Version 008
Date: 07 JUNE 2008

NOTE: Under twelve words have been delted from the header and title due to 
censorship issues related to sci.econ having said policies.

This text is still in Beta devlopment, so is subject to substantial and 
substantive content changes.

No French text is available, but I am open to this being published in French 
language newspapers and periodicals in translation -- as I am from Canada 
(and have a relative that also knows French) ... I would expect to agree to 
the final translation.

== One way the American governmental finance system can collapse ==

The Australia / US / NZ "ANZAC Treaty" relationship has essentially evolved 
into the US trying to bully a small nation (NZ) into obeying an obscure and 
unimportant directive withing the US military theology: the need to carry 
nuclear weapons around the territorial waters and ports of nations that have 
no infrastructure to prevent the theft of such weapons.

There is no proof that this US military 'theological viewpoint' has any 
meaning or strategic value in the South Pacific region. NZ has decided by 
itself that this theological premise helps 'not a single person' to be any 
safer inside or outside of NZ. NZ's decision should be allowed to stand, as 
it has no ideological or theological basis. All successful longstanding 
tactical decisions have no ideological or theological basis - that is why 
the decisions are successful.

Bully nations generally become fat and lazy, and clearly soon become 
incapable of taking care of themselves. The US has clearly demonstrated that 
this is the case in recent years.

The macrosocioeconomic pattern of the US not being able to take care of 
itself has been obvious since the end of the Cold War, but this kind of deep 
seated structural failure takes time to evolve and become de facto 
irreversible.

The bigger they are the harder they fall...

The collapse:

This predicted US economic collapse is really rather simple to see if you 
are aware of the nature of the US society and the way its finance system 
works. It will take a perfect storm of circumstances in order for the 
collapse to happen.

These macroeconomic circumstances are "locked and loaded" right now as it 
were. Like La Palma (in the Canaries) falling into the sea, it could happen 
tomorrow or 10000 years (er days) from now. At this point it is up to 
nature.

All of what you may read below is no more than a series of observations of 
nature.  I am not [by any means] an economist. However, economists can 
observe nature in the same ways and shed more light on these observations.

Basic Assumptions

1. It takes the interaction of two entities in the realm of finance to allow 
the interaction to take place. This is the "ignition catalyst assumption."

What entity in the US has power and influence over great deals of money?

Government entities
-- Federal government (not applicable in the following analysis except as a 
'quote on quote' regulator of the us banking and finance system)
-- State governments (50 of them, plus overseas colonies like Guam, etc..), 
primary players in the drama to follow but that also can regulate many 
aspects of the banking and finance system
-- Local government: municipalities, sewer districts, water districts, 
school districts ... the unregulated entities bathing in at least 100 years 
of endemic corruption and part one of the problems to come ...

What entities are most immune (in the general sense) from investing in risky 
and otherwise unsupervised and unregulated derivatives? The Federal and 
State Governments. The federal and state governments in the US tend to 
operate using different kinds of corruption due to the level of oversight 
existent at their level of power and influence.

All other levels of government are subject to the problem of financial 
investment regulation. Don't let the existence of US Sovereign Wealth Funds 
fool you as these funds operate at the County, State and Federal Levels. 
Counties have a slightly lower risk level for investment meltdowns due to 
the long term after effects of Orange County losing 1 billion dollars over a 
series of simple derivative investments. I am not saying that 100% of 
America's counties are immune from this problem happening again.

An important fact about US governmental organization: each household in the 
US is subject to multiple taxation via multiple layers of government. This 
is partly caused by the vast size of the US. However, the lowest levels of 
government are the most poorly organized. The layering and structuring at 
the local level is either redundant or chaotic.

Both Washington State and California have had statewide referendums that 
have passed that have forbidden tax increases greater than the rate of 
inflation or less. All of these referendums have been rendered null and void 
(or merely totally useless) because of there being so many levels of local 
government that could at any time raise taxes. Each level or layer of 
government has to be fed by tax money.

I have no standardized nationwide number to go by, but the average household 
pays taxes to a minimum of 5 layers of local government in the most remote 
and underpopulated regions. In some suburban centers it is easy to have 11 
to 14 layers of government wanting tax dollars. Separate water and sewer and 
garbage disposal districts is one classic example.

