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I just finished reading a bit of a “futurist” prediction from Alfred McCoy, a professor at the University of Wisconsin-Madison.

“How America will collapse by 2025“

In it he proposes a series of scenarios under which the “US century” will come to a crashing end, as, he states, has occurred to the UK, France, USSR and countless other empires of bygone years.  The scenarios are as follows:

  • General Economic Decline: Dollar loses its status as a reserve currency, deficits can no longer be funded, US military overseas cut down, soaring prices, rising unemployment, general unrest, cyber warfare and at the end the election of a far right candidate to push US power worldwide, but by this point it is too late.
  • Oil Shock: Oil no longer traded in dollars, but in a “basket” of competing currencies or even in a new reserve currency not attached to any single country, US can no longer patrol the Gulf region and has to abandon the entire Indian Ocean, prices skyrocket and an economy that has done nothing to prepare itself for an alternative energy source spirals out of control.
  • Military Misadventures: Pretty self-explanatory.  Iraq, Afghanistan…Iran?  Never-ending need to satiate the military-industrial complex eventually leads to huge deficit and overreach, leading eventually to a US “Suez Canal” moment like that which quickly spelled the end of the UK and French colonial eras.
  • World War III: The author predicts rising tensions with China, especially through cyber attacks and competition in the Western Pacific in waters that China increasingly considers to be Chinese.  No casualties are predicted though, since Chinese military technology will simply outclass the US and hackers will be able to deactivate US drones, equipment and so on within a matter of hours- Equipment whose components likely came from China.
  • New World Order: The US, Europe and Japan shed their relative power to the BRIC countries faster than ever before.  What comes out of the ashes of the great unknown could rival anything from powerful regional blocs to a comprehensive Westphalian system as existed in the wake of the Napoleonic wars in Europe whereby a “Balance of Power” is rigourously enforced and no one country is allowed to dominate.

See also the following articles:

What do you think?  Will there be a specific “scenario” or “trigger” that signals a quick exit of the US as the premier hegemon?  Or maybe you already believe that it has already lost the claim to being the only hegemonic power?  What would the post-US world look like in your opinion?

The accuracy of “Futurism” is obviously difficult to measure and is grounded on assumptions.  Events can change, often at a blinding speed.  War with Iran is now a possibility.  The Eurozone has deteriorated greatly since the article was written (notice that his “basket” of alternative Oil currencies includes Euros in the 2025 scenario).  I personally doubt the possibility of the World War III scenario since China and the US are too intertwined economically for this to make sense.  Instead, I think that a realisation that the US can no longer finance foreign wars and 100+ military bases will catch up with US politicians too late and that this, combined with general economic decline and an over-dependence on oil, really could signal a major problem for the US in 10 years’ time.  Even if all of these scenarios don’t come to pass, the US certainly isn’t realistically tackling its ballooning trade deficits.  FATCA and citizenship-based taxation certainly do not help either to make the US an attractive investment location or exporter of goods.

39 thoughts on “Is the US going to collapse by 2025?”

  2. @ Don My problem with this prediction is that I don’t see how the USA can last until 2025. I wonder if it will even last through the next presidential term. The United States is already insolvent. It borrows 40 cents for every dollar its spends. It is Greece with a printing press.

  3. The US needs to make a very sharp turn right away or the America we used to know will never return. They need to get back to being all businesss all the time. No more wars, no more hating the job creators.

    Obama has made the situation so much worse with his rhetoric against the rich. If he gets reelected the US is finished in my opinion.

  4. The U.S. is on the way out and FATCA will be the final nail in the coffin. Imagine giving people incentives to avoid the U.S. financial markets? How stupid is that? But, they are intent on going forward. There won’t be much effect for the first few years, but after about a decade people will have figured out how to avoid the U.S. altogether.

    But, that doesn’t mean that other countries will become number one.
    How about a decline of the nation state in general? Have any of you read the books by James Dale Davidson? Would recommend “The Great Reckoning” and another one (that is more recent) called “The Sovereign Individual”. It is incredibly interesting. He talks about “exit taxes” (and this was researched in the 90s).

    http://books.google.ca/books?id=O4aOAAAAIAAJ&dq=editions:ISBN0684832720

    Here is a pretty good review:

    “User Review – Flag as inappropriate

    The response of the reader to this book has a lot to do with their emotional attachment with the subject matter. They predict the collapse of the nation-state, as an institution. For those people who have an over-developed sense of patriotism (“My country, right or wrong”) this book is an affront. For those who view modern Government around the world as rapacious, grasping, and inefficient, or as “Vast criminal conspiracies”, this book does not go far enough.

