The US Economic Recession
Captain of The
Jun 4, 2008
extract from the Late May 2008 Issue of Bill Buckler's "Global
The US Economic Recession
- An Update:
While the attention of America
and most of the rest of the world is focussed upon the attempts
by the Fed and Congress to lean against the internal financial
contractionary hurricane inside the US financial system, the
declining economic situation on the ground in the US economy
bears very close attention. US payrolls are down by a total of
260,000 in the past four months. US industrial production peaked
back in January and has fallen at a 4.9 percent annual pace in
the past three months. Total US business sales have plunged at
a 7 percent annual rate in the three months ending in February
despite a surge in wholesalers' sales. Retail sales are grinding
to a halt. Unsold inventories are climbing. This is a real recession.
The Biggest Debt Beat Of All:
To see this is like watching
the edge of an expanding black hole in interstellar space, but
this is a financial hole on the verge of swallowing an entire
nation. The federal government's long-term financial obligations
grew by $US 2.5 TRILLION last year, a reflection of the exploding
costs of Medicare and Social Security benefits as more baby boomers
reach retirement age. As reported in a USA Today analysis, American
taxpayers are on the hook for a record $US 57.3 TRILLION in federal
liabilities to cover the lifetime benefits of everyone eligible
for Medicare, Social Security and other government programs.
That's $US 500,000 per household. When the liabilities of State
and local governments are added to this, the total rises to $US
61.7 TRILLION. That's $US 531,472 per household, more than four
times what Americans owe in personal debt and mortgages. This
is now front page news on USA Today.
Staring Into The Abyss With Wide Open
Millions must have seen this
report. The presidential candidates had nothing to say. The White
House had nothing to say. Congress had nothing to say. Economically,
this much is certain. The debt is unpayable, even if Americans
who still have any are stripped of all their assets to pay for
The American Social Revolution Ahead:
At some point, Americans will
start to realise the reality of this debt morass. They will try
to count their own individual assets and, at that point, a national
panic will take place. Today most Americans have more personal,
household and other liabilities than they have assets. Once this
sinks in, the US will be at the trigger-line of a social revolution
because the physical assets Americans do have control over will,
to most, become a life and death matter. To be stripped of them
- as so many Americans are now being stripped of their houses
- will mean to be left destitute in the street with nowhere to
go. It has happened before. It happened during the 1930s when
agents of bankers showed up to sell a farm they had repossessed.
On the day of the auction, other farmers walked and rode up.
They all had guns in their hands. The auction began and there
were no bids. Finally, a younger man stood forward and offered
one Dollar for the property. Silence. The agents for the bank
tried to leave, only to find that they could not. The other farmers
were still there and some raised their guns. Another long silence.
Then the top man from the bank accepted the one Dollar bid and
that one Dollar was handed over to be followed by a bill of sale.
The younger man then handed another Dollar to the first farmer
and all he said was that the other farmer could pay it back when
he was able. The farm changed hands again and, entirely legally,
the farm was back in the legal ownership of the original owner
with no debts owing.
The agents of the bank left
in their cars in a cloud of dust. For a long way, they could
see men and boys with guns along the roads. At the farm, the
other farmers left one by one and went home. There had been no
violence, nobody had died. But there would have been dead men
if this had not happened and all the men there knew it, the farmers
as well as the bank's agents. This happened many times in the
1930s but the history of it has died in silence. In future, when
the truth dawns on millions of Americans that the Federal Government
is BROKE and unable to pay them what it has promised, the stage
is set for streets and cities in chaos as Americans rise in rage
and in fear.
Living In The Streets:
Where are they all going? Where
are they living now? About 8.5 million US homeowners, about 11
percent of the total, owed more on their mortgages than their
homes were worth in the first quarter. The forecast is that the
number of people in this predicament will rise to more than 12
million next year.
To get a sense of how drastic
events are in the US, it is worthwhile to look at California.
If California were to be measured as a standalone economy, it
would be the world's seventh largest. Take a look at what is
happening there. The median Californian home price has fallen
by 29 percent in the year to March and repossessions are increasing.
Unemployment hit 6.2 percent in March, up 1.2 percent from the
same month last year. In many ways, California is a bell weather
for the rest of the US. Everything almost always happens there
first and to a greater extent and for a longer period before
it takes place in other parts of the US to a lesser degree. These
huge price drops in California are now taking place all over
the US and are cutting like a knife in under the collateral value
of houses. This leaves the lenders looking at their balance sheets
being torn apart. Soon, the lenders will be ripped apart.
A Financial View Of The United States
The financial foundation of
the United States has been broken. The deflationary effect of
falling house prices alone, if run at present speed for a year,
would wipe out about $US 13 TRILLION in the value of the collateral.
That sum, $US 13 TRILLION, is very close to the annual US GDP!
In effect, it has the effect of wiping out the sum total of what
the US has made, traded for and produced for an entire year.
In all economic history, no nation's economy has ever survived
that without a thunderous depression and a crash in its financial
system. In fact, the real (not financial) US recession has just
begun. From now on, no interest rate finagles or other financial
legerdemain can stop it from continuing and getting worse.
