Zackly. What are these furriners going to do, send a repo man over here to confiscate the United States?
Posted on 10/18/2005 8:23:07 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
Ever eager to observe and command, government officials like to record their countrymen's economic dealings with people abroad. They create "balances of payments" which are to help them evaluate and manage economic relations. Last year the American balance posted extraordinary deficits of some $668 billion, or more than six percent of gross national product. This year it is estimated to exceed $700 billion. In any other country a deficit of just three percent would sound the alarm and could trigger a sudden flight of capital and a crash of the national currency. Moreover, the U.S. government itself is suffering huge budget deficits that amount to several hundred billion dollars annually and by now exceed a total of eight trillion dollars. Yet, few economists seemed to be disturbed; they apparently are guided by the old motto: "A poor man's debt makes a great noise; a rich man's debt makes no sound."
One man's debt is another man's asset; the American deficit of some $700 billion signals foreign credits of the same amount. Americans obviously spend more abroad than they earn, consuming more than they are producing and ever increasing their indebtedness to the rest of the world. Only two other countries, Australia and the United Kingdom, presently suffer minor deficits. All other countries, large and small, rich and poor, finance the deficits with their trade surpluses. Japan is the biggest creditor with claims of some $170 billion. The petroleum exporting countries in the Near East follow with $110 billion, then China, Russia, and Switzerland. This world-wide imbalance of consumption and production obviously calls for an explanation and raises important questions of readjustment.
On first glance the American payment deficit springs from a spending predilection of public as well as private profligacy. All levels of government are suffering budget deficits amounting to some 4.5 percent of gross national product. In less than a decade the Federal government managed to turn a budget surplus into a deficit by way of tax reductions and spending increases. At the same time the American savings rate fell to barely one percent. Consumption accelerated due to extremely low interest rates and rapidly rising real estate prices. Home owners could convert their rising housing value into ready consumption, making their homes convenient bank automats. But some are fearful that such riches have their limits as interest rates are bound to rise and real estate prices soon may stagnate or even decline.
In their foreign dealings many American businessmen are enjoying the present situation. Virtually all their international liabilities are denominated in U.S. dollars while some 70 percent of their foreign assets are reckoned in foreign currencies. The value of foreign assets and liabilities obviously changes with every change in the exchange rates of the currencies. A fall of the U.S. dollar immediately trims the value of virtually all American liabilities while it raises the value of American assets owned abroad; a rise of the dollar effects the opposite. The visible fall of the U.S. dollar since 2002 explains why the total current-account deficit of $1.7 trillion merely added some $200 billion in external liabilities and why the 2004 current-account deficit of $668 billion merely raised external liabilities by $170 billion. Every penny of dollar depreciation benefits many American businessmen either by depreciating their debt to foreigners or appreciates their foreign investments, or both. The Federal government with rapidly rising debt of more than $8 trillion is by far the biggest beneficiary.
American officials and their academic friends are quick to reject such analyses and conclusions. They dismiss all thought of responsibility for the situation and instead point to an acute savings predisposition on the part of creditor countries. Ben Bernanke, former governor of the Federal Reserve and now chairman of the Council of Economic Advisers, insists that much of the world is suffering from an acute disorder of "savings glut"; the United States has no choice but to increase consumption. Fortunately, it is willing and ready to act as the "consumer of last resort." This valiant consumer also contravenes and offsets the savings glut of commerce and industry, in particular the entrepreneurial sector, which in many countries has begun to save more than it invests. It usually is the investor of the people's savings, building plants, shops, mills, foundries, and other enterprises, ever eager to raise labor productivity. At this time many prefer to become creditors rather than entrepreneurial debtors, causing much stagnation throughout the industrial world. Even in the United States where economic expansion continues at modest rates, many corporations now prefer to invest in government securities rather than embark upon new production ventures. They are improving their balance sheets and getting ready for any conceivable readjustment.
Economists who observe such behavior may find no fault with their preparations nor with the "savings predilection" of foreigners, the official scapegoats of the international imbalance. They may even sympathize with people who are enjoying the rising value of their homes. But these economists lay the blame for the ominous imbalance of trade relations on the Federal Reserve System which, in the service of Federal deficit financing, managed to cause unprecedented maladjustments. In order to finance huge Federal budget deficits and prevent painful economic readjustments, it lowered interest rates far below market rates and glutted credit markets, which deceived and misled millions of people all over the globe. No other central bank possesses such powers; any attempt to emulate the Fed's policies would cause its currency to crash.
