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It’s 2008. The US Has Dragged the World into a Depression.

Today, Brazil and most South American countries in general are disconnecting from the United States economy, and at the same time they are making new strong connections to the economies of such countries as China, India, and Russia.

Since I wrote a letter to the president of the European Central Bank in December 2001 giving him the reasons why Brazil should adopt the Euro as its new currency, most of my predictions came to past, and since then the US dollar has declined in value against the Euro by 67 percent. (The Brasilians newspaper published that letter in March 2002.)

Today, wealthy Brazilians still have billions of dollars invested here in the United States. Most of these investors probably will lose a large part of their investments in the coming years, because they will not take their money out of the US, and they refuse to believe in the coming melting down of the US dollar and US economy.

Following is an example of the type of newspaper article that they will be reading at the time of the next United States presidential election in November of 2008.

Headlines – October 31, 2008

Here we are one week away from the 2008 United States presidential election. What a ride Americans, and the rest of the world had in the second term of the Bush administration. Some people did not believe it was possible for George W. Bush to do a worse job on his second term, than he did in his first.

A number of events came together to form the perfect storm that pushed the globe into a worldwide depression. The current worldwide depression is getting worse by the day, and it is having a more profound impact than the depression of the 1930’s.

Today, some mainstream economists have identified George W. Bush and his administration as the culprits responsible for setting the spark that caused the meltdown of the global economy.

The entire fiasco started in November of 2000, with the conclusion of the American presidential election, when the US Supreme Court selected George W. Bush as the new president of the United States.

If there were a similar election in any country in Asia, South America, or in Africa, I am sure that the United States mainstream media would characterize the event as a coup d’état.

A Major Turning Point in US History

The terrorist attack of September 11, 2001, had a profound impact in the United States. The attack did not destroy only some property, and over 3,000 human lives; it also destroyed the soul of the American system.

The Constitution of the United States with its Bill of Rights were the soul of the American system, and had served well the needs of the American people for over 220 years. But during the years of the Bush administration, I was sorry to see the American people allowing the destruction of such a great document in the name of fighting terrorism.

Benjamin Franklin, one of the founding fathers of the US nation, once said: “Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety.”

But over time Americans forgot the teachings of this great American, and since September 11, 2001 the US government took many measures that destroyed the American soul including the adoption of the US Patriot Act, and the formation of Homeland Security with its special powers.

Osama bin Laden  – A New Living Legend

Before September 11, 2001, most people had never heard of Osama bin Laden and Al-Qaeda. After 9/11 he became a legend, and a hero to the Arab world in a similar way that the revolutionary Ernesto Che Guevara (1928-1967) became a legend in the Americas.

Osama bin Laden had fought against the Russians, and he had helped the Afghan people destroy, and discredit the Soviet war machine – in the Afghanistan War – soon after that the Soviet Empire collapsed.

Many people also admired him for his daring planning and spectacular implementation of the September 11, 2001, attacks inside the United States. (That kind of event is supposed to happen only in Hollywood movies.)

When Actual Performance Doesn’t Count

In November of 2004, the world was shocked to find out that the American people had re-elect George W. Bush. Among other things George W. Bush and his close circle of advisers had placed the United States on a very delicate international position when the United States attacked Iraq.

The reasons given to the international community of why the United States had to go to war against Iraq, turned out to be completely wrong. After looking for two years, the Americans never found the Weapons of Mass Destruction that they claimed Saddam Hussein had at the time of the invasion in March of 2003.

Remember the American people (59 million Americans, about 27 percent of the total eligible voters in the US) voted to keep George W. Bush in power despite his terrible performance during his first term. They also gave him complete control of the American government with a Republican majority in the House of Representatives and in the Senate. That was history repeating itself, and it was the 1920’s all over again.

George W. Bush followed the footsteps of two other prior Republican presidents – Ronald Reagan, and of his father George H. W. Bush. The Ronald Reagan years established a new mindset for the Republican Party: the level of Debt Doesn’t Matter, and they thought the US government could get away with a reckless policy of large deficit spending with no end in sight.

