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Could the U.S. Become a Third-World Country?

Shirley Mueller, MD | Thursday, November 24, 2011
The U.S. is powerful. We enjoy privilege because we live here. But, could all that fall apart?  “Maybe,” says Michael Lewis, author of Boomerang: Travels in the New Third World. This is his story.

In 2008 Vallejo, Calif. went bankrupt. As a result, the fire department contracted from eight stations to four. The number of fire department employees was reduced from 121 to 67. This was in spite of the fact that the typical Vallejo home was a wooden Victorian that could easily go up in smoke.
 
This scenario would be painful for any municipality. But, it almost certainly was more agonizing for Vallejo, a town located in the San Francisco Bay area with a population of just over 100,000. This was because Lewis, the author of The Big Short and many other books, wrote about it. Then, the bad news was not only known by locals and those in surroundings counties in California. Everybody who read Lewis’s article in Vanity Fair knew about it.
 
The damage didn’t stop there: A series of Vanity Fair pieces by Lewis, including the Vallejo exposé, were published in his recent book, Boomerang. Then, everybody could share the pain.
 
And, that appears to be Lewis’s intent. To educate Americans in a user-friendly, story-teller’s way about the possibility of what we now think of as the impossible: that our country could become third world in the not-too-distant future, maybe as little as 10 years.
 
A vivid manifestation of this would be lack of services like Vallejo experienced. Imagine the police department cut in half as well as the fire department. What if garbage were collected every two weeks or only once a month instead of every week?
 
The way Lewis sees it, the S&P treasury credit rating for our country was decreased from AAA to AA because the rating agency had no faith in our political system to do anything about our debt. There was a general lack of confidence in our government.
 
Slow growth and high unemployment are part and parcel of the same problem. Social unrest follows — look at the Occupy Wall Street movement that swept the nation, expanding to several cities outside of New York.
 
This is happening or has happened in other countries as well. First, Iceland went bankrupt and then Greece teeters on the brink — now Italy. Others in the weak European economies (the PIGS made up of Portugal, Italy, Greece and Spain) are almost certain to follow. Lewis poses the question: Will the U.S. too?
 
In order to get his take, you’ll have to read the book. There is a sweetener here. Most of the chapters are free on the internet at Vanity Fair. Or, buy the book itself. Either way, Lewis tells a good story and makes the reader think about the future of America: something that can’t hurt. That awareness can lead to positive action. That would be a perk for America.
Author Information
Shirley Mueller, MDDr. Shirley Mueller is a physician turned financial consultant and investment educator. Her fee is hourly, not a percentage of assets. She welcomes comments at ShirleyMMueller@MyMoneyMD.com. For more information, visit her website at MyMoneyMD.com.
Column Information
Shirley Mueller, MD is a physician turned financial consultant and investment educator who specializes in guiding clients, both one-on-one and in groups, about how to effectively self-invest using a simple and effective three-step approach