Posted on 02/13/2010 5:07:42 PM PST by the invisib1e hand
Some locker room banter was recently overheard, to the effect that “nothing is made worth a [@#*%&] anymore.” The subject was boxing gloves, which bore an American sounding brand name but which were manufactured in – imagine this – China.
We could not find much ground from which to disagree with that assertion. But the next comment got us thinking: “…they own us, anyway!”
No, they don’t. They own our debt, and that’s not exactly the same thing has having title. We asserted, “lots of things could happen to that debt. We could stop paying on it. Or, we could have 18 percent interest rates again.”
Ever wonder what would happen to the value of China’s US bond holdings if interest rates did what they did in the early 1980’s? We did, and we broke out the old bond calculator and plugged in a few assumptions. Detailed calculations would require data we just don’t have ready access to, nor possess the inclination to estimate with painstaking accuracy. We would be satisfied with a “back-of-the-envelope” estimate.
So, we assumed that the entire Chinese holdings of US debt, all maturities and coupons, averaged to 20 year maturity, with a coupon averaging 3.5%, receiving 12 continuously compounded payments per year. If this were the case, and interest rates here were to spike to 18 percent, as they did in the 1980’s when Paul Volcker was Secretary of Treasury, those bonds would be worth, on average, 21 ½ cents on the dollar (slightly more if the coupon is higher, or if the maturity is shorter). We can’t imagine that a 78.5% haircut on the net worth (how many trillions of dollars?) of their US debt holdings would be a good thing for China. We think, in fact, that in the modern financial world with all its sovereign debt hedges, it might just turn them upside down.
The point is they do not hold all the aces. Our health and prosperity, in fact, should be a vital national concern to China.
This begs other questions, of course. Questions about how much influence that vital national concern of theirs might motivate them to exert on our domestic policies of financial import, such as, say, containing healthcare costs. It might behoove the electorate here to be on guard against healthcare initiatives binding upon all citizens that subordinate the value of a human life to the cost of saving or preserving that life. Such an initiative would have unacceptable potential for conflict of interest and would put the government in an adversarial, monopolistic, and nearly omnipotent relationship with individual citizens. This isn’t the sort of thing that is permitted by the United States Constitution.
An observer, nay a potential victim, can't be faulted for at least speculating that the president’s obsession with his political objectives exposes him (and us) to susceptibility in this regard. After all, this is the man -- Barack Obama -- who's Freudian slips about the value of human life have been characterized as "chilling." It was he, we will recall, who categorized a women's being with child as "punishment." Such an evaluation of the essence of the most innocent and vulnerable human beings among us tells us that human life -- besides his own, of course, and that of those in a position to give service to it -- is absent from his short-list of "things that matter most." A curious situation indeed, for the leader of a nation whose founding documents guarantee the "right to life" for all.
And likewise his Secretary of State, Hillary Clinton, who has declared, on record, that "human rights issues" are not to interfere with more pressing matters like stock and bond market sell-offs. The Secretary is no friend of the unborn, as can be ascertained from her glowing receipt of the "Margaret Sanger Award," Planned Parenthood's highest "honor." Recall that Ms. Sanger was an evangelist for the eugenics movement, who's ideals included killing babies and eliminating "negros." But context is so important in discerning what people really mean by their words and actions. Where on Hillary Clinton's list of priorities does a human life -- besides her own, of course -- lie? That she made this statement of doctrine while visiting with the Chinese Prime Minister (she's beaming in the photo-op) is a helpful aid in understating its ramifications. It perhaps wouldn't be too inaccurate to translate it, "We don't care what you do to your people. We need you to buy our debt." Was there ever a more textbook Faustian bargain in modern times.
Sigh. Probably.
Perhaps it would involve the president's medical advisor, Dr. Ezekiel Emanuel, who is an "authority" on the nasty subject of "allocating medical care." His models on how a totalitarian system should do so are summed up in the "Healthy Lives" concept. Since a picture is worth a thousand words, note the chart below. It shows how his model allocates medical care by age, and how, after the age of 40, the chart is all downhill and after 50, it distinctly recalls an Olympic Ski Jumping slope. While he no doubt subscribes to Darwin's ideas, he allows no reward for being "fit" enough to "survive" that far in life, apparently. I wonder if he's aware of the contradiction.
In light of these realities, and in light of the ruthlessly and remarkably pragmatic and macabre spirit of the age, one can't be ill-advised to at least consider what the risks are -- the risks of really poor leadership and myopic vision in the realms of politics, civil service, scientific inquiry, academia, business and even religion; devoid of a moral that reaches beyond the mean life span of a human being -- a human being that is allowed to be born, that is. If reality were a movie, we imagine it would take the form of Wall Street done by Alfred Hitchcock.
But lets return to practical matters, such as, are we making enough here in the USA to cover what we're spending, and does the answer to this impact discussions of "healthcare for all?" As regards any such sweeping government spending programs, fiscal sanity begs the questions, “why is this even on the table when it’s clear we are in too much debt already, and cannot afford it?”
Indeed.
China will get cocky,stupid, and start a war within this generation.
You can thank America’s UNION GREED for China’s success.. Also, the Asian countries’ FAT CATS seem to love the notion of sweat shops to fulfill their insatiable desire for $$$.
No problem with any country's ascendency, just skeptical of the means and ends in that particular scenario.
and yet, in china one can buy cigarettes and beer that have “made in america” written on the package.
No, it began under George HW Bush. Or maybe Reagan. Or carter. Or nixon...
Yeah, let’s blame the “greedy” middle class folks and let’s ignore the “greedy” upper class. God help us if middle class Americans actually make a good wage and have benefits. Those things are reserved for the upper classes and Wall Street elites.
parsy, who says we gots plenty of “fat cats” right here in the good ‘ol USA
Fed Sec, right?
Yes, he was fed sec.
OK, if you want to go that way, you could say it began under Jesus.
But it took a turn for the smarmy under Clinton.
I’m sure you’re right.
Who was it tried to raise interest rates recently and had to back off because of China?
He wasn’t the secretary but
“From 1969 to 1974 Mr. Volcker served as under-secretary of the Treasury for international monetary affairs. He played an important role in the decisions leading to the U.S. suspension of gold convertibility in 1971, which resulted in the collapse of the Bretton Woods system. In general he acted as a moderating influence on policy, advocating the pursuit of an international solution to monetary problems. After leaving the U.S. Treasury, he became president of the Federal Reserve Bank of New York from 1975 to 1979, leaving to become the chairman of the Federal Reserve in August 1979.”
http://en.wikipedia.org/wiki/Paul_Volcker
Sell herb. Tax it. Deficit paid with a lot more more left over.
Keep reading Wikipedia. Most of it is accurate. And if you don’t have access to the web, read books. Books are good for you. Reading is fun-damental!
“Keep reading Wikipedia. Most of it is accurate.”
I do like Wikipedia for a quick reference but I use a good dose of scepticism especially on political stuff.
Absolutely. I hear the underground saffron market is booming.
Take the tax to $10 a joint. Assume every single person in the US smokes a joint every day. All 300 million of us lighting up every single day, with a $10 per joint tax.
We'd raise $1,095 billion. Wouldn't cover last year's deficit nor this year's deficit. Nor any of the next 4 projected deficits.
Methinks you've been smoking a bit too much 420 already, based upon your statement without making a simple reality check...
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