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Already Not Wall-Street but the Largest State Can Become Epicenter of Financial Collapse

Already Not Wall-Street but the Largest State Can Become Epicenter of Financial Collapse
Кalashnikov Маxim 27.06.2009


Whether China, the Russian Federation and other countries will finance deficiency of the American budget for long? When will they start transition to a system of bilateral clearing calculations thus giving up dollar as instruments of payment? At the same time huge budgetary deficiency of California threatens with default developing into a new coil of crisis of the American economy.





Economist Michael Hudson, the chairman of The Institute for the Study of Long-Term Economic Trends (ISLET) and the professor of University of Missouri gave interview on June, 14th on pages of "Financial Times" having warned: all's going on to bankruptcy of the United States. It hadn't happened yet only thanks to massed purchase of debt papers of exchequer of America by China, the Russian Federation and other countries. Washington hopes that while there's no real alternative to dollar as a mean of international payments. Say, you have nothing else to do: all of you should accept "lettuce" and thus to finance deficiency of the American budget. Already today, according to the economist, debts of the federal government of America only in the central banks of the different countries are estimated in 4 billion dollars.


At the same time the USA make two extremely expensive wars and to support huge number of military bases behind their limits. Hudson convinces: the basic source of a budgeted deficit of the country has purely military character. But sooner or later China (and, probably, the Russian Federation) will get tired to finance own "environment by military bases of the USA" in Asia. Doctor Hudson is convinced that the Shanghai Organization of Cooperation quite possibly can go on creation of system of trade through clearing, payments in national currencies as it was between World War I and II. It won't wait till appearance of some new "world currency".


If it happens, bankruptcy of the USA inevitable. With all following consequences. Now president Obama is busy signing memorandum of privileges for gays (catamites) working in federal (and financed from the federal budget) structures.



At the same time it is obvious that there's only a calm before new storm. Problems with finance of the USA obviously accrue as pressure in tectonic plates.


The Congress has just accepted the 106-milliard plan of assignments for war in Afpak and Iraq. It managed to navigate it using 226 voices against 202 (the bill was not supported by all republicans and 32 democrats). As a matter of fact 80 billion are being assigned for military operations in Afghanistan and Mesopotamia (war cost in the Gulf of 1991 and the cost of approximately 20 years of support of the Soviet armies in Afghan). These eighty billions were added by 5 billion payment of America in IMF (the Russian Federation brings 10 billion) on struggle with world crisis, 7,7 billion on struggle with so-called "pandemic of pork flu" and 1 billion - on encouragement of the American consumers buying economic cars. Two more billions will be spent on purchase of new transport planes "Boeing S-17" despite of attempts of Obama's administration to stop their manufacture.


Thus, deficiency of the federal budget of America "is being dispersed" more and more. Thus Washington has to help to not poor countries through IMF but to own states. The problem of deficiencies of the states becomes aggravated creating additional threat to financial system of the American Union. Apparently, not Wall-Street but the state of California will become the epicenter of the next economic explosion in the USA.


To the beginning of June the governor of California A.Schvarzenegger using titanic efforts managed to reduce a hole in the budget of the region from 40 to 24,3 billion dollars. To patch the hole authorities of California go to extremes. 38 thousand prisoners from 33 prisons of the state should be released (all in all there are 168 thousand prisoners). A half of the ones to be released - illegal migrants. Expenses for staff public health services are being reduced (servicing of 225 thousand children gets under reduction). Academic year at schools should be reduced by one week, it is planned to integrate classes. They say about strong reduction of a number of students at the Californian University. To recover fortunes Santa Barbara it's decided to make petrochinks in the sea near to Santa-Barbara. Well, everybody heard about sale of prison San-Quentin and stadium in Los Angeles.


The state pension fund, CalPERS, having lost 23% of its capitalisation since July, 2008 is running upon the rocks. Necessity to rescue it lays down a heavy weight on tax bearers. In the meantime, California turns to potential epicenter of new financial crash. Agencies "Standard and Poors" lowered a credit rating of the Gold State to the lowest among all states of this level. California - is on the verge of default capable to shake all America. In May the treasurer (the Minister of Finance) of the state sent a letter to the Minister of Finance of the USA Timothy Gethner with the request to help scarce municipalities (analogue with the Russian Federation - budgets of cities and areas). More and more often today they speak in California: default of their state can break all economy of the USA into new crash. Say, the state itself - the eighth on size world economy and the USA will not sustain its collapse. The more so California - the largest state of the country. But California is not lonely: the State of Michigan which treasury is exhausted because of bankruptcy of "Chrysler" and "General Motors" also submits distress signals.


Though Obama's administration seems to search way out on June, 16th the representative of the White House Robert Gibbs made discouraging statement that budgetary problem should be solved by the State of California itself. In the evening of the same day governor Schwarzenegger made the statement that he hadn't asked for help from the federal centre. While experts already mark: Schwarzenegger's program is contrary to the one of "Obama's plan". Social expenses are being cut down in the state, it's planned to "cut down" by 2010 about 60 thousand workplaces.



Most of all financiers of the USA are afraid that default of California will cause panic on securities market of other states and municipalities. Their feverish dump - as domino reaction - can begin. It's spoken by, for example, the deputy director of Rockefeller Institute of Government Dun Boyd. Giving interview to magazine "Business Week" he depicted such a picture: as a result of panic the price of loans for states and municipalities will sharply increase. We will add also: position will remind wild growth of percent on state credit obligations in the Russian Federation of 1998. Growth of the price of loans will force states and municipalities to cut down budgets which means simply to gasoline fire in crisis.


What is the most terrible: only three states in America in 2010-2011 will have sufficient budgets.


All the rest will store deficiency in 350 billion dollars. Rise in price of loans will mean catastrophe for them. Moreover, "annihilation" of economic policies of centre and regions will happen as at fusion of the substance and antisubstance. While Obama's government will increase expenses on social needs and economy support creating new workplaces and increasing deficiency of treasury, the governments of tens states will start doing absolutely opposite things. It means - chaos.


It is remarkable that growth of budgetary deficiency is synchronic with growth of charges for growing army of prisoners and panel setting. Let's take, for example, the State of Wisconsin. Having faced 6,6-milliard deficiency this year the state power also does not know what to do with local prisoners. From 2000 to 2007 year the criminality has grown by 23% and a number of "convicts" - by 14%. Their support stands in 2 billion dollars annually. What could be done? To let part of them be free? (Similar problem - in Michigan where support of prisons eats up 22% of budgetary expenses). By the way: in 2008 the American expenses on penal setting made 303% of expenses of the year. A kind of Imprisoned States of America with Gulag. Though it is interesting: what will happen, if economic crisis will be synchronic with mass release of prisoners from prisons?


Thus, the USA - again on a threshold of strong economic explosion. Instead of rescuing country finance Obama's administration is occupied with war and rights of homosexuals.


Moscow already now needs to take anticipatory measures urgently. It's long overdue to adjust system of clearing without - dollar trade with the basic partners of the Russian Federation as China does, instead of pressing Minsk under foolish "dairy" pretext. But, apparently, Ministry of Finance of the Russian Federation headed by "professional" A.Kudrin will do nothing while it heats a sound of thunder...

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