Debt. Along with inflation the killer of empires. Braudel's study of Capitalism and of Mediterranean history reveals that any state or empire whose debt exceeds 200% of its total economic size will go bankrupt. Western nation states are now at 500% on average trending within a generation to reach 800%. But the media rarely reports this reality. The 'experts' focus just on total public debt and usually on 'external' debt held by investors or institutions outside of the country in question. This is as if domestic bond holders don't matter, or don't need the money paid back. If you look just at the external public debt of Europe, the total debt burden looks manageable. External debt holders are around 50% or less of the total in most states, with Greece, and Ireland the exceptions :

Source: NYT

Even the total public debt figures are below the key bankruptcy threshold of 200% as given in column 3. But this is of course not the real total debts of these states. You have to add in unfunded, unaccounted for, and off the balance liabilities for health care, pensions, social welfare and any other program in which government has promised a transfer to a particular group. When these amounts are added in the picture is much uglier:

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There is no possibility of paying back these massive debts. None. Never in the history of man's development has a state or empire been able to accrue 3-8x its economic size in debt. Bankruptcy is assured. Bankruptcy can be in the form of a hard default [Greece's future]; high inflation [US' future]; or a soft default with stagflation [Brazil in the late 80s and a probable outcome for some of the 17 nations in the Euro].

Total US debt per family is now at $1.5 million. Technically America is bankrupt. So too is Europe. Perhaps enough in tax increases, land sales or asset sales can help close the gap. But without spending cuts and a radical restructuring of the political-economy, culture and expectations, a bankruptcy in almost every nation state is highly probable. The only question will be – what form will the insolvency take and what will be the social, political and military impacts of the insolvency?

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In the USA socialized health care accounts for almost $90 Trillion in unfunded promises. As the population continues to age and fertility continues to decline, the payments to seniors in the form of pensions will double within 20 years to $35 Trillion. No nation state can support such an insufferable level of socialized debt.

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Nothing will be done of course until the bankruptcy process makes itself felt. Politicians will squabble on the margins but no meaningful changes will be enacted. There are too many votes to lose, and too many media outlets will be offended. When the unwinding of debts does start, these same people will pronounce themselves prescient in predicting the debt implosion and will propose more spending, more debt, more printing of money and more compassion and love as the cure.