ALARM - TOTAL SYSTEMIC CRISIS!! LEAP2020 : US DEFAULTS ON DEBT AND ISSUES NEW CURRENCY BY SUMMER 2009

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GEAB N°28 is available! Alarm Total Systemic Crisis - Summer 2009: Suspension of payment of the US government
- Public Official statement GEAB N°28 (October 15, 2008) -



At the time of the publication of the GEAB N°28, LEAP/E2020 decided to launch a new alarm within the framework of the total systemic crisis because our researchers estimate that at the summer 2009, the US government will be in suspension of payment and will not be able to thus refund its creditors (holders of Bills US Treasury, titles of Fanny Mae and Freddy Mac, etc). This situation of bankruptcy will have obviously very negative consequences for the whole of the owners of credits made out in US dollars. According to our team, the period which will open then will become favourable with the installation of a “new Dollar” intended to cure brutally the problem of the suspension of payment and massive escape of capital out of the United States. This process will rise from the five following factors which are analyzed more in detail in the GEAB N°28:

1.L' recent evolution, with the rise, of the US Dollar is a direct consequence and provisional fall of the world purses

2.Le “baptism political” of the Euro has just taken place giving an alternative “of crisis” to the US Dollar, as a credible “value-refuge”

3.La American national debt swells in an unverifiable way from now on

4.L' collapse in the course of the real economy of the United States prevents any alternative solution with the suspension of payment

5. “Strong inflation or hyperinflation in the United States in 2009”, there is the only question.

But one can already have an idea of the evolution to come while looking at Iceland which our team follows to the magnifying glass since the beginning of 2006. This country constitutes an good example indeed from what awaits the United States, and also the United Kingdom. One can consider, like besides good number of Icelander today, that the collapse of the Icelandic financial system came owing to the fact that it was oversize compared to the size of the economy of the country.


Evolution of inflation in Iceland 2003-2008 - Central bank Source of Iceland
Iceland in fact was caught in financial matters for the United Kingdom (1). As the United Kingdom in financial matters was caught itself for the United States and that the United States was caught for whole planet, it is not useless to contemplate preceding Icelandic (2) to apprehend the course of the twelve next months events in London and Washington (3).

We indeed currently attend a double historical phenomenon:

. on the one hand, since September 2008 (as announced in the GEAB N°22 de Février 2008), the whole of planet is from now on conscious of the existence of a total systemic crisis characterized by a collapse of the American financial system and its contagion with the remainder of planet.

. in addition, a growing number of world actors undertake to act by themselves in front of the inefficiency of the measures recommended or catches by the United States, however center of the world financial system since decades. The example of the 1° Summit of Euroland (or Eurozone), which was held Sunday October 12, 2008 and of which decisions, by their width (nearly 1.700 billion Euro) and their nature (4), allowed a return of confidence on the financial markets of all planet, is for this reason completely exemplary “world of after-September 2008”.


Chart of the guarantees of bank deposits in the European Union AFP Source - 09/10/2008
Because there is well a “world of after-September 2008”. For our team, it is from now on obvious that this month will remain in the books of history of the whole of planet like that “dating” release from the total systemic crisis; even if it is not acted in fact that of the phase of “decantation”, the last of the four phases of this crisis identified as of June 2006 by LEAP/E2020 (5). As always when it is about great human units, the perception of the change by the greatest number intervenes only when the change is in fact already quite committed.

In fact, September 2008 marks the major explosion of the “financial detonator” of the total systemic crisis. According to LEAP/E2020, this second half-year 2008 is indeed the moment when “the world plunges in the middle of the phase of impact of the total systemic crisis” (6). What wants to say for our researchers that at the end of this six-month period, the world enters the phase known as of “decantation” of the crisis, i.e. the phase where one sees the consequences of the shock being set up. It is de facto the longest phase of the crisis (between three and ten years according to the countries) and that which will directly affect the greatest number of people and countries. It is the stage which will also see emerging the components from new world balances whose LEAP/E2020 presents the first two graphic illustrations in this GEAB N°28 (7).

Thus, as we repeated on several occasions since 2006, this crisis is much more important, in terms of impact and consequences, that of 1929. Historically, we are all the first actors, witnesses and/or victims of a crisis which affects all planet, with a degree without precedent of interdependence of the countries (because of globalisation of these twenty last years) and of the people (the degree of urbanization, and thus of dependence for the basic needs - water, food, energy,… - is today without precedent in the History). However, the precedent of the years 1930 and its terrible destroying consequences seem with our researchers rather present in the collective memories to enable us, if the citizens are vigilant and the lucid leaders, to avoid a (a) repetita leading to one (or of) conflagration (S) major (S).

Europe, Russia, China, Japan,… constitute without any doubt the collective actors which can ensure that the implosion in the course of the dominant power of these last decades, namely the United States, does not lead planet in a catastrophe. Indeed, except for the USSR of Gorbatchev, the empires tend to vainly try to reverse the course of the History when they feel their power to crumble. It is with the powers partners to channel the process peacefully, like with the citizens and elites of the country concerned to show clearness to face the very painful period which prepares.


