Home Blog State of the Union: This is the final crisis! (excerpt from the GEAB of June 2020)

State of the Union: This is the final crisis! (excerpt from the GEAB of June 2020)

Despite the figures for the pandemic once again sky-rocketing, Biden – like Trump back in March – does not envisage a second lockdown.[1] The reality is that the United States cannot afford for the economy to be put on hold again. This excerpt from last June’s GEAB weighs up the potential damage.

” While Europeans grumble, America is sinking. Beyond perceptions and figures, the pandemic is putting an end to the American-centred system that has reigned over most of the planet since 1945. All the symbols and tools of its power are being undermined:

Image of power: If the West as a whole lost against Asia in the COVID crash-test, the United States and UK came last, representing more than 30% (115,000 + 40,000)[2] of COVID deaths so far (for 5% of the world population) and, in the case of the US, still not managing to contain the epidemic. A failing health system,[3] no social system worthy of the name,[4]… of course we knew all this but we thought it was the secret of the United States’ ability to rebound. Now, no one is under any illusions: the American state structure was simply drained of blood.

Rule of law: If the multiple interferences perpetrated by the United States on foreign soil (Venezuela, Hong Kong, Syria, Europe…) could still be justified because of the values that they still had a vague legitimacy to guarantee, it was shattered with yet another victim of police violence, George Floyd.[5] The simultaneity of this so commonplace event with the accusations uttered against China concerning its ultra-violent management of the demonstrations in Hong Kong, immediately discredits any American word on the subject for quite a while. The Chinese are not mistaken in this… nor the Hong Kong people.[6]

Democracy: We spoke last month of the deep crisis of the American bipartite (or double ‘single-party’) democratic model, which is a major contributor to the division in the country. This time, we would like to draw attention to another increasingly visible dysfunction: the role played by Congress in the insane foreign policy of the country. Two examples have struck us recently:

  • The Caesar Syria Civilian Protection Act[7] passed by Congress in response to the lobbying action of an obscure 5-member association called Americans for a Free Syria,[8] which intends to sanction any entity (person, organisation, country…) working with the regime or person of Bashar al-Assad. Accused of serving American interests, this ‘humanitarian’ initiative would block all hopes of rebuilding the country,[9] rekindle tensions with Russia, and put Lebanon in danger[10]
  • In the same vein, there is, of course, the policy of outrageous interference by the US Congress against China concerning the Chinese city[11] of Hong Kong (the Hong Kong Human Rights and Democracy Act[12]).

These laws are not the work of the State Department, the Pentagon or the White House, but of the chamber of ‘representatives of the people’. One may wonder where, when and how their election gave these representatives the slightest mandate in international matters?! On these issues, American democracy is not only dysfunctional on a domestic level, it has become a danger to world peace. We remain convinced that a ‘black swan’ could bring about a real breakdown of democracy in America this year.

Full employment: The United States has imposed its model on the planet on the basis of one success criterion: unemployment figures.[13] Yet, in two months, COVID-19 has forced 36 million Americans[14] (out of a population of 330 million) to come knocking on the door to receive benefits, in the context of massive and definitive layoffs. Meanwhile, the EU recorded 397,000 job losses in April[15] (out of 500 million Europeans). Of course, the US is known for making layoffs as easily as hiring and those huge figures could decrease. As for Europe, a knock-on effect of business support plans, to enable them to keep on employees for the duration of the shock, could settle into a gradual increase in unemployment rates over the next few months. But we believe that the increase in the US unemployment rate from 3.6% to 14.7% in one year (April 2019-April 2020)[16] is representative of a zombie economy, artificially fuelled by a financial system that allows a network of irrelevant and outdated companies to survive from debt for ‘eternity’. But ‘eternity’ could very well come to an end one day…

Figure 1 – American zombie companies could employ more than 2 million people.  Source : CNBC

