The Fall of the American Empire (?)

These are some ideas I came up with this morning on the way to work. The inspiration came from a CBC article I read about U.S. credit debt.



The age of American dominance is over. This 'recession' talk is nothing. The U.S. is heading full tilt into a major depression at least equal to the 1930s.

Lets look at what we know. 8000 american families are having their homes foreclosed on them every day. People are simply unable to pay their debts. For approximately the last year, this problem has been escalating, and no matter how much the media and experts try to paint a silver lining onto the cloud, reports keep coming out about how much more trouble the economy is in compared to yesterday.

Now, reports are coming in that Americans are beginning to default on their credit card debt. This is ironic to me because I would personally be paying my mortgage before I paid any money to the credit card company. What use is a piece of plastic if I have no house to live in? Anyway, people are missing their payments, or putting down a mere fraction of what they owe. The credit card companies, in response to this, jack up their interest rates as punishment. Now the money the people couldn't afford to pay before is now not even covering interest payments, let alone the meager amount of principle the was at least being paid before.

Next will come personal loans, car loans, and basically every other type of debt millions of Americans are carrying every month. People are losing their homes, then will probably lose their jobs because they're showing up to work in rags, or not at all. The banks will be unable to make up their bottom line because all of the money they lent out is effectively gone forever. Bear Stearns has shown us that the largest of the large banks are not safe from this crisis.

People are going to be terrified to put their money anywhere but under a mattress, and rightfully so. We've been told for months that markets like China would be a safe haven for investors, and now reports are coming out that the Chinese market is going to suffer as much or even more in 2008 as the American one is. This seems pretty apparent to anyone who has money in a Chinese Equity fund: -30% growth over the last six months. If you put $100,000 into one of these funds last summer, you've lost $30,000 without doing a thing. Since outlook is pretty negative at this point, people are getting out and cutting their losses. I work at a bank, and I have seen this firsthand.

So, the banks can't get back the money they lent out, and no-one is putting money back in to make up for it. That sounds like a yummy recipe for disaster.

People are going to start running for the banks, banks are going to call back their money, and no amount of federal intervention is going to save anyone because the intervention needed to be done five years ago. It's 1929 all over again.

This could potentially have been stopped long ago had the U.S. not jumped headfirst into another Vietnam, only this time with a leadership too blinded to see that it was a hopeless cause. Why is it that nobody in the upper levels of government knows that a man will fight until his legs are gone, and then he will crawl through the dirt, all to defend his home. No amount of technology and no number of weapons will ever win a war where you are threatening people's homes and families. Iraq is a lost cause. It will take 100 years to restabilize the region. And for what? Oil that will be unnecessary if we simply tell big oil companies to beat it so we can fully embrace the electric and other alternatively powered cars that we've had available for mass production for at least 20 years now?

So we have a war that is sucking millions of dollars a day out of the U.S. economy and has effectively shrouded the growing credit problems that finally burst out of the war's large shadow last year. Now the U.S. is in a war it can't stop and a credit crisis that is only getting worse and worse. This is the U.S. economy in a freefall. As a history student, I learned and saw and read about the conditions of the 1930s. It's scary to know that in my lifetime I will have to go through it as well.

Or will I? In the 1920s the U.S. was the major player on the world stage. Europe had just finished a devastating war that killed most of it's younger generation and left all of the major producing economies in ruin. China was on the early path that would lead it to a Communist government. Russia was just gathering itself back together after it's own Communist revolution. All of the world that wasn't the U.S. was basically in shambles.

Today things are much different. The EU is strong and powerful. Germany has a (mostly) fully functioning economy, one of the world's strongest. Russia has gone through democracy's birthing pangs and emerged as yet another totalitarian dictatorship, though this one with a powerful black market economy and immensely profitable natural resourses. China's GDP is increase at something like 10% per year and is set to become the largest economy in the world. India and Brazil are emerging as major players in the world. Things in all areas that aren't the U.S. seem to be on the up and up.

So here is the question: will the U.S. drag the world into another great depression, or is the rest of the world powerful enough to keep itself, and the Americans afloat as we head deeper into the 21st Century.

In any case, here is what we know. The U.S. is heading for a major depression. Whether or not it is a Great Depression or a Pretty Big Depression depends on the resilience of everyone else. The U.S. is no longer the major central trading partner for everyone. We can all trade with everyone else and the U.S. The world needs to remember that as the next few years plod along. Cementing this great global economy is the key to preventing another serious depression and all of the potential problems that that can create.

We certainly don't need a WWIII.