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« Beware: Internet Explorer Being Hacked Like Crazy, And At This Time, There's No Fix | Main | Roland Martin: "LEAVE CAROLINE ALONE!" »
December 17, 2008

Entire US Now Actually Bankrupt?
More: If You Thought That Was Scary, Read This Other Guy

Some guy does a bit of number-crunching and calculates that federal liabilities now not only exceed government assets and income (which we all knew, of course), but also the gross cumulative net worth of all American citizens to boot.

The foundation’s grim calculations are based on Sept. 30 consolidated federal statements, which showed that Americans’ total household net worth, diminished by falling stock prices and home equity, is $56.5 trillion. But rising costs for unfunded social programs like Medicare, Medicaid and Social Security increased to $56.4 trillion – and that was before the more recent stock market crash, $700 billion bank bailout, and monster federal deficits chalked up in October and November.

No problem. We'll just bail ourselves out.


A Forecast For A Genuine, Almost-Great Depression: Worst case scenarios:

A pessimist by nature, Rickards believes that many economic forecasters are wrong, and the recession will get far worse than predicted.

He sees an epic disaster scenario in which the U.S. gross domestic product declines by a staggering 35 percent over the next six to seven years. Crippling deflation could take hold. Unemployment, he says, could approach 15 percent.

That’s a calamitous rate, but it would not be an all-time high: unemployment hit 25 percent during the Great Depression.

“The national security community needs to be conversant with this,” Rickards said. “In defense, intelligence, and national security, you earn your money by preparing for things that may be remote, but pose an existential threat if they come to pass.”

In this scenario, the possibilities for global unrest increase dramatically as a staggering United States retreats from foreign aid and global diplomacy and the list of dangerous failed states grows sharply.

The Alternate-Dollar Nightmare

“The Number One vulnerability is the dollar itself,” Rickards concluded. “We’re printing them and shoving them out the door, and the Fed is basically out of bullets. So why hasn’t the dollar collapsed? The short answer is, global investors don’t have any other choice.” That is, there simply aren’t enough Euro- or Yen-backed securities for investors to shift their money out of dollars and into some other currency.

But what if some kind of global coalition – say a trillion-dollar sovereign wealth fund allied with several countries around the world – banded together to create a gold-backed alternative to the dollar?

Rickards says investors – many of whom already resent that they have no alternative to the dollar – would sell American currency in huge numbers to take advantage of the new opportunity. “If that happens, that’s the end of the dollar,” Rickards said. “You’d have high unemployment, deflation, and interest rates would go up. It would take what already looks like a strong recession and make it a Great Depression or worse.”

It should be noted that part of this problem began with Alan Greenspan's very loose-money policies, pursued over the course of seven years -- an action he took, of course, to stave off economic panic after 9/11.

If it all comes tumbling down, the terrorists will have in fact have succeeded at their goal. Like the collapse of the towers themselves, the implosion just took a long time to occur after the foundations had been disintegrated.


digg this
posted by Ace at 11:16 AM

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