Posts Tagged ‘deficits’

Fragile Recovery From Coronavirus Induced Economic Crisis As Warning Signs Grow

September 5th, 2020 Comments off


Government leaders and financial pundits  continue to trumpet the myth of the V-shaped economic recovery, a leading factor in the ability of Wall Street and other exchanges to recoup virtually all their catastrophic losses inflicted in the early stages of theCovid-19 pandemic. Yet, despite the happy talk, the anemic recovery occurring in many economies during Q3  is already in danger of being premature. Growing headwinds  lie ahead  for the global economy.

The temporary alleviation of the worst affects of the economic lockdowns that occurred throughout the second quarter of the year were purchased with a  staggering and unprecedented level of sovereign debt. To give only one example, Canada is projecting a government deficit for 2020 of $343 billion (Canadian), in USD equaling to about $260 billion USD. In the United Sates, the 2020 fiscal deficit incurred by the federal government t (excluding state, county and local government expenditures) is projected currently at  3.3 trillion dollars; more than 15% of America’s GDP.

Never before in human history have sovereigns incurred such massive debt levels within a very short time interval. This rampant borrowing has not been unleashed to fund major infrastructure projects and other activity aimed at stimulating economic growth. In fact, this massive borrowing binge has been utilized by policymakers  for two purposes: providing a financial lifeline to the vast numbers of newly unemployed, and pump up the equity markets that were on the verge of implosion.

For the short-term, stock prices may have recovered and large numbers of unemployed workers have been rescued from instant insolvency. However, with new pockets of Covid-19 emerging and leading to renewed economic lockdowns, and the threat of a second-wave of the coronavirus looming, economic disaster stands right before us. The possibility of an effective vaccine is the remaining hope  for much of the world to escape a Great Depression of the 21st century. How realistic such a therapeutic creation is for the salvation of the global economy remains to be seen.

President Barack Obama Wins Reelection; Now Comes The Fiscal Cliff

November 9th, 2012 Comments off


The results of America’s 2012 presidential election were barely finalized when the political establishment immediately shifted gears, now focusing on what is being referred to as the nation’s “fiscal cliff.” This dire term involves a convergence of two hour glasses running out of sand. One is expiration of the so-called “Bush tax cuts,” the radical reduction in upper income taxation during the Bush presidency that transformed America’s fiscal balance sheet from questionable surplus (only surplus with fuzzy accounting on future Medicare and Social Security obligations). The other is the automatic cutbacks in federal spending that take effect without a negotiated bipartisan deficit reduction agreement

Washington’s massive structural mega-deficits are unsustainable. However, a radical, unplanned reduction done like cold turkey will crash the economy, resulting in a revenue shortfall  for the government, and the retention of a massive deficit.

How will the politicians in Washington DC behave? Like adults? Possibly, because of market terror at the alterative. However, with the Republican Party very bitter towards President Obama for having the audacity to defeat his GOP challenger, don’t be too hopeful that the GOP will put aside its political agenda for the national interest.






 To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.



U.S. Economy At Stall Speed: Q2 GDP Figures Revised Downward

September 28th, 2012 Comments off

In its third revision of GDP data for the second quarter of 2012, the Bureau of Economic Analysis  has posted a dismal set of numbers. The U.S. economy “grew” at a tepid rate of 1.3 percent in Q2 in 2012, versus a slightly higher but still weak rate of 2 percent in Q1. A rate of 1.3 percent growth, which is virtually stall speed, was only made possible by America’s massive structural mega-deficits. In FY 2012, the U.S. federal government deficit is projected to run at $1.3 trillion, representing more than 40 percent of the entire federal budget.

The anemic GDP figures for Q2 reflect an economy that remains in deep crisis. The only factor preventing a compete free fall of the U.S. economy are the massive deficits, which are unsustainable. Even a modest reduction of the deficit, however, would plunge the United States into a deep recession.






 To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.



Deficit Hawks Versus Deficit Worshippers: Paul Krugman Leads the Charge

December 1st, 2009 Comments off

As the U.S. federal government sinks ever deeper into irreversible fiscal imbalance, a cadre of pro-deficit economists, led by Nobel laureate Paul Krugman, have been pounding the airwaves, making the case for an emergency government jobs program, funded by, no surprise, an even larger dose of deficit spending. The case presented by Krugman rests on two pillars: 1. The rate of unemployment is so severe, it risks undermining any sustained economic recovery, threatening larger deficits down the road; 2. Low interest rates mean the U.S. government can fund  additional debt cheaply, those rates in turn assured by the current state of the bond market.