    So to benefit from reading this book, put aside your preconceptions and prejudices. Keep a highlighter handy, and mark the passages you find particularly meaningful, or make you particularly angry. (See, you did have preconceptions and prejudices after all!)
    Further, I would recommend that once you have read the book, you re-read it at your leisure, and Google the most astonishing disclosures.

    OK, now we have disposed of reading methodology, on to the content.

    As a student of history, I enjoy authors who are able to show their firm roots in the past, and use them in a logical way to make their predictions for the future. The authors have a fascinating history of being right on the money with their predictions. In the mid-1980’s, when they predicted the collapse of the Soviet empire, the fall of the Berlin Wall, the civil war in Yugoslavia, they were ridiculed by CNN and every other news network. All the American pundits got it dead wrong, and ever since, when these two men write, smart Americans keep their mouths shut.

    I first read The Sovereign Individual in 1998, at the recommendation of a very smart young friend of mine. Thanks, Ben. 🙂 I recently revisited the book (a hard-cover costs 1 cent on Amazon, with a $3.99 shipping charge), and now that we are some 13 years further down the track, what appeared to be rather “out there” predictions are actually happening.

    So on to the subject matter.

    The Sovereign Individual starts by outlining megapolitical change of the past. Their hypothesis is that, about every 500 years, there have been pivotal changes that have led to a complete restructuring of society. The rise of Feudalism around the end of the first millennium is fascinating, and they lay their groundwork well. Then, the Gunpowder Revolution at the end of the 15th century, which changed the balance of power and vastly increased the profitability of war (State violence), and over time led to the birth of the modern Nation State structure that rules the world.

    The point of laying this strong historical foundation is to show how the next megapolitical change is upon us. Virtually free, high speed, global communication, they predicted when they wrote this book in 1995, is going to create a new world which is going to destroy the Nation State from the inside out, and allow talented people to elect where they live, and which Government they will reward with their taxes. In other words, the talented will become elective consumers of Government, rather than prisoners of the Government where they were born.

    Along the way, they point out that the reaction of Government to the departure of their most talented, along with their money, must be prevented. They illustrate the point in the US, using Bill Clinton’s 30% departure tax for any very wealthy American who chooses to leave the US.

    Further, they point at the markers of Nation State failure: the news services become more partisan, and do less actual reporting, making the news more fictional. Organized crime takes a bigger role in Government from the inside, with corruption becoming the rule, rather than the exception. The rise of smaller organizations that are criminal in nature, and get enormous returns for the violence they commit in the protection of their revenues, such as the drug cartels and the Russian Mafiya —- I could go on, but by now you should get the point.
    To conclude, my return to re-read The Sovereign Individual is showing me that the remarkable predictions the authors made back in 1995, when the book was written (published early

  6. Yes, that was also a great book. A much quicker read (which is probably good). I should say that if you want to read James Dale Davidson you need to settle in for a bit of work. But, it is well worth it.

    I will risk a video:

    I talks a bit about Geithner.

  7. I don’t believe that the US is going to come crashing down. The US will blow up any country that challenges or threatens it in any way. They are so agressive in order to try to keep the #1 slot. Whether it backfires on them, I really don’t care…

    America’s “character” is much more different than Brazil, which is the B in BRICS. This country is not aggressive. They keep to themselves, they don’t try to micro manage their citizens’ lives like the US does, and they don’t have any enemies that I know of. Just with the last fact alone, I will be very happy to have one of their passports.

    Military officers are paid quite well compared to US military officers, especially when you consider that they receive 100% if retirement pay and benefits and in the US, the maximum I believe is 50%. But there are so few positions and there is a lot of competition for slots to be a military officer here. Conscription is also practiced here, but I don’t know anyone who served as an enlisted person. I think it has to do with the cost and they just don’t want to spend money on the military. Yes, once I naturalize I will have to register for the military here, but I’m not worried about because I bet I’ll easily qualify for one of many excuses.

