Tuesday, November 03, 2009
On America Going Broke
Quite germane to our current topic of sovereign default is a column titled Could America go broke? in that venerable medium of news and opinion, The Washington Post. The columnist — who likewise uses the US and Japan as examples — makes it sound as though a default by either country is highly unlikely. But of course he omits mention of the primary reason why both countries are almost certain to go bust and default: Peak oil. For example:
Governments of rich countries are borrowing so much that it’s conceivable that one day the twin assumptions underlying their burgeoning debt (that lenders will continue to lend and that governments will continue to pay) might collapse.Certainly these are two of the assumptions, but they are most definitely not the only ones. Everyone also assumes that cheap energy will make more economic growth possible. Naturally, the columnist can’t bring up the expensive energy factor because that would make it immediately evident that the US, Japan, and a number of other countries are already on their way to fiscal doomsday. And by the way, America is already broke.