A decade of hell and the fall of America

The above chart (h/t Economist's View, "How long will it take for the economy to recover?") issued by the CBO describes what should be the central discussion amongst Americans.

While the developed world was on summer vacation, the economies of Europe and America have begun to decline in an alarming fashion.  Europe is scrambling to stabilize its weak perpherial economies. The march of the PIIGS has expanded to the point where Spain and Italy are no longer just question marks.  European banks are seeing formidable potential losses arise from sovereign debt issues.  Credit is tightening up and these same European banks are looking to national governments and the EU for assistance. Indecision amongst Europe's prominent leaders and a growing populist revolt across the continent have contributed to growing unease in the markets. The breakup of the entire European economic union and the failure of the Euro currency is now seriously being considered.

In America, zero jobs were added to the economy last month. Growth for the second quarter (Q2-2011) was revised to 1% (annualized).  Financial institutions like Bank of America are in trouble and Warren Buffett has again been brought, as the non-governmental creditor of last resort, to prop up the ailing bank. The Republicans have inflicted serious damage to the American economy, in their traitorous advancement of no-taxes and no-growth governance.   Obama is floundering in his dismal attempt to appease his corporate backers, while carving out a middle path for his own election.

The above chart should make you terrified.  Although the rose-colored glasses of 3.5% annual growth is being portrayed, it is the green line with 2.5% growth that is most alarming.  The difference of 1% means that America effectively will lumber along for the next decade with little to no growth, unemployment will remain obscenely high, structural unemployment and a permanent underclass will arise, the deleveraging process will take longer, and governments will be unable to adequetely deal with further social or economic problems effectively.  This is the best case scenario we are working with at the moment, taking into account the data and Rogoff and Reinhart's post-crisis modelling.

Now consider that the world heads into a protracted recession, with China crashing shortly afterwards -taking those countries like Canada and Australia that have been dependent on commodity exports with it- and you've got a recipe for global armageddon.  The world stops growing and economies across the planet try to dig themselves out of this hole.  Here too the data suggests as in the case of the Asian and Latin American crises, that a ten year window will be required to get back any reasonable trendline.  The implication is an entire generation of workers see reduced income, mounting debt, and insufficient job opportunities.  How are these countries going to pay for the benefits sold to the baby-boomer generation, when the children of the boomers are unable to find long-term jobs and thus fund those liabilities?

We have come to the end of the line.  All the major economies of the world are now posed to fall and in that cataclysmic descent, we shall venture hopelessly through a decade of stagnation, decline, and possible collapse.