    In my humble opinion, I don’t even think that Brazil is even trying to compete with other countries, especially the US. They just mind their business and do things that will benefit then, When I start talking about competition, Brazilians say “That’s American!”

    @omg – I think the US crossed that line on 9/11. The 90s were best decade that climaxed with the dot com bubble. Since then, I have never heard any good news coming out of the US.

  8. I agree that the US is in decline, and further that FATCA will simply steepen the slide. How a country could enact such self-destructive legislation is beyond me. Every major country in the worid is probably looking forward to the day when it can ignore a US request to jump, rather than ask “how high.” I don’t think that day is very far off.

    But what really amazes me is how oblivious Americans are to this process. Reminds of the Brits circa 1930, and then again circa 1950, when they couldn’t fathom the end of empire. I recall that Churchill, after his last election as PM, famously said that he wasn’t elected prime minister to preside over the dissolution of the British Empire. But that’s exactly what he did.

    I agree with Petros that this fall will be much quicker than anyone realizes. Once the real impact of FATCA becomes known to the global investment community, all things American are going to be very toxic, and there will be a great sucking sound as investment capital flees the country. It hasn’t happened yet because we’re still in the draft guideline stage of all this. And don’t underestimate just how significant is the fact that China wants no part of this. If they start to see evidence of a capital flight, their appetite for US debt will completely dry up, and once they decide to pull the plug there will be a rush to the exits.

    History is going to repeat itself. Most empires collapse not because of any external threat, but because of rot from within. The US is now showing that in spades.

  9. I believe the most likely scenario is the first one stated. USA will lose their world reserve currency status. The whole US economy is based on having this status and the ability to create a currency out of thin air that is accepted in almost any nation. Probably the Chinese Yuan or some new selection of currencies will replace the USD in trades. As soon as the major holders of USD can divest themselves enough to withstand the economic crash that will occur as soon as the USD loses it’s status.

  10. What is this, the Doom and Gloom society 🙂 ?? Remember this is not set in stone. Changes can be made. I personally hate the FARTCA, but as I said earlier, they can always change it. However, I doubt anything would change regarding the repression of Americans oversas.

    Plus, who knows what the US is promising in return for these countries to sign on?

  11. @geeeez I think that the real problem for the United States is that the basis of its trade, and thus its ability to put cheap goods on its store shelves, is not real. The trade deficit is based on the United States ability to trade currency for goods and that will soon come to an end.

    This bodes ill for the current global economy, because the measure of all things continues to be the dollar. But once the dollar is shown to be the sham that it is, the efficiency of trade and the value of all things traded will then have to find some other standard. As it is, most of us cannot even imagine a world in which the dollar is not the measure of value. Take for example gold: When was the last time you heard the following: “The dollar closed up today at 1/1750th of an ounce of gold; that’s up from 1/1758th of ounce of gold from the day before.”

    Yet in today’s market even gold is not real–for there is a lot of paper derivatives of gold that influence the daily dollar/gold ration (such as unallocated gold certificates and gold futures).

  13. The real acid test for US policymakers if they want to turn things around is whether or not they impose a VAT/GST and be willing to “Mulronenize” themselves. A GST in the US would whipeout a huge amount of underground economy and provide a stable counter cyclical revenue source. If Obama”s goal is provide a more European/Canadian style welfare state you can’t do that on income taxes alone.

    Currency is a huge issue for the US. One thing I’ll say in Canada is just about everything is priced in Canadian Dollars even tradeble commodities such as Jet Fuel. On the otherhand in a lot of developing economies the US dollar STILL serves as the effective currency. Britain created huge problems for itself for a period of almost fifty years by not managing its exchange rate properly.

  15. Compare 9/11 with a turning point from about 1600 years ago. That is about 60 generations back, give or take 10. Some of us live to see parts of five generations. So, not really that far back. In 410 the Visigoths rampaged through Rome for three days. A literary monument to this event is Augustine’s City of God. The potted schoolchild date for the fall of the Roman empire is 476. Things move faster these days. Much of that additional speed is fuelled by petroleum!

