Monday, December 1, 2008

US Going to Break Down? Already Bankrupt?

Friends, esp those from the US of A, though I am not a US citizen, I am a big fan of AMERICA in many ways. America (USA) is not a country - its an IDEA. An idea of freedom, multiculturalism and law and order. It has entire world's 40% scientific power. It is the only nation in world which is actively trying to save the planet from some possible asteroid strike. Its the only place in the world which is more a dream than a geographical/political place.

Having said the above, I am concerned about the possible collapse of USA financially and politically. Surprising? well, its both surprising and painful to even think in this line but our emotions alone can not change the course of events and what looks like imminent is that USA is on the verge of collapse.

The talk about monstrous US national debt and possible end of dollar based world economy is not new. I told that long back in this post. What is worse is the political deterioration as lawmakers and policymakers in USA seem to be not caring for the facts and only trying to hide recent mistakes (recent means past half century) in the worst possible way. One of the biggest mistake was fiat money regime in 1971 when currency (dollar) was untied to gold. They did that to hide the problems their poor handling of economy created then. So far US has survived so many recessions, stagflations but this time it is VERY DIFFERENT. Different even from The Great Depression. This can be very well the end of FIAT MONEY and dollar based system. The Kondrateif Cycle Winter is on cards (which was postponed in 1990s). If things go as they are going now, then the economic collapse is not far away. If the politicians and policymakers continue to repeat same mistakes(for example trying to fix the bubble burst with reinflating it!!!) then even political collapse is nearer.

The collapse of an empire is not new as history shows that even the best of empires ultimately collapsed (remember Romans? OR quite recent USSR?). So a collapse is not surprising but what is painful is the way it is approaching fast. As Dimitry Orlov put all this in his article on Energy Bulletin website uner the following heading:

Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US

the painful thing is if USA is nearing collapse, it is far worse prepared for it than the former USSR. Already there are warning signs like increasing poverty spreading toward suburbs, which indicates the situation on ground is becoming dangerous every passing day.

I am deeply concerned with these developments as I will also be one of those indirectly but deeply affected by such events. Let us hope somehow this possible collapse be diverted but hopes are not the best solutions.


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  2. Harry, you've identified the key problem the U.S. is facing, which is its currency mismanagement. Yes, we are's just a matter of time before our lifestyles catch up to this reality.

    To recap: in 2008 the U.S. created, borrowed, or pledged $8.5 trillion. This is on top of $10.6 trillion in debt, a budget deficit reaching $1 trillion, debt service payments rising to 15% of the federal budget, $52 trillion in present value of unfunded entitlement program liabilities, and a new administration coming to power that firmly believes it can take what's left of our property and "invest"/spend it on our behalf.

    Combine this with a zealous central bank all too eager to debase our currency, and we have a recipe for disaster.

    The days of the American empire are numbered...

  3. Dear Robert,

    You are absolutely right about the huge amount of troubled debt and deficit as well as liabilities worth $52 trillion (though some analysts say its more than $65 trillion).

    The problem is majority of people despite having access to best of reasoning, chose to live in dreams and vote for those who are expert in showbusiness of dream. I am literally amazed how foolish those "well educated" citizens of US are when they "believe" Obama can single-handedly save them from the mistakes of decades.
    However, the good thing is many people ( I talked to some friends) in US are realizing this fact and the trend of sanity will catch up soon, hopefully.

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