There is so much wrong with the US economy that one write could write a story a day for a month on it. But two aspects of the catastrophe facing the US are more important than any others. The first is the staggering debt facing the US government – a debt so large that it cannot possibly pay it off in any normal way. It will have to default on its debt – not by refusing to pay but by deliberately and radically devaluing the dollar so that as it pays its debt down it does so with cheaper and cheaper dollars – that is, dollars that are worth less and less to those foreigners who receive them.
The second aspect of the US economy that poses a global threat is the incredible power of the financial sector to thwart any regulation that might prevent the next financial meltdown.
First, the debt. The total debt of the US federal government is now $125.8 trillion dollars. That’s a lot higher than most people read about in the press because most stories on the US debt do not talk about the unfunded liabilities of the government – for pensions, Social Security, Medicare, Medicaid, and Veteran’s benefits. Here’s the breakdown, according to financial writer and advisor Martin Weiss:
- The officially recognized national debt at $11.8 trillion.
- Unfunded national obligations of $104 trillion.
- Another $9 trillion in cumulative deficits over the next ten years.
- Plus another trillion dollars for health care reform, no matter what bill finally makes it through Congress.
Weiss calculates that if the US government managed to pay down that debt by $100 million a day, it would take 3,446 years to cover all its obligations.
Since 1999 the US dollar has lost 36% of its value against competing major currencies and nearly 75% of its value vis a vis gold. It has declined 14 per cent against the Botswana pula, 22 per cent against Brazil’s real, and 11 per cent against the Russian ruble.
But it is about to get much worse. Reports over the past couple of weeks reveal secret meetings of mid eastern oil producers, China and India to talk about replacing the US dollar with a basket of more reliable currencies as the international currency. Once that happens – over a period of a few years, perhaps more – the US will be unable to pay for its imports or to finance its government budget deficits.
And this, of course, is the economy to which Canada and its lack-lustre corporations have tied their future. The Canadian currency, while it might not rise as much as others, will become increasingly expensive compared to the US dollar, and our exports, already declining just on the threat of the Canadian dollar reaching par, will literally dry up. The only thing we will be able to sell them is energy – if they can afford even that.
Despite this obvious reality the Harper government and Bay Streets most powerful players continue to whistle past the graveyard as we head for economic disaster. They are making no long term plans for trying to adapt to the coming collapse of the US dollar – continuing to put their trust in the private sector – especially the financial sector.
If you want to get an idea of how misplaced that trust is read the article posted on this page under “In other stories…” Here’s an excerpt:
“The [finance] CEOs can directly, through the firm, and by “bundling” contributions of its officers and employees, easily make enormous political contributions and use their PR firms and lobbyists to manipulate the media and public officials. The ability of the financial sector to block meaningful reform after bringing the world to the brink of a second great depression proves how exceptional its powers are to corrupt nearly every critical sector of American public and economic life. The five largest U.S. bnks control roughly half of all bank assets. They use their political and financial power to provide themselves with competitive advantages that allow them to dominate smaller banks.”
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