During the years of the Bush administration – from 2001 to 2008 – the United States finances were completely out of control, and the United States had been borrowing around 89 percent of the savings of the entire world – year after year.

For anyone to understand what the US government was really doing in terms of its finances during the Bush administration, you had to study what happened in similar cases to corporations such as: Enron, WorldCom, and Global Crossing – massive administrative mismanagement, and deception.

The Money Pit

To put the American fiasco in perspective, we have to put the spotlight on the United States government’s cumulative national debt. The cumulative US national debts were only $ 930 billion dollars as of December 31, 1980 – right before Ronald Reagan became president of the United States.

Since then, the US national debt has increased to an estimated $ 13 trillion dollars as of September 30, 2008 – that figure does not include all the other US government unfunded outstanding liabilities conservatively estimated at US$ 70 trillion dollars.

Here is the detail of the additions to the US national debt by president:

Ronald Reagan (8 years in office) added to US debt $ 1.7 trillion dollars.
George Bush Senior (4 years in office) added to US debt $ 1.5 trillion dollars.
Bill Clinton (8 years in office) added to US debt $ 1.6 trillion dollars.
George Bush Junior (first term, 4 years in office) added to US debt $ 1.8 trillion dollars.
George Bush Junior (second term, 4 years in office) added to US debt $ 5 trillion dollars.

Since December 31, 1980 the Republican presidents added $ 10 trillion dollars to the cumulative US national debt, and the Democratic president added $ 1.6 trillion dollars. The Republican administrations added 87 percent of the new US national debt, and the Democratic administration added only 13 percent of the new debt.

All Republican presidents starting with Ronald Reagan have had a complete disregard for sound long-term economic policy, and how their current policies would affect future generations. All these Republican presidents had one thing in common: they did run a very large credit card bill during their administrations, and they were leaving all these debt to future American generations to pay. Since December 31, 1980 the United States had only one fiscally responsible president – former president Bill Clinton – a democrat.

History Repeats Itself

During George W. Bush’s presidential campaign for the 2004 election no one in the US mainstream media brought to the attention of the American people that: “the United States had a Republican president, and Republicans had a majority in the House of Representatives, and in the Senate during the years 1921 to 1930. And we all know the result of the Republican policies during these ten years – The Great Depression of the 1930’s.”
 
Today, looking back from our point of view in October 2008, we should not be surprised that Americans had learned nothing from their prior history. The Republicans policies and complete control of the US government from 2001 to 2008 resulted in a major meltdown of the US economy – and the first Great Depression of the new Millennium.

The Iraq war was completely out of control by December of 2004, and it was clear to the rest of the world that the Iraq war had become an all out civil war. The American army had become irrelevant, and served only as target practice for the insurgency in the Iraqi civil war – but the American casualties, and the costs of the war were pilling up sky high.

Death of the Last Superpower

The idea of the Soviet Union being a superpower died in Afghanistan in the late 1980’s. The idea that the USA was the lone superpower in the world died a fast death in Iraq in the years 2003 to 2006.

By the end of 2004, it was clear to most people around the world that Iraq had immersed into a nasty civil war – and the Americans had lost another war – just as they had lost the Vietnam War in the 1970’s.
 
The American population was very angry with George W. Bush, and members of congress had started impeachment proceedings to get him, and his vice president Dick Cheney out of office.

These men had caused massive damage to American prestige and credibility all around the world, by starting the Iraq war against United Nations approval, and also against accepted principles of international law.

What was the most hurtful thing for the American people was that the Iraqi fiasco had been broadcasted live to the rest of the world, and signaled the end of the line for the last superpower.

The First Great Depression of the New Millennium

During the second term of George W. Bush’s presidency, finally all the American mismanagement and mistakes did catch up with the American economy, and a number of trends merged into a perfect storm causing the final meltdown of the US economy.

