The American Insolvency

This has been building for a long time. More and more you find references to the this issue in the mainstream press. I expect within 1-3 years the US dollar will commence an extended decline in value, however as this article suggests with currencies, swings in sentiment really can be dramatic.

A collapse in the US dollar will be a collapse in US power and influence and accordingly the influence and stability of the Western world. The economic consequences of the global financial crisis will seem mild in comparison to the collapse of the world's reserve currency. In the US the effect will be as severe as the Great Depression - although the US appears almost half way there now.

The real question is where will China land? Stable and assertive? Chaotic and dissolute? Or perhaps, an expansionist police state where miltary conflict is used to maintain public morale and order?

I sincerely wish the green shoots optimists were right. If the US was solvent they probably would be.

The Fourth Turning Revisited

I ran into this interesting article just after the last post. It is interesting because it links Howe & Strauss's work to the current unfolding economic disaster. It is a worthwhile read (although I do not have a view on Peak Oil).

The two key bodies of though which led me to originally foresee the Great Recession were:

- Howe & Strauss Generation Theory - especially The Fourth Turning, and
- Austrian Economic theory

I have posted the link before and its worth a refresh :

http://www.fourthturning.com/

The Long Haul

"the only recession since the Great Depression to wipe out all job growth from the previous expansion"

Please follow the link to this post's feature article from The Wall Street Journal. It is not commonly known but the real unemployment rate in the United States, when you adjust for underemployment, is running at around 16.5%. We already have unemployment running at mid-teens in the United States and we are still in the early stages of this process. I read commentators talking about "green shoots" I see none. What I do see is the United States running up astounding budget deficits and accumulating unprecedent levels of government debt.

There is plenty of ongoing talk now about downward pressure on the US dollar and questions around how long its fiscal prolifigacy can continue.

Despite all the good intentions of the Obama adminsistration and the woefful mess they inherited from the Bush adminstration I suspect they will oversee the comprehensive destruction of the US economy. Needless to say the rest of the world will follow it. This will destablise the world to such an extent that some form of serious global conflict would now appear inevitable in the next decade.

There is still that palpable sense in the community and the media that the good times will return. Unfortunately this generation has already seen their best of times.

We are a full generation away from recovery.