a cura di di Walter Snyder, Swiss Financial Consulting
The US is caught up in the classic tragic cycle and is heading for a fall. The three parts of the cycle are overweening pride (hybris), which begets surfeit (ate), which is followed by retribution (nemesis). The Doom and Gloom Club has been predicting that the economic downfall of the American economy is nigh for some time, but the tone has become shriller and shriller recently.
In fact economic indicators have been negative despite attempts to interpret the data in a favorable light. According to the BLS unemployment is very low even though the percentage of the population actually working does not support such an assertion. The stock market has recovered from the New Year`s hangover, and Wall Street sees a great year ahead even if P/E ratios are extremely high thanks to stock repurchasing that does not contribute to growth. The Fed has postponed rate increases while insisting that uncertainty over geo-political developments requires caution.
In fact Saudi Arabia has threatened to sell $750 billion of treasuries should the Kingdom be made liable for damages resulting from the 2001 terror attacks. China has over £3 trillion of treasuries, which is another unsettling factor. Add to that the fact that sovereign debt is over 104% of GDP and federal spending will increase thanks to the Omnibus Bill, the situation is not at all encouraging as this Newsletter has pointed out in previous numbers.
The American empire seems to have overextended itself after declaring its superiority and righteousness justified its intervening globally. The military has spent trillions bombing wide swathes of the Middle East, thus heartily nourishing the military-industrial complex and increasing the national debt. The Americans think they are better and thus make themselves guilty of pride (hybris), a mortal sin.
This has led to Americans becoming puffed up and swollen not only psychologically but also physically. More than two-thirds of Americans are obese or overweight. They go too far in foreign affairs and eat too much at home. They are satiated through and through. In this way they reach the second stage, surfeit (ate), in the tragic cycle and will have to pay for their transgressions.
Retribution (nemesis) can take various forms. In as much as America has lived beyond its means for decades at the expense of the global community, economic punishment would be appropriate. With the petrodollar being challenged and the PBoC promoting SDRs at the IMF, the fall of the US dollar is imminent. When the almighty dollar collapses, American wealth and poverty will have new dimensions. Investors seeking safe havens will take heed and position themselves accordingly.