Even the European Central Bank, which appeared on the scene in 1999, probably could not follow in Federal Reserve footsteps; it soon would damage the euro. Only the Federal Reserve still seems to have the capability to glut credit markets. Until the creation of the euro the U.S. dollar was the sole reserve currency of the world, held and used not only by every other central bank but also by thousands of commercial banks and countless public and private corporations. It had replaced gold as the universal medium of exchange during the early 1970s and has functioned as world money ever since. This world-wide function obviously has given and continues to give it exceptional strength that affords its issuer an extraordinary leeway for monetary expansion. It receives further support and strength from the reputation of the United States as a safe harbor for foreign investments. A reputation for principle and rectitude is itself a fortune. But how long can the dollar withstand false interest rates and massive budget deficits?
Many countries, rich and poor, now are supporting the richest country on earth. This odd situation raises serious questions of consequences if the creditor countries should suddenly tire of their chore and call a halt to the burden. What would happen if, for instance, the Asian central banks should suddenly refuse to add to their dollar holdings or even reduce them and instead decide to invest their surpluses in euros? Surely, such a reaction would lead to much international turbulence and severe economic crisis.
Economists who remember the past may point to the dollar crisis of 1979 and 1980 when the dollar was under persistent pressure from abroad, when its value was falling rapidly in relation to the currencies of other trading nations and to gold which was deemed to be a safer repository for reserves. Fueled by rising oil prices, the consumer price index soared nearly one percent every month and interest rates climbed to the highest level of the century. With markets for currencies, metals, and other commodities thrown into disarray and the rate of unemployment higher than seven percent, the Federal Reserve under the direction of chairman Paul Volcker finally "took away the punch bowl" by raising the member bank discount rate to twelve percent and boosting marginal reserve requirements for member banks. A degree of hope was restored as many Americans realized that their government had to balance its budget and that people must live within their means, produce more efficiently, and conserve, save, and build for the future.
What we look for may not come to pass; yet we must not let the future frighten us. The present situation of American deficits and foreign credits may continue as far as the eye can see. After all, an old monetary order which had been created at the 1944 Bretton Woods Conference withstood much international disorder for more than thirty years. Some economists and their friends in government like to note the similarities of that order with the new. But this economist does not see the semblance. With his eyes on huge trade deficits and foreign debts and on grave international conflict and strife he braces for more commotion and crises to come.
ping
ping - great article find !!
Why is there never a discussion on the trade practices between, say the French and another third-world country; or between Belguim and the Congo...? Might a study of the interdependencies of these government-born trade pacts show us that currency valuation is really just an assigned peg between ruling classes which enable them to maintain their lifestyles while at the same time giving their social masses just enough to survive at the lowest rate to prevent revolt. Ah, socialism - if you're a politician you're got to love it!~
I heard on Kudlow yesterday that corporations are sitting on record amounts of cash but refuse to expand here in the U.S. The question was what would have to happen to get them to start reinvesting at home? No one had an answer.
The President has the answer ...... lower labor costs, that's why he leaves the borders open.
Ahh, I don't think that's working too well though. The Outstanding Public Debt as of 18 Oct 2005 at 04:58:24 PM GMT is: $ 8,002,711,446,325.2 1 Yup, 8+ TRILLION
The estimated population of the United States is 297,465,732
so each citizen's share of this debt is $26,902.97.
>>Americans obviously spend more abroad than they earn, consuming more than they are producing and ever increasing their indebtedness to the rest of the world. <<
Americans personal savings deposits in the banks stopped growing a couple of years ago. Now the trick is to get your money out of your home value.
So I guess our economy is in great shape and the FTAA passing in January will make it even better. Of course our wages will drop out of sight but that shouldn't concern Republicans who believe in the Presidents policies.
I guess it never dawned on 'em that the other alternative is to distribute these earnings to stockholders as increased dividends.
LOL! What a bunch of arrogant frauds.
They really have some nerve calling themselves "capitalists".
Just a bunch of dumbed-down, non-productive corporate bureaucrats, IMHO.
"I guess it never dawned on 'em that the other alternative is to distribute these earnings to stockholders as increased dividends."
If the valuation of the stock is such that the shareholders are happy, and people are buying the stock, why would they pay a dividend.
thanks for the ping
"Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)
I say let the Chinese buy American real estate assets with all those extra dollars. Maybe we can sell them Rockefeller Center and buy it back later at half price like with did with the Japanese!
The only odd situation is when the Chinese figure out they can't negotiate a bond recall if they want to continue selling us stuff. Well, they can, but it will be at pennies on the dollar! MuWaHaHaHaHaHaHa!!!
As Donald Trump says: "When you owe the bank a million dollars, the bank owns you. When you owe the bank 100 million dollars, you own the bank!"
Ha Ha! Those ChiComs are being played!
Zackly. What are these furriners going to do, send a repo man over here to confiscate the United States?
