Russian Prediction: US To Collapse by 2010
According to to the WSJ, Dr. Panarin, a Russian former KGB analyst, predicts that the US will disintegrate by summer of 2010. He actually made his prediction back in 1997 when this scenario really sounded ludicrous. Now its simply improbable!
Before you dismiss him as another crazy, check out his credentials. “Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry’s academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.”
Here’s the gist of his argument:
Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar.
He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.
California will form the nucleus of what he calls “The Californian Republic,” and will be part of China or under Chinese influence. Texas will be the heart of “The Texas Republic,” a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an “Atlantic America” that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls “The Central North American Republic.” Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.
Interest in his forecast revived this fall when he published an article in Izvestia, one of Russia’s biggest national dailies. In it, he reiterated his theory, called U.S. foreign debt “a pyramid scheme,” and predicted China and Russia would usurp Washington’s role as a global financial regulator.
Americans hope President-elect Barack Obama “can work miracles,” he wrote. “But when spring comes, it will be clear that there are no miracles.”
While I agree that the Federal Reserve is running the world’s largest Ponzi Scheme and that Obama may have a tough time working any miracles, I doubt that will necessarily result in complete disintegration of the US.
The US Dollar might lose its status as the world’s reserve currency and we might see a period of high inflation. The average American might also see a contraction in his or her standard of living, which is more of a regression back to living within one’s means since the days of excess spending are over. But so what if we become a little poorer or our standard of living drops a little. Poor people in the US still live better than poor people everywhere else.
And if, like Dick Cheney, you diversify your investment holdings into foreign currencies & bonds and buy some gold & silver coins you’ll be able to hedge yourself against any collapse in the US dollar or financial system.
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December 31st, 2008 at 2:30 pm
According to newsletter editor Bill Jenkins, a collapse of the Euro seems more likely:
“When the European Union was formed, most supporters saw it as the cat’s pajamas. Strongly growing economies, all banded together, ready to take the economic world by storm. And so long as the party lasted, everybody was happy. Everybody was making money. The wine was flowing in France, and the beer in Germany.
“But now that the flasks and kegs are empty, all the party food has been consumed and it’s time to pay the caterer, all the participants are looking at each other to see who is going to pick up the bill…
“A number of the euro countries are in real trouble… Spain, Italy and Greece, just to name three. At the same time, chief member Germany, which has always been the economic muscle behind the euro (and a model of fiscal reliability) is falling into recession. They will no longer have the “excess” to help bring lagging countries along.
”Add that to the fact that now many of the eurozone countries are crying out to the ECB for ‘stimulus.’
”Who is going to pay for that? Germany, of course! Are they willing to do that? Probably no more than you and I are willing to pay for a bailout for Mexico! Additionally, had Germany not been sharing its wealth with the less-productive nations of the ‘zone,’ they would certainly be in a much better economic position right now…
”Needless to say, if the European Union begins to fragment, the euro will go into the toilet. Where will all the currency chasers turn then? I would suspect right back to the dollar. Now, don’t get me wrong, if this happens, and that is a pretty big if, it is not going to be next week. But we need to keep our eyes open on the big trends to see where there is opportunity to make some money.”
January 1st, 2009 at 9:05 am
“…predicted China and Russia would usurp Washington’s role as a global financial regulator.”
One of the number of signs this guy is a quack: he thinks Russia is going to emerge as a global *anything*, much less a global financial regulator. They just jumped on the whole capitalism idea in the last 20 years!
The post above regarding the EU is way more plausible and something that actually makes me think twice about holding Euros.
January 1st, 2009 at 10:55 am
This is all wishful thinking by Panarin. He and other Russian leaders are hoping and praying for the USA to fall apart like the USSR did. But it is just that: wishful thinking.
As you point out, America has the world’s reserve currency. While this is probably not forever, it certainly will take more than one year for that to change. Most of the rest of the world, including Russia, depends on America’s success for their own economic success. This is the fallacy of Panarin’s arguments. What is Russia’s economy without someone to export energy to? They are no better than Venezuela where their economy is concerned. They are totally dependent on oil exports, as the ruble has shown the past 6 months.