It is more likely that smaller government entities (that are more inherently 
corrupt with endemic multi generational nepotism and favoritism coupled to 
systems of kickbacks have existed endemically in the US for the past 125 
years.

The layer problem is a suburban problem, not a rural or urban one. Urban 
areas like Seattle or Chicago have merged many related functions like 
sewage, water and garbage into the city finance structure. Major cities have 
city expenditures under fairly close surveillance, but this does not affect 
school districts that more or less exist unsupervised except via the federal 
government.

Note:
There is a view held by many economists that the US banking system is a 
'command' based finance system. The USSR historically had a 'command 
economy' but not a command finance system. The USSR in the form of Russia is 
recovering reasonably quickly from a total collapse of the economy of the 
USSR.

No one has ever seen a command finance system collapse separate from that of 
NATZI Germany or maybe Iraq in 2002. These examples are far from ideal or 
accurate considering the nature of the US economy.

It is clear that Iraq and Germany had command finance and economic systems 
at the time of military defeat. The collapse of the US economy in the 1930s 
was when a latent gold / silver standard existed, but any collapse in the 
modern era would not take place under these 1930s style macroeconomic 
conditions.

Private sector
-- Investment banks, as they only accept customers with money and government 
entities that possess nearly unlimited money. The investment processes 
around this "public money" and are not tightly supervised.

-- Hedge funds, as they are allowed to make not only unsupervised (via SEC) 
investments, but also make unsupervised trades (types of investment 
instrument trades that were essentially outlawed in the 1930s).

There is not that much one can say about the private sector being involved 
in this rather predictable collapse. The private sector in the US, where the 
jobs pay adequately well is raft full of employees that have gotten their 
jobs via some back end nepotism in government via other relatives. There is 
a very large share of favoritism playing its hand in the private sector.

One could argue that many industrial parts of the US private sector economy 
are no more than puppets of the public sector, in terms of regulation. This 
is not too different from the former Socialist world of the USSR ... but 
nature in this case is much weirder.

US private sector companies in the finance sector are mostly insipid puppets 
of the public sector, but for reasons not having that much to do with issues 
of regulation per se. The US finance sector (depending on what part of the 
finance sector one is talking about) can be as regulated as if the private 
company is essentially stepping in for government with respect to doing some 
private sector tasks in the economy. In many societies what is accomplished 
by government varies greatly, as it is a good idea for the government to do 
some tasks (like make steel for example, or provide a rail service) in some 
societies that in other societies may have been accomplished by purely 
private entities (US Steel, BNSF Rail).

Nevertheless, in this case one could literally and correctly argue that the 
US government here is the agent of 'the demise of its own power and 
sovereignty' with the private capitol markets being the entity that 
ultimately accomplishes the destruction of sovereignty by wildly altering 
the basic economics of the household.

Note:

Hedge funds are very similar in nature and regulation to 1930s syndicates 
and other related named financial institutions at the time.

Backdating of trades (via investment banks and hedge funds) costs the US 
economy some 100 billion per year, according to at least one set of economic 
research calculations with the baseline for this number being 30 billion per 
year. Using the same constant dollars try to imagine the 'sum of the cost 
backdating' since 1975. The backdating of sharmarket and mutual fund market 
trades has been permitted since [I assume] 1965, but pervasive since 1975 in 
the US finance system. I assume that in Australia the ACCC would never ever 
permit this to happen, because of the market distortions it creates.

The Orange County billion dollar derivative loss, based on a single line 
derivative is my first data points. A few Australian municipalities have had 
some new red ink introduced to their books due to Australia's increase in 
marginal mortgages from 2007 onwards.

Mutual funds (aka pension fund too), that are reasonably well regulated will 
have their asset holdings blown away by some aspects of this finance system 
collapse, separate from the 'peak oil' effects of decades long recession. 
One can expect mutual funds to lose up to 66% of their current base value, 
but the losses may be up to 90% in some cases. A few rare mutual funds that 
are run in unusual ways based on unusual economic precepts will have losses 
in the 5% to 25% range: there is no way of predicting in future what and 
where these funds will be.

2. A similar set of derivative transactions will have to be made smaller 
government entities in the US with a leverage of 1:100 or 1:1000. I call 
this the "primary ignition condition".

One can assume that entities smaller than counties will be making the 
transactions, due to the aftereffects of the Orange County billion dollar 
loss on derivatives. This may as part of my postulate not be true at all, 
but for most of the US it will probably be true.