The American economy went through a downward spiraling out of control implosion. Massive US government budget and trade deficits forced the Federal Reserve Bank to raise interest rates to try to stop the steep decline of the US dollar in world markets against other currencies.

Soon after September 11, 2001 the US dollar started sinking in world markets like the Titanic. The Economist had a Special Report regarding the US dollar on its December 2004 issue – “The disappearing dollar.”

The article said: the decline of the US dollar in the last 3 years makes the United States responsible for the biggest international monetary default in the history of the world. The US dollar had declined by 67 percent versus the euro from US$ 0.82 in November 2001 to US$ 1.37 in December 2004.

The world lost its confidence in the US economy because they realized that the US economy was over leveraged, and would not have the necessary cash flow to pay its bills in the future. The US economy was outsourcing its good paying jobs by the millions to other countries – in the last four years the US economy had exported over 10 million jobs. A flood of US corporations started reincorporating in tax havens to avoid paying US corporate taxes.

To compound the US economic problems, US corporations started repudiating the benefit payments of their pension and health plans. Everybody wanted to pass their pension responsibility to the US government – the trend started with the steel industry, then the airline industry, the major auto manufacturers, and after that, every company with a substantial pension plan. The US government had no choice other than to swallow approximately US$ 600 billion in new pension liabilities. 

After a number of new terrorist attacks inside the United States, the market dynamic of all these events combined to cause a major institutional collapse in the derivatives market, and that started a domino effect in the entire financial system causing a massive meltdown.

Panic among the major holders of US dollar also contributed to the stampede like we had never seen before – and at the end, Chernobyl looked like nothing when compared with the final meltdown of the US dollar, and US economy during the summer of 2008.

Ricardo C. Amaral is an author and economist. He can be reached at brazilamaral@yahoo.com.

Copyright  © 2005 All rights reserved.

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  • Show Comments (14)

  • Ricardo C. Amaral

    In reference to a typo on above article – should read 2008.
    There was no typo to be corrected on the original article.

    I had the correct info on the article when I sent to be published in February 2005 as follows:

    “Panic among the major holders of US dollar also contributed to the stampede like we had never seen before – and at the end, Chernobyl looked like nothing when compared with the final meltdown of the US dollar, and US economy during the summer of 2008.”

    .

  • FowlerAnnie20

    respond this topic
    I guess that to get the personal loans from creditors you ought to present a great motivation. But, one time I’ve received a auto loan, just because I was willing to buy a bike.

  • Marilyn

    What would you do now, since your predictions here have come to fruition, and NO ONE KNOWS WHAT TO DO OR BELIEVE.! I found you on Charlie Rose’ site. Hope you stay informative there. Thank you!

  • Ricardo C. Amaral

    Reply to Mark
    You are right my screen name is South America at the Elite Trader website, and you can check some of my postings on the above subject as follows:

    Itˢ۪s 2008. The U.S. Has Dragged the World into a Depression
    [url]http://www.elitetrader.com/vb/showthread.php?s=&threadid=124509[/url]

    The US dollar and the biggest default in history
    [url]http://www.elitetrader.com/vb/showthread.php?s=&threadid=121313[/url]

    Over 75 years ago Wall Street Crashed; but today the New Crash is already underway…
    [url]http://www.elitetrader.com/vb/showthread.php?s=&threadid=117003[/url]

    I hope you will enjoy reading the above threads.

    ,

  • Ricardo C. Amaral

    In reference to a typo on above article – should read 2008.
    In 2005 as soon as the article was published I realized that there was a mistake (typo) in the last sentence of the article. The article was written from the point of view of November of 2008 at the time of the US presidential election, and I was referring to the summer of 2008 right before such an election.

    The editor of Brazzil magazine never corrects the article after the article has been published, and the article keeps any mistakes that were in the article at the time of publication.

