Monday, August 12, 2013

Heading for Ruin

The magnitude of the U.S. government's indebtedness and unfunded liabilities is proporinately greater than that which brought down Detroit's fiscal house of cards.  The politicians' recklessly-created and increasingly wobbly federal economic structure is still standing only because, unlike Detroit, the feds can print money.

The magnitude of the indebtedness and and unfunded liabilities of the U.S. is proportinately greater than that which caused Greece's calamitous collapse.  America thus far has not experienced similar devastation only because its dollar is the world's reserve currency.

The printing of money to maintain the illusion of solvency and semblances of prosperity is turning into an inescapable trap that can be neither continued nor ended.  Continuation would bring ruin through hyperinflation while any and every hint of termination instantly results in  panicky financial retreats of magnitudes that threaten the economy of the nation and perhaps even that of the entire world.

At the same time the status of our greenbacks as the world's reserve currency is eroding. International financial transactions are increasingly settling accounts with currencies other than American dollars.  It is worth noting that this morning's Wall Street Journal  reported that the U.S. dollar is plummeting in value against the world's other major currencies. 

Not being an economist, I will not pretend to be able to predict when and how we will experience the consequences of our reckless overspending and money printing. What I do believe is that an economic structure is similar to a physical one in that failure to deal with a rotten foundation eventually must lead to a collapse despite stopgap effort to prop it up.  Furthermore, I believe that severity of the ultimate necessary collapse will only be intensified by the extremity and duration of the cosmetic efforts to make the structure appear to be sound.

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