Wake up and smell the coffee on this one. They can buy our remaining factories...ship them to Tianjin and ACCELLERATE their industrial economic dominance of the trade "relationship." They can buy up OUR resources...OUTBIDDING US for oil, gas, coal, iron ore, steel scrap, rare earth metals, raw lumber, relagating the U.S. to a third world also-ran. They have already nailed down an exclusive with Iran's oil. They are trying to ace us out of Venezuela's oil...which is our only major alternative here to Middle East oil currently. (They are helping Chavez build up and arm himself with a major military force...why do you think?) They are buying U.S. scrap steel essential to our mini-mills at top dollar, and sucking it all away at levels eclipsing the similar insatiability of WW-II Japan prior to Pearl Harbor.
They nearly picked up UNOCAL for a song. The White House was all set to not just cave to the Chi-Comm's lobby...but abet it. The Chi-Comm's have $700 billion sloshing around and are looking for ways to spend it to our hurt...i.e., without doing anything to buy any of our manufactures. They wish to suck our industry away from us. Permanently. E.g., They only want to take. And keep.
As the mighty Chinese Yuan becomes the invincible reserve currency of the world, the Banna Republic of the Former U.S. of A. will fall to turmoil and internal revolution. This is war. Notice how EVERYTHING the communists here are doing is designed to destroy national sentiment? From teaching revisionist falsehoods and misrepresentations throughout all grade levels in schools, and PC-correctness, schism-America (i.e., hyphenated americans). Instead of the United States, we are the UN-TIED States. Polyglot aliens are given priority admission to the U.S. legally...and they don't even have to learn english or think of acculturating...nor do they want to. They hate us too. And the RATs have written our educational funding mandates so that their languages have to be taught in our schools (ESL run amok).
Meanwhile, our envious Southern neighbor, long festering resentments over the loss of Texas and California 150 years ago, et al., is manifestly aiding and abetting a "reconquista" movement of the illegals they encourage to invade across our borders. Vincente Fox is no friend of America...and he is no friend of liberty. He even was cooperating with Chinese manipulations in our hemisphere with Castro's Cuba, Hugo Chavez's Venezuela and Brazil's new Marxist government. Only recently realizing that China has played him for a sap...but still too wed to his anti-U.S. rhetoric to reverse course.
We need to restore the things which unite us. From teaching American history accurately, and debunking the revisionists, and seeing our enemies clearly. Including neighbors that aren't too neighborly. That includes restoring economic opportunity for AMERICANS safeguarded by economic outsourcing disincentives...shedding the chimera falsehoods of the import lobby. That was always part of the greatness of America. And a necessary social compact.
The phoney free traders have long said that the only consequence is that the Chi-Comms get our worthless dollars. Wrong. They get our factories. We get their worthless manufactures that enfeeble us, and make us dependent on them across the board. They are reversing the industrial relationship. Soon it will be unstoppable. Delta will be snapped up for a song. Then GM. Then Ford. Then Boeing. This is what they are counting on. Winning the fight without the enemy realizing he is in one until it is too late.
It has been working for them for 15 years. The only thing they need to worry about is people who are alert and see the danger, Nick. I would not put it past them to start assassinations of key American protectionists. You are aware of the titanic number of agents they have over here, aren't you? "Accidents" will happen.
I do not know very much about economics.
But to my way of thinking when the majority of your people start third world jobs,for third world wages,and living in third world houses and exist in third world conditions, then you become a third world country.
All the good this country seems to be good for anymore is to consume.
If our government keeps the flow of the good paying jobs leaving the country and flooding the job market with cheap illegal labor deliberately depressing the wages of the jobs that are left here we won't be able to do even that.
The government politicians and big business better remember that those employees who wages you are destroying are also the tax base for the government and the customer for business.
When enough lose their job and/or they go broke so do you.
So, how many China agents has the FBI caught to date?
What happens to third world countries that borrow money from abroad and can't make payments? Interest rates are raised and the lender dictates internal economic policy as a condition of further loans the financially stretched country must have.
Wouldn't it be ironic if we borrowed ourselves into a position to have our economics dictated by China?
| Wouldn't it be ironic if we borrowed ourselves into a position to have our economics dictated by China?
At that point, we have their stuff, and we have our money back. So far, so good. What the Chinese have is a piece of paper that says we'll give them the money back in 30 years, except if they invade Taiwan we'll consider that an Act of War and abrogate the debt (which we're allowed to do under International Law if they make war on us). How exactly do you think they can "dictate" policy to us? The only policy they want from us is to keep buying their stuff so they don't have a billion unemployed Chinese trying to hang the leaders of the Communist Party. If they try to foment any sort of slowdown here, they get whacked worse than we do. |
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