The Global Test Most Will Fail: Surviving the Bust That Inevitably Follows a Boom
Now that virtually every nation is entering the bust phase, all are being tested.
Booms powered by credit, new markets and speculation are followed by busts as night follows day. This creates a very difficult test for every nation-state facing the inevitable bust: how does the leadership deal with the end of the boom?
As the world is about to learn once again, the “fix” may make the next bust even more destructive.
the “fix” may make the next bust even more destructive.
let’s start by reviewing what conditions generate booms.
1. An undeveloped nation gains access to new credit, markets and resources and go through a “boost phase” much like a rocket lifting off when suddenly abundant finance capital ignites the country’s latent growth potential. When a country with little to no public or private debt suddenly gains access to essentially unlimited capital, growth explodes.
One variant of this is the discovery of vast new resources that quickly attract capital (for example, oil) or that generate new wealth (for example, gold).
The modern example of a developing nation gaining access to new credit, markets and resources is of course China, but this model also describes America in the 1790s and early 1800s, and many other nations in various phases of their development.
2. A new sector opens up in a developed nation’s economy. A recent example is the Internet, which exploded in a boost phase from 1995 to 2000. In these cases, the new sector simply didn’t exist, and the boost phase is as spectacular as the ones in newly developing economies.
Example from American history include the railroad-fueled boom of the 1870s and 1880s and the advent of electric light and later, radio.
…click on the above link to read the rest of the article…