Oil: The entire shale industry is emblematic of this zombie economy sustained by millions of printed dollars.[17] And since everything related to oil is inseparable from the American power system, the debate continues to rage on whether or not to save these companies.[18] The collapse of this sector[19] would be a symbol, not only of the end of oil’s supremacy over the energy sector, but also of America’s domination of this sector. Today, the United States, which no longer has a hold on Saudi Arabia (irresistibly attracted by the Chinese sirens[20]), is seeing the shattering of its crazy dream of using the filthy and ridiculously expensive ‘new technology’ of fracking to become the world’s leading oil producer.[21] What a strategic mistake… The problem is that they no longer have any pennies left to fund a truly innovative energy plan. Hence Congress is reduced to increasing the budgets allocated to nuclear fusion (to the detriment of more innovative research projects on nuclear fission).[22] More than ever, the American economy is based on cheap energy to which access will become a real problem. Is an energy shortage on the agenda in this oil-oriented country in the near future?

Meanwhile, two years after its launch,[23] the petroyuan is seeing some progress… [24]

Figure 2 – Tintin in America

The dollar: Backed by oil, the dollar in 2020 is under attack from all sides: the oil crisis; the emergence of digital currencies to replace it;[25] the economic crisis linked to the COVID crisis, which is more badly controlled than in Asia or Europe;[26] the explosion of debts and deficits;[27] the collapse of key interest rates… If the dollar ceases this year to be the sole pillar of the international monetary system,[28] the reality and relativity from which it has been protected since 1971 will begin to impose themselves … starting with the weight of its USD 23 trillion debt.[29]

The middle class: Another symbol of the American model is the large and affluent middle class of the 1950s – a true yardstick of North American economic success. Of course, the 2008 crisis had already seriously undermined this success criterion.[30] Twelve years later, the COVID-19 shock is on the verge of causing a veritable social hecatomb.[31] Already in February (i.e. before the pandemic hit the American continent), economists were sounding the alarm concerning a level of household debt that was, once again, worryingly high ($14.15 trillion).[32] Two months later, the number of business bankruptcies had increased by 48% compared to the previous year, with 722 bankruptcies recorded in April.[33] If this figure is not impressive enough in absolute terms, it includes some very large companies emblematic of American consumer society (J.C. Penney, Neiman Marcus, J. Crew, Gold’s Gym, True Religion Apparels…).[34] What is also striking is the speed with which some of the ‘jewels’ of the US economy (supermarkets, oil companies, etc.) filed for bankruptcy in the wake of the pandemic. These corporate bankruptcies are already translating into millions of unemployed, as we have seen above. And this, in turn, is leading to an explosion in the number of individual bankruptcies,[35] rent arrears[36] and payment defaults of all kinds … heralding a complete halt to bank credit[37] and blocking any hope of rapid economic recovery. With the Fed’s interest rate already hitting the floor,[38] the American financial system has no room for manoeuvre and American society is destined for a new episode of extreme poverty.

The cheap economy: Since the 1970s, the poverty of American society has been camouflaged by the collapsing costs of world production: cheap energy, relocation of industry, lack of a social system, light taxation… all this so that poorer and poorer Americans can continue to consume. But we remain convinced that inflation will be one of the major consequences of the COVID-19 shock… and that it is in the US that this inflation could take on the appearance of hyperinflation: because Chinese wages and production have not been as cheap for several years now;[39] because consumer prices will rise if the dollar collapses; because the price of the energy on which the US depends (oil) could rise again if a shortage situation were to arise due to the destruction of certain sectors;[40] because the US is full of sharks who will take advantage of the misery to make money while the state structures, under the lobby of the powerful, are not designed to prevent large predators from operating (for example, credit cards have interest rates of 20%, even though the Fed’s key interest rate is close to zero);[41] companies are setting up to lend small sums at very high interest rates (pay day loan companies)[42] etc… Inflation is, therefore, already present, camouflaged by questionable calculation methods, and we anticipate that it is about to soar.

International ‘clientele’: All the shortcomings of the US economic and financial systems are well known, having been perfectly elucidated in 2008. If the system has lasted another 12 years, it is ‘thanks’ to the network of ‘customers’ of the United States – i.e. all the economic interests dependent on the American consumer market. In Asia, in particular, many industries and service companies are connected to the American economy, with a vested interest in ensuring that, year in and year out, the Americans consume the products those Asian companies produce. To achieve this, it seemed enough to help maintain the value of the dollar and to produce cheaply. But today, the bankruptcy of whole sections of the American retail industry is on the verge of causing a wave of bankruptcies throughout the international supply chain… enough to send the economies of the countries concerned – including India[43] – back to China.”

