Wednesday, July 27, 2011

Doomsday







This scenario demonstrates the fragility of the existing "world order".  It based on an internal political crisis in the USA combined with a series of dangerous weakenings of the US capital market taking place a the time of writing. Enabling conditions similar to the scenario may resurface at another moment.



27 July 2011

Scenario research
Doomsday for the USA

By: Karsten Riise

Doomsday does not happen every year. But sometimes a series of circumstances
create the possibility, that Doomsday can come.

In the following scenario I investigate how Doomsday for the USA may come
already this year 2011 - every step is very likely to occur.

In the scenario US stocks will fall 30%~40% or more. US government bonds and
the dollar will tumble too. A break down of the financial and military world order.

29 July - US economy sinks further

Friday 29 July 2011, US growth for 2nd quarter 2011 comes out on meager 1.6%, significantly below the 1.9% in 1st quarter 2011. This will unmistakingly indicate, that US growth is sinking in spite of all the "stimulus" from the US government and from the USAs national bank, the Federal Reserve.

The US government deficit is 11% of GDP and Federal Reserve's program called "Quantitative Easing" no. 2 bought up US government bonds worth more than 4% of GDP per month in 6 months - in total this 'stimulus' amounted to 15% of GDP with too small effect and unsustainable for much longer time.

At this point in the scenario, the US financial markets tremble but still hope for continued US government deficits through a raise of the debt ceiling and a new larger "Quantitative Easing" no. 3 from the Federal Reserve bank - just like it happened last year in August 2010, when the US stock market also was on the verge of a break down after bad growth figures, but was "rescued" in the last
minute by unfulfillable promises from Federal Reserve bank Director Bernanke.


2 August - USA stops payments

Tuesday 2 August 2011, Tea Party and other steadfast Republican politicians in the US Congress block an increase of the US debt ceiling. The US government stops about half of its payments, including interest on government bonds. Financial markets in the USA and around the globe are in shock as papers tumble - a new financial crisis.

Nobody wants to give in. After a hectic time, a bad political compromise is made in Congress, where the debt ceiling is lifted for few months at a time. Financial markets understand that this will lead to a new debt crisis every few months - US stocks and bonds continue to fall, and the dollar goes down as investors leave the USA.

This event will start a new world order of the international financial markets.

New 'stimulus' - but continued crisis

The US national bank, Federal Reserve, after long hesitation, announces "Quantitative Easing" no 3, buying up US government bonds for yet another $ 600 billion. After a small upturn, US stocks and the dollar continue to fall as the stockmarket says "too little too late". Investors now say that the "Quantitative Easing" no 3 should have been doubled to $ 1200 billion and not "only" $ 600
billion like last time.

Later, economists recognize that "Quantitative Easing" never really helped the economy significantly anyway, and that increasing "Quantitative Easing" with new rounds no 3,4,5 etc. to 1200 mill, 1800 mill and 2400 mill dollars and so on every 6 months would just have led the USA into to an even greater disaster.


Israel bombs Iran

Israel attacks Iran alone without informing the USA beforehand. As the USA draws out its forces from Iraq end of 2011, and slowly also from Afghanistan, Israel was getting increasingly nervous. The Israeli nervousness was underscored by the events of the "Arab Spring", which has resulted in less American control of Egypt in its actions towards Israel. Also Turkey presses Israel more.

With a new historic financial crisis in the USA , Israel also recognizes that USAs financial power is breaking down, and that USAs appetite for more war reaches zero. Israel therefore wants to destroy Iran's nuclear facilities before it is too late and "Iran gets the bomb" - Israel calculates there will never come a better time, and that Israel will get support from USA anyway, when Israel starts the action.

As the Israeli jets depart for their attacks, Israeli President Netanyahu calls US President Obama and says : "We are under way to Iran - do what you have to do."


Iran attacks Oil supply

Iran retaliates the Israeli attack wth speed boat attacks on Oil tankers passing through the Straight of Hormuz and missile attacks on Israeli cities. The Israeli missile shield does not work as expected, and Israel takes substantial losses.

Israel therefore escalates the conflict with more attacks on Iranian cities and installations. This in turn incites Iran to more attacks on oil supplies.

Oil prices soar to $ 300 per barrel - it can still get worse.

The USA attacks Iran

The USA feels forced to attack Iran in order to re-open the flow of cheap oil from the Persian Gulf. However, no matter how fiercely the USA attacks Iran, USA is not able to protect the Oil ships against Iranian attacks. And Iran now escalates even further with missile attacks on Oil installations in Saudi Arabia, Kuwait and sabotage on Oil in Iraq. The USA is in a way powerless.

The 50.000 US troops caught up in Iraq take heavy losses from Iranian organised attacks, and Iran supplies weapons to insurgents in Afghanistan.

US Embassies and foreign companies in 10 poor countries with US backed dictatorships are attacked by mobs enraged by the events.

According to the scenario, Oil now hits a peak of $ 400 per barrel. Be careful about security in poor countries.


Bahrain blocks US operations

Iran, only 200 km (125 miles) away from Bahrain, also attacks the US 5th Fleet Headquarters in Bahrain with missiles. Saudi forces, who help uphold the Bahraini leadership against the majority, are weakened by the conflict.

Bahraini pro-democracy activists use the occasion to tumble their authocrats. Other activists, maybe Iranian sympathisers, attack the US 5th Fleet Heaquarters. The USA can no longer use Bahrain for its Fleet or as a hub for air-transport of military supplies to Afghanistan.


Pakistanis block US supplies

In Pakistan, a mass movement of 500.000 angry Pakistanis, encited by the events in the Persian Gulf, start to block US fuel deliveries and other military supplies for the 200.000 US and NATO soldiers and security contractors in Afghanistan.

Pakistani military and ISI security service are passive bywatchers.


Russian 'train-strike' hits US supplies in Afghanistan

Russia never forgot what the USA did to them in Afghanistan, and Russia feels pressured by the USA. Russia does not officially want to break her agreement to let US supplies for Afghanistan pass through Russia. Instead, the Russian secret service manipulates widespread train strikes in Russia, that "accidentally" affect all trains with US supplies for Afghanistan.


USA flees from Afghanistan

A worse economic crisis than in the 1930'ies, no land supplies to 200.000 US troops and allies in Afghanistan, and no air-deliveries from Bahrain. A number of US ships sunk and US airplanes downed by Iranian anti-aircraft missiles - and still no Oil flowing from the Persian Gulf.

The US government panics.

An air-bridge for an evacuation of al US soldiers and citizens from Afghanistan is badly improvised and only partly successful. The USA takes more losses. All heavy arms and equipment are left behind.

Contingency plans for an air-bridge from Afghanistan to India will be a good idea.
In the scenario, gold now sky rockets furhter up, and peaks at $ 6000.

American Gorbatchow

The Soviet Empire disappeared not with a bang but with a whimper, and living standards dropped by 30% or more. The US Empire is a parallel story.

President Obama was never the right man to run the US Empire, even though he surrounded himself with people who were. But President Obama will be the right man to help the US Empire disappear with as little bang as possible, and to take best possible care of maybe 100 million poor people in America, as a result of such a crisis.


Change we can believe in?

We shall soon see. All the events described are likely and must be taken serious.
Doomsday has happened before - it always creates a new foundation.

Doomsday, as described in this scenario, will be a serious call to learn in order to
build an even better world.


Karsten Riise
Partner & Editor


CHANGE NEWS &
CHANGE MANAGEMENT