The Coming Economic Collapse

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With the exponential growth of debt and derivatives, a sovereign debt default could trigger economic shock waves that would make the previous 2008-09 economic collapse look like the pre-shocks of a much larger earthquake. This video presents one possible scenario on how a dollar collapse would affect one family.

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China Calls Our Bluff: The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation

by Washington’s Blog
July 25, 2010

America’s biggest creditor – China – has called our bluff.

As the Financial Times notes, the head of China’s biggest credit rating agency has said America is insolvent and that U.S. credit ratings are a joke:

The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated.

“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview.

***

He specifically criticised the practice of “rating shopping” by companies who offer their business to the agency that provides the most favourable rating.

In the aftermath of the financial crisis “rating shopping” has been one of the key complaints from western regulators , who have heavily criticised the big three agencies for handing top ratings to mortgage-linked securities that turned toxic when the US housing market collapsed in 2007.

“The financial crisis was caused because rating agencies didn’t properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests,” Mr Guan said.

Recently, the rating agencies have been criticised for being too slow to downgrade some of the heavily indebted peripheral eurozone economies, most notably Spain, which still holds triple A ratings from Moody’s.

There is also a view among many investors that the agencies would shy away from withdrawing triple A ratings to countries such as the US and UK because of the political pressure that would bear down on them in the event of such actions.

Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency.

The results were very different from those published by Moody’s, Standard & Poor’s and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong’s belief that China is more politically and economically stable than all of these countries.

Mr Guan said his company’s methodology has been developed over the last five years and reflects a more objective assessment of a government’s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth.

“The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ,” Mr Guan said.

***

A wildly enthusiastic editorial published by Xinhua , China’s official state newswire, lauded Dagong’s report as a significant step toward breaking the monopoly of western rating agencies of which it said China has long been a “victim”.

“Compared with the US’ conquest of the world by means of force, Moody’s has controlled the world through its dominance in credit ratings,” the editorial said…

China is right. U.S. credit ratings have been less than worthless. And – in the real world – America should have been downgraded to junk. See thisthisthisthisthis,thisthisthis and this.

China is not shy about reminding the U.S. who’s got the biggest pockets. As the Financial Times quotes Mr. Guan:

“China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”

Might Makes Right Economic Collapse

Indeed, Guan is even dissing America’s military prowess:

“Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”

As I’ve repeatedly shown, borrowing money to fund our huge military expenditures are – paradoxically – weakening our national security:

As I’ve previously pointed out, America’s military-industrial complex is ruining our economy.

And U.S. military and intelligence leaders say that the economic crisis is the biggest national security threat to the United States. See thisthis and this.

[I]t is ironic that America’s huge military spending is what made us an empire … but our huge military is what is bankrupting us … thus destroying our status as an empire …

Indeed, as I pointed out in 2008:

So why hasn’t America’s credit rating been downgraded?

Well, a report by Moody’s in September states:

“In superficially similar circumstances, the ratings of Japan and some Scandinavian countries were downgraded in the 1990s.

***

For reasons that take their roots into the large size and wealth of the economy and, ultimately, the US military power, the US government faces very little liquidity risk — its debt remains a safe heaven. There is a large market for even a significant increase in debt issuance.”

So Japan and Scandinavia have wimpy militaries, so they got downgraded, but the U.S. has lots of bombs, so we don’t? In any event, American cannot remain a hyperpower if it is broke.

The fact that America spends more than the rest of the world combined on our military means that we can keep an artificially high credit rating. But ironically, all the money we’re spending on our military means that we become less and less credit-worthy … and that we’ll no longer be able to fund our military.

The Scary Part

I chatted with the head of a small investment brokerage about the China credit rating story.

Because he gives his clients very bullish, status quo advice, I assumed that he would say that China was wrong.

To my surprise, he simply responded:

They’re right. What’s scary is that China knows it.

In other words, everyone who pays any attention knows that we’re broke. What’s scary is that our biggest creditor knows it.

Tricks Up Their Sleeves?

China has been threatening for many months to replace the dollar as the world’s reserve currency (and see this). And China, Russia and other countries have made a lot of noises about replacing the dollar with the SDR. See this and this.

Gordon T. Long argues that the much talked about gold swaps are part and parcel of the plan to replace the dollar with the SDR. Time will tell if he’s right.

China, of course, is not without its own problems. See this and this.

In related news, Germany’s biggest companies are starting to shun Wall Street as too risky.

