America’s Economy Will Declare Bankruptcy

The Iranian deputy minister for finance believes that America’s economy will soon declare bankruptcy but he also points to the fact that huge turnarounds that are able to devastate an economy can take 25 to 50 years.

“My analysis of the capitalist economy is not a short term analysis. I’m not just talking about 2007 or 2008. America’s economy may even recover tomorrow. I’m talking about a series of international studies,” said Behrouz Alishiri.

He said that the capitalist economy is a turbulent system and global economics have many ups and downs but these ups and downs have a certain rhythmic order and an economy will be devastated when these fluctuations reach zero. The American economy has experienced many fluctuations in the past 300 to 400 years but has been able to recover each time it got close to the zero line.

He added that one of the solutions to reviving a capitalist economy is innovation. Innovation means creating new segments in the economy. For example, during the Ford revolution, industrial automation was added to the economy and saved the economy from collapse but this revolution led to a number of wars. The electronic revolution has done the same.

He also added that innovation is a tool for improving production and one of these improvements was the development of new financial tools. The capitalist economy did not undergo any innovation in the actual economy but it experienced an innovation in finance. The last method was buying loans from banks and making profit from those loans.

Through this method, public debt became corporate property and corporations grew larger. When 10 people claimed they were unable to pay their debt in due time, the result was like an avalanche. This innovation climaxed in 2005 and 2006 and we believe that it failed because it was not based on real assets. The interesting fact is that these assets were not just national but international and, therefore, the national financial crisis in the U.S. transformed into a global financial crisis.

Alishiri believes that the tool of innovation no longer exists and the capitalist economy can only choose the second option — war.

He believes that wars have been a tool for stimulating economic growth throughout history and adds that WWI and WWII and local conflicts have worked the same way. Wars have two goals — hegemonic or occupational goals. In occupational wars, the attacker aims to occupy new lands; for example, to gain access to new markets in Africa, energy in Iraq or mineral resources in Afghanistan.

He stressed that these types of wars are no longer happening and adds that it is true that the world powers fought with each other in the world wars but that’s not going to happen again. In the current situation, another large-scale war would mean a nuclear catastrophe for everyone. Therefore, it seems that world powers are no longer interested in large-scale wars but more in verbal and regional wars instead. But these limited wars can’t stimulate economic growth like large-scale wars do.

Alishiri claimed that each economy has a leading sector and this sector in America is the defense industry. The U.S. keeps creating limited conflicts to sell weapons and creates fear of a particular country in order to sell weapons to its neighboring countries. But these limited wars cannot in any way compete with large-scale wars in stimulating the economy. Therefore this is also not a suitable solution for America. So neither innovation nor limited-scale wars can save the American economy.

He added that an economy with a national debt of more than 250 percent of its GDP is absolutely bankrupt. This amount of debt should be paid somehow, but how is that going to be possible? It should be paid by cutting public spending and that means reducing economic growth, which is the largest contradiction in the capitalist economy. The capitalist economy lives on growth in sales and consumption and will collapse when it fails to grow. If it has to pay its debt, it has to lower its growth rate but even if it does this only temporarily, it will collapse.

Alishiri believes that considering the abovementioned facts, the American economy will soon declare bankruptcy and adds that even if it may take a while, it must be remembered that huge turnarounds that are able to devastate an economy can take 25 to 50 years, but it is clear that this process will start sooner or later for the U.S. Therefore, the economic crisis can’t be controlled by economists anymore and the politicians should decide how to manage the economy from now on.