What was the evidence behind my claim of the USA being bankrupt? And how does one define a bankrupt country? And where do other countries, particularly the UK and Switzerland, fit into the equation?
First of all, defining a bankrupt country is not easy. Iceland clearly went bankrupt in a more traditional sense. But Iceland was a relatively insignificant country of only a few hundred thousand people. My contention is that the USA is also bankrupt, but it is not so obvious because there are many other factors there supporting the currency – the greatest of which is China. While the USA is bankrupt, China is the richest country in the world.
Who says? And where is my evidence for that? No less authority than the Central Intelligence Agency, obviously a US government agency. Now don’t get me wrong, I know the CIA make mistakes, at least one of which led to a major war. But I think in this case the CIA’s figures are quite accurate…
The latest revision of the CIA world factbook has been released. In this report it shows the Current Account Balance. In plain language, that just shows what countries have ‘money in the bank’ and which are operating in a permanent overdraft mode!
China is at the top of the list, with a huge positive balance – not far off that of Germany, which occupies the number 2 position.
The United States is at the bottom, with a negative balance more than five times greater than the next largest debtor, Spain.
You’ll also see the UK, France, Spain and Italy down there with the USA.
On the CIA World Factbook chart for “Reserves Of Foreign Exchange In Gold” you’ll see China up at the top again, with huge foreign exchange and gold reserves. Most of China’s foreign exchange buy brics onlinereserves are held in US dollars.
On this chart, the USA is at number 19, with foreign exchange and gold reserves just above Switzerland’s (but note the USA has smaller reserves than Malaysia, Libya, Mexico and Iran)
So compare the figures – the USA’s negative current account balance with the USA’s reserves – what is actually there backing the dollar – and you’ll see a huge discrepancy. The current account deficit is almost nine times the amount of the reserves.