These derivative purchases will have to be made corruptly, as without 
corruption the transactions could never and would never be made in the fist 
place.
-- Nepotism will be the preferred transaction method in Democrat leaning 
regions.
-- Favoritism will be more common in transactions in Republican leaning 
regions.
-- Kickbacks will to be involved in all political regions.
-- Probably not a single one of these derivative transactions will take 
place without a kickback (and hiring each other's private or public sector 
relatives in exchange for the transactions being made will be mandatory).

Universally: the transactions [of these wildly unrelated extremely leveraged 
derivatives] will be made in small numbers over a long time frame as a 
series of small transactions by the smaller government entities. Yet the 
total of these small transactions will yield some truly astonishing 
expenditure numbers. Local government in the US has money, and plenty of it 
to spend corruptly without supervision.


When and how it will happen?

I don't know how the excessively levered derivatives will be created. It 
does not require any plotting and planning to create more harmful 
derivatives than the ones that currently exist that most government entities 
already own.

You don't need any kind of centralized conspiracy to happen here, just a 
total lack of supervision of a large scale financial sector in the US 
economy. Economies work by 'the actions of multiple unseen hands' as Adam 
Smith says, so I will let his analogy stand as it is applicable to this 
evolution of the US economy.

I suppose that several US investment banks and hedge funds could create 
dangerously explosive derivatives by accident [as this is how it usually 
happens with fiscal meltdowns in the US].

One could suppose that these largely unregulated economic finance 
institutions could quickly come to the conclusion that 'in order for the 
company to be saved from oblivion' these aforementioned 'implosive financial 
instruments' must be 'sold immediately to whomever or whatever will buy 
them' to avoid the company that created from becoming 'as worthless than a 
candystore lolly'.

Consumers will not be able to buy these dodgey 'derivative' finance 
instruments as consumers don't have any money [right now to do so] due to 
the nature of the US economy. Oddly, the price of oil plays no substantial 
nor substantive overall part in US consumers 'not having any money to spend' 
(spending = investing) on these finance instruments in the bigger overall 
macroeconomic nature of the US economy.

Bear Stearns at the time of its dissolution was worth about $1000 NZD, but 
the sale transaction was doctored to save the dignity of CEOs [and that part 
of the US finance sector].

This exportation of risk is common in the US finance sector. Thus the 
suggestion of this risk exportation happening via the government sector 
being turned into a sinkhole for bad derivatives is totally unremarkable.

This risk exportation scenario may be currently happening as I write -- but 
it might not not happen at all. I cannot know the unknowable. What is 
important is that this risk exportation scenario could happen.

Any dodgey financial instrument can be hidden inside a seemingly safe 
financial instrument. The [2006 - present] US morgue finance mess has proven 
that this derivative hiding trick can truly backfire at a macroeconomic 
scale.

Local government bureaucrats in the US (that mostly came to their posts 
exclusively by nepotism and favoritism) are not trained (nor necessarily 
even interested) to know the difference between a terrible investment or a 
bad investment much less a good investment. Their job is job security, as 
permanence is power. If bad local government investments result in millions 
losing their homes due to extremely high local council rates, these folk 
don't care.

Local government bureaucrats pensions' as well as job security will not be 
affected  or effected in any way whatsoever regardless of how totally 
insolvent the local government is. On top of this "Iron Ricebowl factor" [or 
social consideration] is the additional fact that the future local 
government jobs and pensions of the relatives of people currently in power 
will not be affected.

No matter how vastly hypertitantic the economic meltdown, there has been and 
will always be perpetual lifelong job security for local government 
bureaucrats in the USA. In the USA local government is corruption and 
corruption is local government.

It is this way because ordinary Americans want it this way. Americans cannot 
cope with America being run in any other way. This is not because of the 
inherent nature of local government in the US, the problems of local 
government are universal.

If it makes you the reader feel any better, the government at the US federal 
level has all of the problems of local movement but in different forms that 
are typically less viable to the general public.

Speed of the collapse, comments:

This collapse will not happen in the immediate future of your reading this, 
that is to say a 3 year to 9 year delay of this is possible.

There may be not one master point of collapse (as implied with the Great 
Depression), or more likely it will be a perfect storm of conditions that 
will set up to 10 global economic conditions (or 20 but at least 4 
conditions) into new states not yet seen before or anticipated.

