The future of the USA - 2012-2016: An insolvent and ungovernable United States (first part)


- Excerpt GEAB N°60 (December 16, 2011) -



The future of the USA - 2012-2016: An insolvent and ungovernable United States (first part)
In this issue, our team gives its anticipations regarding the future of the United States for the 2012-2016 period. We recall that since 2006 and the first GEAB issues, LEAP/E2020 described the global systemic crisis as a phenomenon characterizing the end of the world as we know it since 1945, marking the collapse of the American pillar on which this world order has rested for nearly seven decades. Since 2006, we had identified the period 2011-2013 as that during which the “Dollar Wall” on which the power of the United States sits would fall apart. Summer 2011, with the cut in the United States’ credit rating by S & P, marked an historic turning point and confirmed that the “impossible” (1) was indeed in the process of coming true. Therefore today, it seems essential to provide our subscribers with a clear anticipatory vision of what awaits the “pillar” of the world before the crisis at the point when the crisis moved into “top gear” in summer 2011 (2).

Thus, according to LEAP/E2020, the 2012 election year, which opens against the backdrop of economic and social depression, complete paralysis of the federal system (3), strong rejection of the traditional two-party system and a growing questioning of the relevance of the Constitution, inaugurates a crucial period in the history of the United States. Over the next four years, the country will be subjected to political, economic, financial and social upheaval such as it has not known since the end of the Civil War which, by an accident of history, started exactly 150 years ago in 1861. During this period, the US will be simultaneously insolvent and ungovernable, turning that which was the “flagship” of the world in recent decades into a “drunken boat”.

To make the complexity of the current process understandable, our team has chosen to organize its anticipations around three key areas:

1. US institutional deadlock and the break-up of the traditional two-party system
2. The unstoppable spiral of recession/depression/inflation
3. The breakdown of the US socio-political fabric

The future of the USA - 2012-2016: An insolvent and ungovernable United States (first part)

US institutional deadlock and the break-up of the traditional two-party system

From the beginning of 2010 our team had anticipated the state of institutional paralysis that has characterized the United States since the November 2010 elections. 2011 has allowed everyone to discover that, in fact, it had now become impossible for Washington to take any decision of importance, especially regarding economic and budgetary affairs, even though at the heart of the country's difficulties. Federal authorities are now unable to take measures to reduce the federal deficit, to adopt a sustainable federal budget, to implement policies to support the economy... Whether the Presidency, Congress or the Federal Reserve, each of these three key institutions is proving powerless to decide and/or implement meaningful policies.

The example of the Fed’s inability to implement QE3 (4) is indicative of the internal deadlock of the political system as it is now up against the public opposition of the Republican Party, the Tea Party and Occupy Wall Street (not to mention the outward opposition of most of the world’s central banks). And, far from improving, on the contrary the situation will get worse in 2012 and after.

In fact, one of the major causes of this institutional deadlock is the break-up of the traditional two-party system that accelerated with the November 2010 Congressional elections. Already, for over a decade, one of the phenomena that had allowed US bipartisanism to run relatively smoothly since 1945 was being lost, namely the wide permeability between both parties’ political views: the absence of a strong ideological divide enabling the avoidance of the paralysis that threatens any system with a strict separation of powers backed by the two-party system (5). During the 2000s, this permeability has completely disappeared against the background of growing ideological tensions, particularly at the initiative of the Republican Party and its constituent parts, ultra-religious, anti-tax and now anti-federal government.

Yet, since 2009, we are witnessing the rapid emergence of a new cause of institutional deadlock: the breakup of the two-party system pure and simple. This profound change has begun to register clearly in the US Congressional debates from November 2010 and especially during the summer of 2011 with the stalemate on the budget discussions and the surreal debate on the US public debt ceiling. Elected officials claiming to be representative of the Tea Party movement (TP) have, de facto, become a party within the Republican party, or rather, according to LEAP/E2020, the embryo of a new party in the process of splitting the traditional Republican Party: their arguments akin to the confederate speeches of the Civil War (pro-state, anti-federal, anti-tax, pro-white, isolationist ... and in general manipulated by powerful economic and financial interests).

Autumn 2011, witnessed the emergence of the Tea Party’s "democrat twin", namely the Occupy Wall Street movement (OWS). Like the Tea Party movement, OWS brings very disparate trends together: anti-Wall Street, anti-interventionist, anti-military, environmental, in favour of a social security system,... The two movements represent the widespread frustration of US public opinion in the face of the federal political system’s deadlock and the widespread corruption prevailing in Washington (6). LEAP/E2020 believes that the TP and OWS will be key players in the November 2012 Congressional elections. The search for new players outside the two major parties has become a priority for a growing number of American citizens.

