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And they argued as they stood on the deck of the Titanic. Meanwhile the water came up to their ankles. The smell of myopia was strong in the room, filling the nostrils.

Let us look to 3 inflection points in the recent epoch of American history.

1. August 6TH 1945. The dropping the Atomic Bomb on Hiroshima was the day that America became hegemonic in the world militarily, economically and technologically. America became invincible in all things.

2. July 20, 1969 was the high water mark of America as a world power. It took 8 years from the date that the goal was set to what only a few years before seemed impossible. To land a man on the Moon. Now we could do it all. America could have Guns and Butter without consequence.

3. September 24TH, 2008. The day that President GW Bush came on TV and said the American financial system was in crisis and was melting down. That was the day that the perception of American invincibility in the world CRACKED. Not only have Americans lost their sense of well being, but the world now looks at America in a different light. At that moment the world changed from anything that most Americans who were alive had ever known before. Risk that had once only had been an abstract notion had become a reality.

Andy Grove said a few scant years before that "America was living on its reputation and would soon have to start proving it once again."

September 24TH 2008 was the day that the perception of American invincibility and illusion of being wealthy "cracked." Americans lost their sense of well being and the world looks at America in a different light since that day. The US had two choices to make at that point in the crisis.

1. Let the financial system and by default the economy of the US and world to crash and burn.

2. Try and bail out the system with the hope that it could be jump started and thus be resuscitated. Since this later course of action was the lessor of two evils it was the course adopted.

What happened in essence is that the private sector debt was assumed by the public sector which combined with the existing public sector debt has created the MOTHER OF ALL BUBBLES the Sovereign Debt Bubble. The efforts of the US government, Federal Reserve, various European governments and banks have all been aimed at putting Humpty Dumpty back together again. The jury is still out on whether the US economy can sustain it self without a Quantitative Easing program. Further it might be said that the US economy being a behemoth is not easily killed and would of on its own hook have recovered some sort of equilibrium.

What is not understood is that this new equilibrium is in essence a new paradigm. This is something that most people don't understand as they want to continue to apply governmental and Federal Reserve supports to go back to the illusion of being wealthy that was broken on September 24TH 2008. This is where President Obama has been found particularly wanting and shows that his sagacity quotient is practically non existent as he has never realized that a new paradigm was at work since September 24TH 2008. This becomes evident with his statement, "That it is a shame that there are 45 million people without HC insurance in a rich nation like America." Not only has President Obama and his Democrat Party not realized a new paradigm has been established they want to continue on with a living better through a bigger and better government program as if nothing has changed. All of which is and has created a huge ticking time bomb of Sovereign Debt.

The net psychological affect of what happened on September 24, 2008 was that the dsyfunctionality of the US financial and economic system of trying to maintaining the illusion of America being a wealthy nation shattered like Humpty Dumpty. No longer could America hide the dsyfunctionality of its being overleveraged, whether it was through CDO's, home mortgages via Freddy and Fanny ,hiding deficit spending by using the accounting gimmick of making the SS Trust an accounts payable instead of a debt, state debt or national debts. Since Government debts affects the monetary system which is the very foundation of any economy, everyday that goes by that the National debt climbs makes the US economy that much more of a precarious situation. Since the USD is the Reserve Currency and the US economy the largest in the world, the question then becomes who is large enough to backstop the US government in case of a debt crisis? The answwer is that there is no one large enough to backstop the US and thus there is no place to run as the world economy will fail also.

The US has for decades been using both public and private debt instruments to maintain the illusion of being hegemonic economically. This debt has now become so large and unwieldy that it can no longer be masked and has several ominous potential side effects

1. The US National debt is becoming so large and the US position so central to the world economy that it can destroy the Global economy if and when a debt crisis should occur

2. This debt puts a drag on the US economy and is to the point where it is making the US economic growth moribund. It is only a matter of time before the debt level will be so great that it will make economic growth impossible.

What these debts masked was changing economic conditions for the US economy as the Global economy took root and began to grow. The US to remedy the structural competitive malaise it finds itself in, beyond the problem of debt and deficit is to bring taxes, regulations and wages into line with the rest of the world.

The US has 2 choices one is to move in that direction on its own accord or to have events dictate actions. One should remember that the great US prosperity boom of the post WW2 era was an aberration in history which was not unsustainable as the Global economy began to rebuild itself and grow. The failure of the US was not to understand this phenomenon and make the necessary changes to meet exigencies.
M