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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: benwood who wrote (48514)	3/22/2006 6:11:39 PM
From: NOW	Read Replies (1) \| Respond to of 116555

you are so right! Here is Chalmers Johnson saying the same thing today: "The only thing I can think of that might do it would be bankruptcy. Like what happened to Argentina in 2001. The richest country in Latin America became one of the poorest. It collapsed. It lost the ability to borrow money and lost control of its affairs, but a great many Argentines did think about what corrupt presidents had listened to what corrupt advice and done what stupid things during the 1990s. And right now, the country is on its way back. TD: But superpower bankruptcy? It's a concept nobody's really explored. When the British empire finally went, we were behind them. Is there somebody behind us? Johnson: No. TD: So what would it mean for us to go bankrupt?. After all, we're not Argentina. Johnson: It would mean losing control over things. All of a sudden, we would be dependent on the kindness of strangers. looking for handouts. We already have a $725 billion trade deficit; the largest fiscal deficit in our history, now well over 6% of GDP. The defense budgets are off the charts and don't make any sense, and don't forget that $500 billion we've already spent on the Iraq war -- every nickel of it borrowed from people in China and Japan who saved and invested because they would like to have access to this market. Any time they decide they don't want to lend to us, interest rates will go crazy and the stock exchange will collapse. We pour about $2 billion a day just into servicing the amounts we borrow. The moment people quit lending us that money, we have to get it out of domestic savings and right now we have a negative savings rate in this country. To get Americans to save 20% of their income, you'd have to pay them at least a 20% interest rate and that would produce a truly howling recession. We'd be back to the state of things in the 1930s that my mother used to describe to me -- we lived in the Arizona countryside then -- when someone would tap on the rear door and say, "Have you got any work? I don't want to be paid, I just want to eat." And she'd say, "Sure, we'll find something for you to do and give you eggs and potatoes." A depression like that would go on in this country for quite a while. The rest of the world would also have a severe recession, but would probably get over it a lot faster. " tomdispatch.com