A survey from 2011 (Snyder 2011) suggests that of all the fears Americans have about a major catastrophe in the United States their greatest was that of an economic collapse. Some sixty-five percent who were polled said that. Just to get an idea of what those on social media thought today, I polled my Facebook and Google+ connections. Indeed, a majority, albeit not by much, agreed that an economic collapse scared them more than a lot of things. Their reasoning was two-fold. First, they felt that it could have been avoided, but now think that may no longer be the case, and second because they felt that not only would this change the foundation of getting anything done in America, but more profoundly it would completely alter their way and quality of life. Some even claim a collapse is quite probable and perhaps could occur sometime this year. (Means 2012)
I’ll begin with outlining what appear to be the most likely causes of such a collapse, but will note that no one issue is likely to cause a collapse; rather, it will probably be a culmination of several of the issues and/or others that I may not discuss. Up front, the primary concerns are US foreign and domestic indebtedness; nations dropping the US dollar (USD) as the reserve currency; no gold standard; the expanding costs of entitlement programs; healthcare; and the Federal Reserve itself. To be sure, many of these issues could probably be mitigated, but that too would take a lot of sacrifice on the part of the government and would require all the political parties to finally come together for the good of the union, which has proven nearly impossible for decades.
Let’s start with the USG’s indebtedness to foreign lenders and the American people. Now, I don’t have a financial studies background, but common sense seems to rule when you see a $17 TRILLION national debt (Dinan 2013) that continues to grow and nearly no spending cuts that matter in the short or long term. In any home budget, when your expenses and existing debt exceed your income, you go broke. Now, add in that the USD was the strongest currency for a long time and became the globe’s reserve currency. When nations drop the USD as their means of settling trade imbalances, for instance, the dollar gets weaker. This is exactly what has begun to happen, Brazil, Russia, India, China, and South Africa all stated they were doing just that (Roberts 2013), though finding a solid source on this has admittedly been tough. However, throughout history the reserve currency has changed over time, so it is not completely unexpected that the dollar would lose this status. The time, though, may be sooner than expected, thus contributing to a collapse.
Here, I’ll tie in the fact that Nixon took us off the gold standard (Kadlec 2011) and the money-printing policy of the Federal Reserve (Lewis 2013). Our money is now ‘fiat money,’ meaning its value is determined by supply and demand, and law, not a physical commodity such as gold or silver. Couple that with the Federal Reserve printing money to finance the deficit (recall the $17T mentioned earlier). There are some arguments about whether that printing money part is accurate, but for lack of a better term I will use it, and could redefine as ‘issuing large amounts currency’ that could be in other than paper or coin money, such as bonds. So, here we have what almost amounts to thin air backing our money. Does that sound like a good way to keep a strong economy?
Finally, I assert that the increasing costs of entitlement programs, in which I would include welfare programs, unemployment benefits, and even universal healthcare, is also a further drain on our economy and will continue to wear down the damn that keeps the flood waters at bay. A number of experts have attested that the current unemployment rates are false, and that the problem is far greater than the US Government wishes us to know. Consider it a new way of counting, but one that I do not understand and cannot fully describe for you here. Even if that number remains low as it appears now, about 6.7 percent (US Dept of Labor 2014), it is a drain on the economy, it is not good (mind you that ‘better than previous years’ is not inherently ‘good’).
So, there are many issues to speak about with regards to the US economy. I have only briefly discussed some of the more important and powerful ones, but I believe that this demonstrates how an economic collapse could occur in the United States. The deeper concern is that we are, from the individual American to the US Government, not truly prepared for its cataclysmic impact on our lives. The latter seems to think the problem can be kicked further and further down the road, and that if the government kicks it hard enough and long enough it will be remedied. Logically, that does not make sense either.
Dinan, Stephen. U.S. debt jumps a record $328 billion — tops $17 trillion for first time. October 18, 2013. http://www.washingtontimes.com/news/2013/oct/18/us-debt-jumps-400-billion-tops-17-trillion-first-t/ (accessed February 5, 2014).
Kadlec, Charles. Nixon’s Colossal Monetary Error: The Verdict 40 Years Later. August 15, 2011. http://www.forbes.com/sites/charleskadlec/2011/08/15/nixons-colossal-monetary-error-the-verdict-40-years-later/ (accessed February 5, 2014).
Lewis, Nathan. The Federal Reserve Is Now Badly Hooked On Its Quantitative Easing. September 29, 2013. http://www.forbes.com/sites/nathanlewis/2013/09/29/the-federal-reserve-is-now-badly-hooked-on-its-quantitative-easing/2/ (accessed February 5, 2014).
Means, Grady. U.S. economy on schedule to crash March 4, 2014. October 5, 2012. http://www.washingtontimes.com/news/2012/oct/25/us-economy-on-schedule-to-crash-march-2014/?page=all (accessed February 5, 2014).
Roberts, Paul Craig, interview by Michael Whitney. Escape From the Dollar (November 5, 2013).
Snyder, Michael. The Number One Catastrophic Event That Americans Worry About: Economic Collapse. December 30, 2011. http://www.infowars.com/the-number-one-catastrophic-event-that-americans-worry-about-economic-collapse/ (accessed February 5, 2014).
US Dept of Labor. Bureau of Labor Statistics. February 6, 2014. http://data.bls.gov/timeseries/LNS14000000 (accessed February 6, 2014).