Can the Rest of the Western World avoid major ensuing Collapses after the US Debt Collapse?
Thomas Poetter
AI/IT Architect (AI, Big Data, Cloud, Apps, Enterprise, Security), Agile Coach/Project Management/Product Owner, CyberSecurity
As the USA is currently adding 1 trillion dollars of debt every 100 days[1], having currently? a debt rate of around 125% of the GDP with 870 billion dollars as annual interest payments (more than the big military budget) while the total tax revenue of the USA is just slightly growing and is at around 5.5 trillion for 2025. That will quickly lead to a debt collapse – especially with all the other problems the USA has around exploding costs for wars, medical treatments, old-age pensions, interest payments, avoiding economic collapse, etc. The US economy is also in serious economic trouble[2] falling into a recession after adding 25% new debt as economic stimulus and those effects running out, another factor contributing to the decline of the USD.
The IMF (International Monetary Fund) warned that even before defaulting, the US big debt and interest payments would make financing for other countries who compete for that financing harder and more expensive.
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ArmstrongEconomics[3] writes “Quantitative Easing destroyed the Keynesian model, and there is now no other alternative for central banks to control the economy. If they raise rates, the budget explodes. ... There is no limit to what the government will spend with “money” that simply does not exist. Governments continue to borrow perpetually with no real intention of paying back their debts. This is one piece of the Sovereign Debt Crisis that will implode like a nuclear bomb the likes of which we have never witnessed. ... the Keynesian model cannot account for declining confidence in both government and the economy.”
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The big questions is if the USA can still manage when and how it glides into a debt collapse, e.g. by bringing in CBDCs (Central Bank Digital Currencies) and efficiently starting over with those as new currency. Probably not!
In any case, who will take the losses? The Fed[4]? The bankers? If so, there would be a slight chance of getting through this without civil war or other bloodshed. Ha-ha, probably none of them would take the losses as they worked so hard to have this all play out in their favor, e.g. with fractional reserve banking and many tricks like bringing in the Fed's new money as debt of the USA and then collect high interests for the money created out of thin air for the privately owned Fed. Similarly other banks are allowed to create around 90% of the money for private and company credits out of thin air and collect interests on all. If you pay more than 10% fees for your credit, the bank has no risk at all. The interesting scenario for the USA is probably force-replacing the then failed and more or less worthless USD by a new CBDC. A debt collapse is also a matter of supply, demand and trust and for the USD that is quickly becoming increasingly negative as many countries like China are dumping their USDs, the BRICS have alternatives, it has no intrinsic value, etc. Many debt collapses have occurred in history – typically with much turmoil and many deaths. That path could even be intentional to gain total control over arbitrarily programmable and manipulable digital money as CBDC.
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As this is public and nobody wants to lose money, many countries like e.g. China and many companies are dumping the US dollar. It might thus be quickly losing its lead currency status to the digital Yuan, the Ruble, etc.
The other Western countries are tightly connected to the USA: Politically and economically – probably too tightly: We can expect many domino effects from companies/states losing the value of their US dollars with its collapse: Disrupted supply chains for a longer time as trust, funds and ways to pay will be disrupted: It will be much worse than the banking crisis with the Lehman Brothers collapse: People in many countries won’t be able to buy food or get or pay for medicines even if they are in stock. Stock markets and all US dollar assets will be disrupted, i.e. many trillion dollars in securities – and that might be the trigger and excuse for the great taking:
Banks as custodians are sitting on piles of securities[5]: The bankers and billionaires behind them can legally take all securities for themselves and are amassing physical properties like gold, land and built bunkers with all modern amenities like vertical farming.
The Global Financial Crisis (GFC) version 2.0 or extended or additional wars could "conveniently" lead to a global government debt write-off. That could be the real 'Great Reset’ the WEF has been talking about since 2020.
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Maybe a middle way would be that the USA declares bankruptcy and does not pay back certain debts but introduces a new CBDC dollar and tries to make business run as before with that new CBDC dollar. That will probably only work if not economically that important actors (i.e. not entrepreneurs) are hit: Private people and banks.
It looks like they want to start over with much less people, the number of 500 million had been carved into the Georgia Guidestones. Also predictive programming as in the Clinton’s “Leave the World behind” and many other developments point at huge uprisings and collapse of civilization.
Some countries like Germany explore tight budgeting and probably austerity measures soon, maybe even a "crushing austerity program" as Germany wanted to impose on Greece in 2012. Together with Joe Biden’s AI executive order attracting AI investments and money and the inflation reduction program attracting foreign companies, technologies and talent, this is draining the rest of the world of scarce people and resources.
That leaves the EU out of options if they don’t want to replicate the inflation reduction act and also risk a debt collapse soon, they are caught between a rock and a hard place. Germany alone would need >500 billion Euro immediate investment need to allow its economy to continue competing according to a 2024 study, but actually that would be required just for AI and then there are the Ukraine war, millions of refugees, massive corruption and many other costly problems ....
It seems that there is no way for the Western world to avoid collapse than to quickly upgrade capitalism towards Potentialism or a related solution which yet has to be defined.
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[4] It can’t be the US Treasury as they are the debtors, i.e. being over-indebted.
[5] https://thegreattaking.com/, https://www.youtube.com/watch?v=1GHXe0PbNG4, https://www.youtube.com/watch?v=sU1wWJGJvF0
[6] Jesus‘ parable about 3-10 servants and that we as God’s servants should be as active and efficient as possible: https://www.biblegateway.com/passage/?search=Matthew%2025%3A14-30&version=CEV Matthew 25:14-30, https://www.biblegateway.com/passage/?search=Luke.19.11-Luke.19.27&version=CEV Luke 19.11-27