Assumptions:
Conditions can be "TRADITIONAL HISTORICAL FOREX RELATIONSHIPS" such as (AUD 
 > NZD), or any set of stock or bond relationships that although 
traditionally understood going thru a phase change making new comprehension 
much longer to take effect.

To be perfectly blunt I will say I have no idea here of what the trigger 
conditions will be, as nature always can find new and supervising ways of 
revealing itself. Assuming that 'peak oil' will play a part probably is a 
marginally good idea based solely on oil's place in the US economy. However, 
I don't see 'peak oil' as being 100% of the triggering cause, it is more 
like a reasonable number like 1.5%, noticeable but negligible in the overall 
scheme of things.

It is impossible to guess which kinds of derivatives or derivative trades 
will trigger the collapse. It is impossible to know the unknowable.

What levels of economic damage are we looking at?

I am assuming for a government entity covering the needs of 30,000 people a 
debt level of 500,000 will be incurred due to the nature of the leveraged 
derivatives.

ASSUME 2.28 people per household
ASSUME existing household debt nationwide in the US averages to $3,000; 
don't add this number to any of the following numbers just note its 
existence.

ASSUME that this model is a massive overly linear oversimplification, and 
that the real world events this model attempts to predict will be baffle the 
mind. There is a total lack of imagination in this model, but that does not 
lessen the general overall probabilistic accuracy of the collapse it hopes 
to simulate. The real world economy is always more interesting and varied 
than its financial simulation.

The "Optimistic Model"
-- 123 is used here to allow for easier reading of the numbers; this 
particular model may
be a realistic model for many government entities

Math:
$500,123,123 / 30123 people = $16,602 extra debt {per person} on top of 
existing rates per household;

COMPUTE NEW DEBT BURDEN: 2.28 * $16,602 = $37,852 per household

The "Pessimistic Model"
-- 989 used to avoid 1.0 billion; this may be the realistic model for many 
government entities that make larger leveraged investments

Math:
$989,123,123 / 30123 people = $32,836 extra debt {per person} on top of 
existing rates per household;

COMPUTE NEW DEBT BURDEN: 2.28 * $32,836 = $74,866 per household

Note:
Multiple taxation districts [or taxation layers in general] exist on top of 
each other in a nearly unregulated "hodge podge" such that one should add 
both the pessimistic and optimistic models per household:

Math: $74,866 + $37,852 = $112,718.

The sum is: $112,718 extra debt {per household of 2.28 people} on top of 
existing rates of current and future government debt per household.

ONE MUST ASSUME THAT THERE WILL BE A 5% interest added to each household 
repaying this amount, as the is the US standard interest rate with respect 
to paying back government debt. One must assume that the 5% interest rate 
will not last, and that the interest rate will possibly reach 15% per annum 
given worsening economic (and  debt) conditions.

NOTE:

It is assumed that this will occur when "Peak Oil" has fully stopped 
peaking. That is to say that global oil production will go down each year, 
meaning less oil available for the US economy each year.

It is assumed that the US has only managed to achieve a 7.5% decoupling of 
economic growth from energy use. This 7.5% number is an overestimate, and 
realistically a 3% decoupling is probably the recommended number. NZ has 
managed to average between 10% to 15% decoupling of economic growth from 
energy consumption. The US is no way near NZ in terms of efficient use of 
energy, in terms of decoupling its energy use from economic growth.

This model ignores the possibility of some levels of government actually 
getting themselves into debt in the 2 billion to 5 billion dollar level [per 
a normalized population of 50,000 people]. This much higher debt level is 
not theoretically impossible. It is possible in at least 2% of the time when 
this governmental finance implosion happens. The initial explosion of new 
debt will cause future explosions of debt that is itself leveraged.

THE BAIL OUT

All of the corrupt local entities that went out of their way to make clearly 
corrupt investments will not [as a rule] be taken over by the investment 
banks. That kind of investment bank takeover would mean a possible end to 
the existing multi-generational corruption that is so deeply ingrained in 
the American way of life and way of government. In America there must be 
corruption fist before the government moves to create any goods or services.

The Court systems in the US will try as much as possible to maintain the 
sovereignty of their corrupt relatives in the other government sectors 
regardless of what the law actually says.