The Bill Jenkins article you cite makes the case that the Euro is much more likely to collapse than is the USD. I agree with this. Europe does not have the advautage of having the world’s reserve currency, so its economic problems are not financed by the rest of the world. There is also much less foreign ownership of EU real assets than in America. This is our secret advantage.
A major factor in America’s favor is the complete lack of dominance by any one race or ethnicity. Instead, America is the proverbial “melting pot” filled with people from all corners of the world. This means that most other countries on the planet have a significant financial stake in America, already, through the connection of family members living in America, many of whom own assets in America, real estate and / or businesses.
What is much more likely to happen, and which is completely consistent with the history of America, is that there will be more and more financial ownership of America by foreign interests. China can convert its huge surplus of US obligations (mostly in the form of Treasuries) into ownership in American real assets. We already saw this play out several times in the past: most recently when Japan took ownership of American assets in the late 80s and early 90s, and much earlier, when the British took large ownership stakes in American assets in the 1870s after the railroad financial collapse (the British held the railroads as collateral for loans to build the American rail system).
This does not hurt, but helps America. The more that disparate foreign interests have ownership in America’s real assets, the more the future of America becomes their future (China, Saudia Arabia, India, Japan, Brazil, et al). America is the country that will build bridges to the rest of the world and will eventually usher in global peace based on shared business interests, the past decade of foreign policy errors aside.
January 2nd, 2009 at 1:05 am
“America is the country that will build bridges to the rest of the world and will eventually usher in global peace based on shared business interests, the past decade of foreign policy errors aside.”
Brian, I hope this day comes soon. But so long as we keep spending money we don’t have on senseless wars, this doesn’t seem likely.
On another note, I think Bush’s Iraqi War may have killed nearly as many Americans as the terrorists have. I’m reading “mobs, messiahs & markets”. very interesting, highly irreverent and they make an interesting point that shoving “democracy & freedom” down the Iraqi’s throats may not be the best idea, since they’re a mix of different races that have never lived under peaceful democratic governance.
January 2nd, 2009 at 4:04 pm
While I agree that the Russian analyst quoted with the U.S. disintegration theory is simply some kind of wacko, let’s not jump to call it “the Russian” view.
It is too soon to write obituaries for America, dollar, or the Euro (Union or currency). Dollar is likely to weaken for sure. It has strengthened a lot lately, and the looming deficit is not going to help.
January 3rd, 2009 at 12:06 pm
Happy New Year Nirav!
January 8th, 2009 at 9:24 pm
The country may not break apart according to Panarin’s scenario, but it may might just break apart just the same.
I recall Dr. Gary Vezzoli (M.I.T at that time) predicting the country would break apart back in 1993.
January 9th, 2009 at 5:26 am
This is a ridiculous assertion with absolutely NO basis. No states are even talking about seceding from the Union. NONE. There is no pressure to make a change, so why would it happen? I have not hear any credible reasons given.
Quebec has been very actively talking about seceding from Canada for 50 years, yet hasn’t done so. That province is very motivated and has reasons (cultural) to do so, yet hasn’t. This type of dramatic political change does not just change on some Russian whacko’s whim.
Stop worrying about something that has NO chance of happeninng. We have plenty of real problems to be concerned with.
January 10th, 2009 at 4:13 pm
Actually it’s not so hard to believe. Just five years ago none of us would have thought that we’re going to be where we are right now. The unemployment, collapse of housing and financial markets, recession that slowly morphs into depression, highest in our history national debt and falling standard of living. Yet, it is happening right now. And it’s just a tip of the iceberg. Obviously no one is going to reprint maps, but the country IS being divided to areas of influence. It might not be apparent to some people outside of these areas, but it becomes clear if you dig deeper. While we were building cash reserve, which disappeared in the blink of the eye, other countries were building intellectual and social reserve by providing free health care and education for it’s citizens. (Russia ranks #1 among countries with highest percentage of college graduates) Brian, if you are looking for ridiculous assertions, how about this one: Thinking that something will not happen just because it did not happen in the last 50 years. I live in CA(eight largest economy in the world) and can tell you that most of the technologies here were copied/stolen by Chinese. Co’s that were suppose to profit from those techs., went out of business. Most of the real estate in CA is owned by Chinese. Same Red China we owe most of our nat. debt to. I think you are the one with wishful thinking. The process of division is not going to be that obvious. There is not going to be a wall between CA and NV, it’s mostly going to be drawing of new agreements and transfers of ownerships. Something an average Joe like you would not even know about until you hear about it on CNN.
