreds of trillions. As the economist Fritz Machlup once told a meeting of his colleagues:

We don’t even know enough about the Eurodollar market to say that it should be controlled. 

If you want to visualise what this shadow money system looks like, this is an attempt at illustrating all the instruments involved in the supply of the US dollar:

Still confused? You’re not alone. If this illustrates anything, it’s that the federal reserve and central banking is just a small part of the story. This enormously complex web developed over decades through private institutions, satisfying the need for a truly global money system unconstrained by national barriers.

But in the process of decoupling the dollar from Federal Reserve reserve control, bankers have given themselves the power to create unsanctioned and unregulated money. This translates to enormous power to override national government’s monetary policy and fulfill many of the roles most people assume central banks and their governments are handling:

Because Eurocurrencies give private financial institutions the unrestricted ability to expand the availability of a particular currency, the country whose currency is the target of the Euroinstrument no longer has exclusive control over its money supply.

…

Furthermore, the lack of reserve requirements on Eurodollars creates a potentially infinite money multiplier, potentially leading to an infinite degree of inflation, all without the input of the Federal Reserve or the U.S. Treasury. Thus, the power to control the number of dollars (or dollar-equivalent instruments) in the market has been taken out of the exclusive control of U.S. authority and diffused among foreign banking institutions.

Discussion around economics is still heavily focused on central bank monetary policy and government programs like Quantitative Easing, which helps maintain the illusion that it’s still accountable, elected representatives with the final say.

It’s understandable we are biased to focus on government institutions: it has always been understood that monetary sovereignty is a prerequisite for political sovereignty. But it is now clear that governments have quietly surrendered a great degree of monetary sovereignty to the private interests running the international banking system — one of the most significant and revolutionary political changes ever, yet one hardly discussed.

It’s shocking to discover the scope and influence of this system, and to discover everything presented here has been out in the open for years, strangely ignored or overlooked by popular economists, financial analysts and politicians alike. Yet some esteemed economists like Paul Einzig and Milton Friedman did identify and study this system, and both also wrote of a grand “conspiracy of silence” by the global banking cartel to hide its existence. Since most economic analysis still ignores it, we are left with an always partial view of how the economy functions.

Why the dollar isn’t going away

There is another important realisation that comes with understanding the shadow money system: the Eurodollar is the real global reserve currency. The emergence of the Eurodollar system was an emergent innovation, coming from the many players involved in the global financial system seeking the maximally efficient form of money to handle their business. Understanding this helps us understand why it will be so hard to dethrone the dollar from its dominant position.

Imagine a world without the dollar. Suppose a German manufacturer needs to import raw materials from Brazil. The Brazilian exporter prefers to be paid in Brazilian reals, while the German importer has funds in euro. Only, there isn’t much from Europe the Brazilian company is interested in spending its new euro on, and constantly exchanging currencies can be costly and time-consuming.

However, with the Eurodollar system, the German importer can use its euro deposits to create a Eurodollar deposit in a German bank. This Eurodollar deposit can then be transferred to a Brazilian bank, which converts it to Brazilian reals and pays the exporter. The Brazilian bank can hold the Eurodollar deposit or use it to fund its own Eurodollar lending activities. Everybody wins! (Or so it must have seemed to the people inventing this system.)

Now imagine a government or governments trying to replace this. There are decades worth of highly complex and interwoven technological arrangements that have made this system function seamlessly. The dollar retains its strength because there is a constant demand for US Treasury securities backing this system.

Looking at how financiers are treating these securities, the dollar looks more secure than ever: US Treasury data reveals the foreign demand for these securities has massively increased in recent years. Holdings of long-term US Treasuries by private foreign investors jumped about 52% over the past three years to $3.4 trillion, for the first time overtaking the holdings of central banks.

Notice that the story here is not about US aircraft carriers or puppet regimes, but the private interests of the bankers that make up this system. A lot of dollar-doomers make a case that is all about geopolitics. The US is an ailing empire they say; it has a large and growing list of enemies, as well as potential challengers on the world stage like China, and we are entering a multipolar age where the US cannot dominate the world’s affairs like it did in the 20th Century. That may all be true, but it doesn’t make the Eurodollar system any less efficient for the global banking cartel.