I sympathize with Paul Krugman’s concern about unemployment. Clearly, TARP and the other bailout and stimulus measures were aimed at Wall Street’s recovery, not Main Street’s. But I disagree with his optimism regarding the ability of the United States economy to absorb more sovereign debt. In only nine years, America’s national debt to GDP ratio has doubled, currently standing at 80%. Furthermore, his belief that interest rates offered on U.S. government debt can be maintained at perpetually low rates is based on theology, not economic science. It is inevitable that interest rates will rise for a host of reasons, not the least being that  the U.S. will find increasing competition in the sovereign debt market from other deficit-seduced governments. Even a modest rise in bond yields will utterly devastate the capacity of the American government to service its public debts. Fiscal collapse would be the result, bringing in its wake a level of unemployment that would leave even Paul Krugman pining for the jobless rates of late 2009.

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,   


Is The United States Too Big To Fail?

April 29th, 2009 Comments off
In 1970 Soviet dissident Andrei Amalrik wrote a highly controversial book entitled, “Will the Soviet Union Survive until 1984?” The book was vociferously criticized by Kremlinologists, who maintained that the mighty USSR, superpower rival to the United States, was simply “too big to fail.” Back in 1970, it was considered the height of lunacy to envision the demise of the Soviet colossus.
Well, Amalrik was off by seven years, but otherwise he was remarkably prescient. How was it possible for him to be correct and the legions of Soviet experts so wrong? The primary reason is that Andrei Amalrik understood what the so-called experts did not; there is no such thing as “too big to fail.” That applies to countries and empires as well as companies. The United States of America included.
The Global Economic Crisis has savaged the economy of the U.S. along with much of the rest of the world. In response to the most severe economic contraction America has experienced since the Great Depression, the Obama administration is going into debt to fund massive economic stimulus programs. Yet, as extravagant as those stimulus programs may appear on the surface, they are marginal in comparison with the trillions of taxpayer dollars both the Bush and Obama administrations have made available to subsidize Wall Street and the major actors in the financial industry, to in effect save them from the consequences of their own follies. The mantra of both the current and previous administrations is that these Wall Street entities are “too big to fail,” meaning if they are not provided with whatever taxpayer-funded credit they demand, a systemic financial collapse would ensue.
The price being demanded-and obtained-by the oligarchs of Wall Street, combined with the economic demand destruction unleashed by their reckless greed is expanding the national debt of the United States at a frightening pace. An example of this disastrous fiscal trend is the recent announcement by the U.S. Treasury Department that for the second quarter of 2009 the United States government will need to borrow $361 billion to pay its bills, compared with $13 billion for the same period in 2008. For all of 2008, the U.S. budget deficit was approximately $455 billion; in the third quarter alone of 2009 it is projected to be $515 billion, and that is probably an overly optimistic estimate.

In addition to the $750 billion TARP program to bailout banks and Wall Street that was approved last October by Congress, untold trillions of dollars have been provided or promised to the financial industry by Treasury and the Federal Reserve, off the books of the official budget. A most recent estimate puts this figure up to $13 trillion, nearly equal the entire GDP of the United States. The official national debt of the U.S. now tops $11 trillion, and may surpass the GDP within two years. In addition, state, county and local governments across the country are sinking into an ocean of red ink. In effect, the entire credit worthiness of the United States has become the “lender of last resort” for the “too big to fail” entities. The financial elites of America are no doubt uncorking their champagne bottles, as their privileged excesses are held whole through the ultimate backstop; the indebtedness of not only the current generation of Americans, but also their children and perhaps even their grandchildren. It appears that the oligarchs are so devoid of historical understanding, they fail to recognize that this subsidization of their Wall Street empire of credit default swaps and gargantuan compensation packages can only be sustained if the United States can forever go into debt. And in order to believe that the U.S. is ultimately “too big to fail,” they have to be equally ignorant of basic mathematics, the ultimate irony for the supposed magicians of high finance.