January 11th, 2009 at 7:08 am
Jeff, I think you miss my point. I accept that people of other nationalities will own parts of America. They already do and always have. This is fundamental to our laws, politics and economy. The concept of foreign ownership of our assets is one of the major factors that sets us apart from other countries.
This idea that America will be gobbled up by some foreign interest is not new. In my own memory, as recently as the late 1980s, there was a fear of Japan buying up America: Japan, Inc. it was called then. Japan did buy a good chunk of America. They built manufacturing plants (automotive, electronics) and their citizens came to America to run those plants, not just on the West Coast, but throughout the country. Did that somehow hurt America? I would say it helps us.
There have been many similar periods of foreign acquisition throughout our history. The British paid for and built our rail system in the 1860s and 70s. The British literally owned our rail system at a time when that was a new and strategically important technology. The rails are still here and so are the descendants of the British citizens that came here to manage their investments.
And so on it goes through history. I welcome the investment in America of every country with which we have a national trade imbalance. If you know of Adam Smith’s “invisible hand”, you will understand this is the natural working of open markets. I understand that China has $2 trillion American dollar surplus. They have greatly benefited by exporting their products to America. We help build the world by allowing free trade and the export of labor. I understand that the only way China can recirculate (spend) those dollars is by purchasing American real assets. This is why I don’t worry about the Chinese “dumping dollars” on the market crashing the dollar. Why is the US dollar the world reserve currency? Why are Treasury rates at zero, and in some cases below zero, as investors around the world scurry for cover during a crisis? Really, you (I can tell just an “average Joe” yourself) need to answer these questions before expressing your self-doubt.
As for the assertion about the superior education of other nationalities, I don’t accept that. It is a popular myth that other nations cultivate. My basis for doubt is that so many foreign students come to America for their college education. If the best schools in the world are here (MIT, Stanford, UC-Berkley and all our state univerisities, Harvard and all the Ivy League schools), how is that we have such a poor education system? If it were true that other countries have better educated students, the fact is that many of those students attend higher education in those same schools? Many that are educated here, stay here. So, America is the beneficiary of foreign educated students. Education is one of our major exports.
I can’t stop anyone from feelings of inferiority. If you feel compelled to doubt yourself and our country, that is your right living in this country. But try to have an open mind and consider all the ways that America is different, not the least that America is really just a collection of every nationality on the planet. “The process of division is not going to be that obvious”. You go ahead and think that. I prefer to think that it is the process of unification that is not obvious. We bring the world together here, and it is my hope it is that unification that we will export.
January 18th, 2009 at 1:05 pm
Whatever people have seen in the recent past, they tend to extrapolate. This Russian has seen the collapse of the Soviet Union. He now projects that for other countries, and specifically, the country the USSR had perceived as their biggest rival.
When gas has gone to $4 per gallon, there were “experts” who projected that gas could/would go to $10 per gallon. Then gas retreats to under $2 per gallon, and then we hear experts project that “gas could go down to $1 per gallon.” Gas then turns around a bit, and the “experts” project that gas is going back to $4 per gallon in a couple weeks. These people are IDIOTS.
I see people do the same thing with stocks. They see a stock trending up, and they draw a straight line to infinity. They see a stock trending down, and they draw a straight line down to zero.
I must be different because I definitely do not see straight lines. I see chaotic jaggedness. Each top or bottom, we see the “straight line” turn on a dime. No warning. Nothing. It happens all the time and people still don’t get it. Why?
