You've probably seen the elaborate domino set-up that takes up almost an entire room. It must have taken the creator weeks to construct.
With the nudge of one domino the whole beautiful set-up will cascade down in a few minutes.
Is the elaborate domino set-up analogous to our global economic and financial set-up?
Yes, and the "nudging finger" is the unprecedented world-wide credit build-up:
Financial history shows that every true credit boom is followed by a credit bust. The massive credit mountain you see on the above chart will be leveled by a "financial implosion." In other words, the credit must deflate.
We're already seeing how unsustainable debt is crippling Europe. And in the U.S., we're seeing how heavy debt burdens have put state and local governments in deep financial trouble.
What will be the first financial domino to fall?
Perhaps it already happened with the MF Global bankruptcy. Or, the first domino may be the Congressional Super-Committee's failure to reach a deficit-reducing agreement. A financial collapse may start with a "final straw" in Europe.
"The financial collapse that historians will later call a 'trigger,' 'catalyst' or 'tipping point' will occur soon. Recent news suggests that it may come in the form of a collapse of foreign loans. (MF Global’s leveraged bets on foreign-government debt just did it in.) But it could come from a domestic bank just as easily. No such event is really a trigger; it just happens to be the first disaster among the many inevitable ones that must follow a credit bubble."
Elliott Wave Theorist, November 2011
America's last deflationary depression was from 1929 to 1933. As the latest Theorist also points out, "In recent years, government borrowing and spending has produced a deficit of $15 trillion, 11,500 times that of 1931."
Even with the change in the dollar's purchasing power, that's a staggering difference.