Analysts everywhere are reminding us that the US dollar is collapsing, both because of exploding debt in the US, but also because of substantial instability in this country. Political uprisings in Libya have less to do with instability than rallies like this.
I’ve been warning about the prospect of a collapse in the US dollar for some time and have even invented my own term for the impact that this will have on anyone living outside the US: interflation. The US will continue to export its inflation to other countries, punishing us in prices for their inability to control their spending. It’s the internationalization of inflation that none of us can afford.
The ponzi scheme has to stop. Gerald Calente has described that food and oil prices will continue to skyrocket in the US and that resulting increases in interest rates will crush any opportunity for growth in the American economy.
This situation is what Jeremy Rifkin calls ‘Economic Endgame’, where the US economy (and the global economy by dependency) ping-pongs between states of uncontrollable and unpredictable deflation and growth hitting a wall because any growth translates to rapid expansion in oil prices (which then results in rapid price increases in most other commodities).
Canada, the EU and other countries around the world can avoid this instability by uncoupling themselves and their economies from the influence of pricing everything in US dollars. Once they do, appreciation will translate to real price decreases in their own economies, fueling real and natural rates of growth and consumption without inflation. These growth rates will then translate to real demand for US goods and services, presuming they are willing to make anything any more and not survive on the ‘hand in someone else’s pocket’ economy.
Once again, any politician in Canada would be wise to recommend and run on a platform of price equality and stabilization for Canadians, but that’s very unlikely to happen with our current slate of Harper clones.
Another solution for the US will be to eliminate their outrageous level of defense spending, but right now, it’s the only thing keeping this economy alive.