[With debt spinning wildly out of control and the States threatening to revolt against the tyranny of Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the nation would look five years from now.  In the essay below, John Skerencac finds these times too volatile to predict, other than to say that some very dramatic changes are surely coming. On the positive side, he sees a nascent revival of America’s manufacturing sector and a trend toward fiscal austerity. But if we fail, he says, there’s always the “Mad Max” option. RA] 

Rick was nice enough to ask me to write a short essay stating my view of what the world will look like five years from now. Perhaps with enough of us engaging in an intelligent exchange of ideas, we might help each other make better decisions about where to allocate our resources. First, in my opinion, Congress will continue to ignore the ever growing budget deficit until outside forces compel them to take action. Scenarios for this include: 

• Enough States stand up to D.C. and make it obvious that the votes are there to bring down the Federal government via Constitutional Convention or 10th Amendment nullification. 
• The Federal Reserve’s three-card monte game of buying Treasuries somehow comes undone, causing an interest rate spike that creates havoc in the economy. 
• The world finally repudiates the Dollar as a reserve currency, leaving us no choice but to make draconian cuts. 

Feel free to add your own tipping point, but with the February budget deficit at $223 billion, I feel we are very close to a train wreck. I feel that when push comes to shove, and the D.C. gang feels threatened by the States revolting over the mess they have created for us, they will turn on a dime and make big cuts in spending and stop Federal meddling in State issues. 

That still leaves the massive National Debt to be dealt with. That is a very tough call to make once interest rates spike and it becomes difficult to service the existing debt. Will they selectively default? Will they make interest on Federal debt tax-free to lower what they need to pay? Will they declare a National Emergency and create a new currency and revisit FDR’s gold seizure?  And those are just the USA internal issues. 

The Positive Side 

What becomes of the Euro and the European Union? What role will China, Russia , etc. play in all  this? What happens when we bring our legions home at long last? There are so many variables, and powerful political forces in play, we have a social and financial simultaneous equation to be solved. It seems I have wound up with more questions than answers. 

I will be positive and wrap up with what I think the U.S. will look like five years from today. Free Trade Agreements have been scrapped, protective tariffs of some sort are in place. We will be well on our way to restoring a manufacturing base. Loss of reserve status for the dollar has forced us to develop oil resources; the Bakken field comes to mind. We have cobbled together some sort of replacement currency for the dollar.

Since Federal supports for housing are no more, house prices have settled down to reflect what wages alone will support.