However, there will be this pattern in the bailouts, that we know from past 
events like the Savings & Loan debacle of the late 1980s, and the Orange 
County debt bubble:
-- Counties will try to bail out smaller cities, water districts, etc ... in 
most states.
-- This will leave the counties [that now are barely holding ground with 
their current debt  levels] beyond bankrupt. Counties will have to be bailed 
out by their respective state governments.
-- Some states will have such large sale economic black holes created by the 
multiple levels of bailouts such that the only way for the entire state not 
be be repossessed by the investment banks would be to merge with other 
states. Merging states (a reasonably sensible solution to an economic 
problem when there are 50 states) will not happen. The American mind has no 
such concept of states merging, and 100% of Americans would prefer to go to 
a public square and blow themselves to bits than see states or counties 
merge no matter how extraordinary the circumstances.
-- One can assume that the Federal Reserve will be involved eventually, by 
the time that 20 states could be declared "non sovereign entities via debt 
load issues". There will be attempts at bailouts via the Federal Reserve of 
several levels of government. However , weather the US [as a whole] will be 
able to maintain any kind of 'economic sovereignty' at the end of this 
economic cataclysm is really more up to luck. This luck is totally dependent 
on the depths of corruption at the federal level, and the US government at 
the federal level is substantially and substantively corrupt.

I will just assume that the US will move from being a titularly sovereign 
entity to a non-sovereign ... if you think in practical geopolitical terms.

Social and sociology notes:

There will be and must be a large scale coverup at all levels of government.

The media corporations, as they depend on the Federal Government for their 
broadcasting rights and maintenance of their marketing zones ... will make 
the American people believe it is their own fault even when the evidence is 
out in plain sight that the exact opposite is true.

Academics will be able to fully uncover the reasons for disaster coming to 
pass some 20 years after the event, but the event itself may be a mess like 
the triggers of the great depression.

It must be said that 20 years from now all the nepotism, favoritism and 
kickbacks can be totally swept under the table. Modern US governmental 
accounting books can be made to reflect that blameless people made the 
actual decisions that led to the finance collapse.

In the long run not a single person in government [and certainly very few in 
the finance sector] will be punished. The best case is that maybe 6 CEOs 
spend 6 months in prison based on a flimsy "failure to supervise" aspects of 
US finance system law. The US Supreme Court will overturn their convictions, 
with a probability of 90%.

The American people are so docile and so engrossed in the slave mentality 
such that there will be no social unrest. This will baffle the rest of the 
world, and not help the USD value on the world FOREX markets.

The Foreign Exchange Impact

The USD will probably drop like a rock following this parity pattern 
(t=t++).
BASIC computer line numbers are used to allow for room to fill in 
currencies.

10. CAD, AUD: already achieved -- only here as a marker
20. NZD, a secondary marker - assumed to happen before YY2009-DD128
???? : the exact order of parity is not known beyond this point
30. PESO (Mex)
40. YEN / Indian Rupee
50. FIJI DOLLAR or PNG KINA (made stronger by relation to AUD & NZD)

This is not a complete series of the FOREX collapse of the USD. Traditional 
FOREX relationships other currencies [that have been moderated by the USD] 
will in many cases go thru a phase or polarity change. As the US Dollar 
collapses, and the USD ceases to be a global reserve currency new currency 
relationships will form. This has already started to happen as back as the 
late 1990s, but in a weaker form.

In the end at least expect:
1.0 YEN = 1.0 USD (optimistic)
or
1.0 RUPEE = 1.0 USD (pessimistic)

NOTE:
As of March 2008 the EURO has [more or less] inherited the role of the new 
"global reserve" currency. Many economists have made arguments that the EURO 
has already reached this position in relativistic terms perhaps one or two 
years ago.

The only fly in the ointment is that Germany and France are in a state of 
near bankruptcy in the late 2000s. I expect that this temporary insolvency 
is merely a temporary phenomena and that a reasonable way can be found out 
of this EURO mess, with the solution probably being a weaker EURO. It is not 
expected that the EURO will decline to the value of the USD but merely 
decline to a band that hovers around the CAD and CHF.

The USD is not a global reserve currency at the time of this being written.

