Only for the brave? Doom and Gloom analysis of "USA Inc" + solutions.

This report, co-authored in early 2011 by Mary Meeker of KPCB (Kleiner, Perkins, Caulfied, Byers) the legendary Silicon Valley Venture Capital firm, is deeply challenging.
Long PDF and Short PDF available as well.

It's not your average "Doom & Gloom" report or "The Sky if Falling, all is lost, get to the Bunkers" shrill fear-mongering.

This is solid analysis backed by good research and unrelenting numbers.

These folks know their way around a balance sheet, their record speaks for itself. If you can't refute it, you have to believe and act on it.

The headlines for me are dual:

• If nothing changes, within 15 years the USA won't be able to pay its bills [like Greece and Spain], and
• these folks are very positive. They layout the strengths of the US Economy and its people and a game-plan for getting back into the black.

So, look at the video [43mins] and pull down one or more of the PDF's if you like, I'm not only suggesting that this is not something that everyone should read, but that people should carefully consider beforehand if they even want to read this. It's not said, but the GFC was just the beginning...

Be prepared to read some deeply disturbing and challenging data/analysis, I found it quite sobering.
The authors pointedly don't dwell on the negative outcomes or consequences inside the USA and for the rest of the world. There will be many commentators only too glad to bang that drum and instil "Fear, Uncertainty and Doubt" into a wider audience.

BUT, the whole reason Mary and her team spent a small fortune constructing this report, is they, the acknowledged experts in analysing the operations of any business, not only think there is hope, but think solutions are possible and achievable. This comes from a fundamentally positive 'frame'.

That they did the research, produced the analysis and published it, is a massive vote of confidence by some of the world's best financial minds in the resilience and capability of "USA Inc" and that solutions are within the grasp of Americans. The solutions may not be easy or palatable, but they are achievable.

This report is about Hope and Inspiration, don't lose sight of that when you read it.

King Cotton reprised: The End of the Uncle Sam Brand as a Universal Currency

I really hope that Mit Romney and the Republicans win the next Presidential election. That way when the fruits of years of the excesses of Republican Presidents (Bush I & II notably) come to fruition (around 60% of the current $14,300B public debt), the general public, and GoP voters in particular, will not be able to easily pin the blame on Obama.

The point about "discontinuities" is they are disruptive events that happen very quickly and to most, without appreciable warning. Think the fall of the Berlin Wall at the end of 1989 and the dissolution of the USSR and Communist Eastern Bloc shortly afterwards.

It is more than likely that the USA is now heading to its own economic "discontinuity", a reprise of the Confederate States discovering that "King Cotton" wasn't a match for the manufacturing power of the Northern states Union.

I've only recently become aware that oil transactions are increasingly being done outside US Dollars. A random selection of articles returned by a quick Google search:
Jan 2012, India transacting with Iran,
Jan 2011, The dominant dollar no more by US economics professor,
Mar 2012, The Renminbi  as Reserve Currency (+ part 2)

The accounting definition of money is "a unit of exchange", it is the basic building block of commerce and trade. But only if both sides of a transaction put the same value on it and it is liquid and holds its value with others.

For international trade to work, there has to be a common unit of exchange: a currency benchmark against which everyone sets their exchange rate and in which markets set prices for traded commodities and goods.

Once the world rested its trade on "the gold standard", but when the fiction evaporated that every dollar printed was backed by a unique piece of gold in a vault somewhere, the world moved to paper currency, eventually the US Dollar assumed the role of the world's common or reserve currency.

What happens to the US economy and Government budgets when they can't raise loans for the current 40% of the budget not covered by taxes?  If the US currency does lose its universal trade currency status and its "AAA" credit rating, the cost of money (interest on loans) will suddenly rise, throwing further strain on the US Government budget.

Can the USA survive its 16% of GDP spend on Healthcare? What happens as this rises 40-50% with the ageing of the Baby Boomers and their end-of-life care needs funding?

01-May-2012: Alan Kohler provided a chart, sourced from the UN 2010/11, of global Military spending.
The USA, at ~$700B, spends 43% of Global military spending.
China is next at $120B with UK, France and Russia around $60B each and Japan around $55B.

Since 1961 when Eisenhower coined the term "military-industrial complex", the USA has been committed to a very large military budget, and in the way of things bureaucratic, it rarely falls.
Will they ever be able to reign in their Military spending? How quickly can they do that? The tap cannot be shut-off quickly...
What will the Government decide to de-prioritise if they are forced to reduce their expenditures?
More importantly, how will the electorate act?
[end 01-May]

When, not if, the Uncle Sam Brand loses its special status as the global currency of trade and settlement, for the first time the automatic economic system re-balancing mechanism, falling exchange rates, will kick in. This won't be any gentle or leisurely correction. Once it starts, it will feed on itself into an avalanche, which must of necessity, overshoot on the first round.

What happens to the collective psyche of American Business and the public when they discover the true worth of their goods and services?  It will be a crushing blow, but one that many sectors and individuals will respond to with vigour and enthusiasm: America earned its place as a super-power and traces of that same energy, drive and capability remain.

This won't be pretty to watch, let alone be a part of.
And those most affected, the almost two decades worth of Baby Boomers, who will have their retirement plans destroyed and most basic needs like healthcare put in jeopardy, how will they react?

These are the same generation that din't just opposed the Vietnam War, they flooded into the streets and demonstrated. Many liked to "stick it to The Man" and to actively voice their discontent.

How will they react when told they have to pay for the excesses of the top 1% and a very cosy relationship between the Republicans, the wealthy and the Big End of Town?
Especially now that they have a lot more experience and a set of very powerful tools in the Internet?

I've no idea of estimating the When or How Deep of a crash like this.
Nor do I know how I'd survive in such a scenario - obviously with a very cheap US Dollar, it will become a prime travel destination.

But the really important thing I've not got a clue about: How can I make money from this insight?

It's not enough to "have a good idea", but to be taken seriously, you've got to back your hunches with cold hard cash...