Desperate Economic Action Ahead?
Aug
10
2010
The Apocalypse
The economic condition of the country continues to decline toward its rendezvous with an, as yet, unknowable catastrophe. Speculation regarding this outcome is natural because self-interest, if not self-preservation, is at stake.
Here is but one possibility. It is not a prediction, but a look at a series of not improbable events that could develop. Any similar government desperation would change our economic world overnight.
It is mid-year 2012. The country has officially been in recession since the end of 2010. Many believe that it never recovered from what began in 2008. The word depression is now commonplace.
Trust in Congress has fallen to single digits. Similarly, government reports and statistics are increasingly mocked by the public. The media is likened to Pravda because only government-speak is allowed. Distrust, despair and fear are everywhere.
2012 Economic Scenario:
Official unemployment numbers approach 14%. Unofficial estimates of unemployment range from 30 -35%. There are no signs of a turnaround in employment.
The Dow-Jones average has hovered around 4,500 for the past month.
Official GDP has been declining for four consecutive quarters. Independent analysts estimate the true numbers have been declining for two years.
Tax collections continue to drop while Federal spending accelerates. The deficit is expected to exceed $3 Trillion. Federal debt now exceeds $16 Trillion.
The rate of foreclosures has doubled from the previous high in 2011. Personal and corporate bankruptcies have reached levels thought impossible.
Major companies have left or announced intentions of leaving the U.S. to avoid the confiscatory taxes and regulations. College students, unable to find jobs, are emigrating to more favorable economies.
California, Illinois and several other states are in bankruptcy court. Almost a thousand municipalities have filed as well. Many states and municipalities are using IOUs for payments.
Welfare and unemployment checks are two months behind on average. Social Security checks and Medicare reimbursements are delayed. Some private pension funds have reduced their payments by 10 – 25%.
Hospitals and doctors refuse to see Medicare patients until Federal reimbursements, already eight months behind schedule, are paid.
Public unions across the country are on strike. Large areas are without teachers, police, firemen or hospital staff.
Food stamps are rejected at grocery stores because of slow reimbursement and government default risk.
Martial law has been imposed in several cities to counter rioting and looting.
Isolated runs on banks have occurred. Mattress-stuffing is considered less risky than zero interest returns from banks.
The dollar is rejected by local merchants around the world. Oil is priced in a weighted basket of currencies of which only 20% represents dollars.
Foreign disinvestment in Treasuries has been accelerating as a result of trade wars, concerns of default and the desperate need for funding at home.
Gold is selling at $2,800 per ounce.
Despite QE on a scale not even Paul Krugman would have recommended, the economy continues to deteriorate. Treasury and toxic asset purchases have swelled the Fed’s balance sheet from $800 billion in 2008 to $6 Trillion.
Despite incredible money-creation, the deflationary spiral continues. Banks continue to add more excess reserves. Creditworthy borrowers refuse to borrow. People and businesses everywhere have hunkered down, waiting for the next shoe to drop. Many withdraw funds from the banking system in fear of its collapse.
The Emergency Measure
It is against this backdrop that the President of the United States appears with a major economic announcement. Treasury Secretary Chris Dodd and Fed Chairman Barney Frank, both in their best solemnity, accompany him.
President Joe Biden (in office for six months after former President Obama resigned “to spend more time with his family”) issues a short, terse message:
The Federal Government, as a result of our national economic emergency, will be recalling all US dollars effective immediately.
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