News From a Forein Countrie Came....

As Traherne wrote, before you think that I have been on the sauce at this time of the morning. In the midst of this week's gathering euro-crisis, I've been thinking about the other monetary union under pressure--the United States of America.

The US, of course, publishes national figures and its statisticians are at least honest enough to contemplate something like 'U6' underemployment--a measure of all those in part time work who want full time work, and of the discouraged.

What strikes me, though, is that American news and American problems are often best understood at a state level.

So this week's news that up to ten per cent of US mortgagors are contemplating walking away from their mortgages because of negative equity made me sit up. I suppose that this is one way to understand a crisis; individuals act like property developers when their capacity to release equity falls below 75% of the repayment requirement of their mortgage, and mail keys back to banks. Banks then claim from the federal government, which then uses its new money issues to pay for them. States are then hit by higher interest rates and a lack of federal money and issue scrip--in effect a limited state currency; and everyone returns to the start of the dance and we all go on as before.

Please be aware that if you are yourself contemplating bankruptcy, you shouldn't take what I write as some sort of spur; the attitudes of elites and the state around you shouldn't corrupt you, and you should get proper advice before you follow anyone's mad example. It is still possible to sail against the wind, though I would be at a loss to know exactly where to start. I understand the devastation that personal and small business losses can cause, though.

However, think about the implications of a one-trillion default in the mortgage market. Such a destruction of value--in effect a forced jubilee--would be surprising enough in itself. When you look at major States, however, you wonder how on earth America is going to come back from its present crisis.

California is practically bankrupt and hamstrung by its constitutional structure. When European eyes lift off of the euro crisis, it is sobering to look at the former Sunshine State; but when you look at the combined budget shortfalls of all the states, amounting to $350 billions, you begin to see some of the scope of the present crisis. $350 billion is roughly $1000 for every man woman and child in the US, on top of the federal deficit. But the worst of the debts are concentrated, from Rhode Island to Arizona, and from Kentucky to Illinois.

The States cannot afford to cope. I think that this means more scrip, as they attempt to pay debt with IOUs, and more job cuts. Scrip, by the way, has hitherto been a short-term solution to woes, with California now paradoxically fearing that people are holding onto too much of it as the State attempts to redeem it (the effect being that people and corporations will ask for it all to be translated into dollars at once or launch lawsuits). Whats to stop scrip being what it was in the colonies just before the revolution, or in the states just before the civil war--an extremely disorienting monetary engine, an alternative cash?

Most Europeans don't understand how swift job losses can be in the states, and how much they are a matter of expensive contract disputes rather than some protective employment statute. We're going to see much more moonlighting, tax evasion, unemployment, and exhaustion of insurance funds by April and it'll come swiftly, if present trends hold.

What would a world be like in which the euro-zone had been split by a Greek default, or forced into the liquidation of apparent German reserves, and the issuance of centrally-backed euro bonds? If that world was one in which US States began to default or massively to reschedule debt or inflate scrip underneath a Federal government with a ridiculous Congress and an executive unable to cope?

Meantime, how would that all fit into an increase in the price of oil, a China under strain, and an ASEAN that was powering up?

This is what a civilisational shift looks like; it could be what how a social collapse starts to manifest. The Atlantic states are on borrowed time, and the Indian Ocean ones are gathering force by the day. I just wish that we would wake up, contemplate flatter taxes or land taxes, more limited government, more personal, insurance-based welfare, and more social provision of natural monopolies to allow the market to function where it can, before it is too late. I wish we would start educating children properly again, and get our media and political classes off the green kool-aid and onto really serious environmental and technological investment, like that which the Germans are benefitting from.

But I am beginning to wonder if it is too late. The economic siege must now end in someone's fall, and I am beginning to wonder if it will be us.

Come on, let's have a sign of escape--come on Polywell, Come on NIF.....

Comments