Early Retirement Blog

Too Big To Fail

To those of you who believe that the U.S. economy is going to collapse, you’re right, it should, if the U.S. were any other country it would, but it is not going to happen.  The reason? America is too big to fail.  America, no matter how corrupt it’s financial markets are, or how stupid it’s leadership is, will not be allowed to fail.

If America were a third-world nation, the IMF and World Bank, would declare our nation insolvent, and demand higher taxes, drastic spending cuts, and higher interest rates, before lending us any money. It’s not happening, and won’t happen, anytime soon.

For those of you unfamiliar with the “Too Big To Fail” policy, it is the un-written policy of the U.S. Government, that there are certain banks and companies, that are too big to fail, that the impact of their failure on the U.S. economy would be so great, and that the failure of these companies would lead to even greater disaster, that it is to the overall benefit of the country and economy, that the government using taxpayer money bail them out.

The same applies to the U.S. economy, we are so big, that our failure would result in a world-wide economic depression.   America is simply too big to be allowed to fail.   The world will not allow it to happen.

I have been writing on the credit crisis, since it began last August, you can find the articles by searching the Retirement Blog.   My focus has been mainly on the impact of the credit crisis on American’s retirements, although I have also explained broader economic implications, and the role of foreign government intervention to keep our economy afloat.

Now, however, many of the same people who got us into this mess, such as Alan Greenspan, are un-necessarily spreading panic through the economy and markets.    Ignore them.   Here are four reasons why the World will not allow the U.S. economy to collapse.

Too Big To Fail
If America fails, the world will enter into an economic depression larger and more severe than the 1930′s, we will take everyone down with us, the world will not allow that to happen.

Exports and Imports
We are a consumption based economy. China, the Arabs, Europeans, and others, depend on our importing  their products, to fuel their own economies.   If the U.S. economy collapses, so do their exports, and their economies.

Reserve Currency
China, the Arabs, Europe and others, peg their currencies to the U.S. dollar.   If the U.S. dollar collapses, so do their currencies, the world will not allow that to happen.

Global Political Stability
Although our empire may be hated or disliked, throughout much of the world and even amongst our largest trading partners, think what will happen if our economy collapses.   The U.S. empire will be forced to close military bases around the world, bringing our troops home, and un-leashing political instability throughout the globe.   Many countries will quickly engage in wars, to try and conquer the spoils, left behind a retreating U.S. military.   Economic crises in many countries, will result in civil unrest, and the toppling of regimes.   The result of an American collapse, will result in wide-spread suffering, misery, and death. The world will not allow it to happen.

These are the four main reasons why, the world continues to support our economy, and our empire.   Not until, China, India, Europe and Russia, can create domestic markets to replace American consumers, and political institutions to replace the U.S., will the world pull the plug.   In the meantime, we will see a slow down in world wide economic growth, which is a good thing.

Hyper-growth, in the economies of the U.S., China, India and others, has led directly to accelerated global warming.   A slow down in these economies, will result in a reduction of greenhouse gas emissions, does  that help you breathe any easier?

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