Financial Bankruptcy: Has the Day of America Passed?

After 9/11, a deliberate conspiracy was set into motion, with Pentagon’s Colonel Ralph Peters releasing a map that depicted Pakistan broken into multiple parts along with a specific timeline. Each year, he attempted to mask this malice with various justifications. When there was silence in Pakistan’s media, I responded consistently with detailed, well-reasoned articles, and on August 28, 2017, I wrote a piece titled, Will America Break Apart? At that time, I faced significant backlash, and many labelled it as wishful thinking, even mockery from some pro-American voices. But today, the demand has begun to surface within several wealthy U.S. states, insisting that their tax contributions not be used to fuel wars, even if it means separating from the United States—suggesting that, like the Soviet Union, America, too, is headed towards fragmentation.

A few months ago, who would have imagined that an arrogant leader, after dropping the “Mother of All Bombs” on Nangarhar to intimidate the world, claiming that America could turn it to ashes in five minutes, would see the mighty U.S. brought to its knees by a tiny, invisible virus, COVID-19? The world shook, and the sole superpower was left in disarray. The economy ground to a halt; production ceased, commercial activities dwindled to the extent that American oil became cheaper than water. Educational institutions shut down, and consumer confidence suffered such a blow that it has yet to recover fully. Had the pandemic lasted any longer, the alarm would have rung, indicating an impending financial collapse, not only for America but for the entire world, pushing everything toward utter chaos.

COVID-19 exposed numerous flaws and weaknesses within the global economic infrastructure. The pandemic’s impact has amplified the economic challenges. Even before COVID-19 spread, there was widespread concern in the U.S. that the current account deficit could reach a staggering $1 trillion. However, with the deficit approaching $2 trillion, other debts have also placed an unprecedented strain on the economy, leading President Biden to inform the nation that if the Senate does not approve further borrowing, a financial collapse is inevitable. Meanwhile, in Israel, economic conditions have deteriorated to the point where, according to global financial institutions, it is effectively bankrupt, and Netanyahu is using war as a guise to maintain his hold on power.

Economic activities, dampened by COVID-19, have severely impacted the banking system, with many branches either closed or merged. Countless buildings now stand empty, symbolic of the present-day capitalist crisis. As a result, thousands face unemployment, adding to the government’s tax and duty losses. During the 2008 recession, the federal tax loss to the U.S. treasury exceeded $400 billion—a burden that continues to this day. Now, the federal tax revenue shortfall is anticipated to be even greater, necessitating extraordinary spending on social welfare. Given the current system, no separate fund allocation is needed, as funding automatically rises to meet demand. Economic experts are speculating on the scale of the current account deficit, with some warning it could exceed $4 to $5 trillion, posing a grave threat to the American economy.

In 2019, U.S. GDP was projected to reach $21 trillion, without any hint of the looming pandemic. But with the economy severely impacted, predictions missed the mark. By 2020, GDP had dropped to $18 trillion, a 15% decline, making the current account deficit more than 28% of the GDP.

Many experts believe that the economic burden of the Ukraine war was already too much when Israel’s recent brutality in the Middle East emerged as the proverbial final straw, with this looming disaster hovering over like a haunting spectre. International financial institutions, also concerned with their survival, continue to impose fresh restrictions, squeezing developing nations ever harder. Consequently, people in these countries may increasingly turn against their governments, potentially triggering a recession so severe that it could culminate in a global economic famine, unleashing a new wave of widespread devastation.

It is important to note that many experts believe these figures are not definitive. A key point to remember is that the United States’ current account deficit will likely be so large this time that securing funding to mitigate its severe negative impact will be nearly impossible. One major issue is that interest rates are not expected to rise; in fact, there’s a visible trend toward a decrease in interest rates. This raises the question: without the prospect of higher returns, how can investors be drawn in? Convincing the largest investors in the U.S. to increase their stakes now seems like an almost impossible task. Major investors in the U.S. include China and the Gulf states, particularly the UAE. China is facing a decline in external demand, meaning its exports are decreasing, while Gulf states are also seeing a drop in oil revenue. In such circumstances, American policymakers will need to think critically about where the investment needed to sustain the U.S. economy will come from. Both China and Saudi Arabia play crucial roles in global capital recycling, and if their flow of capital is interrupted, the global position of the U.S. dollar could weaken significantly.

This raises the question: what can the U.S. do to prevent its economy from collapsing? Currently, the only option for the U.S., similar to the 2008 recession strategy, is to buy its own treasury bonds rather than waiting for other investors to step in. The Federal Reserve will play a key role in this approach.

It’s not just the current account or budget deficit looming over the U.S.; the corporate sector debt crisis is also persistently severe. Corporate debt is now over $10 trillion, exceeding 50% of the U.S. economy’s total turnover. To make matters worse, most of this debt is issued by non-investment grade companies, meaning much of it is essentially junk.