This is based on the 3 to 5 common parameters used to determine if a 
currency meets the conditions of being a 'reserve currency':

1. People like to own it (the AUD), as the nation is managed reasonably 
properly
2. It has the strength and power to exist as a 'classical reserve currency' 
(EUR)
3. There are classical economic reasons to posses it as a reserve currency 
(UK Pound)
4. It is a regional reserve currency, the YEN and Rupee being classical 
examples.


The only fix that cannot and will not happen

This fix is not guaranteed to be 100% effective, at best only 10% to 20%.

I know of no other fixes, and there probably are no other fixes that can 
really exist.

ALL US Governmental (Federal, State, Local, District [Water, Sewer, Garbage, 
etc...]) Bonds MUST be declared JUNK. Not just the standard junk bond rating 
but and the lowest quality of junk bond existent. Perhaps a special category 
for this kind of junk bond should be created [in the global bond rating 
system]: zzz000. Some may humorously argue that I should suggest tptptp, as 
in toilet paper.

Any non-US person or non-US finance entity should get out of owning any kind 
of US bond assets or derivatives containing US bonds (from any layer of 
government).

This decoupling from the USD and USD financial assets is the only way to 
save yourself from owning the equivalent value in toilet paper. A 10,000 USD 
bond [when this mess is over] will only be worth about 10 USD in the most 
ideal outcome imaginable.

Why this fix will never ever happen:
All bond rating entities in the US plus the rating subdivisions of non-US 
finance companies all possess US staff that are 100% subject to corruption. 
In the US bond rating sector nepotism, favoritism and kickbacks have been 
endemic since the end of the Vietnam War as part of the way business is 
done. Bond ratings staff in the US [in the modern era] are not substantially 
or substantially policed. However, like in the City of London all is kept 
quietly under wraps so that the corruption can continue.

In a command monetary system, only a command can fix things:
I suspect that a US Presidential "Order in Cabinet" (but technically is not 
called a decree) could fix the problem. The US has had mostly 
non-interventionist (in this part of the economy) presidents in the past 12 
years so there is no possibility of this ever happening.

The Aftereffects, beyond the USD becoming totally worthless

Background (going to meetings): The smaller the government unit in the US 
the more boring and less frequent its meetings. Most decisions are made 
outside regular meetings, and only nepots and other political hacks show up 
at these meetings. More or less your local US sewage or water district (or 
school district) is totally unsupervised.

The US governmental infrastructure will start to decay: all local government 
assets (and some state government assets) will not be maintained. Debt 
maintenance will increase over time for the entities that absorb the debt 
from the smallest governmental entities, namely counties and state 
governments. Bizarrely, there will be no net layoffs within the bankrupt 
local entities that got into this mess. For the local entities that started 
the mess it will be business as usual.

Paying back all the debt may reach a point where the US Army may need to be 
recalled from most of the countries it is now resident in so that the basic 
infrastructure can be maintained: roads, bridges, city streets, electrical 
and sewer systems.

For the person that owns a theoretical $200,000 home (and with $100,000 in 
bank reserves) and has a marginal income to maintain local rates (city 
taxes, utilities...) so that their house is not repossessed by the city this 
is what they can expect:

150,000 of extra imposed taxes (over a 15 year time frame, but certainly 
spread out over a 50 year time frame by bond manipulations)
+
Interest rates on payments of this $150,000 increasing from 5% to 15% (or 
higher, possibly 25%) over a 20 year time frame.
&&&
a total decay of all government derived services to this household.

Wealthier "upmarket" households will not be as badly punished as middle 
class and working class households: expect up to 50% of all homeowners to 
lose their home in the USA over a 20 year window of time related to this 
finance implosion.

Theoretically one could expect US home ownership to go from whatever rate is 
is now to 20% or 30% best case. THE MORAL BEING: even those who believe they 
are well heeled [and that own their home] have a 50% chance of losing it 
over taxation.

America, a nation famous for tax evasion and lower taxation rates [than most 
OECD nations] will see an astronomical increase in existing tax evasion 
simultaneous to local tax rates rising nationwide to levels beyond what 
Europeans are used to.

In spite of the raise in local tax rates: no new services will be provided 
and the infrastructure maintained by taxation; that infrastructure will 
start to fall apart because so much money is being sent off to pay for 
interest and principal payments on debt. The collapse in the local 
government infrastructure will have analogues to the collapses of similar 
infrastructure in Africa after the colonial powers left.

