REVIEWING THE PAST
The Planet Earth is covered with water in the form of lakes and oceans. Only 30% of the Earth’s surface is land, the rest is water. Less than 2% of the water is fresh water, and the the rest is sea water. The sea water forms gigantic collections called oceans.
The interactions of water molecules, the molecules of minerals, the movement of the sea water, and the waves and currents is infinitely complex. Although scientists have studied the oceans for centuries the oceans are still a major mystery to mankind.
On this very same planet there are over seven billion human beings. They live on the land of our planet. They interact with each other in terms of buying and selling and using goods and services. This activity is called the World Economy. It, too is infinitely complex. The World Economy has been studied for centuries. The world economy, remains a mystery to mankind.
We can easily see that there is a very strong analogy between the oceans and our world economy.
Rushing through space at the speed of 1.022 kilometers per second is another planet called The Moon. It is approximately one quarter the size of the planet Earth.
Since the Moon has mass, its gravitational force acts on the oceans of the planet Earth. The planet Earth has its own gravitational force which acts on the oceans as well. These gravitational forces make the oceans move. Their movement is called Tides.
When the moon pulls the water of the oceans from their depths towards the higher land, we call the movement High Tide.
When the moon is too far away from the oceans to hold the water on high land, the gravitational pull of the Earth pulls the water of the oceans back to the depths of the oceans and we call the movement Low Tide.
Sporadically, the sea floor forms channels leading from the beach to the bottom of the ocean. The water, in this situation has two forces acting on it: the gravity’s force pulling the water down into the deeper channel, and another gravitational force pulling the water back to bottom of the ocean.
With two forces acting on it, the water is compelled to move much faster to the depths of the ocean. This rapid return to the ocean floor is a current called a Rip Current or Rip Tide.
This is a dangerous current for those swimming. An unsophisticated swimmer can easily be dragged to deeper water where the greatest danger is the swimmer’s weakness from struggling to stay afloat.
Drowning is a common result of one becoming caught in a Rip Tide.
Economic Rip Tide
As I mentioned above, the World Economy is analogous to the ocean itself. The tides of the ocean represent the movement of sea water molecules from primitive areas of the ocean to the beaches and land. These molecules are at a higher altitude and most of the more dangerous components remain left behind in the deeper ocean.
The World Economy originated in a simple primitive environment, where wages are low and the forces of survival predominate. As the world’s economies became more complex, living standards rose, just as the ocean’s water rises during high tide.
However, the forces of greed are acting on the World Economy as the forces of gravity act on the waters of the ocean. They are pulling the economy back to the ocean’s floor.
This rise and fall of economies is well known to economists and is described as The Business Cycle.
The Business Cycle
Economists have clearly identified the rises and falls of the World Economy and individual Countries’ Economies.
The economists term the rise in a business cycle as an Expansion or The Boom Phase. They describe the fall in the business cycle as a Contraction or Recession. When the fall is very severe, it is called a Depression.
About 80 years ago, the fall was very severe and encompassed the entire world. This fall was called: The Great Depression of the 1930′s.
The causes of this Great Depression are still unknown. What is known is that the entire world was affected, and only a World War brought relief.
Causes of the Business Cycle
The causes of the Business Cycle like the causes of the Tides are infinitely complex.
Water obeys the forces of gravity, wind, waves, currents and atmospheric pressure, in addition, hundreds of other forces unknown to the scientific community.
Although we can predict with high accuracy the rise and fall of water, perfect predictions are impossible because the moon’s orbit and gravity is affected by other solar events. Even the earth’s gravity changes unpredictably.
Nonetheless, sufficiently accurate predictions can be made concerning tides so that navigation is unimpeded. The causes of the Business Cycle is also infinitely complex, yet, in general, approximate predictions can be made.
At the moment we are entering an Economic Rip Tide. This, like the Great Depression of the 1930′s, is extremely rare. Since we are in uncharted waters predictions run the gamut of good to ghastly.
Reviewing the Past
In the succeeding chapters I will review the events that led to this economic disaster. There I will demonstrate that this is no longer a manifestation of a normal business cycle.
I will lead you into the observation of the sea’s depths. A place where an area of land has been torn away, creating a channel that is pulling on the entire world’s economy.
We shall see how this channel creates the Economic Rip Tide, and how said tide funnels the economy of the world back to the primitive parameters of the ocean bottom.