Published by the GEAP: The GlobalEurope Anticipation Bulletin is the confidential letter of think-tank LEAP/Europe 2020, published in partnership with the Dutch foundation GEFIRA. Their aim is to provid readers with state-of-the-art analyses of geo-political anticipation centered around the study and follow-up of the global systemic crisis, itself focussed on the evolution of the dollar and of the US economy, and their impact on international economy and financial markets, all that seen from a European perspective.
The future of the USA – 2012-2016: An insolvent and ungovernable United States
Thus, according to LEAP/E2020, the 2012 election year, which opens against the backdrop of economic and social depression, complete paralysis of the federal system (29), strong rejection of the traditional two-party system and a growing questioning of the relevance of the Constitution, inaugurates a crucial period in the history of the United States. Over the next four years, the country will be subjected to political, economic, financial and social upheaval such as it has not known since the end of the Civil War which, by an accident of history, started exactly 150 years ago in 1861. During this period, the US will be simultaneously insolvent and ungovernable, turning that which was the “flagship” of the world in recent decades into a “drunken boat”.
To make the complexity of the current process understandable, our team has chosen to organize its anticipations around three key areas:
US institutional deadlock and the break-up of the traditional two-party system
The unstoppable spiral of recession/depression/inflation
The breakdown of the US socio-political fabric
The unstoppable US economic spiral : recession/depression/inflation (extract)
Real estate, the foundation of US household wealth along with the stock market, continues to see prices drop year after year despite desperate attempts by the Fed (32) to facilitate lending to the economy through its zero interest rate policy. The stock market has resumed its downward path artificially interrupted by two Quantitative Easings in 2009 and 2010. US banks, whose balance sheets are much more heavily loaded with financial derivative products than their European counterparts (33), are dangerously approaching a new series of bankruptcies of which MF Global is a but a precursor, indicating the absence of procedural controls or alarms three years after the collapse of Wall Street in 2008 (34).
Poverty is gradually increasing in the country every day, where one in six Americans now depend on food stamps (35) and one in five children has experienced periods of living on the streets (36). Public services (education, social, police, highways…) have been significantly reduced across the country to avoid city, county, or state bankruptcies. The success with which the revolt of the middle class and the young (TP and OWS) has met is explained by these objective developments. And the coming years will see these trends get worse.
The weakness of the 2011 US economy and society is, paradoxically, the result of the “rescue” attempts carried out in 2009/2010 (stimulus plans, QE …) and the worsening of a pre-2008 “normal” situation. 2012 will mark the first year of deterioration from an already badly impaired situation (37).
SMEs, households, local authorities (38), public services,… have no more “padding” to soften the blow of the recession into which the country has fallen again (39). We anticipated that 2012 would see a 30% drop in the Dollar against major world currencies. In this economy, which imports the bulk of its consumer goods, this will result in a corresponding decrease in US household purchasing power against a backdrop of double-digit inflation.
The TP and OWS have, therefore, a bright future ahead of them since the wrath of 2011 will become the rage in 2012/2013.
Global Economic Crisis: The USA, An Insolvent and Ungovernable Country.