As a result, the wheels of the American economy have come to a standstill, and this has impacted the nation’s overall integrity. The economy is likely to deteriorate further, and many institutions may go bankrupt. This will serve as a harsh blow to the U.S. banking system. Syndicated loans can be considered a “bonus” in this scenario, as a significant portion of corporate bonds is directly or indirectly tied to the energy sector, which itself is facing substantial challenges. Experts estimate that about 20% of global production capacity is “excess capacity.”

China, too, has its own challenges. Chinese leadership has recently opted to conceal rather than resolve some fundamental economic issues, overlooking the fact that problems can only be solved by addressing them directly, not by hiding them or diminishing their impact.

The European Union has made attempts to stabilise its situation. Through the European Central Bank (ECB), some measures have been implemented, although Germany and a few other members oppose such moves. No one is willing to risk their currency. A few years ago, the ECB announced the purchase of €850 million in government and corporate bonds, an endeavour that is still incomplete, revealing the internal challenges the EU faces.

It appears that policymakers in Washington are determined to prevent a recession at all costs, which could be a serious misstep. Trying to stop any economic decline through artificial means often results in more complications or intensifies existing issues. No matter how large a bailout packages the government offers, preventing economic downturns completely is rarely feasible. Eventually, the real effects of a bailout package reveal themselves, and issues resurface more prominently.

The economic activities in the U.S. and Europe that were halted due to lockdowns have yet to fully resume. Industrial units that shut down and commercial institutions that closed their doors are still struggling to recover due to financial hurdles. Movement and mobility are still limited or minimal. The aim is to prevent a decline in GDP, but that seems unrealistic; when economic activity stalls, a GDP reduction is inevitable. Rather than attempting to halt this decline, efforts should focus on ensuring that the downturn is only temporary.

During the COVID-19 pandemic, there were attempts to introduce a massive bailout package to inject funds to minimise the effects of the crisis. The idea was that, once the pandemic ended and economic activities resumed, a complete recovery would require extraordinary measures. However, according to global financial institutions, actual events have outpaced all projections.

Now the question is whether America is financially and agriculturally bankrupt? If the crisis created by the ongoing war spending in the Middle East along with the war in Ukraine after the corona virus leaves the US financially and agriculturally bankrupt, how will the reality of a full-blown economic crisis be prevented? Looking at what American policy makers are doing at the moment, it can be said without fear that America is suffering from a serious financial and agricultural failure. U.S. policymakers say the wisdom is to give aid to those in extraordinary need, and to ask those who are marginally better off to bear the short-term effects of the crisis in some way. This clearly means that the economy should be put on hold for a minimum period of time. Only the needy should be helped.

Many in Washington believe that the stock market crash is the real problem. That view turns out to be wrong. Trump gives extraordinary importance to the stock market when evaluating the performance of the economy. As a result, if an improvement is attempted on a temporary basis or if an attempt is made to provide artificial respiration to the stock market, there is a possibility that economic confidence will fall further instead of being restored. According to experts, the economy will actually To be restored, the restoration of trust should be given utmost importance.

In terms of the ability to deal with the severe negative effects of any major crisis, the public trust in the Trump administration remained at a very low level, which was inherited by the Biden government after his departure, but despite millions of efforts, it has not fully recovered from this crisis. They could not get out and now in the presidential election, the candidates blamed each other and called them responsible for the destruction of America. The lack of trust is not limited to expertise, i.e., economic policymakers and professional investors at home and abroad. Currently, more than 50 percent of Americans believe that Trump is not suitable for the position because of Trump’s handling of the Corona virus. Declaring the failed policies of Let alone the rest of us, Trump has failed to instill trust in his favourite Fox News TV channel. Despite the heavy criticism during his tenure, Trump has not taken matters seriously, misrepresented the facts and made policy blunders.

Instead of surrendering to Trump’s thinking that the stock market is everything, American policy makers should have evaluated all the flaws and strengths of the economy and formulated a balanced and acceptable policy. Policy makers should not have ignored the fact that this is not a reality TV show. As a result, the last straw on the economic camel of the United States is now coming to light that China, Russia, and other two countries have made a plan to replace the dollar in the future of buying and selling oil and in all their imports and exports, as if the world Due to the use of dollars in trade, the daily commission of two and a half million dollars has been reduced to half, now it will also have to be lost. It is as if it is necessary to ask that the five major states of the United States themselves have strongly protested against the spending of their people’s taxes in more war frenzy and have indicated that they will go to the last limit, even if it is from the American Union. If we don’t have to opt for separation, is America going to break up in these circumstances?