just to put a perspective on the US economy

The current global crisis has got the economists and lay-man the world over equally interested. Obviously the biggest economy of the world is not only the originator but also the worst effected as well. As against the popular media notions that the worst is about to over and that the recession is going to end to soon, there is in fact a realistic glooming threat of it becoming the worst ever seen deflation seen in human history. Federal government’s balance sheet is the worst nightmare of any economist. Please look at the below figures to get an idea:
1) By mid-May 2007, the US National Debt stood at approximately at mind-boggling $8.85 trillion -- i.e. approximately $28,000 for every American.
2) The current account deficit of the United States for 2006 is estimated to be in excess of $850 billion. This approximates to 7% of its GDP. Surely, even for the US, this is unsustainable.
3) In the current year 2009, the feds will take in about $1.9 trillion in taxes and spend $3.6 trillion. This when the current US government deficits stand at a staggering 13 % of the GDP already. Irish and Latvian economics are going bust at 11% levels !!!
4) The US is running a budget deficit this year equal to four times the biggest budget deficit ever - a record set just last year. In a matter of minutes, China could dump enough US dollars to set off alarms all over the world. All of a sudden dollar holders would rush for the exits - each one trying to get out before the others. In minutes, the dollar market could collapse...taking down US Treasury bonds with it.
5) Obama's budget map is still fanciful. It imagines a loss of only 1.2% of GDP in the current downturn...and a quick return to growth, with a 3% increase in 2010. Yet, the last report showed the US economy contracting at a 6% annual rate. As for growth in 2010...where would it come from? Consumer credit is falling at its fastest pace in 18 years. Consumer incomes are falling too - down 1.2% in the last 12 months.
6) There have been 20 lakh job losses in the US in the first three months of 2009, pushing the unemployment rate to 8.5% of the total workforce. This is the highest since November 1983. If we were to talk about underemployment, which takes into account people who are working part time because they can't find full-time jobs, this rate goes up to 15.6%. When people don't earn, they don't spend, and that leads to a contracting GDP.
7) the economies of the G7 countries (Canada, France, Germany, Italy, Japan, United Kingdom and United States), which make up two-thirds of the world's output, experienced a 7.5% contraction on an annualised basis, during the first three months of this year.
8) The US government has shrewdly disguised its National Medical health insurance scheme deficit in the hindsight of accounting procedures. Their medical insurance is more like a ponzi scheme, where the new investers pay for old investments. The fed doesn’t show the money it shall need to spend in the future to take care of the medical insurance, in today’s liabilities column, and thus neatly escapes reporting it in its balance sheets. The figure of deficit growing over a period of time, today stands at an exaggerating $56 trillion!!! How do they plan to cover for that???
9) The US dollar has already lost more than 20% its value against most other currencies of the world. Printing more dollars left, right and center is not going to help the cause. You cannot write checks to yourself and be richer!!!
10) Late Iraqi leader Saddam Hussein was fully aware of this paradigm. Seeking to exploit the inherent weakness of the US dollar, Saddam wanted to trade his crude in Euros, which would have lead to a lower demand for the US Dollar and thereby triggered a dollar collapse. And those were his 'weapons of mass destruction -- WMD.’

Just to put how hollow our global economic basis is please consider the following figures:
1) There are about $1,600 trillion worth of derivatives in the world.
2) $125 trillion worth of real estate and business assets.
3) $100 trillion worth of stocks and bonds secured by assets.
4) $65 trillion worth of government bonds (rising rapidly).
5) $4 trillion worth of actual currency...and only between $2 and $4 trillion worth of gold and silver.
It is obvious to make from the above that the US currency is going to devalue quite a bit in future. When an empire is old and decaying...they think the government should spend "whatever it takes" to take care of them. This attitude helps destroy the empire...thus making room for the next one.
US government treasury bonds are the world over traded biggest commodity in terms of value and hence it gives the federal government a great leverage to print the dollar and go on the spendthrift way. There are two biggest buyers of the treasury bonds i.e. the Chinese government and the federal government itself. However ironical it may sound, Chinese government here acts as a shopkeeper who pays its client (the US people) to buy stuff from its shop!!! For the first time in more than 5 decades, the US treasury bonds were not finding buyers in the New York stock exchange earlier this year, the federal government quickly retracted and pulled back the number of bonds being issued.
The Brazilian currency, real, overtook the South African rand today as the world's best-performing currency. Brazil posted a $146 million current account surplus in April, its government announced yesterday, the first such surplus since September 2007. Brazil's government has introduced aggressive new tax cuts and new trade agreements (mostly with China), and has thus become the darling of the currency trade. Low taxes, open trade and account surplus is good for a nation's economy?
Don’t judge a nation’s economic prowess on the basis of its stock market performance. On that basis US stock market should have collapsed completely by now, and these are not just my views, infact it is shared by some greats like Warren Buffet, who has gone on to extent to advice people not to buy US government treasury bonds!!! People associated with the stock markets don’t think really, they react!! And this applies to everbody including myself. If not then there would be no explanation of buying the Satyam shares at 24 Rs value, selling it at 49.75 Rs per share in the rally leading upto L&T announcing hiking its stake from 4% to 12%, and now when the share is trading at around 60 Rs levels. The share was fundamentally not buyable at any of the above price levels, but of course because of the arbitrage opportunity present, many like me clocked a good handsome profit of almost 100%!!!
There could be major shifts in the world order in the coming times and we shall all be witness to the same. These are some exciting times and we are in the middle of history being written for our country India.