• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
 
Why the US is collapsing
Hello, visitors from Digg, Reddit, StumbleUpon, and Slashdot. Summaryin one paragraph: This is the leader of the Swedish Pirate Partyexplaining how the US went bankrupt in 1971, and has been covering itup through an accelerating whack-a-mole borrowing frenzy that isbursting right now. It has been paying rapidly growing VISA bills usingMasterCard and vice versa for 37 years. The creditors are catching up,and the US is about to go extinct as a superpower. Become irrelevant.It is not yet on its death bed, it is still walking, breathing and capable of entertaining a conversation in public. But there are ominousbloodstains on its hands used to cover the painful coughing.Last summer, I wrote (in Swedish) about how the US is ingrave dangerof becoming the Fourth Reich. I also said that such a state would notlast for more than 15 years, because of a number of factors I wouldelaborate on later.I was right about the sequence of events, but horribly off on the timing.Where I had expected them to happen gradually in about ten or 15years, instead they are unfolding before my eyes at an acceleratingpace.Some people believe that pirate politics is somehow about the right toobtain music and movies without paying. Some, a bit more initiated,believe it is for fight for civil liberties. In that, they are correct. But fewunderstand the scope of this fight. It is not against the music industry.It is not against entertainment cartels.I see the pirate fight as being against corrupt governments thatsystematically curtail civil liberties as the primary and only defense of a gigantic and growing financial bubble, built over four decades. A fightagainst a small elite that are literally killing people to be able to keepliving in luxury without paying the bills for it. Some bloggers havecalled thisFascism 2.0. The entertainment cartels are just a small partof this bubble, and fascism is used here in its most lexical sense.
fascism
 
n.
a merging of the interests of big corporations andgovernment, adjoined with a systematic curtailment of civil libertiesIn order to understand what pirate politics are really about, you needto understand global economic politics in ways that most people willnever encounter. You need to understand the gold coin of Bretton-Woods, Toyota's impact on Detroit, the strategic dollar advantage of the Marshall Plan, why the WTO and UN WIPO are rivals, how and whythe US uses threats of trade sanctions, and how money is created andceases to exist on today's financial markets. I will cover the basics inthis blog post. The most prominent of these bubble-pumping governments is the US.And their bubble is bursting. The dollar is not just falling in exchange
 
rate, as in "oh, the curves are on a downslope, interesting, btw Iwonder what's for lunch today". The US dollars are about to become asirrelevant as the rubles, the deutschmarks, and the sesertii.For these empires - the Soviet, German and Roman empire - followedthe exact same pattern. And if history is a teacher, future empires willdo so too.
Part I: Background
Some of you may have noticed that the dollar has lost some of itsvalue against other currencies, the euro in particular. Usually, with ahealthy currency, this would not be a cause for alarm, other that a signthat the American households might be overborrowing andovermortgaging, and thus increasing the money supply, causing therate to fall due to supply/demand rules.It is much more serious than that.Let's go back to 1947. The US did two extremely strategic moves atthat point. One was called The Marshall Planand looked like charity,giving money away to all of war-torn Europe, officially to help repelcommunism. Three years prior, it had established theBretton Woods system, whichput the US Dollar at the center of rebuilding the countries, andguaranteed an exchange in gold for the US Dollar. Every 35 US Dollarswould be exchangable and refundable with one ounce in gold.I genuinely believe that these two deals were good for everybodyinvolved. The ruined Europe got a foundation for rebuilding its nations.But what the US accomplished was much more important than that: itsucceeded in making its own currency into a world currency. The dollarbecame the trade standard. This status is extremely important. In fact, it carries the entire USeconomy and its continuous overspending. Let's stop for a moment tounderstand why.Every nation has a currency reserve today. Savings in a piggy bank, if you like. This currency reserve was filled with the world's most stableand standard currency, the dollar.Let's take that again: every nation has been buying dollars for the past60 years just to stockpile it, because the US Dollar has been thestandard currency.And since they are buying the dollar, this means that the US is gettingsomething else of value in return. In effect, the US has been able toprint money at a rate that outpaces its industrial production, just
 
because countries have been buying its currency.At the end of 2007, this stockpile across the world was two and a half trillion dollars. More specifically, it was2,445,180 million dollars.What this means, is that unless the US has an equivalent on two and ahalf trillion dollars in cash on hand, which it absolutely doesn't, the UShas consumed goods and services for two and a half trillion dollars thatare not yet paid for. The countries bought dollars in exchange for yen-or-whatever, the US bought shiny toys for the yen-or-whatever, andnever gave it a second thought. This is like going on a shopping spree and paying with checks, andhaving the luxury of the checks never arriving at the bank to chargethe account.But the checks for that two and a half trillion dollars haven't vanished. They are sitting in vaults. And they are starting to trickle in to thebank. A barely noticeable dripping at first, it is now starting to turn intoa small stream, and once people figure out what is happening, it'sgoing to be a burst dam torrenting down the valley of global finance.How much is two and a half trillion dollars? Actually, it isn't a lot of money in the global economy. It's about $7,500 for every man, womanand child in the US. It is about four years' worth of American militaryspending. It's about one-quarter of the American GDP. The key here, however, is not how much money it is. It is that there isno financial coverage for it. Spending $1,000 on a TV set isn't a lot of money, but it can cause a lot of bad consequences for you and yourstanding if you don't happen to have those $1,000, and no morecreditors are willing to lend you a hand.And the US is running out of new creditors fast.
Part II: The war bankrupted the US
I wrote previously, that under the Bretton-Woods agreement, the dollarwas essentially an IOU. A loan paper, an obligation to the US. Every 35dollars was good for one ounce of gold, to be paid at any time of thecreditor's choosing. However, the war tore through the Americaneconomy like a plough through a golf course. At the start of the war,the gold coverage was 55%, which is healthy by modern bankstandards. During just 1970, however, that coverage dwindled from55% to 22%.Wait. 1970? Right. I'm not talking about Iraq. I'm talking aboutVietnam.At this point, economists no longer believed in the US' capacity of regulating its expenditure and making good on its promises.
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...