As regards the 2012 presidential election, it’s unrealistic to believe that a third force will be able to present an alternative presidential candidate. In fact, at less than a year from the election, no personality has appeared capable of personifying this third avenue, and there is no organization capable of carrying such a candidature countrywide. On the other hand, for the elections to Congress (and certainly in many State elections), the TP and OWS will play the role of “breakers” of the traditional Democrat / Republican duopoly.

For 2012, LEAP/E2020 anticipates an even more divided Congress than this one, with the two movements strongly represented in the House of Representatives. Out of the total, we estimate that elected officials linked to the TP and OWS will account for one third of the House of Representatives and 15% of the Senate. This additional splitting into four parties/movements, with ideologies increasingly closed to the idea of any compromise, will strengthen Congress’ ungovernable nature and therefore the Federal government, since the President cannot do much when Congress hasn’t a secure majority and, on the contrary, it is deeply divided on the country’s broad direction (including the President’s role). The institutional system of the United States is totally helpless in the face of a four-party system, especially when this change represents a rejection of the current system.

Comparison between the Tea Party / Occupy Wall Street movements - Source  Big picture, 11/2011
Comparison between the Tea Party / Occupy Wall Street movements - Source Big picture, 11/2011
Therefore, LEAP/E2020 expects an increase in the number of partial and short-term measures from 2013 (as we have seen already with these partial and last minute budget agreements to “keep the Federal State going" (7)), the inability to schedule the country’s main fiscal balances (8), and in 2014 at the latest (a new election year) a radicalization of competing arguments around a redefinition of what is the United States.

It’s at this moment that the “window of opportunity” will open for the heaven-sent man (9) intended to “save the country”. As a matter of fact, there could be several candidates for the “rescue”, which will strengthen the country’s internal divisions. That man will have the 2016 presidential elections in his sights, with a necessary worsening of the domestic and overseas situation on the menu to enhance his position of “savior” (10).

Our team, like many observers of US politics for that matter, has already identified one of the possible candidates for this role of “savior of the Nation”: General David Petraeus. Besides his name that sounds like a Roman governor, he behaved as such during his term as head of the US Armed Forces in Iraq and Afghanistan. Many are the soldiers, diplomats, and other federal bureaucrats who would like to see a man of this “calibre” restore order in the country and an unquestionable federal state in command. The fans of order (11), for the rest love uniforms.

In the opposite camp, for now, there is no one of any credibility in terms of national visibility or charisma. 2012 may still change that and bring out a strong leader in the OWS movement or the left of the Democratic Party. But here our team remains guarded because this political family has often great difficulty in producing charismatic leaders (12), especially in a country where their mortality rate is particularly high (the Kennedy brothers, Martin Luther King,...).

The issue of balanced budgets in a recession, the financing of deficits and, therefore, the level of the military budget, will considerably push the military-industrial complex (13) to act, reinforcing all the more the option of a “heaven-sent man in uniform”. In summary, the current deadlock in Washington will become more marked from 2012 and become a source of widespread political chaos from 2013, knowing that powerful interests will be tempted to play politics of the worst kind to ensure the victory of a “savior” in 2016.

The problem for these "Beltway" players (14) is that the country isn’t facing a “normal” crisis or even a “serious” one like 1929, but really an historic crisis that happens unexpectedly once every four or five centuries (15). Thus since 2008 the United States has been embroiled, with a significant acceleration in 2011, in an unstoppable economic spiral: the sequence of recession/depression/inflation.

----------
Notes:

(1) Let’s remember just a year ago it seemed totally crazy to anticipate such a breakdown. Financial experts, the specialized media and other experts of “the future as a mirror image of the past” considered such a breakdown impossible, or possible after five or ten years if the country's financial situation continued to deteriorate.

(2) This requirement is all the higher that the media and financial sectors are completely parasitized by the “lure” of the “Euro crisis” destined, as we have been emphasizing for the last two years, to hide the seriousness of the situation at the heart of the global financial system, namely on Wall Street and in the City. David Cameron’s resounding failure in Brussels last week incidentally shows the panic that reigns in the heart of Anglo-Saxon finance.