But what if a point is reached when the rest of the world is no longer willing to lend its scarce capital to the United States, and subsidize its Wall Street bailouts and extravagant military industrial complex? No doubt, the oligarchs would then use their political muscle to enact higher taxation on middle income Americans. This may come in the form of higher consumption taxes; however, a growing possibility is the hidden tax of inflation. A dirty secret that is increasingly being discussed by economists in quiet corners is that there is no way the United States can possibly pay for the servicing of its massive, expanding national debt without resorting to inflation.

What the financial and political elites have not analyzed are the consequences for America’s social cohesion and viability should the nation’s exploding debt burst beyond the point of containment. For unlike AIG, Citigroup and Goldman Sachs, the United States does not have the option of calling upon others to rescue it from its own excesses, with the justification being that it is “too big to fail.”

It strikes me that most Americans, not only the financial elites but across the nation’s social fabric, have a distorted image of how their country fits in with the rest of the world amid the Global Economic Crisis. In a chilling parallel to our times, Amalrik writes about the paralysis of isolation as a factor that would eventually bring about the collapse of the Soviet Union. In 1970 he wrote, “This isolation has created for all—from the bureaucratic elite to the lowest social levels—an almost surrealistic picture of the world and of their place in it. Yet the longer this state of affairs helps to perpetuate the status quo, the more rapid and decisive will be its collapse when confrontation with reality becomes inevitable.”

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 









Dire Warning On U.K. Deficits; What Are The Implications For The U.S. Debt Crisis?

March 27th, 2009 Comments off
As U.K. Prime Minister Gordon Brown goes globetrotting on his mission to spread the gospel of massive borrowing by governments to fund stimulus spending in response to the Global Economic Crisis, setting the stage for the G20 Summit in London, the governor of the Bank of England, Mervyn King, was preaching a different message to members of Parliament at a Treasury Committee meeting. The Bank of England is the central bank of the U.K., in effect the British equivalent of the Federal Reserve in the United States. While accepting the traditional Keynesian view that in times of economic downturn spending must be increased by governments despite reduced tax revenues, creating inevitable budgetary deficits, King went on to tell the parliamentarians that, “Given how big those deficits are, I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits…I think the fiscal position in the U.K. is not one where we could say, ‘well, why don’t we just engage in another significant round of fiscal expansion’.”

In contrast with Fed Chairman Ben Bernanke, the Bank of England governor is watching the accumulating public debt with deep concern, instead of advocating massive quantitative easing, as it is being executed in the U.S. by the Federal Reserve. Mervyn King is clearly worried about the long-term implications of the growing national debt driven by fiscal imbalances, recognizing the future and destabilizing dangers of hyperinflation and national insolvency. Carefully worded and diplomatic as his message was, King’s warning is a clear message to the British political establishment: the current budgetary trajectory is unsustainable.

How bad is the U.K.’s fiscal posture? The true answer is obscured by the accounting rules being applied by the British government, which has assumed the costs and risks of bailing out the U.K.’s largely insolvent banking sector. By some calculations, the loans and guarantees have created a potential public liability of approximately $700 billion that is not reflected in official public debt figures, which stand at about one trillion dollars, or 47% of the nation’s GDP.

In comparison, there are no warnings about massive U.S. budgetary deficits that are being planned by politicians for the next decade, far beyond the three-year time limit King recommended to the MPs on the Treasury Committee. Yet, the United States has an even more daunting debt problem than the United Kingdom. At present, the national debt of the United States exceeds $11 trillion, equivalent to 78% of GDP, a much higher figure than during the New Deal period of the Great Depression of the 1930s. With U.S. GDP projected to shrink in the current fiscal year while deficits add at least $2 trillion to the national debt (my estimate), the ratio of public debt will rise to a point approaching the entire GDP, perhaps within the next five years.

There is another aspect to the U.S. public debt crisis. In 2008, the Federal government spent $412 billion on interest payments for servicing of the national debt. Currently, interest rates are at record lows; the U.S. Treasury has even been able to auction off short-term Treasuries at zero interest rates. However, the inevitable erosion of the dollar’s intrinsic value and changing market conditions will drive up interest rates. That, in combination with the rapid growth in the public debt, could mean interest payments soon becoming the largest proportion of Federal spending, even surpassing military outlays. In a few years, debt-servicing costs may exceed one trillion dollars annually.

