Bankrupt USA now faces an army revolt!

It is now three years since the world realised that the credit crunch had arrived, although the general public generally only twigged somewhat later as Northern Rock faced collapse. Yet today our ruling elites clearly remain blissfully unaware of the depths of the disaster they have wrought. An economics Professor from Boston University has now spelt out the facts in the starkest terms for Bloomberg, as may be read in full from here, while the following quote carries the essence:

Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.

And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.

Worse Than Greece

Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.

The scenario for the UK remains almost identical to that which the Professor cites for the USA, yet no action is forthcoming from the Coalition Government and none is proposed bar an announcement in October of reported severe spending cuts. Meantime the next downward plunge in the property price collapse looms in the wings. On 30th August 2007 in this blog in a posting titled "Britain's economic abyss" I concluded with the following: .... An Australian hedge fund went under yesterday and even the usually cheerful local SW news 'Spotlight' had a gloomy item on the looming house price bust. Not much of any of this in the morning press, but Camilla Cavendish in The Times has a good column, , from which comes this quote: Which just goes to show, I suppose, that idiocy is no more a bar to promotion in the City than anywhere else. People who complimented themselves on their brilliance at inventing ever more complex financial instruments with which to spread risk had started to act as though risk had been abolished. The problem is that the actions of the US Federal Reserve and Britain's Treasury under Gordon Brown, effectively achieved just that- indicating they would always underpin the fantasy world which they themselves had created. Until some major casualties are allowed to reap the consequences of their profligacy the final crunch will just be that much worse. A recent gushing report on the record price of 222 million dollars for a flat in London, also reported in the US as the most expensive real estate deal ever, indicates the opposite to that being reported, namely as a sign of house price strength; rather I would suggest it is a sign of amazing dollar weakness, and as goes the dollar so too will follow the pound, the euro, the yen and even the RMB! If 222 million dollars today, why not 222 billion in three years time, everything else seems to be going that way. Surely the fact that an individual can spend such a sum on a six bedroomed flat in the middle of a city bodes ill for the value of the dollar in the ordinary worker's billfold? What price a loaf of bread in Mayfair or within a stone's throw of Central Park in New York in such a world? Indeed will there then be loaves of bread in our cities for such individuals to buy and will these elites still retain the connection between mouth and stomach to make such consumption even necessary let alone worthwhile? This blog has frequently put forward suggestions (eg here and here) as to one way to avoid the continuing house price collapse where all the misplaced wealth of the nation now rests. As ever such advice is ignored and the crazyiness continues. In March 2009 this blog suggested to avoid the depression Bernanke be dropped from a helicopter, last week he unnerved the markets where junior traders with their bosses presumably on vacation sensed the looming chaos, by dedicating virtually non-existing mortgage assets assumed from Fannie Mae and Freddie Mac to purchase long term US Treasury debt thus further depleting interest yields. Is worthless money worth paying interest on at all? Perhaps as long as fools exist to barter flats for hundreds of millions of dollars I guess the answer to that still remains (but IMO not for very much longer) yes! One small exception to this refusal to face up to facts and realities, I choose to presume, came from Britain's Defence Minister last week when he reportedly insisted that the battle over who will pay for Trident was an ongoing discussion. He said: "Ultimately, all our defence capabilities have to be paid for. Which bits are paid, over what timescale, is part of the discussions we are having and I'm not going to entertain them in public. I have enough time entertaining them in private." I will take that as all the reply I am likely to get to my open letter to Dr. Liam Fox posted on this blog last week. The complete silence on any matter of significance to the future security of the nation from the co-addressee of that latter, Foreign Secretary William Hague, can be assumed to continue to be the case unless I post to the contrary on this blog. While the economic disaster in the USA and Britain seem very similar on Defence and Afghanistan at least Cameron's stand-in mannequin Nick Clegg will not have an army revolt to face over the next couple of weeks. The gauntlet thrown down by General Petraeus to his Commander in Chief on the influential Meet the Press TV programme yesterday, portends a deeper crisis to come. Britain's depleted, under-resourced and ongoingly uselessly sacrificed service personnel regrettably seem in no state to challenge the utter dross who for so long have been negligently governing what was once the United Kingdom.