They talk about “momentum”. A good concept when you are talking about a heavy object wanting to keep traveling in the same direction it’s going in. But there is absolutely no such thing in financial markets. The concept is absurd. There is no mass to a stock price. It goes up and down in jagged fashion all day long, and there is absolutely nothing to convince anyone viewing the raw data that there is anything like momentum in stock prices.
Moral of the story is: No one knows what’s going to happen. That’s it.
January 19th, 2009 at 7:50 pm
I have often wondered how the Romans felt before the collapse of their world empire. Now I know. America is slipping in too many directions at once to hold together much longer, but 2010 is unlikely to be the year of our demise. 2060 is more realistic, I think, given the current rate of our decline.
February 2nd, 2009 at 1:17 pm
The whole “collapse of Rome” story is so melodramatic. What do Leonardo Da Vinci, Michaelangelo, the Renaissance and modern architecture, medicine, finance and the banking system (the Medici family), modern global commerce, the man who discovered America have in common? They all came from Italy (Rome). And the Vatican and Catholic Church seem to be doing fine as well.
I think America will be doing equally well in 1000 years (the number of years that these men lived / events happened after the proverbial “Fall of Rome”). Even though the center of the financial world may have moved many times over that millenium (as it has the past 1000).
We all need to just take a ‘lude and relax. The world is NOT coming to an end.
February 2nd, 2009 at 4:46 pm
do you know the unemployment numbers in southern Italy? It’s incredibly high. The world may not come to an end but there will be a systemic shift in our standard of living.
February 11th, 2009 at 2:15 pm
I’m impressed.
With all due respect, Dr. Panarin has painted a rather simplified version of events. Certainly the time frame is now unrealistic. Perhaps adding another five to ten years might make it more palpable. Nevertheless, to see the blindness of those responding definitely shows why someone with Dr. Panarin’s intelligence would arrive at such a conclusion.
Americans are clueless about what goes on in the rest of the world. The responses above demonstrate this. The poor in the US don’t live better than poor in other countries, that’s simply ignorance. Being the melting pot of the world doesn’t give the rest of the world a stake in this country at all. Owning US debt does, but emigrants don’t. Americans have always shown a great ignorance of the rest of the planet, and these responses demonstrate this clearly.
We are becoming an ex-superpower, this is sure. When the world decouples from US debt, we will start resembling a third-world country more than an industrialized one. Our mfg base is all but disappeared. The UK is ten times worse off. We have brought this upon ourselves, and we are now obligated to pay the piper. The bill is expensive, but is due.
I don’t think the US will disintegrate unless there is a major uprising by the people which is about as likely as a snowball reaching the gates of Hades. The yachts people drive around will disappear. Consumerism for the sake of spending will die away. The desire to fight as many wars as possible regardless of their need will go away. And the hundreds of billions of dollars being given to a handful of elite will end, but that’s to be expected, we have no more money.
Neither this program nor NAU is likely at this point. And Americans are too pampered to be worried about starting anything else. We’ll just be given our comeuppance and move on.
February 11th, 2009 at 6:29 pm
what you need to be thinking about in addition to the current economic problems is the big demographic problem starting in about 2012. Social security and medicare payouts, which are already not affordable for the US gov’t, are going to skyrocket and there is not enough incoming younger workers to fund the payouts. And there’s not going to be any way around this.
Any geo-political disintegration of mainland US would not happen for quite some time… like a century, maybe. But losing world reserve currency status… maybe. I see it’s possible if China gets it act together and leads economically.
February 16th, 2009 at 6:48 pm
my father who is a captain of industry for a chinese multi national and also retired from british and american multinationals summed it up best “when the United States sneezes, everyobody else catches a cold and some even die of pneumonia”
and commenting on a holiday newscast of a US walmart clerk being trampled to death, he commented that “anywhere else in the world rioting for basic life essentials like food and water and shelter would ellicit such callousness, only in america could it have been caused by a mad frenzy to buy a game console in short supply and in high demand”
’nuff said! thanks dad!