Evolution of the loans of the US financial institutions near the American Federal fund (08/01/1986 - 09/10/2008) - Source Federal Reserve Bank off St Louis
The “emergency repair” of the international financial channels, realized above all by the countries of the euro area at this beginning of October 2008 (8), should not mask three essential facts:

. this “emergency repair”, necessary to avoid a panic which threatened to absorb all the world financial system in a few weeks, treats temporarily only one symptom. It does nothing but buy time, two to three months maximum, because the total recession and the collapse of the US economy (the table above thus shows the vertiginous growth of the funds lent to the US banks by the Federal fund) will accelerate and create new economic, social tensions and policies which it is necessary to treat by anticipation as of the next month (once “financial packages” implemented)

. even if it were absolutely necessary to restart the system of credit, the gigantic financial means devoted on all planet to “emergency repairs” of the world financial system are as many means which could not be placed at the disposal of the real economy in the months to come to face the total recession

. “emergency repair” constitutes a marginalisation, and thus an additional weakening of the United States, since it sets up of the contrary processes at those preached by Washington for the 700 Billion USD the TARP Hank Paulson and Ben Bernanke: a recapitalisation of the banks by the governments (decision that Hank Paulson is obliged to follow now) and a guarantee of the interbank loans (makes the governments of Euroland of them replace the insurers of appropriations, an industry in the middle of world and primarily American finance since decades). These evolutions divert always more decisional relays and financial flows out of the American orbit at one time when the economy of the United States and the explosion of their national debt (9) and private would have some more than ever need; without same speech of the retirements which fly away in smoke (10).

The last point illustrates how, in the months to come, the solutions with the crisis and its various sequences (financial, economic, social and political) will diverge more and more: what is good for the rest of the world will not be it for the United States (11) and from now on, Euroland at the head, the rest of the world seems to determine to make its own choices.

The brutal shock that the suspension of payment of the United States at the summer 2009 will generate is partly a consequence of this decisional decoupling of the great economies of the world compared to the United States. It is foreseeable and can be deadened if the whole of the actors start as of now anticipating it; it is besides one of the topics developed in this GEAB N°28. LEAP/E2020 hopes only that the shock of September 2008 “will have educated” the political officials, economic and financial of planet so that they understand that one acts better by anticipation that in the urgency. It would be a pity that Euroland, Asia and the oil-producing countries, just like the American citizens besides, brutally discover during the summer 2009, with the one weekend favour prolonged or of an administrative closing of the banks and purses for several days on the American territory, that their their US Dollar and US Treasury bills are not worth any more that 10% of their value because a “new Dollar” have just been founded (12).

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Notes:

(1) Iceland has adopted for more than 10 years all the principles of deregulation and financiarisation of the economy which were developed and implemented in the United States and the United Kingdom. Reykjavik had become a kind of “Tiny” financier of London and Washington, to very take again to the character of film britannico-American Austin Powers. And the three countries undertook to play financially “frog which wants to be done as large as ox”, to take again the fable of Jean of the Fountain whose end is fatal with frog.

(2) Thus the Icelandic purse crumbled of 76% after to be closed a few days “to avoid” panic! Source: MarketWatch, 14/10/2008

(3) For this reason, we delay on the amount of the “financial package” announced by London, that is to say 640 billion Euro including 64 billion Euro for recapitaliser banks and 320 billion Euro to reinflate the medium-term debts of these same banks (source: Financial Times, 09/10/2008). With an economy in freefall with the image of the real estate market, a which gallops inflation, of the retirements by capitalization which disappear in smoke, and a currency with low, separately badly to increase the national debt and to weaken even more the Book, one sees how that can “already save” banks very badly in point. With the difference of the banks of the countries of the majority of the euro area, the British financial system, like its American counterpart, is in the middle of the crisis, and not a collateral victim. And Gordon Brown can play joined together Churchill and Roosevelt well (Source: Telegraph, 14/10/2008), but in its obvious ignorance of the History, he forgets that neither Churchill nor Roosevelt had been with the orders of their countries for 10 years when they had to face each one their “great crisis” (that is worth besides for the United States and the Bush administration - Paulson and Bernanke included - which all come from the “problem” and thus make very little probably parties of the “solution”). Without counting that Roosevelt and Churchill organized the tops like Yalta or Teheran while leaving French and Germans with the door, whereas it is him which had to remain with the door of the Summit of Euroland.

(4) Source: The Express train, 13/10/2008

(5) Source GEAB N°5, 15/05/2006

(6) Source GEAB N°26, 15/06/2008

(7) LEAP/E2020 thus presents a synthesis of its anticipations on the phase of decantation of the crisis thanks to a chart of the world of the impact of the crisis differentiating between 6 great groups from country; as well as an anticipatory calendar 2008-2013 of the 4 sequences financial, economic, social and policy for each one of these areas.

(8) Because it is well the euro area, Euroland, which made it possible to stop the spiral of total panic. Since weeks, the American and British initiatives followed one another without effect. It is the irruption of a new collective actor, the “top of Euroland” and its decisions of scale, which constituted the phenomenon new and reassuring. It is besides a new actor who Washington and London systematically prevented from emerging since the launching of the Euro 6 years ago. And one needed a whole setting in diplomatic scene (preliminary, photo meeting of pre-top group,…) to make it possible British to the Prime Minister to make believe that it was not marginalized in this process, whereas he does not belong de facto in the summits meeting of the euro area. In this GEAB N°28, LEAP/E2020 reconsiders this phenomenon and the durable systemic consequences of the behaviour of the 1st top of Euroland.

(9) The American financial rescue plan already increased by 17.000 USD the debt of each American. Source: CommodityOnline, 06/10/2008

(10) They are indeed 2.000 billion USD retirements by capitalization which disappeared in smoke these last weeks in the United States. Source: USAToday, 08/10/2008

(11) In any case in the short run. Because our team is persuaded that for the people American, with means and long terms, it is not bad whole that the system dominating in Washington and New York is basically called into question. It is indeed this system which plunged this country in the dramatic problems where tens of million Americans struggle today, like illustrates it perfectly this article of the NewYork Times of the 11/10/2008

(12) Even if it is a measurement of little width compared to the prospect for suspension of payment for the United States, those which think that it is time to reinvest in the financial markets can find useful to know that the New York Stock Exchange has just revised all its thresholds of interruption of quotations due to too strong fall from the courses. Source: NYSE/Euronext, 30/09/2008