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3. HOW STATES COLLAPSE: INTRODUCTION AND THE LOGIC BEHIND DEBT CYCLES

Mike Miller
4 days ago
4 min read

THE AMERICAN DEBT CYCLE – A REVIEW OF 80 YEARS (1944–2024)

Introduction:

Why the USA is the Most Important Case

The United States of America is not just any state. Since 1944, it has been the dominant economic, military, and monetary power in the world. The US dollar is the world's reserve currency, US government bonds are considered the "safest haven," and the decisions of the Federal Reserve influence global capital flows. But precisely for this reason, the analysis of American debt development is so significant: If the most powerful state on Earth succumbs to the debt cycle, the world follows. The following review shows in stages how the USA has followed the same mechanisms since World War II that previously brought down other empires – only on a larger scale and with global impact.

Phase 1: The Gold-Backed Order (1944–1971)

1944 – Bretton Woods Agreement: The US dollar becomes the global reserve currency, backed by gold. Other currencies are pegged to the dollar, which in turn is convertible into gold ($35 per ounce). The USA is considered the anchor state.

Quote: "The system was stable as long as there was confidence in the dollar's gold value." But already in the 1960s, US spending rises – for the Vietnam War, social programs (Great Society), and consumer promotion. Gold reserves shrink.

1971 – Nixon Shock: The USA unilaterally abolishes the gold standard ("Temporarily," as Nixon said). The dollar becomes a pure fiat currency, backed only by trust – not by substance. The first step into the debt-driven cycle is taken.

Phase 2: Inflation, Repression, and the Interest Rate Weapon (1970s–1980s)

1970s: The inflated money supply leads to high inflation (double-digit). The oil price shock exacerbates the situation. The dollar loses value, and confidence erodes.

1980–82: Paul Volcker, head of the Federal Reserve, raises key interest rates to over 20%. The USA saves its currency – but the price is high:
Recession
Massive job cuts
Exploding interest burden on national debt

Quote: "The interest rate hike was necessary – but it laid the foundation for the next wave of debt."

Phase 3: The Reagan Revolution and the Deficit as a Permanent State (1980s–1990s)

1981–1989: Under President Reagan, taxes are cut and military spending is increased – without counter-financing. National debt rises rapidly. Nevertheless, the economy flourishes in the short term – thanks to consumption, credit, and financial market liberalization.

Quote: "Reaganomics was built on trust and debt. The system lived – on borrowed money."

Consequence:

The state permanently lives beyond its means.
The debt ratio rises.
The stock market booms – driven by cheap credit and financial derivatives.

Phase 4: The Digital Boom and the Bubble (1990s–2000s)

1990s: The internet revolution generates enormous growth, rising tax revenues – and even brief budget surpluses under Clinton. However:
The deregulation of financial markets (1999: Glass-Steagall repealed)
And the household debt... create a fragile balance.

2000 – Dot-com Crash: The stock market bubble bursts. The Fed lowers interest rates – which prepares the next bubble.

Phase 5: The Global Financial Crisis 2008

2001–2007: Low interest rates, cheap money, and mortgage loans lead to the real estate bubble. Banks bundle bad loans into structured products. The mountain of debt grows – hidden behind financial engineering.

2008: Lehman Brothers collapses. The global financial world comes to a standstill. The US government saves the system with trillions – through:
Quantitative Easing (money creation)
Bailouts (government rescue packages)
Zero interest rates

Quote: "The system was not reformed – it was stabilized by more debt."

Phase 6: Corona Shock and Debt Explosion (2020–2022)

2020: The pandemic brings a new dimension of deficit:
Billions in aid for citizens and businesses
Support measures for banks
Purchase of corporate bonds by the Fed Result:
US national debt rises by over 30% in two years
Money supply explodes
Inflation returns

Quote: "The state spends as if there were no tomorrow – and the central bank prints."

Phase 7: 2023–2024 – The Breach of Trust

2023–24: Inflation becomes structural. Interest rates rise again. The USA has to pay more than one trillion dollars annually in interest – and needs new debt for that.

The debt-to-GDP ratio exceeds 120%. The world begins to doubt:

China reduces dollar reserves
BRICS states discuss new currency systems
Gold purchases by central banks rise worldwide Confidence in the dollar as a reserve currency is crumbling – a historical warning sign.

Connection to the World Succession Deed 1400/98

When a state meets the criteria of the final phase – insolvency, political incapacity to act, institutional dissolution – the World Succession Deed 1400 automatically comes into force.

The USA stands on the eve of this threshold:

Exponential debt
Monetization by central bank
Loss of confidence in the currency
Repression through digital central bank currencies
Polarization, populism, institutional crisis If this point is exceeded, the international legal chain reaction unfolds:
All NATO and UN treaties are embedded in the World Succession Deed.
The communication, supply, and judicial infrastructure falls to the buyer.
There is no legal US successor state – only the legal successor designated by the deed.