25 September 2008

'Very Great Depression' in the US

SEQUENCE 6 - 'Very Great Depression' in the US, social unrest and army's growing influence on public affairs (2nd quarter 2007 – 4th quarter 2009)
- Excerpt GEAB N°18 (October 2007) -

If you were a subscriber to the GEAB, you would have read what will follow as early as October 16, 2007:

As described previously by LEAP/E2020, the epicentre of the global systemic crisis is in the US, collapsing pillar of the global order. For this reason, the impact of this crisis is a lot more violent and enduring than anywhere else in the world.

For instance, the bursting of the housing bubble is provoking the sudden impoverishment of millions of American citizens whose houses are foreclosed: each month, foreclosures double (1) leading dozens of millions of US citizens (women and children who live in the foreclosed houses) to end up on the street (2) or to find new homes in the worst conditions (3).

The ongoing recession creates unemployment concealed by the official statistics (the same statistics which negated that a housing bubble was bursting or that there was subprime crisis as long as they could) but nevertheless driving millions of Americans (the same ones most often) to the street. This being so, the crisis is beginning to hit middle classes (4) sometimes even above that (as in the case of the Wall Street layoffs).

The drop of house prices today affects all the categories of US households who used their house mortgage to finance their lifestyle (i.e. a large majority of Americans). They are now rushing on their credit cards (at a prohibitive cost) to avoid downgrading too much their “way of life” (5), but it is a short term solution (6).

Throughout the country already, local authorities started to reduce public services by lack of sufficient fiscal income. States are beginning to wonder (7). The federal government solely, speaking with the voice of G.W. Bush, demands more money for its wars and refuses to extend social protection to poor children.

Social unrest has in fact started and it aggravates each day (8). LEAP/E2020 wishes to remind that without a general social protection, the impact of an economic recession in the US is socially terrible. The magnitude of this crisis, combining housing collapse, economic recession, inflation of consuming goods and imported energy via USD weakness,… all this together with a political blockade in Washington provide the background for a « regime crisis ».

The army is the only institution in the US with a strong credibility. Dozens of millions of US citizens depend on it for their jobs, studies, contracts,… It is one of the only national backbone of the country. Its generals receive media coverage. They criticize more and more the political class accusing it of betraying the people and the army. The recent success of former US commander in Iraq General Sanchez using this rhetoric is eloquent about the state of mind in the country (9). The warm welcome of today's US commander in Iraq General Petraeus by the Congress during an audition on the situation in Iraq completes the image: as highlighted by various commentators, it looked like a victorious Roman general welcomed by a Roman senate at beck and call. The militaries are now those in charge of making all the important decisions concerning the war in Iraq. Let's wait and see what they will do with the Turkish case. No one in the political class, including among the democrats, dares to criticize the military chiefs despite the fact that they are more than mere “victims” of “irresponsible policies” in the Iraqi rout.

For this now central component of the US political system, the financial and economic crisis is becoming a problem, because in a context of unpopular wars in Iraq and Afghanistan and of economic recession in the country, the probable election of a Democrat to the presidency in one year time would entail a significant reduction of the budget allocated to the defence. And this is simply unacceptable for the last structuring force of the country.

The « Very Great Depression » is already triggered in the US and, according to LEAP/E2020, it will result before the end of 2009 in a regime crisis in the US, where the army will play an important role.

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