China has put much effort trying to make its yuan a viable alternative to the dollar, and for all that, less than 3% of the world’s foreign-exchange reserves are denominated in yuan. By one estimate, the dollar is a part of 88% of all international transactions, the euro 31%, while the yuan is involved in just 7% (more than one currency can be involved in a transaction.)

If China wanted to make the yuan a true global reserve currency, they would need to embrace massive financial deregulation and abolish their currently strict capital controls, in order to allow massive inflows of foreign held currency and yuan into China. But China needs to maintain its strict financial regulation for domestic economic success, and political stability. China is unlikely to ever decide to abandon the statist model it has followed for decades just to make itself a better hub for the international financial system.

Some have touted BRICS, of which China is a member, as potentially leading the way in establishing an alternative monetary system. On paper, this looks more promising: BRICS countries have 42% of the world’s population, and an estimated 37% of the world’s GDP.

Could BRICS go about establishing a currency? Presumably, it would need a central bank, and presumably that would be centered in China, representing an unacceptable loss of sovereignty to other countries in the alliance, especially India, with whom it has ongoing territorial conflicts. The idea of a “BRICS coin” has been floated a lot over the years, either backed by gold or fully digital. But just last year, the head of BRICS’ New Development Bank made it clear there are no immediate plans for the group to create a common currency.

Even if BRICS were willing to put aside their disagreements and commit to a BRICS coin, it’s hard to see what competitive advantage it would have over the current system. A gold-backed currency? Bankers abandoned gold and embraced the Eurodollar system in the first place because gold-backed currency was a hindrance to their activities.

What about the “R” in BRICS? Perhaps Russia’s fortunes point to a potential alternative to dollar dominance. After all, since Russia’s invasion of Ukraine, the US government has weaponised the financial system in ways previously unseen. Is this not a display to the world of the precarity of relying on the good graces of America to sustain your financial system? Many reasoned that if the United States overplayed its hand sanctioning Russia, this is the lesson the rest of the world would take, and then it would only be a matter of time before enough interested parties conspired to take down the mighty dollar.

The most headline grabbing sanction against Russia came when the US and its Western allies invoked what some analysts called “the nuclear option”, and colluded to take Russia off of SWIFT (Society for Worldwide Interbank Financial Telecommunication). This was highly significant, as SWIFT is used by banks worldwide as a kind of instant messaging service. President Biden promised that this would “ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.”

With the basic understanding of the US dollar as something strictly under the control of the US government, many assumed they could just deny Russia access to the dollar by cutting them off from the SWIFT system. But despite the high-profile deplatforming, Russian banks suffered little more than an inconvenience from being denied access to SWIFT, because of how effective the Eurodollar system is.

Eurodollar economist Jeffrey Snider summarised the problem with this attempt at deplatforming the Russian economy:

SWIFT constitutes very little insofar as the inner workings of the offshore banking network is concerned.

…

Deprive some of Russia’s institutions their ability to message to correspondents using SWIFT and they’ll simply communicate (how’s that for more irony!) with them some other way (including just picking up the phone) because the offshore correspondents are still there. They will continue to conduct their monetary business regardless of the method payments requests are sent and received.

Ironically, the very fact the US government could do so little to hinder Russian banks’ access to the Eurodollar market shows why it is so effective, and why the dollar will keep its position for the foreseeable future.

This takes us back to the start of this story, when the Eurodollar market emerged under shady and secretive circumstances in the city of London. I wrote no one is really sure how the Eurodollar emerged, but the most likely theory is that the real origin actually lies with the Soviet Union.

In 1956, the Soviets were also in the position of fearing international sanction for invading a smaller neighbour. After they crushed the 1956 rebellion in Hungary, Soviet officials feared the US would target their holdings of dollar deposits in American banks.

In response, the Soviets withdrew their dollars and moved them to two Russian banks based in Europe: Commercial pour L’Europe du Nord (BCEN) in Paris, and the Moscow Narodny Bank in London. Using those dollar deposits, these Russian banks may have become the first lenders in the global Eurodollar market.

On February 28, 1957, the Moscow Narodny Bank in London lent out $800,000. This modest sum was borrowed and repaid entirely outside the American banking system — or any centralised banking system. Bankers had just discovered an amazing innovation. BCEN in Paris also took some Narodny dollars and lent them out. The Paris bank was known by its telex name EUROBANK, and that, supposedly, is how dollars deposited in banks outside the US came to be known as “Eurodollars”.

