how bout a little doom and gloom?

Triple warnings this past week:

* the Royal Bank of Scotland fears a steep fall in the world stock market -
http://tinyurl. com/5ghu9v
* the bank of all banks in the world, the BIS, Bank of International
Settlements, in Switzerland, said that a worldwide depression is now a
distinct possibility - http://tinyurl. com/326qbq
* Morgan Stanley, a leading American Investment firm, signaled similar
pessimistic messages - http://tinyurl. com/5z6xxf

So what's happening out there? Frankly, all financial institutions are in deep
trouble, and the reason is the American dollar. The situation is so dire that
it's not going to make a hoot of difference who becomes the next president of
the United States: it's beyond the power of the rulers of the American political
and economic system to curtail severe damage to its entire economic enterprise.
Neither Obama nor McCain can do anything to stem the disaster that will be
fully employed by the end of this year.

Part of the cause is that the USA happens to be the most indebted nation on
the planet and its people the least prepared to cope with peak oil and peak
food.

Even now Americans throw away up to 40 per cent of the food they buy, their
high-powered and fuel-thirsty automotive park cannot be converted to more
efficient vehicles for many years, while their exurban lifestyle makes
car-sharing and mass transport impossible for most.

So what's so inevitable of the current monetary scene?

The world's entire Gross domestic product is some $50 trillion, of which the
USA accounts for about $13 trillion. However, it owes more than $2 trillion to
foreigners, of which Japan and China carry about half and Great Britain some
10 per cent with the remainder divided over many countries. Canada has less
than one per cent. The American public carries $9 trillion in credit-card debt
and even more in mortgages. Its national debt is close to $10 trillion while its
Social Security and Medicaid has a future liability in excess of $50 trillion,
burdening the average USA household with debt totaling more than $600,000.

And then there are the outstanding derivatives! They grew from $100 trillion
5 years ago to $500 trillion in 2007. Warren Buffet - the world's richest man
after Bill Gates and a most savvy investor - wrote in 2002: "We try to be alert
to any sort of mega-catastrophe risk, and that posture may make us unduly
appreciative about the burgeoning quantities of long-term derivatives contracts
and the massive amount of uncollateralized receivables that are growing
alongside. In our view, however, derivatives are financial weapons of mass
destruction, carrying dangers that, while now latent, are potentially lethal."

Now, when everything that can go wrong is going wrong, this financial WMD,
this weapon of mass destruction, is no longer latent but out in the open ready to
kill the American economy.

According to the LEAP think tank, based in Europe - subscriptions cost 200
Euro or $300 per year - in the next six months all factors affecting the economy
will converge, and create a perfect socio-economic hurricane.

The root of the problem is always money, basically the US dollar of which
there are trillions too many in circulations, so many that its value is decreasing,
and the world doesn't know what to do with them. It's this flood of money
that drives up the price of all commodities, including oil, of course. Nobody
wants more US dollars, unless its value increases.

But that can only happen when the US pushes up interest rates, which will cause
the US economy to die within a few weeks, as the real estate market falls to
zero by lack of affordable credit, interest on Adjustable Rate Mortgage loans
skyrockets, drastically shrinking consumption, and corporate failures multiply
exponentially and stock markets collapse.

No, higher interest rates are not the solution. However, to do nothing is not an
option either, because soon nobody will accept U.S. dollars anymore.

Basically the US has lost the ability to govern its own economic policy. Thanks
to its trillions of debts, it is now powerless to avoid disaster. No wonder
banks are getting nervous.

The immediate consequence of America's economic collapse will be the end of
the war in Iraq, because, suddenly, as the greenback disappears as the world
currency, the US will be forced to live within its means. Since the war is the
most costly of all its undertakings, the troops will abruptly go home.

Curiously the WMDs -- the weapons of mass destruction -- were not in Iraq:
they are in the heart of America, right on Wall Street. Pity the veterans and the
wounded; there will be no money to look after them -- no pensions, no jobs,
no medical care.

Eventually a new financial system will emerge, but only after a period of
tremendous turmoil and pain.