2013: The government-owned Citibank of America, formed by the forced merger and nationalization of the United States’ two biggest banks, now dominates retail banking. The number of U.S. banks has fallen by half, from 8,534 in 2007. There are just 3,000 hedge funds all over the world – less than a third of the precrisis total. The regulatory framework that was imposed by Treasury Secretary Timothy Geithner in the previous four years has completely changed the financial landscape. With new restrictions on executive compensation, bank capitalization,and derivatives trading,retail banking has become more like a public utility. Even nonbank entities like hedge funds and insurance companies have to operate under the unsleeping eye of the new Financial Authority for the Regulation of Systemic Institutions (FARSI).
Despite FARSI’s extensive powers, the U.S. government is still grappling with the fiscal legacy of the crisis. The federal debt is now around $20 trillion – $3 trillion higher than the Obama administration forecast in its 2009 budget. The top income tax rate is 45%. The S&P 500 is down to 418, where it was in December 1991 – a decline comparable to that between 1929 and 1934. The United States, it appears, is stuck in the middle of its own lost decade, with real GDP having grown by barely 1% per annum since 2010.
We started out calling it the Subprime Crisis. It quickly became the Credit Crunch and then the Global Financial Crisis. By 2013 a new name has stuck: the Breakdown.
The breakdown of the American colossus has fundamentally altered the international economic order. China’s GDP in 2013 is half that of the United States; in 2006 it was only one-fi ft h as big. The U.S. dollar has halved in value against the Chinese yuan
following a Russo-Chinese initiative to replace the greenback as the international reserve currency with the International Monetary Fund’s Special Drawing Rights (SDRs, pronounced “sadders”). Oil, for instance, is priced in SDRs.
For the newly elected U.S. president, Jeb Bush, who defeated Sarah Palin for the Republican nomination in 2012, the time has fi nally come to Put America First. Treasury Secretary John Paulson says he is optimistic about his negotiations with the IMF to repay the 150 billion SDR loan negotiated by his predecessor. An investor in gold mines all over the world, Paulson is enthusiastic about the president’s plan to return the United States to the gold standard. At the G4’s latest meeting, the Brazilian, Russian, Indian, and Chinese foreign ministers unite to condemn Commerce Secretary Lou Dobbs’s latest round of tariff s on imported apparel and automobiles.
Meanwhile, Defense Secretary Max Boot confirms that U.S. “R” (for robot) forces will continue to be deployed in the radioactive zone around Bushehr as part of Operation Iranian Freedom, launched by the new Bush administration to support Israel’s recent strikes on Iran’s nuclear facilities. With unemployment stuck at 12%, many Americans are excited by the military successes in Iran; the Islamic Republic inflicted several humiliations on President Obama’s administration aft er his disastrous visit to Tehran in 2010. However, people are more nervous about the naval clashes between American and Chinese forces in the South China Sea.
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