And so, in one of the great ironies of history, the 20th Century’s great communist regime sparked an innovation on the financial markets that greatly expanded the power of capital and moved the activities of bankers beyond the scope of governments.

The Eurodollar system became so dominant because of innovations from people trying to avoid US government control of their dollars, and that’s precisely why the system is so resilient — to alternate currencies, to geopolitical shocks, and to the US government itself.

Nothing lasts forever, but for now, global dollar dominance is on pretty solid ground.

This article was first published in 2020.

For those professing a preference for one type of government over another, anugly reality is they all cut from the same cloth. Whether we are talking about Democracy, Communism, Socialism, or Fascism the strong link they share is one of dominance and a desire to control. While seen as vastly different systems with distinct goals, each is rooted in the promise people should sacrifice as needed for “the greater good.” The main flaw in a democracy is that it allows a simple majority to force their desires upon others. This is why our forefathers set checks and balances in the Constitution, however, even these do not guarantee freedom will remain. 

Today, the burden of risk and the amount of “skin in the game” is not equally shared by all of society. Over time our financial system and institutions have been corrupted by crony capitalism and a political system that panders to the masses by exchanging favors for baubles. It could be argued that those in power don’t have to take away our freedom by force if we are willing to surrender it or trade it for a few paid weeks off work. Nor do they have to be fair in how they go about this if they simply get a majority of the populace to go along with their plan.

The suspicion governments are self-serving creatures is apparent in the old school British imperial definition of “commerce” which used free trade as a cover for the military dominance of weak nations. Those put in a position of being exploited often saw this as simply a ruse promoted by those wishing to abuse them. In short, opening borders and turning off protectionism simply makes it easier to rob countries of their wealth. America, a wayward child of England, has been accused of following this same path.

In a 2020 article a case was made that the world was headed towards an economic crisis due to several factors. The problem is that such a scenario encompasses all aspects of life, from food and energy, to supply chains, geopolitics, and possibly even war. This article is an effort to offer up some ideas on how governments might respond to such an event based on current trends and some of the events that have occurred during the covid-19 pandemic. If we accept the idea that governments are self-serving and that a huge majority of the people suffer during an economic depression, we should expect frictions to develop as the populace seeks solutions to ease their pain. 

Sadly, governments across the world have overreached and crushed the rights of individuals during the pandemic. People have been denied the ability to travel, locked in their homes, followed by drones, and even been jailed. This may have been just a taste of what we might expect if governments are put under pressure to perform. Many people have pointed to the fact that in the past “war has been the go-to answer” often used to take our eyes off of problems. Hopefully, that will not be the case, however, many of the other options possible in the age of almost total surveillance do not seem much better. 

It is wise to remember that when all is said and done, those in power will not be kind to us but they will rapidly throw us under the bus without a thought. Silencing dissidents or those that protest or disagree by limiting free speech is only a start. Lock-downs and curfews take on a whole new meaning when harshly enforced. They can include things like house arrest, cutting power, links to the internet and communication, and even water to areas where unrest gets out of hand. You can expect governments to remove anything that gives us the power to control our fate.

The topic of our future and culture always circles back to and is directly linked to the issue of jobs vanishing as automation and an army of robots march into our workplace. This can result in a future that takes on a very grim dystopian appearance. The fear of being replaced by a robot or seeing your job being outsourced or eliminated is on the rise. Do not be surprised if in the end those displaced from the job market are only given enough to ensure they remain docile and behave. If and when this becomes an issue conflict and violence will arise.

While some people credit Rahm Emanuel with the saying, Winston Churchill was the first to say, “Never let a good crisis go to waste.” He said it in the mid-1940s as we were approaching the end of World War II, and history indicates those in government have taken heed. The one thing we can count on is that when things crumble, the old, “we should have done more” or the “it would have been far worse” lines always flow forth from those in charge. Under this logic, we should be prepared to be subjected to massive abuse by those with strong agendas.  

Possibly, one of the most dire threats we face flows from the combination of big tech and those in pursuit of the highly touted one-world agenda. This brings together a slew of organizations, governments, companies, wealthy, individuals, and bankers with the goal of expanding their power. The gathering in Davos of the World Economic Forum is not for our benefit but more for plutocrats like Facebook’s Mark Zuckerberg and Amazon’s Jeff Bezos that desire to “break the world” with their ruthless agendas to bring more political power into their hands. Recently a great deal of attention has been given to some of the ideas and vision the WEF has floated. One of the most powerful became visible when WEF public relations released a video entitled: “8 Predictions for the World in 2030. Its 2030 agenda offers a telling glimpse into what the technocratic elite has in store for the rest of us. It promotes the idea that  by 2030 “You will own nothing. And you’ll be happy. 