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5 Responses

  1. Before the final death stroke is administered to the economy the elitist of the New World Order are going devalue the currency, which will cause hyper-inflation and will be the ultimate demise of the middle class. After that occurs Irael will bomb the nuclear power plant in Iraq. Iraq will retailiate striking Israel and the U.S will come to Israel’s aid and Russia, China and North Korea will enter into the conflict, which will be the start of World War Three. This is all the agenda of the elitiest of the NWO. They want to get rid of at least niniety percent of the world population. There are over seven billion people on earth and not enough resourses to sustain them, so they are going have a justibiable genecide war to get rid of them. You don’t need as many skilled and unskilled workers anymore, because modern technology can replace them with industrial robots. They only need mostly the highly skilled, professionals, scientist and engineers.

  2. Nunse you might be on a wrong place over here. The financial system cant collapse but honestly it is difficult to the average to understand the virtual game not seeking for more profits but for more global power leading again in fresh more profits. But what we do? We are talking for years to get the message across and all governors literally have no dig anymore to catch up in the FED background. Look at this toilet paper role of 2300 pages Obama wishes to name financial reform because he is a misrable coward working for evil intentions of global control.
    Lots of re naming and shifting you will find and you will find lots of new control items protecting the true gangsters even more. May everybody understand that banks are nothing more than upfront tools and never have been more than this, just multiplied on top by the greed of its owners and managers lifted to high ranked citizens surrounded by this utmost misrable economists declaring science instead of folks slavery.
    Dont call anybody in the USA. Its too late for the dump to wake up. And if they do you will hear those stupids saying ¨we didnt know¨ because all they wanting to know about is how to get consuming empty life working and how to shit on the rest of the bad world delivered for free on the screen!
    Next stage will be global war or global ass kissing while the initial snake laughs their a off. Putting the dollar into the bin where it belongs too latest since Bretton Woods got no meaning unless all G20 agreements, world bank agreements, development agreements, IMF systm, rating clubs and stock exchanges being null and void and discovered tools to mass murder and mass manipulation of the initial club.
    Hope at least you folks here do understand how it is neted and linked. The US indeed is broke and is broke since money emission has been given into privat hands made look like institutionalised and the Bushes, Clintons, Obamas, Reagans, and back to Jefferson helped the biggest scam to humanity ever. Even glorified Kennedy did and got killed for another reason of gang hustles in the same club. This at least is my opinion after analyzing Kennedy not having helped the germans finding out the truth of jews power play, Churchill, Stalin and Roosevelts part of another scam presented as the WW II history.
    So that truck is fully stucked, no more engines, nor more fuel and this truck is called the USA, once the hope for humanity keen to develope true democracy. It has been made by laws, restrictions and corrupt congressman not to react properly in times of such. Chess mate.

  3. If anyone worships the wild beast or it’s image, and receives a mark on his forehead or upon his hand, he will also drink of the wine of the anger of God, that is poured out unduluted into the cup of wrath. He will be marked for destruction.

  4. James M Nunes says:

    I saw a rider on a black horse, and the one upon it had a pair of scales. A quart of wheat for a denarius and a three quarts of barley for a denarius. Do not harm the olive oil and the wine. The black horse represents the financial base of the economic system. The one seated upon it are the commercialist. The pair of scales are the weights and measures of the items sold and the unit price. A denarius is the monetary system. A denarius in the first century A.D. was the equivolent to a days wages. Before the final collapse of the economic system there is going to be hyper-inflation. A loaf of bread will cost a days wages. There will be a monetary collapse followed by an economic collapse. A monetary collapse is where the financial base of the economic system falls a part. An economic collapse is where the very foundations of employment and production come to a grinding halt. The olive oil and the wine represents necessities, which are food and energy.

    • And it puts under compulsion all persons, the small and the great, and the rich and the poor, and the free and the slaves, that they should give these a mark in their right hand or upon their forehead, and that nobody might be able to buy or sell except a person having the mark, the name of the wild beast or the number of its name. Here is where wisdom comes in. Let the one that has inteligence calculate the number of the wild beast, for it is man’s number, and it’s number is 666. Here is the interpretation of. There will be a man that rises up from this new world order and he will introduce a paperless monetary system based on a computerized bookeeping enteries of debits and credits with each persons account number. This new system will be first introduced gradually by using a plastic debit or a smart card with a computer chip inbeded in it, than a computer chip will be inbeded in a person’s right hand or forehead with that person’s account information. Every time you buy or sell you will swipe you hand or forehead on a computerized scaner, which will debit or credit your account. The government will be able to keep tract of every transaction and will deduct the taxes owed from right off the top of each person’s account. The number 666 is not a litteral number or should it be taken out of context. The number 6 symbolizes an imperfect number or a man’s number. By repeating the number 3 times 666, it adds emphasis to it. The wild beast in prohetic language is interpreted as governments or rulers. The rich rule over those of little means, and the borrower is a servant to the man doing the lending. One world government under elite politicians, bankers, and industrialist. The bankers symbolize the house in the card game. Every hand that is dealt, the bankers get their percentage right off the top. At least in Las Vegas, they tell you what the rules of the game are. Here the cards are stacked against you.

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