Is the U.S. Becoming a Third World Nation? by Charles Hugh Smith

You don’t have to look too hard to uncover many similarities between the US and a typical banana republic. From Charles Hugh Smith at

This is a chart of an informal kleptocracy which cloaks itself in the faux finery of democracy and a (rigged) “market” economy.

Back in the day, nations that didn’t qualify as either developed (First World) or developing (Second World) were by default Third World, impoverished, corrupt and what we now refer to as failed states–governments that were incapable of improving the lives of their people and the machinery of governance, generally as a result of corruption and self-serving elites, i.e. kleptocracies.

Is the U.S. slipping into Third World status? While many scoff at the very question, others citing the rise of homelessness, entrenched pockets of abject poverty and the decaying state of infrastructure might nod “yes.”

These are not uniquely Third World problems, they’re symptoms of a status quo that’s fast losing First World capabilities. What characterizes Third World/Failing States isn’t just poverty, crumbling infrastructure and endemic corruption; at a systems level these are the key dynamics in Third World/Failing States:

1. The status quo protects insiders at the expense of everyone else.

2. There is no real accountability; failure has no consequences, bureaucrats are never fired for incompetence, reforms are watered down or neutered by institutional sclerosis.

3. Pay-to-play is the most cost-effective way to influence policy or evade consequences.

4. The status quo is incapable of differentiating between complexity that serves the legitimate purposes of transparency and accountability and complexity that serves no purpose beyond guaranteeing insiders’ paper-shuffling jobs. As a consequence, complexity that adds no value chokes the economy and the government.

5. There are two sets of laws: one for insiders and the super-wealthy, and another harsher set for everyone else.

6. The super-wealthy fear nothing because the system functions to serve their interests.

7. The super-wealthy and state insiders control the media’s narratives and the machinery of governance to serve their interests. Reforms are in name only; the faces of elected officials change but nothing changes structurally.

8. Insiders, well-paid pundits and the technocrats serving the corporate and state elites believe the status quo is just fine because they’re doing fine; they are blind to the soaring inequality, systemic corruption, stupendous waste and the impossibility of real reform.

Does America’s status quo protect insiders at the expense of everyone else? Yes. As for the other seven characteristics: yes, yes, yes, yes, yes, yes and yes.

And lets’ not forget #9: the vast majority of the economic gains flow to the elite at the very top of the wealth-power pyramid: is this true in the U.S.? Definitively yes. Just look at this chart: this is a chart of an informal kleptocracy which cloaks itself in the faux finery of democracy and a (rigged) “market” economy.

That’s the very definition of a Third World failed state.

3 responses to “Is the U.S. Becoming a Third World Nation? by Charles Hugh Smith

  1. William Pittman

    No need for tariffs or trade wars, and no need for interest on federal debt to become so large that it becomes the largest portion of the budget. Monetize the federal debt, which would somewhat weaken USD, and take increasing interest burden off taxpayers’ backs. A weaker USD would make farmers and manufacturers more competitive in global marketplace, and would make imports less attractive. The Fed could incrementally create USD sufficient to buy the debt, and it could be kept forever in the portfolio with bank debt and other nations’ sovereign debt acquired during QE. This would cost taxpayers nothing, since interest Fed earns on loans flows back to Treasury. QE showed us that creating more USD does not result in hyperinflation, since USD has remained at record highs vs. other currencies, as can be seen in the DXY historical chart. This is because USD value is psychological rather than based on a store of value such as gold or silver. Fed could take this action, and not have to lower rates, so savers would not be hurt.


  2. William Pittman

    Some other points to consider: Most are aware of the federal debt and the increasing interest bomb. Few would vote for additional taxes to pay it down. Monetizing would be only effective way to eliminate it. And it is fair, since the debt belongs to all of us. We elected the officials who ran it up. Monetizing it is least burdensome; may be barely noticed, as evidenced by the effect on USD when the money supply was expanded during QE. It only gets worse the longer we wait, and if unchecked, it will eventually bring us down more than any hostile foreign power.


  3. William Pittman

    A little about too strong USD: In mid-2014 the value of USD vs other currencies was manipulated higher (see DXY historical chart). Kerry visited the Saudi king, and shortly thereafter the Saudis decided to act against their own apparent self-interest, flooding the world with oil, and bring the price down from $100+ to under $30 by 2016. At the same time a cabal (probably central banks and cohorts) began a scheme to crash the gold price vs. USD by shorting paper gold ETF’s in one market and later covering in another market. Gold bottomed in early 2016. DXY went from 70-80 range to 90-100+ where it has remained. Why did they do this? My guess is it was a prophylactic measure against hyperinflation that could have resulted from QE, but didn’t. Now, we are stuck with the consequences, ballooning trade deficits, and ineffective and unpopular tariffs and trade wars, as our farmers and manufacturers are handicapped by too strong dollar. It should also be noted that the world’s poor are hurt by the dollar’s strength when they buy essential commodities which are priced in dollars using their home currencies.


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