February 18th, 2009 at 6:02 pm
Hi! I am from Russia and I live in New Hampshire for 5 years. I am marriage and we have a 3 years old son.I love America same as I love Russia and I wouldn’t want at all that something would happen to America or it would fall apart.But the situation now here remined me a lot what had happened in Russia. I was a teenager when Gorbachev become a president and I remember how all people(expecially young one) was happy about him becoming a president.Older population of Russian people didn’t like him right away.They would always say that he will make USSR to fall apart.I am not that good in politic,but before election this November a lot of people was very excited about Obama becoming a president.They would be saying that he is young and he knows what he is doing(same as people talked about Gorbachev way back in Russia)I really hope that everything will get better in US soon.
March 10th, 2009 at 12:36 am
I will not state that the USA is going to collapse. However, I would propose a question to everyone who is so sure it won’t:
How is the USA going to pay it’s financial obligations?
Consider some facts:
Current federal debt (March 4, 2009): $10.9 trillion ($37,000 per capita)
GDP per capita: $48,000
Total US financial obligations: $65.5 trillion ($222,000 per capita)
Considering that the workforce has 141 million workers:
Debt per working person: $77,000
Financial obligations per working person: $464,000
The government is projected to add another $1.75 trillion or so this coming year.
I am ignorant on these topics so please help me understand how the government will solve these numbers?
March 10th, 2009 at 5:01 am
First off, the guy who wrote this is a Russian. Russia is in much worse shape than America. They absolutely need oil prices to be high, which is to say, they need America to have a very strong economy to drive up oil demand. So, if America goes down, so does the rest of the world. He is dreaming if he thinks it is any other way.
To answer your question, Kevin: consider that when you buy a house, you take on more debt than your annual income. You pay off the debt over 30 years, a little at a time, with interest. And hopefully for the person borrowing money, the money gets cheaper over time due to some inflation (at least that is the way it has always worked in America).
I propose it is the same way for the government debt: it will take years to pay off, and some of the pain will be relieved by inflation that cheapens the dollar. Those buying 30 year Treasuries right now, will not get back the value of what they put in (who would buy a 30 year Treasury at 3.5% interest? Are they crazy? but they do)
There is also some percentage of government debt that is backed by assets taken back from businesses (TARP, TALF, etc) Those debts will be paid back by the business that did the borrowing, or the government will (hopefully) be able to sell those assets at a future date. That will also reduce national debt.
But as you point out, the biggest percent of national debt are the accrued value of future social welfare payments (Social Security, Medicare, Medicaid, Welfare) and those will require future tax revenues. Those payments are also indexed to inflation and so won’t be reduced by a cheaper dollar. But the economy will also grow over the next 30 years (hopefully), so as a percent of the economy, it will not appear quite so intimidating at that future date.
We will all pay higher taxes and experience a less ebullient economy than the past 20 years, to pay for all of this. But the world will not come to an end, nor America.
March 10th, 2009 at 4:48 pm
Thanks for the response Brian. I certainly hope you are right, because a financial or complete collapse obviously would spell some horrible times for Americans. Just some further observations about the numbers considering your mortgage and inflation example.
By the numbers, perhaps it could be analogous to a man who makes $48,000 per year, and has a $222,000 mortgage. At an average interest rate of 4.15% (not sure what the actual rates are) he would be paying about $9,100 in interest for the year. A 25 year mortgage at these numbers would have a monthy payment of $1,185 ($14,222 for the year). He’d be making progress if he kept making his monthly payments, however, he isn’t. He is actually going to pay only the interest for 2009. (In fact, the government is going spend an additional $5,700. I’m not sure if that is borrowed or printed.) Now I’m not really sure how taxes play into the GDP, but it’s stated as 28.3 % of GDP on Wikipedia. So would that mean the man in our analogy is paying around $13,500 in taxes? If so, that would give him about $25,400 of disposable income after taxes and interest payments. If he makes payments on the debt that would bring his disposable income to $11,178.
