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In spite of upbeat comments from their political leaders, developed countries are still facing tough times. And the situation seems unlikely to get any better any time soon. According to projections published by the Organization for Economic Co-operation and Development (OECD), the euro zone counties’ sovereign debts are expected to rise up to 90% of GDP while the US national debt is sure to hit 100% of GDP by 2011. The US House of Representatives has recently raised the national debt limit up to $12.4 trillion, which is only a couple of trillions of dollars away from the US GDP itself currently standing at approximately $14 trillion dollars. According to experts, this level is likely to be exceeded before the end of 2009.

Following the negative news from Dubai, Greece has hit newspaper headlines across the globe. The aggregate debt has reached €300 billion, which amounts to 125% to GDP, and is likely to go up 9% to €326 billion (133% of GDP). The authorities are pledging to bring the budget deficit down to 9.1% of GDP from the current 12.7%, but that is still 3 times higher than the EU-authorized budget deficit threshold. Other European countries’ national debts are also on the brink of hitting the GDP level in a year or two and will have no other choice but issue government bonds.

Thus the most important question that arises is WHEN. When will this worldwide Ponzi scheme collapse under its own weight? When will the entire world stop robbing Paul to pay Peter? The numbers are inexorable when pointing to the actual condition of the world economy. If some real asset like gold, silver or any other rare commodity was in circulation worldwide as money thus limiting the money supply to the actual amount of that particular commodity in circulation, the entire world economy would have already collapsed and disintegrated. The global economic system has been bankrupt for a long time and is now nothing more than a giant bubble. Artificial liquidity created out of thin air by central banks throughout the world keeps the bubble deliberately inflated for obvious political reasons.

It is doubtful that the growing US national debt can have any adverse effect on the US economy. The Fed can run its printing presses to solve the problem since the debt is in the very currency they print. On the contrary, countries whose currencies are not as easily convertible as the US dollar may soon face serious chalenges.

Boris L. Anisimov

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