Options for a failed U.S. Economy

A recent Pravda article spells it out:

1. The United States is the largest borrower in the world, the US national debt now exceeding 11 trillion dollars, and continuing to avalanche.

2. With the government taking on the debts of corporations, the corporate debt crisis has thus become the American governmental debt crisis.

3. According to experts, there is high probability of default on US treasury bonds. Some project that the USA has already started on a plan to refuse the dollar in order to avoid debt payments.

4. One analyst concludes that a US default is likely, only after the world finds an alternative to the US dollar. The dollar’s immediate collapse is unacceptable simply because 63 percent of world reserves are saved in dollars, and that would result in a global economic collapse.

5. Analyst Dmitry Abzalov believes that the current situation with the US national debt may end with a new war. The war will destroy excessive liquidity and the current debt. A war boosts the nation’s industry, with recovery based on defense orders.

The recession message from Fed chairman Ben Bernanke

Fed chairman Ben Bernanke’s recent keynote on the state of the economy could have been accompanied by a funeral dirge. He made no effort to conceal the gloomy facts:

“Currently, about 21% of subprime ARMs are ninety days or more delinquent, and foreclosure rates are rising sharply ...The far-reaching financial impact of the subprime shock is that it has contributed to a considerable increase in investor uncertainty about the appropriate valuations of a broader range of financial assets …The market strains have been serious, and they continue to pose risks to the broader economy.”

Bernanke's grim (but realistic) forecast: “The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced.”

When someone of Bernanke’s status makes statements to this effect, that says it all. We're entering a major recession.

U.S. Recession 'has arrived'

The feared recession in the US economy has already arrived, according to a report from Merrill Lynch.

An official ruling on whether the US is in recession is made by the National Bureau of Economic Research, but this decision may not come for two years. The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months".

Merrill Lynch said that the current consensus view on Wall Street that ‘there is a good chance of avoiding a recession’ is "in denial". "To say that the backdrop is 'recession like' is akin to an obstetrician telling a woman that she is 'sort of pregnant'," the report said.

[BBC excerpt]