What they don’t talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.
There’s a good reason politicians don’t like to talk about the nation’s long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.
http://news.yahoo.com/s/ap/20061028/ap_on_go_ot/america_the_bankrupt
Asian governments are also buying our government debt from tax receipts they have made off of our trade deficit. They will only do this until the dollar gets weak enough to make it unprofitable for them. Interest rate increases to prop up the dollar lead to recession less tax revenue bigger debt a vicious circle.
I just finished Kevin Phillips book “American Theocracy” Theocracy” the part about our credit culture and debt is absolutely chilling. The United States is headed for a major wake up and loss of living standard. The government debt will feed on itself we have lost an historic opportunity to pay this down. Bush’s tax cuts and Corporate drug benefit plan have sunk us.
Thanks Robliberal for this diary but only the coming economic pain will make people pay attention.
Let’s suppose that a collapse occurs as a 20%, 30% collapse in the valuation of the U.S. dollar. Does that mean that other parts of the world suddenly become better? Because they take over from the United States? No.
If the United States goes under, the rest of the world goes under.
In August 1971, the Nixon Administration, or rather George P. Shultz–the man who later put dictator Pinochet into power in Chile, together with Henry Kissinger and Felix Rohatyn–floated the dollar. Up to that time, the U.S. dollar had been a regulated currency within a fixed-parity system among currencies internationally. The dollar was still, essentially, as good as gold. The dollar which was the only world currency at the end of World War II. The stability of the dollar, through things like the Marshall Plan, and similar arrangements, and the fixed-exchange-rate system, enabled the recovery of Western Europe and other parts of the world, through things like the Kreditanstalt für Wiederaufbau in Germany, as vehicles for mobilizing credit to reconstruct the economies of war-torn Germany and France.
In 1971, the dollar was turned into toilet paper, by an act of an administration. It was backed up in 1972, by a meeting of the International Monetary Fund. (Again, George Shultz was there.) The dollar was no longer a U.S. dollar. It was an IMF dollar–a U.S. dollar denominated in IMF conditions. With nothing underneath it–just good faith and trust that everything would be all right.
Now, everything in the world today, is related to this dollar. China has vast claims denominated in dollars. All parts of the world have vast claims denominated in dollars. What happens if the dollar collapses by 30%?
China collapses. India collapses. Because not only is the dollar worth less, in their so-called asset list, but the chain-reaction collapse of the U.S. market, its effects on other parts of the world, mean a collapse of the economies of India, China and also Europe. A disaster for every part of the world.
Only if the United States takes action, with consent and cooperation of other nations, to make the dollar a fixed value of security, thus maintaining the credit system upon which the entire world depends at this time, only under those conditions can we avoid something comparable to what happened to Europe in the Fourteenth Century, when the Lombard banking system collapsed taking Europe into a New Dark Age.
This is typical of what happens on the day of crisis: Suddenly, you’re faced with a point, a collapse of the dollar is about to occur. You say, “Well, the dollar’s going to collapse, the rest of us will get by, China will do well, India will do well, Europe will find a way to manage, Russia will do all right…”
No.
The world will go into chaos like one of those things that happens when people are taken by surprise, and things they keep telling themselves are true, are shown suddenly not to be true.
The survivors are those who wise up and act, recognizing that what they had believed was a fantasy.