Hat tip: Panama Law
Of the $800 billion that the Economic Stimulus Package covers only $200 billion will be spent in 2009. Of this $200 billion, half is tax cuts only, which is not the same as pumping money into the economy. For instance the tax cut last year resulted in only 30% of the money saved as a result of the tax cut money being spent. The lions share, 70% was directed into savings. Savings are not the same as a cash injection. The banks are not lending, remember. The money that is coming from Obama’s package will probably not get into the hands of the people until much later in the year. Things will become worse. Job losses and business failures will continue to grow.
The Chinese stimulus package will do little for the USA. China is dependent on exports. They need the USA market. If the USA continues to rely on importing from China versus getting back into production cost effectively, their problems will continue. The USA financial institutions are extremely insolvent. There is not much hope in sight. Bailing them out is just putting a finger in another hole in the dyke. Soon you run out of fingers as the holes keep popping up.
Running out of fingers means the world realizes the show is over regarding the US dollar, demand drops, hyper inflation sets in and you wind up filling up the backseat of your car with money when you go grocery shopping. Rest assured Obama and the US mint will make sure they print enough money for this. The US cannot magically break all the laws of economics. They have to do something fundamental, which they are not doing. They are a military superpower that is broke economically.
Have we seen this model before? The USSR. How did it end? They broke up into smaller nations. Did anyone step in and take over – No. Did chaos economic and otherwise set in – Yes. Did it eventually straighten out – Yes. Now you have the model. How would it help? The new country would deny the Federal Reserve System debt as illegal and unconstitutional and walk away from it. They would go to a more secure money supply, probably hard coins of gold and silver. They would grab the military assets in their regions. Set up a new nation(s). Probably go protectionist with protective tariffs and heavily into agriculture and manufacturing. The world policeman model would be gone. The other causes of economic chaos like a fiat money supply bank and a stock market driven by said bank would be non-existent. They would raise a military to protect their own country. Generally that is what would happen.
Those people that are government workers and dependent on the social welfare systems would be in for a shock. It is really hard to predict when and how it would happen. The most conservative model is to look at the former USSR. It is also assumptive that the USA cannot keep continue the way it is going. Also remember when a country is broke and a superpower it can become dangerous to the rest of the world.