Path: news.ccsf.jp!tomockey.ddo.jp!border1.nntp.dca.giganews.com!nntp.giganews.com!news.alt.net!news.u.washington.edu!not-for-mail From: "Max Power" Newsgroups: alt.economie.politique,alt.fr.economie.de.marche,fj.soc.economy,fr.soc.economie Subject: Under twelve words have been delted from the header and title due to censorship issues related to sci.econ having said policies Date: Mon, 9 Jun 2008 18:35:14 -0700 Organization: University of Washington Lines: 838 Message-ID: Reply-To: "Max Power" NNTP-Posting-Host: c-67-168-165-138.hsd1.wa.comcast.net Mime-Version: 1.0 Content-Type: text/plain; format=flowed; charset="iso-8859-1"; reply-type=original Content-Transfer-Encoding: 7bit X-Trace: gnus01.u.washington.edu 1213061746 2410 67.168.165.138 (10 Jun 2008 01:35:46 GMT) X-Complaints-To: help@cac.washington.edu NNTP-Posting-Date: Tue, 10 Jun 2008 01:35:46 +0000 (UTC) X-Priority: 3 X-MSMail-Priority: Normal X-Newsreader: Microsoft Windows Mail 6.0.6001.18000 X-MimeOLE: Produced By Microsoft MimeOLE V6.0.6001.18000 Xref: news.ccsf.jp fj.soc.economy:1242 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.