The Fate of America's Economy

The history has shown us that economic and political giants, which conquered the world at one time, could be destroyed and humiliated on the other time.



Roman Empire is the greatest and the biggest empire in the world on the first century. It was destroyed and divided into several kingdoms and empires by the fifth century.



VOC was the biggest trading company in the world on the second half of the 17th century. It filed for bankruptcy just a day before the 1800 New Year.



And now, i'm afraid that for several years ahead, we'll see that the United States of America economy, which have been the world's economic hegemony for hundreds of years are going to a tragic, humiliating bankruptcy. The worst part is that i have enough reasons to worry.



The first, it has great amount of liabilties while having their money being pumped away from their coffers. Based on US National Debt Clock (Jul 26th 2009, c.01.49 pm), the US Federal Government has an outstanding liabilities of $ 11,6 trillion, thus make every person in America owe almost $38 000. The Federal Government said that they have predicted the 2009 federal budget deficit for $2 trillion, the worst deficit since the inception of the Republic.



The second, the USA has announced that they will pump another trillions to the financial system. Based on August Bloomberg Market Magazine, this will accounted to the grand federal stimulus program, thus make it worth more than $13 trillion, almost the same with 2008 USA GDP



The third, they also have a future potential obligations (the liabilities outside the balance sheet) for more than $70 trillion in Medicare, Medicaid, and other welfare programs for the retired-would-be baby boomers. Stop here. This is one of the worst nightmare in the economic history. When you accumulate these effects with future trends of decreasing amount of workforces, over-saturated economic system, lack of strong and effective America's counterpart economies (eventhough China will significantly help us), and USA's influence in world's economic system, this will make the world's greatest economic disaster, far worse than the 1929.



The question is, why is it so important for us, the fast-growing emerging market working, middle, and upper class people? And how about China?



Well, eventhough we're "immune" from 2008-2009 economic crisis, the things will not go the same way for this case. This is about the federal debt, and they have to and must pay it. And as explained first, they have shortage of money. If they can't generate enough cash from taxes and international trades to pay general expenses, let alone the things "paying debts". On the other hands, China and Middle East will questioned America's good will and leave them away if America can't pay the debt. The only way is to print as much money as possible, or to freeze the debt without agreement with the lenders, as Argentina had done several years ago.



Dump the second alternative. America is a capitalist economy, and they can't betray the principles by freezing the debt. But hey, the America's biggest lenders is their own people! So if American is willingly writing-off the debt of their government, America can endure and regain their strength to pay the debt.



But still, that option is nearly unviable. The most possible solving is the printing-money things. But if they do that things, the result is hyperinflation, thus hurts the Americans spending power, reducing imports, slows the exports from developing economies and economic partners, hurts the local economies, increasing bankruptcies filing, make unemployment rate rises, decreasing spending powers worldwide. The spiralling effect is hard to be healed.



And China? For years ahead, China will stay to be a producer country and not a consumer one like America, except for raw materials. It's hard for China to absorb the things that should be exported to America, and China will not be as helpful as we've expected, eventhough their help will be significant.



And what should we do? Be prepared, and be ready to get a profit from it, if you know how to get it.