How do you begin to fight or turn back a force that has even incorporated and leveraged the ever-present smartphone as an ultra-powerful surveillance device? By developing programs to organize phone data so that it provides real-time intelligence on every citizen, and using it to guide and influence our actions the power of the state has been deeply enhanced. The digital age has made it far easier for government to seize our computers and records to shape a case against anyone by massaging the data as they see fit. The reason we hear so little criticism of these actions from our government may be that we are next in line to have our freedom culled. Governments are not the friend of the average man. Orwell wrote about how governments could take on a life of their own and criticized totalitarianism throughout his writings.

Totalitarianism, the most extreme and complete form of authoritarianism is a political concept that defines a mode of government, which prohibits opposition parties, restricts individual opposition to the state and its claims, and exercises an extremely high degree of control over public and private life. Political power in totalitarian states is generally pushed by those on the far left or right with strong agendas and an all-encompassing propaganda campaign, which is disseminated through mass media. Signs of its growth are often marked by political repression, growing control over the economy, restriction of speech, and mass surveillance.

Of course, a huge step in individuals losing control over their lives would be the adoption of a single world currency.Those in charge of our financial machinery have indicated to the public their desire for more power. This means creating a truly global centralized economic system and a highly controlled world currency framework dominated by a select cult of banking oligarchs. This would, in effect makes the rest of the human race their slaves. The banking elites are positioning themselves to avoid blame for a disaster in which all fiat currencies fall in value by selling us on an elaborate recovery con-game which includes converting to a new worldwide currency. Remember, this is conceived and perpetuated by those with the most to gain. 

For years the IMF has been discussing replacing the dollar with the SDR as the world reserve currency. It would require governments to borrow from the world central banking authority, rather than printing currency to finance their infrastructure programs. With governments floating the idea of going cashless and to digital currencies, this would give them even greater control over our lives. To be clear, the elites are positioned and merely waiting for a geopolitical disaster or catastrophe so overwhelming that when the time arrives they can portray themselves as our saviors by carrying out this plan. 

This is all part of the New World Order and globalization idea pushed by many of the rich elite and world leaders. It contends that larger, more cooperative governments under one financial unit will benefit us all. The fact is Americans have a great deal to lose if the dollar is dethroned and declines in value. Those who will be crucified are the middle-class Americans whose wealth is locked into or are holding long-term USD bonds thinking they are a safe investment.  To Americans, the fate of dollar-dominated assets and their value when the dust finally settles should be a huge concern but most Americans fail to grasp the implications. 

The transition to a world currency would take a far greater toll on paper assets than tangible goods. While recognizing the flaws of the dollar and our current system I have come to believe the other fiat currencies such as the euro and yen hold even less merit. This includes cryptocurrencies such as bitcoin. Regardless, in the end, we should expect to be told and not given an option as to what is coming. If events unfold in the way those promoting a one-world currency hope, they will be able to portray cleaning up a financial mess as a blessing. The truth is, they will benefit greatly from putting a dagger in the heart of freedom. This is not written to frighten or as a prediction of doom but to dampen any illusions those at the top value those below them.

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Let’s make one thing clear. Lenders were never required by government programs to lend out more than the house was worth. That’s a myth that keeps being perpetuated.

In fact, by 2006, banks, mortage brokers and investment firms made more money from making sub-prime loans than they did from making traditional loans. That’s where our problem starts.

The modern mortgage bond was developed in the 1980s to take advantage of a market for such securities that was created by the U.S. government but was by 2000 largely operated as a private enterprise. Among these was the Federal Home Mortgage Corporation or “Freddie Mac”. Investment banks like Solomon Brothers would buy bundles of mortgages from a bank for cash, then turn them into a series of securities with various interest rates and risk possibilities and then sell them to pension funds and hedge funds. Mortgage bonds paid slightly higher returns than government bonds but, because they were backed by Freddie Mac, they were seen as the equivalent of government bonds from a risk perspective.

