Tag Archives: national debt

Flashpoint China: The Perils of U.S. Debt

Chinese poster featuring Marx, Engels, Lenin, ...

Chinese poster paying homage to communism

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As the Red Dragon of communist China grows into an economic powerhouse, someday soon it will almost inevitably create a confrontation with the red, white and blue beacon of freedom known as the United States, and the supremacy of communism or democracy will come to a head.

Such a confrontation is not desired and saner minds can and must help to prevent it. But we live in a world that despite great technological advances, in fact in some ways, ironically because of technological advances, is more dangerous than it has ever been before. And in this dangerous world are many flashpoints, flashpoints that can be easily sparked by the erratic tendencies of regimes such as those in Iran, Syria, Myanmar, North Korea and others as well as unstable governments in nations such as Afghanistan and Pakistan.

The risks that these and others nations present can be responsible for triggering a domino-like series of events that that could easily spark a Sino-American confrontation that at least challenges America in the Pacific, where the United States has deeply vested economic interests in nations such as Taiwan and Japan.

The likelihood of such a confrontation is very real and for many reasons.

With instability in the Middle East raging on, and as China continues its rise into an industrial superpower that consumes more and more fossil fuels, its increasing access to such things as oil, could force China to aggressively claim access to more reliable sources of energy, such as the vast gas and oil rich deposits that are contained in disputed sections of the China Sea.

Another flashpoint could be a Chinese attempt to consume and pilfer the economic rich island nation of Taiwan.

Any series of events, anywhere in the world could force such circumstances of confrontation. The situation is so real that China has even created a new missile that can make Aircraft carriers, the instruments which help provide American supremacy in the Pacific, obsolete.

Given the complete incompatibility of communism and democracy and all the variables which exist as possible flashpoints, how the confrontation may present itself is not quite as important as how we cope with it.

In the beginning stages of such hostility, how would we cope with it?

To answer that questions, let us base the scenario on circumstances as they currently exist.

As we stand now, the federal debt stands at $13.4 trillion dollars. That figure does not mention the $110 trillion dollars that exists in the unfunded mandates of Social Security and Medicare liabilities. Of that debt, China holds nearly $850 billion in American treasury bonds. Of that, the Chinese have recently and discreetly turned them into notes that will mature in less than 11 months from now.

That being the case, as soon as tensions rise over a surprising Sino-American confrontation, China will more than likely begin to sell off their $850 billion in U.S. treasury bonds. The result of that would be a worldwide sell-off that would stream through the American bond market and fuel investors fears over inflation. As hours and days passed, Americans may very well begin to withdraw their deposits out of banks, money markets funds and other assets, such as life insurance policies.

Not long after that, the Federal Reserve would be forced to arbitrarily invest what would be virtually non-existing trillions of dollars to cover its obligations.  That would spur on high inflation and push us into the realm of hyperinflation, something that given the lack of confidence in the financial markets because of the events of 2008 an 2009, would be an almost certainty.

With hyperinflation started, the U.S. government will have virtually no economic credibility and the dollar will become worthless. And the irony of all ironies is that in regard to national security, the U.S. would not even have the ability secure fuel for its military. It would have to deplete our national reserves and eventually China would have won economic and military supremacy before the first shot was even fired.

It should be understood that I am not a fan of doomsday scenarios and I am not suggesting that confrontation with China is inevitable. But even without a Chinese military threat, given the instability of the world, any series of events could set off the type of economic scenario presented here. I repeat, could. Not will. But could. But the question becomes how long can we live with such a possibility?

We once thought that terrorism was a major problem in places like Israel and other far off lands but not here in America. Then it happened, here, and it became a priority.

If we ever want to avoid the unimaginable from becoming very imaginable, we must eliminate that which makes the impossible quite possible. We must pay down our massive debt. Most Americans do not realize that our debt, a net negative accumulated by both Republicans and Democrats, hangs over us like a sword of Damocles, threatening to unravel more than our supremacy in the world, but our very existence and way of life.

It is time that we realize that as difficult as it may be to control spending, we must do so and we must do so now. And how we do it is just as important as doing it. It must be done by the means of our free markets which will grow our economy in a way that, unlike federal spending, is sustainable and produces the opportunity for wealth to be created and spread through increased employment, stable financial markets, and solid money, not credit and speculation but cold, hard, cash.

And as such a trend for free market, economic growth increases, the federal government must do its part and slash spending, downsize government, create spending limits and reassess how our money is spent and where it goes. We will need to take measures such as a moratorium on all non-essential foreign aid, adopting constitutional spending limits, overhauling our existing tax code and most of all, by putting an end to the notion that the federal government can spend our way to prosperity.

