Incresingly, the US has to 'ape' the successful process/culture/ painful realities that the South Koreans faced only some 13 years ago: default all state debt in grand style (and in the US case, it has to include federal, state, municipal, GSE, medicare, social security, and other entitlement payments to organisations such as VA, etc. The first step is for the current Administration to turn turtle and
- declare exactly how much is due/required over the next 10 years (i.e. expense view), compare it to the best and worse case scenarios for the tax and other receipts to the same departments/organisations (i.e. income view), including debt servicing payments to Treasury and foreign governments;
- as a natural consequence of the above accounting, admit that further QE is just not affordable, and worse, not palliative to any sector of the US economy and worse, globally;
- admit publicly to Central Banks, pension funds, banks, etc etc all over the world that the US Treasury Bills are no longer truly risk-free AAA instruments;
- 'force' a default of all this debt, and enter into a serious restructuring of such debt, so that only a small portion of overall debt is owed, and that too is deferred to future periods, pegged to US GNP annual growth (a la Argentine post-default negotiation of recent years;
- accept a resulting massive devaluation of the USD, and dare I suggest, reverse peg the USD to the CNY (2nd largest economic power in the world), and I recommend 1 CNY = 3.80 USD. Such pegged rate should hold until the US is 'free' from potential 'social unrest' from all classes of society within its borders;
- free the PGM markets to find their own levels, and facilitate a new 'basket' of truly respectable, reserve currencies to emerge, from CNY, to perhaps a newly 'minted' but entirely fiat (but pegged to the above) derivative of the SDR that the rest of the world would accept, respect and agree as the replacement of the USD and EUR for future Central Bank holdings;
- in parallel, let the southern European and other fringe European countries default on their respective EUR denominated debt, and orchestrate a similar rescheduling of this debt to their respective national GNP annual growth;
- let the EUR also decline substantially to find its true value, taking account of all the unsustainable debts already owed by the likes of Greece, Spain, Ireland, etc;
- go into 'deep think' about the US' new role in the world, as it will have to be a more diminished and less interventionist one, with far less, unitary offensive interventions in foreign lands, etc;
- redraw the US tax code entirely, allowing for simplicity, balanced budget spending, providing far greater tax holidays, tax free industrial estates, etc so that the US rapidly evolves into an 'emerging market' along the lines of China, Mexico, Brazil and India;
- redraw the Constitution as appropriate so that a more central power emerges, and individual states politics are subservient to US federal laws, courts and structures!
- quickly bring the Tea Party movement to the true economic realities facing the US, whereby 'Beacon on the Hill' should be entirely subservient/irrelevant to 'bringing home the bacon' political 'value/objective' for every American who is hardworking, is committed to work hard, pursue the American Dream, etc - which must represent most Americans, including boatloads of illegal immigrants of every colour and description.
Under this scenario, the PGMs will find their natural levels quite quickly, the disruption in social, economic and political terms will be far less disruptive and more organised/controlled than the worst of the fears many in this thread have exposed over the years. |