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However, by the early 2000s the mortgage bond market was pretty saturated – just about everyone who wanted a mortgage had one. Mortgage bonds were very lucrative for investment banks and they made a lot of money off of them, more than they did from corporate bonds or underwriting stock issues. The question was how to grow the market.

Sub-prime lending was the answer, but this posed some problems. Sub-prime loans had a higher default rate and, as such, mortgage bonds based on this type of mortgage was seen as riskier, which made them harder to sell. They did offer higher interest rates, but they were not attractive to institutional investors, which was the big market.

Now, I spoke before about breaking the bonds up into different series of securities, so the investments banks dialed up this practice to 11. Each bundle of mortages would be turned into a series of (usually) three sets of securities called “tranches”. The first tranch would pay the lowest interest rate, but the holders of this tranch got first crack at the cash flow. The second tranch would pay a higher rate, but only after the first tranch was paid. The third tranch would pay the highest rate, but only after the first two were paid out.

The next step was to get the bonds “rated”. There are two “ratings agencies”, Standard & Poors and Moody’s. Long story short, the rating agencies earned fees from the brokers selling the bonds, not the buyers buying them, they would work with brokers to earn the investment grade rating (“A”) and they used a model for risk that assumed each individual mortgage would perform independently of every other mortgage. “A” grade was sold to institutional investors, “B” grade to hedge funds and the investment banks generally kept the “C” grade – no one would buy those.

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In order to create more mortgage bonds, investment banks would encourage lenders to just get people to sign on the dotted line. These sub-prime mortgages were sold aggresively to people who didn’t have mortgages, either new buyers, investment buyers, or even people who had no mortgage on their existing home and needed some cash. Even if you came in with a request for a regular mortgage, a broker might push you over to a sub-prime product. Say you came in trying to buy a $200,000 house with a 10% down payment. You would instead be sold a $220,000 mortgage with a low “teaser” rate that reset in 2 years but had a lower monthly payment up front. You were told that (1) your property would go up and (2) there would be no problem re-financing your mortgage when the payments went up.

Next, some bond holders knew mortgage bonds were a bit risky so investment banks sold them insurance in case the bonds defaulted, a “credit default swap”. You paid a premium and, if the bond defaulted, you would swap the bond for the insurance amount. These had to be “underwritten” as the investment banks didn’t have the capital to pay off possible losses, so they went to big insurance companies and offered them a large share of the premium income if they would just agree to pay off any bonds that defaulted. As the insurance company saw these bonds as “A” rated, they figured they would never have to pay off.

By 2006, pretty much every possible mortgage had been sold and the market for new mortgages dried up. No problem. The investment banks just sold more credit default swaps and used that cash flow to create new bonds.

But in the second quarter of 2007, many of those mortgages with teaser rates came due. People started defaulting on the loans. The credit rating model figured defaults would be scattered, but instead on most bonds they tended to be concentrated – everyone defaulting at once.

With bonds defaulting, investors became wary of new bonds, so lenders couldn’t sell their mortgages to investment banks. They had used that money to lend out even more money and those loans started defaulting too, only this time the lenders were on the hook.

When the bonds defaulted, the credit default swaps started to be redeemed. Even before this, as the values fell, the insurance companies had to start selling assets at fire sale prices to provide collateral.

Investment banks that had heavily invested in the “C” tranches and had sold more credit default swaps were soon running out of money. Lehman Brothers defaulted on short term loans on money markets, which put money markets into a rare negative equity situation.

So:

• People defaulting on mortgages they can’t afford and not being able to refinance. Thousands of properties in default.
• Mortgage bonds defaulting because people aren’t making payment. This means mutual funds are going down and pension funds are in a cash crunch.
• Bonds being redeemed for credit default swaps and, because banks sold more default swaps than there were mortgage bonds, the insurance companies are now holding more defaulted mortgage bonds than there were mortgages.
• Property values, which were inflated by easy loans and high liquidity, start to collapse, putting many home owners (even ones with conventional loans) under water.
• Because of the uncertainty in the money markets due to the bad paper there, legitimate companies like auto makers and credit card companies that borrowed heavily on money markets can’t borrow new money and instead are being asked for cash to cover their existing notes.

As such, the government had to step in and provide money to keep things orderly. They provided money to insurance companies. They took an equity share of auto companies. They set up funds to refinance mortgages in default.

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