A lot of local government assets may be privatized to get rid of 10% to 20% 
of the debit burden in some cases. It is not likely that many state or 
federal government assets will be privatized in this mess, but some 
privatization may occur. The investment banking entities will inherit 
government assets that have very high negative future value.

How to avoid the disaster, a non-American's thumbnail guide to surviving 
this mess


What you probably should do:

1. Totally divest yourself or your company of any USD holdings or USD 
assets. To maintain a US base and advantages I can foresee that a model of 
90% disinvestment out of the USD and US finance system.

2. Have your money holdings spread across at least 5 different currencies in 
5 different countries and banking / finance systems. Expect your net worth 
losses to be around 10% to 20% as this crisis unfolds.

3. If you are only in 3 different currency zones your net worth losses will 
be up to 66% in some cases.

4. You must be prepared to abandon every single USD asset or financial 
instrument, as its value can and will drop nearly to zero.

5. Some economies are more firewalled against economic declines in the US, 
but it ultimately boils down to what nations own the least US currency and 
USD derivatives.

Stuff I have totally ignored, but explosively important stuff

These "theoretical guesstimations" have ignored many important parallel 
effects in the US governmental and finance system that increase the "Net 
Debt per Household (Governmental)".

In a nation like Australia or NZ, finding the "Net Debt per Household 
(governmental) might take up to seven years to perfect to the level of 
resolution of postcodes. However, even in the messily run Canada, this 
number can be be derived at the level of resolution that is accurate to the 
postcode level of geographical ambiguity. There may always be unresolved 
issues related to future costs, and the characterization of existing 
government owned derivatives.

I don't know all that I have ignored, but here are a few things that have 
crossed my mind:

1. Medicare's slice of the US yearly budget is predicted to increase over 
time to absorb the entire US military budget in its entirety. Although the 
increase in the size of the Medicare budget will [as most demographers can 
plainly see] lead to the elderly population being any healthier in 
retirement.

2. The US population is aging, and the retirees will likely not fully retire 
for a long time. This creates an artificial distortion of Social Security 
income and future expenditures.

3. The US education system has collapsed: the best SAT scores were in the 
mid-1960s and have not risen since. Although the SAT scores alone make a bad 
sample mechanism, there are many many separate bodies of evidence from 
academic research to indicate that the modern American is geographically, 
geopolitically, scientifically, and financially illiterate.

The US population can neither see this crisis (and other disasters relating 
to government) coming. Nor does the US populous have the intellectual skills 
to come up with a set of workable solutions to the problem. What solutions 
are derived by the populous will not punish those that made the bad 
decisions in the first place. This kind of disaster [as it were] will the US 
into a non-existent non-entity.

4. No American person [and most if not all American Economists] has any idea 
exactly how much governmental debt there is per postcode. Admittedly, in 
Australia, NZ and Canada it might take 7 years work to find such numbers at 
the postcode level of granularity. There still is the issue of accounting 
for government owned derivatives (separate from corporate shares and bonds) 
in the Commonwealth nations.

Still, that said it is totally unknown to me, and I assume all US economists 
the thumbnail calculation of "Net Governmental Debt per Postcode". The US 
governmental debt problem may be far more sadistically perverse than my 
crudest underestimations can derive.

5. The US healthcare system is run in such a way that a substantial part of 
the population working in the private sector is literally one sickness or 
accident away from financial insolvency.

This bizarre mostly private sector financial arrangement that is the US 
healthcare system did not factor into my analysis. My public sector debt 
disaster model only accounts for the decrease on home ownership via an 
explosion of public sector debt, not any ancillary impacts on the helathcare 
system this implosion may have.

In any case the public funding collapse may non-linearly amplify the affects 
of this financial disaster as such a large part of the US healthcare system 
is publicly funded. The disappearance of the public health service may lead 
to more private sector accidents and illnesses decreasing productivity 
leading to an amplification of the debt implosion.

6. Political 'noise' saturating the mass media to a point that it overpowers 
large segments of the general public from being able to see what is going on 
or caring.

The US mass media is very accustomed to covering highly unimportant 
celebrity rows, as it is highly profitable. However, the way the US media is 
structured has led to this being done with the coverage of politics.