Read the GEAB 146 in full


[1]      Source : BusinessInsider, 19/11/2020

[2]      Source: Worldometer

[3]      This was true before the pandemic (source: Forbes, 25/10/2019) but now, it is being reinforced by the Financial Times: How Coronavirus broke America’s healthcare system. Source: FT, 29/04/2020

[4]      Coronavirus is revealing ugly truths about social structure in the US. Source: Quartz, 2020

[5]      After George Floyd, Rayshard Brooks in Atlanta on June 12th. Source: CNN, 14/06/2020

[6]      Source: SouthChinaMorningPost, 12/06/2020

[7]      Source: Wikipedia

[8]      They really are five! Source: FreeSyria

[9]      Source: The Guardian, 12/06/2020

[10]     This Emirati article says a lot about the exasperation of the citizens of the region about this kind of decree. Source: GulfToday, 14/06/2020

[11]     Could someone remind them that the city was retroceded to China in 1997 to end the colonial era?

[12]     Source: Wikipedia

[13]     A criterion that has become absurd with the emergence of a mechanised and now digitalised society where the production of wealth no longer depends on human sweat. Nevertheless, for some time to come, unemployment figures will call the tune. The day when a basic universal income becomes a human right is the day we will be able to conclude that we have changed paradigm and have finally emerged from the era of slavery.

[14]     Source: DenverPost, 14/05/2020

[15]     Source: Euronews, 11/06/2020

[16]     Source: CNBC, 08/05/2020

[17]     Source: OilPrice, 18/04/2020

[18]     For: OilPrice, 20/05/2020; and against: CNN, 21/05/20920.

[19]     We anticipate that the sector will not be subject to a major bailout plan and that many companies will therefore go bankrupt. And finally, we don’t even think that the oil majors or banks will be interested: the business model of this industry is far too absurd. Source: CNN Business, 30/04/2020

[20]     Last November, China became Saudi oil’s biggest customer. Source: Anadolu Agency, 26/11/2019

[21]     Source: EIA, 12/09/2018

[22]     Source: IEEESpectrum, 20/05//2020

[23]     Launched in March 2018; we warned our readers of its arrival in September 2017. Source: GEAB, 15/09/2017

[24]     Take the time to read this article. Source: SouthChinaMorningPost, 12/06/2020

[25]     Source: WSJ, 22/09/2019

[26]     Source: Business Insider, 24/05/2020

[27]     Source: WSJ, 09/04/2020

[28]     Even Bloomberg signals the end of the dollar. Source: Bloomberg, 08/06/2020

[29]     Source: AllNews, 10/06/2020

[30]     Source: LATimes, 09/09/2018

[31]     How the coronavirus is killing the middle class. Source: NYT, 14/05/2020

[32]     Source: Reuters, 11/02/2020

[33]     Source: WSJ, 04/06/2020

[34]     Source: NBCNews, 15/05/2020

[35]     Source: BusinessInsider, 24/05/2020

[36]     Nearly a Third of U.S. Apartment Renters Didn’t Pay April Rent. Source: WSJ, 08/04/2020

[37]     The coronavirus pandemic’s looming credit crisis. Source: USAToday, 08/06/2020

[38]     The Fed’s announcement that it would keep rates close to zero until 2022 did not fail to impress the markets, strongly impacting bank shares. Source: The Street, 11/06/2020

[39]     Source: FitchSolutions, 03/05/2019

[40]     As suggested in this article: Source: OilPrice, 12/05/2020

[41]     Source: NerdWallet, 29/05/2020

[42]     Source: YahooFinance, 17/04/2020

[43]     To fully understand what is happening in terms of the US-world separation, this article from The Hindu (a pro-government media) is enlightening. Source: The Hindu, 05/06/2020


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