Without massive debt forgiveness and a new capitalist model, there is no alternative future.
The US public debt climbed to $14.58 trillion at the end of August 2012. This made it slightly bigger than the $14.53 trillion size of America’s GDP in 2010.
I typed that fact in bold because I’m beginning to wonder what it takes to make global citizens wake up to the fact of America’s depth of indebtedness. The planet’s pivotal economy will, from here on in, be required to make an extra 10cents on the Dollar export profit each year – at the rate of the total deficit in turnover – to start paying off any of the debt. (And that assumes interest rates and import tariffs stay exactly as they are).
Here’s another fab factoid:
‘The Fed’s new round of quantitative easing, or QE3, will hurt the U.S. economy. The Fed’s plan of buying $40 billion in mortgage-backed securities a month and keeping interest rates near zero does little to raise GDP, reduces the value of the dollar, and raises the price of commodities. From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.’
At Jackson Hole in 2011, Bernanke told his audience that the Fed “has lots of alternative strategies still to be tried”. Is this latest repeat seen as an alternative, or is Benny waiting until he’s more double-dog certain that Armageddon is the only alternative to some creativity being applied to the problem?
Look across the Western world: in the UK, over £400bn has been thrown at QE, to no effect. The expenditure has dwarfed any savings made by Chancellor George Osborne, and the economy continues to flatline, with the only job creation occurring thanks to lower wages and shorter hours. The debts of all EU States (but especially the southern members) are astronomical: Greece has no chance at all of repaying hers, and both Spain and Italy are heading down the same road. If Germany commits to being the last resort saviour of the eurozone, its fiscal probity will implode. But Mario Draghi is now set to embark upon ‘unlimited’ bond buying…aka, QE.
Bernanke, Osborne and Draghi are pissing against a Tsunami. The Establishments have run out of ideas, and people around the world know it: that’s why the megamoney has started investing bigtime in property and gold. Because fiat currencies are being eroded by treasury thinkers who believe (along with the risk-taking banker/bondholder axis) that somehow, over time, the populace can be used to monetise their fantasies.
None of this matters any more. The calculations of the self-styled clever are so hopelessly out, so ridiculously poorly thought through, the elastic will snap and create a hyperinflated global slump long, long before any of the crazy obligations they took on have been soaked up by the mugs. Only then will somebody with courage wake up to the only solution: wind the debt/surplus clock back to zero, or face a future in which nobody can afford to export, because nobody can afford to buy.
At that moment – who knows? – it might occur to the mercantile globalism fanatics that we need a real alternative.