Over the past three years, Americans have succeeded in convincing us that the crisis was over except in Europe. And better, even, that Europe was the only one responsible for this, without acknowledging that the financial disturbances began with the excessive indebtedness of American households, and with the securitization of these loans, without wanting also to recognize that, as Europe established, with great difficulty, the first elements of a governance suited to a globalized world, and began to control its public debts, the weakness of American democracy
allowed spending levels to expand and public revenues to plummet, to an unknown degree in history. And the situation that the next President will face, whoever that might be, will be truly daunting.
On the surface, everything seems to go very well, on the other side of the Atlantic: Silicon Valley remains the leading place of world creativity. New York remains the most fascinating city in the world. American cinema continues to inspire the world. The American Armed Forces are still deployed around the world, and on them depend the security of democracies. New sources of energy will ensure its autonomy. Enclosed in its optimism, America still believes that it will suffice to borrow for a time, pending the return to growth, which will swallow the debt.
But the debt is growing much faster than ever before in American history (by more than a trillion more each year), and even faster than that of any European country; it will exceed in two years, 80% of GDP, which is twice the level to that in 2008.
In order to finance it, the federal budget borrows 4 trillion this year and debt service exceeds the total of the budget of defence, social security, and health care system.
This works well for as long as the lenders agree. They are of two kinds: the Federal Reserve (the US Central Bank) which has been printing banknotes endlessly (to lend to the State and the commercial banks), and the new powers, who have become richer by an increase in the price of energy, are putting there the bulk of their surplus: because the country seems strong and safe to them, because they have no alternative investments, and because America is used as a mercenary.
For how long?
The Fed now owns one-sixth of the public debt, which is the highest level in US history. And sovereign funds will start to diversify their investments. The financing of the American debt will be increasingly difficult.
Logically, this should, some day soon, lead to a collapse in the value of the dollar, a massive increase of interest rates, which will prove to be disastrous: an increase in interest rates by a percentage point will increase by 100 billion the debt-servicing costs.
At that point, America will declare bankruptcy. It will no longer have the power to help out some 17% of its unemployed population, feed the 50 million people who would not survive without the soup kitchen, repair thousands of broken bridges and roads. To give back its strength to a school system which has become catastrophic (except for the most prestigious universities, with now a majority of foreign students). To preserve its military strength.
Unless there are some miraculous technological breakthroughs, or a wartime economy, a collapse of the American society is announced. No-one, in Europe, would benefit from this.
j@attali.com
Twitter : @jattali