As if things were not bad enough, the U.S. government has made massive commitments in terms of direct borrowing and backstop guarantees in the trillions of dollars for bailing out the financial, banking, mortgage and even industrial sectors. Except for the TARP program, these massive fiscal obligations are off the books, but may very well come due, at the expense of the already over-leveraged U.S. taxpayers.

Mervyn King has displayed a rare example of candor and intellectual courage among the central bankers and politicians deciding our fate as the Global Economic Crisis intensifies. If only that same level of civic honesty could be replicated across the Atlantic.






Stimulus Madness: The Inheritance Of Insolvency

February 19th, 2009 Comments off
A one-year anniversary passed days ago, without any fanfare. The Economic Stimulus Act of 2008 was enacted into law after its passage by Congress, on February 13, 2008. How soon we forget.
With the first inklings that the “strong fundamentals” of the American economy may have been somewhat unhinged by the sub-prime meltdown, the Republican and Democratic political establishment, joined by the Federal Reserve and Treasury Department, happily approved an extra dose of borrowing added to an already deficit-ridden federal budget. The sum of $152 billion would be borrowed from the children and grandchildren of America, and in a reverse form of inheritance, sent in the form of tax rebate checks to the current adults of the United States. The hope was that American consumers would dash off to the shopping malls as soon as they opened the envelopes with the U.S. government checks enclosed.

In retrospect, this so-called “economic stimulus” was sheer political gimmickry. As we now know, it did nothing to enhance the American economy, while almost doubling the projected deficit. Yet, we were all assured by President Bush’s press secretary that we absolutely had to borrow this money from our descendants, so as to ensure we left them a “strong economy.” No wonder our memories are so short, as we pass the one-year anniversary of this $152 billion boondoggle without a microsecond’s worth of notice.

Since that first stimulus, we have been through the implosion of the U.S. economy, the onset of the Global Economic Crisis, followed by the near collapse of the world’s financial system. This was followed by another deficit-driven expenditure, supposedly necessary to rescue the American economy; the $700 billion TARP program to prop up the nation’s insolvent, ineptly managed banks and financial institutions. Not to be outdone, TARP is now eclipsed by the $787 billion “American Economic Recovery Plan,” the gargantuan stimulus package enacted by the new Obama administration. Yet, this is not the end. It may only be the beginning of stimulus madness.

President Obama has already indicated he may be back for another stimulus program. Some economists have suggested that in a year’s time we may see a $2 trillion stimulus plan. In addition, TARP has been proven to be ineffective in facilitating a rescue of the largely insolvent banking sector of the United States.

President Obama and his team have paid lip service to the need to return to “fiscal discipline” once the economic crisis is in the past. Several optimists in the political establishment have even suggested that the U.S. budget will be balanced by 2012. Don’t believe it; we have all been down this economic make-believe road before.

Beginning with The Economic Stimulus Act of 2008, the U.S. political and financial elites have embarked on the most catastrophic addiction with debt in the entire history of human civilization. Despite the pompous rationalizations that are offered for the leveraging of America’s finances to an extent that is unsustainable, there is no rational elaboration that can be offered for this insane and inane fiscal policy. Rather than cure the U.S. and global economic crisis, these stimulus fantasies are only assured of one outcome: we will leave for our children and their children the inheritance of insolvency.



Fiscal Chemotherapy Masquerading As Cure For Global Economic Crisis

February 4th, 2009 Comments off
During the medieval epoch, the pseudo-science of alchemy arose to enable the primitive economies of Europe, during the Dark Ages, to transcend their feudal limitations. Alchemists claimed they could transmute base metals into gold through their mysterious machinations. It never worked, yet for centuries alchemists aroused the hopes of vast multitudes of the savviest citizens of their era. Flash forward to the dawn of the 21st century, and we are witnessing the emergence of a new pseudo-science as the center of salvation for the ravages of the Global Economic Crisis.

The inept policy-makers and their legions of technocrats, as with the alchemists of so long ago, are claiming that their own permutation of economics will somehow create gold out of thin air, thus terminating the Global Economic Crisis and restoring prosperity. They tried monetary policy, however with interest rates on central bank funds in many major economies at effectively a rate of zero, and the global economy only falling further into the abyss, a new bag of tricks must be offered to the pubic.

