Michael A. Ross, Published January 02 2011
Economic collapse is the only outcomeAmerica is rapidly becoming a third-world basket-case economy much like Haiti, Somalia, Zimbabwe and California. California? Consider what incoming Gov. Jerry Brown had to say: “We’ve been living in fantasy land. It is much worse than I thought. I’m shocked.”
California, along with 45 others states, is running a cumulative
$140 billion deficit. This after closing a $73 billion deficit in 2009.
States have been getting by on
$160 billion in stimulus funds from the federal government, which, as everyone should know by now, comes from the Federal Reserve’s magic printing press. These funds run out in June. What then?
States have seen revenue declines for five straight quarters, the first time since 1962. State and local government’s other funding source, the $3 trillion municipal bond market, is in danger of defaulting. Will “helicopter” Ben Bernanke fly to the rescue and buy munis just as he did with $1.4 trillion in mortgage bonds and commercial paper? Just as QE2 is buying $600 billion in U.S. Treasuries? The Fed is buying this trash because the market is rejecting it. It is worthless.
Now comes Sen. Kent Conrad, D-N.D. (Forum opinion Dec. 22), chairman of the Senate Budget Committee, supporting a budget plan that “will increase the deficit over the next two years . . .Then we can pivot and deal with the deficit and debt longer term. . . cut federal deficits by nearly $4 trillion over the next decade, providing a road map to putting America back on a solid fiscal path.”
I swear! What has this guy been smoking? He is a complete economic illiterate. We seemingly find the most inept and incompetent and send them to Washington and create this enormous crisis and then propose to fix it with more of the same snake oil.
Foreign governments see this and are buying fewer dollar-denominated assets, and in some cases, such as China, are moving away from the dollar. The only saving grace for the greenback is the crisis in the European Union, which is bailing out entire countries. China and Japan cannot and will not continue to bail out the West. The Euro and the dollar will find their true intrinsic value: zero.
Civilizations are based on economies and economies on currencies. When the Euro and dollar go, it will be total economic and societal collapse. There is no other way out.