(3) Euroland, despite its “handicaps”, repeated at length in the Anglo-Saxon media and the hysterical gibes of Wall Street and City intermediaries, has managed for nearly two years to build a whole new politico-institutional device to pass through the crisis and prepare for the world after. On the contrary, the United States is proving itself totally incapable of the least initiative to adapt itself to the new world order as was once again recently demonstrated with the failure of the deficit reduction super-committee goal despite its very limited target of 1.5 trillion in reductions over 10 years (see chart above). The history of states, like the species, shows however that the ability to adapt is essential for survival, and it's a law that has no exceptions.

(4) A situation that we had anticipated since QE2 whilst the conventional wisdom of financial markets was that nothing could prevent the Fed from running its printing press indefinitely. Stock market investors currently pay a high price for this mistaken belief.

(5) In fact, the United States institutional system, a faithful reflection of the ideas of the Enlightenment, and of Montesquieu in particular, puts face to face powers that have almost no control over each other. When it works, it's called the balance of power and one marvels at it (the constitutional law courses of these last sixty years have thus made the US a model of its kind). But when it malfunctions, it leads straight to paralysis because no one authority is able to dominate the others and therefore difficult decisions are constantly being deferred, which very quickly throws the country into chaos, especially since this type of situation tends to occur in times of crisis (when very difficult decisions to be taken quickly) and not when all is going well.

(6) Because we really must call “a spade a spade”: the US institutional system is now totally corrupted by the private interests of the country’s richest 1% (big business, hedge funds, billionaires,...) and it really is this observation that causes the anger of American citizens of all stripes. The Supreme Court’s 2010 decision to remove all limits on the financing of political campaigns by businesses merely ratifies the situation whilst showing that the judiciary itself is now also corrupted at the highest level. Our team wishes to clarify that this type of observation is now common currency in the whole of the US population whilst still marginal until 2008. And this shift of the margin to the “mainstream” is a sign that the country is about to face a serious political crisis: the loss of confidence in institutions is always a terrible trauma for a country, especially when it follows an almost blind confidence in these institutions. There’s only the Americanists outside the United States, and in Europe particularly, to still believe in the virtues of the US system, this stage is now well outmoded for the majority of Americans.

(7) This week we are once again witnessing an episode which risks, for the third time this year, closing the federal administration absent a temporary budget agreement. Source: CNBC, 14/12/2011

-8) We think it highly likely that the 2013 budget would be simply impossible to adopt, helping to strengthen the prevailing chaos. In fact, the two opposing trends that make social or military expenditure budgetary “taboos” will find themselves strengthened after November 2012, making any compromise still more illusory. And our team does not believe in the implementation of the “automatic reductions” in 2013 resulting from the failure of the super-commission on the deficit: the military-industrial lobby will not accept this sharp reduction. Only the three major rating agencies pretend to believe it, to defer the timing of a further US downgrade.

(9) Or woman.

(10) These are standard methods for countries in a serious crisis. History is full of such situations. However, losing their outrageous status in terms of wealth and isolation, the US now belongs to history. They are no longer a dream that floats above the harsh reality of other continents.

(11) Which includes, of course, the great fortunes of US business in their ranks and Republicans of all persuasions or substantially all (except the Tea Party libertarian fringe like Ron Paul). Source: Time, 24/06/2011

(12) Generally, the left doubts leaders.

(13) We remind subscribers that this expression was not invented by an inveterate leftist pacifist but by President Dwight D. Eisenhower in his speech at the end of his term of office in 1960. Source: Wikipedia.

(14) Which refers to “insiders” who work at the heart of federal government, inside the Washington ringroad (Beltway).

(15) In other words, the United States has never experienced such a "tsunami" because they it’s too new for that.

Mercredi 28 Mars 2012
LEAP/E2020
Lu 27374 fois


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GEAB N°86 - Contents

- Published on June 17, 2014 -

Global systemic crisis – The Major Global Geopolitical Reconfiguration
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Numerous cracks come from the outside: for example the challenge to US dominance by China and Russia. But, amongst the most serious cracks in the Dollar wall, is the market for US municipal bonds and the US pension system… (page 19)
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Central Banks – What the coexistence of QE and deflation reveals about the Western financial system
Common sense (or rather economic sense) would expect that excessive use of the printing press, especially in the US and Japan, causes inflation – if not hyperinflation given the amount of money injected into the system. And yet, it’s nothing of the kind. Are deflation and the printing press conniving in the US? Or in Europe? How can that be possible? (page 25)
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Investments, trends and recommendations
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Alternative financial investments… (page 30)
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GlobalEurometre - Results and analyses
Even if some financial issues, such as the risk of bank failures or the fear of losing one’s money, seem to be less worrying, for the first time in several months we are seeing signs of a weakening in confidence in the European currency… (page 35)
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