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The COLLAPSE of American Power


Meecar
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In his famous book, The Collapse of British Power (1972), Correlli Barnett reports that in the opening days of World War II Great Britain only had enough gold and foreign exchange to finance war expenditures for a few months. The British turned to the Americans to finance their ability to wage war. Barnett writes that this dependency signaled the end of British power.

 

From their inception, America's 21st century wars against Afghanistan and Iraq have been red ink wars financed by foreigners, principally the Chinese and Japanese, who purchase the US Treasury bonds that the US government issues to finance its red ink budgets.

 

The Bush administration forecasts a $410 billion federal budget deficit for this year, an indication that, as the US saving rate is approximately zero, the US is not only dependent on foreigners to finance its wars but also dependent on foreigners to finance part of the US government's domestic expenditures. Foreign borrowing is paying US government salaries--perhaps that of the President himself--or funding the expenditures of the various cabinet departments. Financially, the US is not an independent country.

 

The Bush administration's $410 billion deficit forecast is based on the unrealistic assumption of 2.7% GDP growth in 2008, whereas in actual fact the US economy has fallen into a recession that could be severe. There will be no 2.7% growth, and the actual deficit will be substantially larger than $410 billion.

 

Just as the government's budget is in disarray, so is the US dollar which continues to decline in value in relation to other currencies. The dollar is under pressure not only from budget deficits, but also from very large trade deficits and from inflation expectations resulting from the Federal Reserve's effort to stabilize the very troubled financial system with large injections of liquidity.

 

A troubled currency and financial system and large budget and trade deficits do not present an attractive face to creditors. Yet Washington in its hubris seems to believe that the US can forever rely on the Chinese, Japanese and Saudis to finance America's life beyond its means. Imagine the shock when the day arrives that a US Treasury auction of new debt instruments is not fully subscribed.

 

The US has squandered $500 billion dollars on a war that serves no American purpose. Moreover, the $500 billion is only the out-of-pocket costs. It does not include the replacement cost of the destroyed equipment, the future costs of care for veterans, the cost of the interests on the loans that have financed the war, or the lost US GDP from diverting scarce resources to war. Experts who are not part of the government's spin machine estimate the cost of the Iraq war to be as much as $3 trillion.

 

The Republican candidate for President said he would be content to continue the war for 100 years. With what resources? When America's creditors consider our behavior they see total fiscal irresponsibility. They see a deluded country that acts as if it is a privilege for foreigners to lend to it, and a deluded country that believes that foreigners will continue to accumulate US debt until the end of time.

 

The fact of the matter is that the US is bankrupt. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that "the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007." In everyday language, the US government cannot pass an audit.

 

Moreover, the GAO report pointed out that the accrued liabilities of the federal government "totaled approximately $53 trillion as of September 30, 2007." No funds have been set aside against this mind boggling liability.

 

Just so the reader understands, $53 trillion is $53,000 billion.

 

Frustrated by speaking to deaf ears, Walker recently resigned as head of the Government Accountability Office.

 

As of March 17, 2008, one Swiss franc is worth more than $1 dollar. In 1970, the exchange rate was 4.2 Swiss francs to the dollar. In 1970, $1 purchased 360 Japanese yen. Today $1 dollar purchases less than 100 yen.

 

If you were a creditor, would you want to hold debt in a currency that has such a poor record against the currency of a small island country that was nuked and defeated in WW II, or against a small landlocked European country that clings to its independence and is not a member of the EU?

 

Would you want to hold the debt of a country whose imports exceed its industrial production? According to the latest US statistics as reported in the February 28 issue of Manufacturing and Technology News, in 2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP. A country whose imports exceed its industrial production cannot close its trade deficit by exporting more.

 

The dollar has even collapsed in value against the euro, the currency of a make-believe country that does not exist: the European Union. France, Germany, Italy, England and the other members of the EU still exist as sovereign nations. England even retains its own currency. Yet the euro hits new highs daily against the dollar.

 

Noam Chomsky recently wrote that America thinks that it owns the world. That is definitely the view of the neoconized Bush administration. But the fact of the matter is that the US owes the world. The US "superpower" cannot even finance its own domestic operations, much less its gratuitous wars except via the kindness of foreigners to lend it money that cannot be repaid.

 

The US will never repay the loans. The American economy has been devastated by offshoring, by foreign competition, and by the importation of foreigners on work visas, while it holds to a free trade ideology that benefits corporate fat cats and shareholders at the expense of American labor. The dollar is failing in its role as reserve currency and will soon be abandoned.

 

When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners.

 

I sometimes wonder if the bankrupt "superpower" will be able to scrape together the resources to bring home the troops stationed in its hundreds of bases overseas, or whether they will just be abandoned.

 

 

What do you guys think?

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you seem very happy that the chao ang mos are in financial sh1t ?

 

if you are hoping that it will bring down stinkapore housing and erp prices ... you might want to rethink again

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Just as the government's budget is in disarray, so is the US dollar which continues to decline in value in relation to other currencies. The dollar is under pressure not only from budget deficits, but also from very large trade deficits and from inflation expectations resulting from the Federal Reserve's effort to stabilize the very troubled financial system with large injections of liquidity.

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Turbocharged

the US is the largest consumer of goods produced everywhere else in the world..

 

the only compatible market i can think of now is Europe..

 

China - they are producers of goods..not consumers..Also, more than half of their population still living below poverty level. 3 meals a day got problem liao. Where got the money to buy luxury goods?

 

India - Same case as China

 

Jap - World's 2nd largest economy. True, but their economy has been on decline since the late 90s and early 2000. And their population is not exactly you would say significant when compared to US and EU

 

 

So China and co are not stupid. They know if the US economy fails..they will drag everyone down with them..and US not stupid too..they know almost everyone is dependent on them, so keep on sucking lor..

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I think us consumes about 7-9trillion dollars while china and indian each about 1-2trillion dollars only

 

therefore the other economies cannot absorb the USA consumer driven economy

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Turbocharged

That's why..BINGO..

 

the moment US economy is hit hard..everyone will go down too..

 

Made in China and India goods have nowhere to go..

 

EU spending power is not great. Eastern Europe still living on the spoils of soviet union. That left us with Western Europe. On top of that, EU have alot of laws to protect their own manufacturing industries. So goods from outside EU are not competitive at all.

 

In short, US kena pwn, the the rest of the world dependent on US kena pwn too..

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(edited)

sad to say, the world will not allow it to collapse..... cos almost every countries economy and foreign reserves are linked to it. Yeah, we see some countries starting to stock up their foreign reserves in EURO... but the fact is, there are still trillions of USD lying in the central banks of most countries.

 

If US collapse, so will most countries as well.... but without the collapse, there is minimum of no correction at all. [sweatdrop]

Edited by Altivo
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The world is like an island.

 

On this island are 1 American (US not Canadian) and all the rest are people all over the world.

 

The people all over the world organize themselves to collect firewood, some go fishing, some grow vegetables, some collect water and all that.

 

At the end of the day, they start a fire and cook the vegetables, fish and all that and the American eats them. That's all he does. He eats them. Out of his goodwill, the rest of the inhabitants of the island gets to eat what the American doesn't finish.

 

Answers your question?

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Turbocharged

He is right in a sense..

 

we dont export very much things to the US..

 

and our economy is difersified enough such that we still can be dependent on EU side.

 

Our main strength is in our financial and shipping..there are awful lot of other areas where we can trade with..not just US..

 

But for those countries that export mainly to US, gg for them

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Turbocharged

and we're been swallowing it like complete idiots but nv make noise when it's time to make noise..

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