  16. @geeeez

    I couldn’t agree with you more – I lived in the US from the late 90s through the early 2000s, and the change was really dramatic. I very much enjoyed living in the US in the late 90s and couldn’t believe how quickly the country had changed by the time that I left. I visited two years’ ago and was absolutely shocked at how bad things have become – I refuse to return again after this last trip as well due to my “enhanced patdown” by the security staff at the airport.

    Agree with Petros as well – I think even the author was claiming that the US will collapse at the latest in 2025, not that that is the moment that it will happen. The US needs to introduce a VAT like Tim said, withdraw all overseas military personnel and close all bases, probably raise income taxes, simplify the tax code, get rid of FATCA, end citizenship-based taxation to increase exporting power and reduce its dependence on overseas oil. The US seems intent on driving itself to oblivion though. I wonder if this is the most predictable decline of a world power in history?

  17. @usxcanada

    I think that 476 is a bit of an artificial date to give us a clear period of time when Rome existed (ie 700s BC to 476 AD). I would argue that the Empire really fell in 454 with the death of Flavius Aetius (the “Last Roman”) and was essentially controlled by Ostrogoth warlords for 20 years who decided to just formally end the empire when they realised that they was no longer any need to keep a little kid, Romulus Augustulus, on the throne. The Roman Senate itself existed until the 500s AD, but had no real power.

    I wonder if the US will break up as well. We see more and more signs of a sense of a growing regional identity in the US as Victoria mentioned in another thread. Independence is openly discussed in Alaska and Texas, and a movement is growing in California. Most Americans view these movements as nonsense nowadays, but events certainly can change quickly. Many of my friends in California complain that it receives only 78 cents for every dollar it contributes to the US government, whilst small states in the Mid West and the South sometimes receive something like 2.50 dollars back. Just wait until Fox News decides to report that – It reeks of European SOCIALISM!!!

    http://mediamatters.org/blog/201011160026

    Oh, but wait, they won’t because it tends to be the rich blue states supporting poor red ones 🙂

  18. Not too long ago I was talking with some folks in Seattle about a senator from a southern state who was trying to get federal money to get a harbor dredged. The universal reaction to this on the part of Seattleites seemed to be, “if they want their harbor dredged, then they can damn well pay for it themselves.” The answer to that, of course, is that they can’t pay for it themselves. I was talking to a taxi driver when I was there last summer and there was a huge influx of people from other parts of the US into the Pacific Northwest after the 2009 crash. His take on it was that the natives were not thrilled. Even Seattle didn’t weather the economic downturn unscathed. I saw public libraries that had to close because of budget problems. Basic infrastructure is in terrible shape. My daughter checked out an IB program at one of the local schools – the program was fine but the school itself shocked the hell out of her. She had never seen an inner city American public high school before and she doesn’t ever want to see one again.

    That said Americans are pretty resilient and overall fairly optimistic. The economy will get better, I think. Will it ever be what it was? I doubt it. But it will still be a nice destination to live and work among many other very nice destinations in the world.

    And that brings me to what I think is the real issue. It’s not much that the US is or isn’t in decline – it’s more about the rise of everybody else. Sure Europe has problems but France is doing OK. Germany seems to be fine. Asia is a real magnet – tons of opportunity. I was in Shanghai for the expo and to tour start-ups. Wow. Made you dream. India too. Went to Bangalore, Pune, Mumbai, Madras. More wow. Saw tons of construction and met a lot of really energetic and entrepreneurial people in Casablanca when I was there earlier this year. The US will still be important for some time to come but today there are really good alternatives if you want to be a part of globalization and the international migration movement. And if you happen to be one of the 10% of people with good qualifications and a profession that travels well, then the sky is the limit. You can go practically anywhere you want. None of this is Obama or Bush’s fault – it’s just that the world has changed and what was true 20 years ago is no longer the case now. It just isn’t and it would be much more productive to deal with what is, as opposed to wasting time crying over what was. My .02.

  19. I just watched a really depressing video on BBC entitled “Poor America – Some Kids are making Ketchup Soup”

    http://news.bbc.co.uk/panorama/hi/front_page/newsid_9695000/9695217.stm

    I think it is stories like this that really get lost in these sorts of geo-political discussions about economic decline. Frankly, I find this to be disgraceful that over 20 million are earning just 11,000 dollars in the US and can barely eat, yet the US government is squandering money on military adventures.

