The future of the USA - 2012-2016 - The unstoppable US economic spiral: Recession/depression/inflation (Part 2)
- Excerpt GEAB N°60 (December 16, 2011) -
In fact, the United States ends 2011 in a state of weakness unmatched since the Civil War. They practice no significant leadership at international level. The confrontation between geopolitical blocs is sharpening and they find themselves confronted by almost all the world’s major players: China, Russia, Brazil (and in general almost all of South America) and now Euroland (1). Meanwhile, they cannot control unemployment where the true rate stagnates at around 20% against the backdrop of an unabated and unprecedented reduction in the labour force (which has now fallen to its 2001 level (2)).
Real estate, the foundation of US household wealth along with the stock market, continues to see prices drop year after year despite desperate attempts by the Fed (3) to facilitate lending to the economy through its zero interest rate policy. The stock market has resumed its downward path artificially interrupted by two Quantitative Easings in 2009 and 2010. US banks, whose balance sheets are much more heavily loaded with financial derivative products than their European counterparts (4), are dangerously approaching a new series of bankruptcies of which MF Global is a but a precursor, indicating the absence of procedural controls or alarms three years after the collapse of Wall Street in 2008 (5).
Poverty is gradually increasing in the country every day, where one in six Americans now depend on food stamps (6) and one in five children has experienced periods of living on the streets (7). Public services (education, social, police, highways...) have been significantly reduced across the country to avoid city, county, or state bankruptcies. The success with which the revolt of the middle class and the young (TP and OWS) has met is explained by these objective developments. And the coming years will see these trends get worse.
The weakness of the 2011 US economy and society is, paradoxically, the result of the “rescue” attempts carried out in 2009/2010 (stimulus plans, QE ...) and the worsening of a pre-2008 “normal” situation. 2012 will mark the first year of deterioration from an already badly impaired situation (8).
SMEs, households, local authorities (9), public services,... have no more “padding” to soften the blow of the recession into which the country has fallen again (10). We anticipated that 2012 would see a 30% drop in the Dollar against major world currencies. In this economy, which imports the bulk of its consumer goods, this will result in a corresponding decrease in US household purchasing power against a backdrop of double-digit inflation.
The TP and OWS have, therefore, a bright future ahead of them since the wrath of 2011 will become the rage in 2012/2013. And according to LEAP/E2020, nothing is less certain than the ability of a general in uniform to master such a rage. For the great financial issue in 2012 (which is why the attacks on Euroland have multiplied and intensified since the end of summer 2011) is simply the financing of the huge “black hole” of US deficits.
In the next GEAB issue, we will develop a clearer-cut analysis on why 2012 marks a catastrophic turning point for the US Treasury Bond market, but what we are talking about here was already officially recorded by the OECD: in 2012, there will no longer be enough money available to finance Western deficits (11). It's an anticipation that we made in 2009 by, for the first time quantifying what we called the disappearance of “ghost-assets” that this crisis is turning into smoke, shock after shock. The OECD confirms this prognosis and this explains the increasingly open warfare conducted by the UK and the US to try and appropriate the remaining financial resources, particularly at the expense of Euroland, capable of being a greater attraction on its own (12).
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