The massive debt-driven stimulus spending plans being unveiled with monotonous regularity by the political leaders of the major economies are nothing more than fiscal chemotherapy. With the Global Economic Crisis having metastasized beyond the point of containment, this disastrous flirtation with national insolvency by policy-makers will only accelerate the path to global economic disintegration.

The major proponent of fiscal chemotherapy is the United States, which will in the near future pass a so-called “economic recovery plan” that will initially cost one trillion dollars over two years. However, even without this stimulus plan, the U.S. federal budget is already projected to incur a deficit of $1.2 trillion. Add in the stimulus, plus hundreds of billions of more dollars required for bank bailouts beyond the $700 billion TARP fiasco, then factor in the sharp decline in revenue from taxation as businesses go bankrupt and millions more Americans lose their jobs, and it is clear that the U.S. Treasury will have to borrow far more than even the stratospheric projection of $1.2 trillion. But it gets worse.

Politicians close to the Obama administration, as well as some economists who stand by the Keynesian formula for combating economic recessions, have already strongly hinted that the $1 trillion stimulus package will not be nearly enough to resolve the economic crisis, and will have to be massively enlarged and repeated. What this in effect means is that the United States will be compelled to borrow untold trillions of dollars for years to come. Now, with domestic credit possibilities utterly exhausted, it is to foreign creditors that the U.S. Treasury must look to for financing the profligate budgetary deficits of the United States.

Unfortunately for the U.S. Treasury Department, virtually every major economic actor on the planet is also replicating grandiose deficit spending wrapped up as stimulus packages. This includes almost all the G7 and BRIC countries. More alarming for the U.S., one of those nations is China, looked upon as the major source of available credit by the Treasury Department. However, China currently has its own priorities, now that the Global Economic Crisis is beginning to batter the world’s third largest economy in severe ways. A normally reticent Chinese government has disclosed that the number of unemployed migrant workers in their country now tops 20 million. It is for that reason that the authorities in China have begun a stimulus-spending program currently budgeted at $600 billion, but almost certainly to grow substantially beyond that figure.

The economic contraction hitting China means far fewer surplus dollars generated by Chinese savers. The credit pool in China is now shrinking, and most of those funds will logically be used to finance the government’s operating deficit in China, as opposed to the United States.

If China dries up as a source of credit for the U.S. government, where is the alternative? The Gulf Arab states are also being lacerated by the Global Economic Crisis, as the implosion of oil commodity prices has created severe budgetary constraints in the previously abundant coffers of OPEC. As with China, whatever sovereign wealth or other surplus funds are still available will be directed in the first instance towards enhanced domestic spending deemed necessary to maintain social cohesion.

The essential point is that the fiscal chemotherapy that suggests that, as with a cancer patient, the toxicity of the medicine, in this case budgetary deficits, must be absorbed for the short-term to preserve the long-term health of the patient is nonsensical in the extreme. There simply will not be enough credit in the entire world to finance the budgetary deficits that are likely to arise in the United States as well as other major economies. Rather than pursue the only sane fiscal option available, namely radical budgetary surgery (as with massive trimming of bloated U.S. military spending), the mediocre elites dominating U.S. decision-making circles have chosen to go down the route of fiscal chemotherapy and economic alchemy, which can only result in terminal consequences for the American economy.


U.S. Budget Deficit Will Likely Exceed 2 Trillion Dollars

January 15th, 2009 Comments off
The U.S. congressional budget office has recently forecast that the current federal budget deficit will exceed $ 1.2 trillion dollars, more than double the previous year’s near-record government overdraft. However, the CBO estimate does not even include the Obama stimulus package in its estimates, likely to be in the range of a trillion dollars over two years. Perhaps most problematic, the estimates conveniently set aside the catastrophic diminution in tax receipts that are inevitable, as the impact of the Global Economic Crisis on the American economy contracts payrolls and bankrupts businesses large and small. Just as dead men tell no tales, dead companies and unemployed workers pay no taxes. projects that for 2009, the U.S. government will have a deficit in excess of two trillion dollars and possibly even in excess of $2.5 trillion. However, government taxing and spending does not only occur at the federal level. All over America during the course of 2009, state, municipal and county governments will be drowning in red ink, and beg the federal government to bail them out. That is the logic of borrowing from Peter to pay Paul. There is a limit to how much money even the United States Treasury can borrow. However, an even greater danger lurks in both the short and long term.
The massive deficit spending that Washington initiated as the global financial and economic crisis accelerated was supposed to free up the credit markets and allow normal flows of business lending to proceed. In a fiscal paradox, the very solution implemented by the U.S. Treasury and Congress, massive debt spending by government, will inevitably suck up credit from the private sector like a vacuum cleaner, diverting this economic necessity into the public deficit purse, further aggravating the credit crunch.
The out-of-control multi-trillion dollar deficits being offered by Washington politicians and their coteries of corporate socialists desperate for a government bailout will bankrupt both the public and private sector, and ensure that the Global Economic Crisis brings about a worldwide depression of catastrophic proportions.

