Blog article by Jacques Attali

Yesterday, I came upon an interesting blog article in French by the celebrated writer Jacques Attali. [Use Google to discover the many talents of this eclectic French intellectual.] When I contacted the author, he gave me permission to translate his article and include it in my Antipodes blog. I've since discovered that an English version of Attali's blog already exists here.

The US is bankrupt

Jacques Attali

One day, we'll be obliged to thank English-language media and English-speaking politicians for having talked so much, at the start of this second decade of the 21st century, about the plight of the euro and the predicaments entailed in building Europe. These "Anglo-Saxons" (as the French say) will have made Europeans aware of such problems, and nudged them into looking for solutions.

It's a fact that, over the last three years, the European Union has transformed considerably its administrative institutions. Devices such as the Central Bank's LTRO (long-term refinancing operation), their OMT (outright monetary transactions) and the Luxembourg-based ESM (European stability mechanism) have been installed in order to fend off attacks against the euro. Financial tools have been invented with the aim of stabilizing Europe's banking system. We've witnessed initial attempts at budget convergency and even taxation uniformity. Much remains to be achieved, of course. Eurozone budget potential must become the source of large-scale investments. It must finance job training for the unemployed. It must promote the emergence of a genuine eurozone parliament. All those ambitions will be attained sooner or later. Europeans have finally started to realize that austerity is not an answer. Economic growth is the only acceptable democratic reaction to excessive debt and unemployment.

Meanwhile, the English-speaking world doesn't seem to realize that its bankruptcy is approaching fast. The British like to make fun of the eurozone, at the same time that they tolerate a budget deficit exceeding 8% of their GDP (gross domestic product) combined with uncontrollable public debts. As for Americans, they refuse to admit that, in many domains, their situation is far worse than that of Europeans. Within the eurozone, there is a balance of payments surplus, which is not the case in the US. Unemployment (based upon meaningful figures) is far greater in the US than in Europe, to the same extent as social inequalities and crime. Life expectancy is increasing in Europe, while dropping alarmingly in the US.

As for public debt—an Anglo-Saxon theme song whenever they start preaching to eurozone members—the US is in a state of crisis. Indeed, it's hardly an exaggeration to speak of bankruptcy. The level of US public debt has soared to 16,000 billions of dollars, which represents 100% of their GDP. Needless to say, this is far beyond the ceiling that Congress and the president had once set themselves. Recent calculations based upon data from the US Office of Budget indicate that the public deficit will be some 800 billions of dollars in 2014. Wishful thinking places the figure at 590 billions of dollars in 2018, provided that intended spending cuts are respected and that growth beyond 2015 remains superior to 4%, but these hypotheses are improbable. It's more likely that the deficit will stagnate, year in, year out, between 800 and a thousand billions of dollars. In other words, the best possible hypotheses would place the US public debt in the vicinity of 20 thousand billions of dollars in 2018, maybe even  22 thousand billions of dollars.

This public debt will be financed more and more in the only possible way, by the US Federal Reserve System. In other words, the US will persist in financing their defense system, their health services and their administration by means of new banknotes! And this paper will have no greater real value than the goodwill and trust of friends who need the presence and assistance of the United States of America...

What's more, the US balance of payments has had a yearly deficit, over the last decade, of some 500 billions of dollars.

Clearly, the US is in a far worse state than the EU as a whole. Their situation is even worse than that of the most debt-ridden nations in Europe.

One might imagine a day when China is suddenly alarmed by an anti-Japanese syndrome (capable of evolving through alliances into frank anti-Americanism), or a moment when the Gulf States (under the influence of Islamic fundamentalists) decide to invest in another currency and to cease quoting oil prices in dollars. A scenario of that kind would entail the fall of the US superpower, or its decision to use warfare in a vain last-minute fling aimed at resolving the nation's contradictions.

That kind of future would be repugnant to everybody concerned. We Europeans must offer Americans the same kind of sound advice that we have recently received from them. We must shout out to them, on the rooftops, that they're about to go bankrupt... so that they'll take steps immediately—if there's still some time left—to avoid such a fate. They have the necessary means to save themselves, provided that they realize that this salvation will not arise automatically and spontaneously, as something the world would owe them.

When great empires start to see themselves as immortal, they're inevitably on the edge of a fall.

 [translation by William Skyvington, submitted to Jacques Attali for approval]