It seems paying off the debt would require printing more money, which would cause massive inflation. Or it would require increasing taxes, which would hurt the economy and make people’s lives difficult. Alternatively, they could cut government survices which would no doubt cause civil unrest, or at very least some very difficult times for the citizens. Of course, there is the third uption presented in this article. That is, the government just keeps doing what it’s doing until it can no longer pay it’s obligations and goes into default, experiencing all the problems that go with it.
Now I’m sure this is highly over simplified, but it doesn’t look to optimistic to me. Perhaps the world will not end, but as you say, it would be very difficult times and I am not so certain it won’t spell the changes mentioned in this article.
March 10th, 2009 at 7:50 pm
No Kevin, I think your simplified answer makes good points that aren’t too far from the truth. I already suggested we are facing higher taxes (Obama and Congress will see to that). I do think we will need to tighten our belt, or reduce transfer payments in the future. Now is not the time for that. All classic economists believed you should either print more money (monetarists) or reduce taxes and spend more (Keynesians) during a recession or depression. I agree.
But once all that money printing does its trick, and it always has before, we need to reel in the growth so as not to have too high inflation. I do think we will have (and want) moderate inflation which people can tolerate since it is possible to plan and budget for 5% inflation. And it helps devalue the dollar over time reducing the burden of Treasury debt (again, I would not be buying long term Treasuries right here as they are sure to devalue). There is nothing wrong with devaluing the dollar slowly so people tolerate it.
Money is just a symbol on a piece of paper. There is nothing magical about $1. When I was ten years old, it was 10 candy bars. Today it may represent one candy bar. In 40 years it may represent a piece of bubble gum. Who cares as long as income rises as fast as inflation? Buffett agreed with the reality of this scenario in his CNBC interviews on Monday, without giving a particular number for inflation. If inflation gets out of control, we already know the recipe to fix it: jack up interest rates above the rate of inflation and squeeze it out of the economy. I was there in 1980 when we did that and it wasn’t too bad. I even found my first job in 1982, at the bottom of the deep recession caused by high interest rates. You just had to buy 15% 20 year Treasury bonds at the top and you did quite well.
I think the wealthier segment of the population will bear a bigger burden for many years. That was bound to happen with or without a Dem Congress and Admin. The best way to solve the retirement entitlement problem is to limit distributions above a certain income or tax benefits higher to return payouts to the Treasury. Social Security (the second word is security, not guaranteeed pension) will not be worth much for the top 10-20% of wealth in America.
One thing I know for sure, every time the economy gets in a big bind, the dooms-dayers come out of the woodwork. It happened in the 1930s and again in the late 1970s (which I personally remember). But we always find our way through. Really, the ingenuity and productivity of 300 million people can not be discounted. We do make things difficult for ourselves in a market based economy (ruled by greed and fear), but we always find our way. I gave the ways we have done it in the past (a little inflation, a little belt tightening, more immigration to add to our workforce / taxpayer base, a little more taxes until we start running a surplus like in 1999). We will get through this and I am still buying stock.c
February 9th, 2010 at 12:26 pm
Anyone that believes the employment market is thawing does not have access to the facts and some simple numbers. The US
produces 5.1 million higher education degrees a year. People ready to work. There us an estimated 15 million people out of work already. If you can believe this ridiculous under estimate. The President believes he can
create 2 million jobs over 10 years and considers this an achievement. With just some very simple calculations. Low and behold the US has over 50 million degreed people and only 2 million jobs. Add in the people that are out of work and presently looking. Scrape Bureau of Labor Statistic numbers. Or maybe US agency officials believe 50 million
people will die or leave their jobs. Finding work in the US
is and will be like hitting the lottery unless those fools
get off their butts and rebuild the economy. Dump NAFTA
and start utilizing trade barriers and tariffs. Protect
the American Public not foreign policy. DUMB-BOS
February 9th, 2010 at 1:06 pm
Actually trade barriers and tariffs are now thought to have exacerbated the great depression.
the government should stop throwing money after failing industries and just let them fail. better to spend that money on healthcare, education and unemployment assistance.