The SIX Sectorial Areas Of US Insolvency:
Today there are four lesser
areas of insolvency in the United States. These are the federal
budget deficit, the US trade and current account deficit, the
now insolvent big US banks, and the rising tide of negative equity
for American homeowners. Right in the middle of these four lesser
insolvencies are the two biggest of all. These are the combined
federal and state unfunded liabilities of $US 61.7 TRILLION and
the $US 7 TRILLION in US external debt - which is climbing by
$US 1 TRILLION per year.
After taking a long deep breath,
it should be obvious that to "solve" even one of these
six areas of US insolvency would take an extraordinary effort.
To solve all six, even in a sequence, would take the efforts
of at least one US generation but likely more than one. Worse,
much worse, is the fact that it would take most Americans totally
by surprise that they now are in this economic situation even
after it has been plastered all over a recent issue of USA Today.
The rest of the world CAN see this coming. That is why they are
pulling away from the US, barricading themselves inside their
own respective economic corners, and making urgent arrangements
amongst themselves in this recent series of top-level global
summits. Remember, the US was not present at a single one of
It is this last which is signal,
in global geo-political terms, because it signifies that the
US is no longer the world's real centre of gravity anymore. The
rest of the world has already downgraded the USA to being simply
the power on the North American continent in world economic terms
and is impossible to talk to.
The only thing really feared
by the rest of the world is that the economic collapse of the
US, now sliding into deepening recession, will have drastic effects
on their own economies. This is the driving power behind these
recent world summits. Only closer economic relations between
these other nations can lessen the effects of the worldwide effects
of the coming US economic depression and financial collapse.
The Policy Of The "Elite"
Versus The Public:
Politically, one can always
know when an "establishment" is in charge of any nation.
After every election and change of government, nothing really
changes. The public is given the spectacle of people running
for public office, of primaries, of party conventions, of national
elections for Prime Minister or President. After it is all over,
everything looks the same until the next election approaches.
Then the same thing happens all over again. Politically though,
as time passes, this process splits the establishment from the
general public so that, at election time, the numbers of those
voting starts a long-term decline.
When the nation's political
establishment realises this is happening, it often starts small
external wars in order to distract the public internally. These
wars are never large enough to place the nation in jeopardy.
Any internal changes or improvements are postponed because of
the small external war and the public waits for a peace to be
made. It cannot protest while the war is going on, that would
be unpatriotic. This attitude is also known by the political
establishment, which is the historical reason why many of these
small wars have gone on for astounding lengths of time. But the
real internal political problem with all small external wars
is that the process of fighting them often leads to increasing
internal repressions in order to extract from the public the
economic means of war. When that happens, the public's outlook
starts to diverge from that of the political elite and the nation
has a fissure. Here, the political elite faces a policy choice.
It can either alter its own policy, end its external wars and
start to address what the public is concerned about. Or it can
continue its policy of small external aggressions for the purposes
of internal distraction. If it does the latter, it places itself
on the political road of ever increasing internal repression
in order to continue its external policy. Having done that, and
in increasing fear of its own public, the elite starts to finance
its external wars with credit, i.e. loans. It does not dare to
tax for the costs.
The Political Cross-Over Point:
Along this road, a point is
always reached where the public realises that their own lives
are going nowhere because of the climbing costs of the external
wars. An example here is the US where real American living standards
have not improved since the early 1970s. In 2001, in the midst
of recession and after 9/11, the US political "elite"
declared war - on "terror". Then came the attack on
Iraq. Five years later, the US armed forces are still there in
an unwinnable war. The costs are killing the fiscal budget of
the US and Treasury debts are soaring. In response to the increasing
resentment felt by ever more Americans, the US political establishment
has established a full-scale internal surveillance state, always
only a step away from a police state. That has been done because
it is now the US political establishment which lives in political
fear of the American public. What they fear is that the American
public will spontaneously turn on them in a massive demonstration
of sheer frustration.
The FINAL Choice:
The political elite now faces
an American public which has realised that the US has failed
in its military campaign in the Middle East as well as having
failed as the economic managers of the US economy. This is the
most dangerous point of all. Politically, this is the point where
the political elite has to make its final choice. That choice
is to maintain its external policy at the internal cost of full-scale
repression or to give away its external policy at the very likely
political cost of a total loss of internal political power.
Historically for the United
States, the outlook is not good. No political elite nor its political
establishment has ever vacated power without an immense internal
political and/or physical struggle to maintain it. But as the
sudden fall in 1991 of the USSR has shown, once a political establishment
(the Communist Party) loses its morale, its fall from power is
total and absolute. The American political establishment is today
in a similar position. The United States is now in a pre-revolutionary
It will either suddenly swing
backwards towards its historical tradition of Individual Liberty
and Freedom. Or it will suddenly swing into the long night of
an internal police state and endless new wars.
follows for subscribers
William (Bill) Buckler
Captain of The
Copyright ©1984-2008 The
All Rights Reserved.
(reproduced with permission)
The Privateer 2008 Volume
- Late May Issue - Number 604
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