Stephen Roach, chief economist at investment banking giant Morgan Stanley, has made a prediction: America has no better than a 10 per cent chance of avoiding economic "armageddon."
According to comments reported in the Boston Herald on November 23, Roach says that to finance the US current account deficit with the rest of the world, the country has to import $2.6 billion in cash each working day, or 80 per cent of the entire world's net savings every 24 hours.
And the debt keeps getting bigger. The US Congress has just approved an increase of US$800 billion to the country's debt limit, which brings its total debt to US$8.18 trillion. The new borrowing limit, approved on November 18 by a vote of 208-204 in the House of Representatives, will come into effect this Monday when US President George Bush signs the resolution into law.
Roach notes that household debt is also at record levels. He says that 20 years ago, the total debt of US households was equal to half the size of the economy. Today it is at 85 per cent.
Armageddon theories are not new. In July 2003 The Dominion article, "The Conceited Empire," speculated on the eventual fall of the US superpower. The article is centered on predictions by French historian and demographer Emmanuel Todd, who has been credited with predicting the fall of the Soviet Union in the 1970s.
Recent events give such theories new credit.
Over the last four years, the Bush administration has increased the allowable debt by US$2.23 trillion. That's more than the total actual debt the US accumulated from its founding to 1986. As the value of the US dollar drops against that of foreign currencies, Roach suggests that a "spectacular wave of bankruptcies" could follow.
In the 2003 Dominion article, Todd noted that as emerging world powers stabilize, they become less dependant on the US; in turn, the US becomes more and more dependant on the rest of the world. However, he argues that America does have that one final superiority: its military.
"This is classic for a crumbling system," he observes. "The final glory is militarism."
» Boston Herald: Economic Armageddon Predicted
» Resist!ca: U.S. Congress adds $800 billion to debt limit
» The Dominion: The Conceited Empire
» News Observer: Nations slash Iraq's debt
The Dominion is a monthly paper published by an incipient network of independent journalists in Canada. It aims to provide accurate, critical coverage that is accountable to its readers and the subjects it tackles. Taking its name from Canada's official status as both a colony and a colonial force, the Dominion examines politics, culture and daily life with a view to understanding the exercise of power.