    The US will probably collapse, and while that won’t make me shed any tears for the US government, I am very worried about what will happen to the average person in the US when this does, considering that they already receive so little support.

    If anyone reading this is based in the UK you can watch the whole programme tonight on BBC One and later on iPlayer. I imagine that it will eventually migrate to Youtube and I will try to find it and post a link when it does.

  20. @Don – Yes, I may not be living in the US but I have still have my parents in Seattle and a whole host of nieces, nephews and cousins there. Not for anything in the world do I want to see any of them hurt or in trouble. So I do hope things improve. I really do.

  21. The US has a major problem. It’s top export is the dollar.

    http://righteousinvestor.com/2010/11/05/the-us-dollar-americas-greatest-export-jim-grant/

    http://righteousinvestor.wordpress.com/2010/10/09/the-chief-export-of-the-united-states-the-us-dollar/

    Now the dollar is not worth anything real: it is only symbolic in value, a derivative. But the symbol is now being watered down with low interest rates, quantitative easing, and 1.5 trillion dollar federal deficits. This erodes desire for the dollar and confidence therein.

    But in contrast to Victoria’s rosy picture of the US and the rest of the world, I say, Be prepared for the worst (and hopefully the worst won’t happen, only the bad). The United States has already defaulted. The Federal Government spends over 40 cents for every dollar it brings in. There is also equally troubling debt at the state and municipal levels. This is fairyland. It can’t continue. And when the gravy train stops, people will riot in the streets. All the government employees, all the people on welfare and food stamps, all the seniors not getting their social security, and/or the military who are not receiving their salaries. Something has to give. Hyperinflation or austerity: pick your poison. In the first scenario, hyperinflation, government continues to pay out but the money becomes worthless. In the second scenario, austerity, government cuts back to a balanced budget and lets the interest rates go back to normal, but then people don’t get the money their used to getting. Either one or the other. Take your pick. But they will both result in the same thing: riots.

    The juvenile delinquents in Washington knew this was going to happen 30 years ago if they kept down the path they were going, but they did nothing to stop it. Did they fix Social Security? Medicare, etc.? No! They just added more entitlements along the way. And now there are unfunded liabilities that can never be repaid (60 trillion). Every pension plan can determine what funds are available for future liabilities but the United States has spent all the Social Security taxes and the Social Security System is sitting on a pile of I.O.U.s from the Treasury, meaning that they will have to tax the American people a second time in order to pay it out. There is nothing in Social Security. Nothing.

    So there is gonna be hell to pay. Yes, perhaps the American people are resilient, but they better get used to living on a lot less, and they and the rest of us are going to have a big wake up call that the only things that really matter is what is real not what is derivative. That is why I have a spam collection.

  23. I’m with Victoria – I’m against the treatment of People Born in American that Live Abroad (PBIATLA), but I don’t want the US to fail. You know why? If the US fails, it will take down the global financial system. Everyone around the world would be affected in some way. The situation may go away quickly, it may not.

    This whole global currency war was started by the US to pay for the Iraq war. Many countries didn’t want to “donate” for the war (except Japan), so the US made them pay anyway through currency devaluation.

  24. @ geeeez Who wants the US to fail? It has failed already. It is just a question when and how we see the fall. You can kick the can down the road towards hyperinflation, or you can deal with it now, austerity. But you can’t avoid the problem.

  25. Would US currency devaluation be good for expats as you have money oversea anyway ?

    13 years ago, I moved to US and I took a job of $45K US (at that time, it was around $82K in Canadian Currency, that was almost twice as much I was making in Canada then). Now, I am making almost the same amount money in Canadian currency as I was making 13 years ago because US currency devalued.

    Then what is even worse, the RRSP is inflated — and ending up more penalty inside OVDI.

    The cost of living is not cheap here though. 13 years ago, co-pay for doctor’s office is $8. Now it is $25, and insurance premium has also increased (but that is pre-tax), Rent is also doubled. My spending has been tightening

    I thought the better days are ahead of us — I can’t imagine it is getting worse.

    Good things, I live cheap, and I teach my kids to live cheap. As long as we have something to eat — we won’t join the riot.

    I do think US needs to make products — not to make more rules/laws (stupid ones) and that will only make lawyers and CAP rich — and they don’t produce anything except making it worse (no offense to lawyer and CPA).

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