Economic Crisis And Disintegration Of The American Empire

January 14th, 2009 Comments off
What we of this generation are witnessing is one of those rare epochal events that occur perhaps once in a millenium: the disintegration of an empire. The Global Economic Crisis will claim as its ultimate casualty the American Empire. How ironic that the neoconservative clique that advocated “American exceptionalism” based on wars of imperial expediency without end, financed by borrowing from foreign creditors, have ended up being the eventual gravediggers of the United States as the hyper-power of the planet.

For over a year, while the U.S. economy was mired in recession and exporting its economic disasters globally, the senior political and business leaders of the American establishment proclaimed to the American people that all was well, that the fundamentals of the economy were “strong,” while they threw taxpayers money at corporations and financial institutions “too big to fail” in a vain and desperate attempt to keep the floodtide of financial failure from inundating the whole economy. The collapse of Lehman Brothers exposed the fragility and rot for all to see and now the entire world is mired in a Global Economic Crisis that more and more economists are labeling as a second Great Depression.

While no one can predict with exactitude what the ultimate outcome will be after the world’s economies have completed their march through Calvary, it is likely that the denouement of this economic and financial apocalypse will see the end of American power as the hegemony-driven master of the planet.

America’s superiority was based on its military infrastructure, and the capability to project power thousands of miles from its shores, inflicting “shock and awe” on any foreign entity that inspired its ire. However, that military industrial complex required a massively productive and successful economy to maintain itself. During the last eight years, while America replaced its ability to create goods that the world needed with complex financial instruments and securitized mortgages as its primary export product, it relied on foreign creditors to subsidize the American military establishment and the cost of the foreign wars it was engaged in. That bubble is now in the process of bursting with tectonic force.

The U.S. government managed to double its national debt during the last 8 years, even before the onset of the Global Economic Crisis. Since then, the government has borrowed $700 billion for the TARP Wall Street Bailout, and is projecting a budget deficit of over one trillion dollars in 2009. That is before the Obama administration passes its own stimulus package after it takes office, possibly boosting the deficit to the stratospheric level of over two trillion dollars! With foreign countries America relies on to finance its deficit now about to embark on their own massive stimulus spending based on deficits, that source of credit will either dry up or become costly beyond tolerance. A few years more of multi-trillion dollar deficits and the single largest item in the federal budget will be the servicing of the national debt. When that happens, it will be fiscally impossible for the United States to maintain its current military outlay, which equals if not exceeds the rest of the world combined.

At present the U.S. pours roughly a trillion dollars into its military industrial complex. What must be understood about the U.S. defense budget is the depth of its deceptive architecture. While the official Pentagon budget is in the range of $600 billion, it excludes other expenditures scattered throughout the line items of the federal budget that properly belong under the category of military allocations. For example, the official defense budget excludes nearly two hundred billion dollars of unfunded (meaning borrowed) spending on the wars in Iraq and Afghanistan. It excludes military benefits for veterans, intelligence gathering and other national security activity. Most deceptively excluded is most spending on nuclear weapons, measured in the tens of billions of dollars, which is clearly a military allocation, but is budgeted under the Department of Energy.

The smoke and mirrors is about to be shattered, as the Global Economic Crisis gathers momentum. The U.S. will lose its capacity to finance its military establishment, unless it replicates the example of the once-mighty Soviet Union, which placed its military first and civilian economy last, ultimately leading to the implosion of both.

We are truly witnessing a global economic trauma that will also radically reorder the geopolitical configuration of our planet. What is uncertain is if America will emerge as a constitutional, democratic republic at peace with the world, or as a desperate actor that will grasp at retaining its once invincible economic and military power no matter the cost to its future generations.