    This is the incorrect info included on the above article:

    À¢€œPanic among the major holders of US dollar also contributed to the stampede like we had never seen before – and at the end, Chernobyl looked like nothing when compared with the final meltdown of the US dollar, and US economy during the summer of 2006.À¢€Â

    This is the correct info that was supposed to be on the article:

    Panic among the major holders of US dollar also contributed to the stampede like we had never seen before – and at the end, Chernobyl looked like nothing when compared with the final meltdown of the US dollar, and US economy during the summer of 2008.

    .

  • forrest allen brown

    why do you stay in the US then if it is so bad go to france
    live with the rag heads

    why is the US to blame for the world depression we did not drag any country
    to the US banks to deposit there stolen moneys

    it is like if the US coughs the world gets a cold
    and it is to blame for all countries money problems

    RA & mark here is a french term you should learn before you move over

    hold up your hands and repeat

    we surinder

  • Mark

    Amazing accuracy
    I was just going through websites trying to see when people predicted the next Depression. Whether in 2008 or 2009. I came across a forum where your screen name was “SOUTH AMERICA.” I just now read this and WOW. I can totally see all of that happening and am already seeing it happen with my own eyes and ears. Particularly this part :

    “To compound the US economic problems, US corporations started repudiating the benefit payments of their pension and health plans. Everybody wanted to pass their pension responsibility to the US government – the trend started with the steel industry, then the airline industry, the major auto manufacturers, and after that, every company with a substantial pension plan. The US government had no choice other than to swallow approximately US$ 600 billion in new pension liabilities.”

    Everyone is looking to each other to bail the other one out. I just heard that the auto company CHRYSLER is going overseas to China, and we have outsourced thousands if not millions of jobs to China, India, and other low wage paying countries. I think the only thing that hasn’t come to pass yet in this article is the attacks on American soil. And the American soldiers being target practice for the Iraqi Insurgency. I’m pretty sure that will happen though. Especially if we have either Hilary Clinton or John McCain (both war mongers) as a president. I think you hit everything right on. It’s amazing to see those first couple of comments from 2005 saying that your facts were way off or it was just a fantasy. Now we’re here in 2008 and it’s all unfolding just as you say!

    MARK

  • Ricardo C. Amaral

    The Coming Global Depression.
    Last Friday, March 2, 2007 Paul Krugman’s column on The New York Times –
    The Meltdown – also painted a black picture as the above article.

    .

  • Guest

    1 year later…
    USA is still in Iraq, wasting money, and actively spreading the bad reputation.

  • Guest

    Fiction/ potential fact
    I’m sorry to say that some of the authors facts are correct. Even some of the economist here in the U.S. agree that the U.S. economy is on the edge of a precipice. And if something is not done to balance the budget, cut defficit, wasteful spending not only does America face another depression, but just like the last depression, this one will have a dommino effect on the world economy.

  • Guest

    Guest
    Interesting fiction here. Demonstrates how easily a journalist can create deception merely by inserting and omitting facts as he pleases. However, I do agree that the USA is on a slippery slope. I also remember the USA was on this slope before in the late 70`s and it came roaring back. Never underestimate the resolve of the American people and forget the knuckleheads in Washington. Most Americans don`t know or care who their congressman is. They are too busy making things happen for themselves. I have lived around the world, but never see the decisiveness of spirit and resolve as in the USA. They will get it right.

  • Guest

    Miscalculation
    At least one ‘fact’ in this article is demonstrably not true. The dollar has not declined 67% against the Euro. In 2001 the Euro was at about $0.85. As of today, it is at about $1.30. This represents a 35% decline in value, not 67%, and the trend is towards increasing valuation of the dollar.

    Without the need of investigating further, this casts doubt on all of the other ‘facts’ presented by the author.

  • Guest

    Fantasy Indeed!
    This author has an extremely actice imagination. Not only is his past history erroneous, but his predictictions basing his article’s outcome are way out of line. Iraq will be fine, the are proving it already. Maybe he is ready to lie down and “obey Islam”, as Zarquari has demanded, but I am not

  • Guest

    Interesting fantasy!
    An unlikely extrapolation, based on facts selected to bolster the author’s viewpoint.

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