When it comes to political rows among politicians, 90% of the time the row 
is not important as 90% of the time it does not impact long term government 
policy ... at least that is the trend in the US. Saturating the mass media 
with totally unimportant political rows is a way to guarantee complete 
public apathy over all levels of government policy and decision making.

There are myriad reasons for this: local, state and federal government 
employees most of the time end up having their realities hired into the 
public media as a way of guaranteeing a total lack of scrutiny. Generally 
this is a favoritism hiring swap, done with mass media employees wives or 
husbands.

This endemic policy of favoritism hiring swaps has evolved in spits and 
spurts since the beginning of the Cold War. After the Watergate Scandal this 
trend has become part and parcel of mass media and public sector 
interaction. You could argue that American newspapers and newscasts have not 
been beneficial to the general public in the USA since the 1980s.

These favoritism hiring swaps (public sector into private sector into public 
sector etc ...) have evolved into totally unsupervised transactions since 
the demise of USSR. The USSR mass media that openly opposed the way the US 
ran itself kept not only the US mass media more honest but also kept the US 
from sinking into a cesspit of unlimited corruption. It may sound ridiculous 
that the USSR kept the US from destroying itself politically, socially etc 
during the Cold War but that is the way things worked out.

Am I saying that investigative journalism of government in the US is dead? 
No, it is just that is almost dead. Lower levels of government are 
completely protected from public scrutiny via favoritism in hiring that 
compounded with deep public apathy over public affairs.

Even if there was a financial implosion in public sector debt via 
investments in shoddy and misleading derivatives ... the public would not 
care 'not one iota' about the the whole matter thanks to the mass media.

7. The actual cost of nepotism in the US economy since 1945 probably could 
be assumed to be 100 billion in constant 2008 dollars. Nepotism was less 
pervasive in America in the past, but choosing years to reduce the constant 
dollar cost to 50 billion and 25 billion are tricky. Economists in the US 
avoid this kind of analysis as most of them got their jobs via favoritism 
and they depend on nepotism to sustain their career.

8. Maintenance of basic civil infrastructure (roads, bridges, dams, sewers, 
power networks, public buildings...) in the US has so far not been 
problematic, but there is so much old infrastructure in place that is due 
for removal or replacement in the next 20 to 50 years such that one could 
easily expect that 15% of GNP could go to maintaining infrastructure.

This 15% extra 'future cost' added will be added to what the US is spending 
(in percent terms) for maintaining its current infrastructure in its current 
form. Very often at the state, county and local level this infrastructure 
maintenance money is wasted on creating or maintaining totally unnecessary 
infrastructure while public services are allowed to deteriorate.

Many economists are predicting that Medicare will absorb the entire military 
budget at the US federal level, but it is possible that the side effects of 
this may absorb the civil infrastructure maintenance budget at the state, 
county and local level as well.

9. Compared to the 1960s to 1980s Americans: Generation X, Generation Y and 
'The Millennials' may lack the proper business skills. You need to have 
either the intellectual capacity [to make good business decisions] or 
training on how to avoid making bad business decisions. If you are not 
intellectually 'up to snuff' you [and your business] will be taken advantage 
of.

As the economy worsens due to recessionary behavioral adaptations (somewhat 
but not exclusively related to peak oil) many businesses will cease to exist 
because:

A. They are weighted down with staff poorly skilled in business practices.
B. Said staffs are not able to intellectually capable of adapting to the new 
market conditions.

10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 ...

Conclusions

Frankly, I don't give a damn if the US wants to send itself into financial 
hell. I am not an American, nor do I wish to have anything to do with 
Americans. My stay in the American society has not been successful one, nor 
did I really freely choose to live here. I would leave these imperialist 
lands in a heartbeat for Australasia to live permanently [except for the 
lack of 150,000 EUROs]. The thought of even seeing another American again 
abhors me, as no possible good could ever come from it.

It is not likely that the US will continue to have the present level of 
geopolitical power that it has now for a combination of internalities and 
uncontrollable externalities.

Regardless of how it happens the US will become a nation with a very low 
rate of home ownership. The US will also become a nation with a highly 
displaced populous.  In a way the US will become internally similar to China 
or India but without the population being able to think for or take care of 
itself.

There are already many nations that currently have parameters of home 
ownership and displacement similar to what the US will have in not too long 
a period of time.

In the end the US will be 'a has been nation' - not a so called 'world 
power'.

As with bullies: the bigger they are the harder they fall.