First things first. The United States of America is broke. The government relies on hundreds of billions of dollars worth of foreign loans to prop up its national Ponzi scheme. It runs its foreign wars on borrowed foreign money. It finances its tax cuts for the very rich on borrowed foreign money. It finances its monthly balance of trade deficits on borrowed foreign money.

The last ten days has seen that same US government shove over a hundred billion dollars into propping up its astonishingly unregulated financial sector to prevent strategic collapses. The takeover of Fannie Mae and Freddie Mac, the nationalization of AIG. Yesterday it announced $50-billion in loan guarantees for troubled money market funds. And now, the jewel in the crown – SEVEN HUNDRED BILLION DOLLARS or to you arithmetic types 700,000,000,000 dollars, all of it borrowed, to buy bad mortgages.

This floats the US national debt ceiling to $11.3 TRILLION dollars. (That’s $11,300,000,000,000.00) Now that’s some serious, serious money even at ridiculously low interest rates.

So, just how does the government get another 0.7-trillion bucks? Why the old-fashioned way, of course. It pledges the good credit (or what’s left of it) of the American taxpayer. That’d be the working class and middle class wage earners and their children and their grandchildren. Some day all this will be transcribed into American family tree charts. Neat, eh? “Yes, it was in great-great-great-grandad Fred’s time that you kids were sold down the river.”

Before they’re done they’ll be looking at close to a trillion dollars siphoned out of working class wallets to make good the recklessness of the country’s financial sector.

Talk about running on empty! But here’s the 800-pound gorilla in the room – inflation. Can the American government pump all this additional borrowed money into the economy without triggering a wave of inflation? If inflation does set in, how does the US government meet its interest obligations?

Foreign lenders took a hit over the last two years with the devaluation of the greenback. As the US dollar tanked against all other currencies, their loans – and the interest they received – dropped in value substantially. Despite that these lenders held on to their belief that America was the safest place to invest their surplus cash. What remains to be seen is will they swallow another hit if these trillion dollar bailouts spark a wave of inflation?

Is America so far into these foreign lenders that they no longer have any choice but to keep propping up the US economy no matter how recklessly it’s managed, no matter how inflationary the bailouts? I think we’re going to see the answer to that question over the next twelve to eighteen months.
We could just be witnessing the decline and fall of the American Empire.

By the way, if you’re still unclear as to how the Reagan Revolution came crashing down, check out this item from The Globe & Mail. It’s all pretty much there: