The Anglo American administrative state

It was once said: “The sun never sets on the British Empire.”

It was true because the empire with its colonies was so large beyond imagination.

When the sun was setting in England, it was rising in Australia at the same time.

The British Empire rose to prominence after the collapse of Dutch colonial empire.

At its height, it controlled 24% of the Earth including the Americas.

But the breakout of World War I & II finally brought the British Empire down.

After the 2nd world war, America became the only superpower of the world.

The American Revolution got the US separated away from the British Empire.

But the US and the British were still inextricably linked together by a financial model.

This Anglo American administrative state was held together economically.

Hong Kong, Singapore, India throughout the world, they functioned on the model of the Anglo American state.

You basically had an Anglo American global world set upon by an English common law.

The enforcement mechanism was the World navy with American navy and military.

It was led by the Bank of England and its offspring the Federal Reserve.

Since the 1800s till today, that essentially has been the rulers of the game with the US$ the reverse currency.

This has been beneficial and good for the entire world.

It has brought prosperity and lifted hundreds of millions out of poverty.

It also brought innovation in manufacturing, entertainment and technology.

Once upon a time, central banks could only print money based on the amount of gold they held.

The gold standard is a monetary system where a country's paper money has a value directly linked to gold.

Therefore, you could redeem physical gold in exchange for your money from banks.

But because of inflation and wars in the 1960s, the printing of money was pull out of the gold standard in 1971.

This resulted with the emergence of fiat currencies which are not backed any assets.

A fiat currency is money that is issued and backed by a government and we have some 180 fiat currencies in the world today.

The value of fiat currencies is derived from the relationship between supply and demand and the stability of the issuing government.

Since then, money in the form of fiat currencies is printed all over the world by central banks.

Without the backing of assets, central banks would now just print their currencies with a few clicks on a computer.

Fiscal dominance – the out of control spending of the politicians and the central banks have allowed it to happen.

Since 2008, in global capital markets, the whole infrastructure of global finance has been based upon 0% interest rates.

You have these governments who just spend and spend just like a Keynesian theory throughout the world.

Now you have $300 trillion of debts with another $2000 trillion of derivatives everywhere.

Loans and deficits run the current world economy.

60 years ago, a single working husband supported the entire family.

40 years ago, a husband and wife working supported the entire family.

Now, a husband, a wife and credit card debts support the entire family.

The biggest risk of fiat currencies is that if we print too much, it will trigger a bout of hyperinflation

Now after decades of printing too many currencies, we have hyperinflation in the world today.

Inflation is always caused by a larger supply of money than the products produced.

It took us inflation to understand the basics of the real economy.

Inflation is now moving from products, commodities to services.

It is sticky and moving from the cost of milk to housing loans and credit cards.

Market capitulation?occurs when panic selling becomes a market-wide phenomenon that affects most stocks.

Stock markets are crashing and crumbling with stocks and bonds going down.

What is going to happen next is a credit crisis.

Inflation is just a start. There might be a sovereign debt crisis coming to the 1st world.

Not Greece, not Sri Lanka but in the developed world.

This time it will not just be the credit crisis of companies like in the financial crisis of 2008.

This might be a credit crisis of governments.

We need to prepare for the worst because if we don’t and the worse happens, the Anglo American administrative state might collapse.