Paying down our massive federal debt will require willpower. It will require us to consider it a national security issue, because it is. Ridding ourselves of our debt will require disciplined leadership in both the House and Senate, as well as the White House. It requires a President who is armed with a well inked veto pen and the guts to say no

And without a bipartisan effort to promptly and effectively tackle the debt, I believe that it is up to Republicans to declare an economic national emergency, one that brings a complete halt to the direction in which Democrats are taking us. One that tackles our debt now, not later, when it just might be too late.

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Ask Not What Your Country Can Spend For You. Ask What You Can Spend For Your Country

PhotobucketI am no economist but in reviewing the assessments and suggestions of major economists there seems to be some very valid suggestions, at least from what a layman like me can understand.

Despite my lack of economic expertise, I do know the basic fundamentals of the economy and I believe my understanding of those fundamentals is what can sometimes create some confusion when reviewing the advice of so called financial experts and leading economic government officials.

All the suggestions offered by them are based on spending.

Spending is what grows our economy. The more we consume and spend, the more that is produced. The more that is produced increases the need to employ more people to meet those production needs. By employing more people we are empowering others to spend more and from there the cycle continues in an ever growing circumference of increased wealth.

Sounds pretty simple. Yet other factors help to complicate things and break the seemingly simple and free flow of this cycle. Things such as unexpected shortages of materials, import and export troubles, natural disasters which influence the chain of events, and many more all factor in the process.

While understanding this, what is responsible for the current economic crisis?

Has there been some sort of natural disaster that has depleted a particular basic and essential resource that our economic cycle relies on? Has there been a total collapse of certain industries which have thrown the cycle off with an inordinate amount of unemployment and consumption which further deteriorate the supply and demand cycle?

To a certain, small extent, events like that have taken place but not in some kind of all consuming way. There have been droughts effecting crops and downturns in some markets that have produced layoffs. But none have been to the extent which has, for example, made wheat crops extinct or stopped cars from being made.

So what’s the problem?

Well in my unprofessional, economic, opinion, the problem is rooted in something that government financial experts are not discussing. In fact, in my opinion, most solutions being initiated by government officials, past, present and future, are the problem. They are trying to put icing on a cake before they baked it. They all promote spending.

In tune with the laws of supply and demand, spending is good. However; the focus on spending has been accentuated and promoted so much and for so long that it has brought about a couple of misguided generations that have taken that advice too far.

As a society we have become accustomed to spending more than we have, and responsibly. should.

The predatory promotional practices that financial markets undertake ,in an attempt to make more money of their own, is a big part of the current economic crisis. It is a crisis brought about by the chickens coming home to roost and the bill coming forward to be paid.

We have taken the advice of Republican and Democrat leaders and we have spent. The government has even taken their own advice and spends. The government has spent money in order to give us money to spend with. They call it an economic stimulus. The problem though is that

  1. The government doesn’t really have enough money to do that. They have their own, our own, deficit, and…….
  2. The money they gave us back in this so called stimulus package was ours, so maybe they should have taken less from us in the first place.

Those two points alone raise doubts about the soundness of the “spending solution” given to all of our problems. Yet, those in charge still offer it as the most sound solution to our problems. They even go a step further and ask people to not save any of the monies given out in stimulus packages.

Although I do not have a problem with spending,………. all you have to do is tag along with me at clothing or shoe store to realize that,….. I do have problem with spending money that we don’t have. And there in lies the problem.

The promoting of spending practices has created generations of spenders. These spenders don’t even use real money. They use plastic. We all use plastic. In some instances you can’t even pay for a good or service without credit.

This has led to our getting accustomed with living on borrowed money,……. plastic,……..fake money.

For decades now, the government has encouraged this practice. Government policies have encouraged borrowers and lenders to enter into deals that neither can really afford. The greatest example of this was the Homeownership Initiative that was created under the Clinton administration. It forced lenders to make a significant number of loans available to unqualified borrowers, borrowers who could not pay these loans back. The practice was so popular that it helped to create the banking crisis that ushered in the current crisis.

The promoted “spending” solutions that have dominated our problem solving efforts with the economy are, in and of themself, part of the problem.

Americans need to get back to an economy that is based on sound fiscal policies. That statement brings into play many suggested economic theories and actions but when I write “sound fiscal policies” I am not making reference to some deep epistemology of mankind or the ontology of finances. Nor am I debating the importance of the Keynesian school of thought. I am simply saying that society…..our citizens, needs to begin living within its means.

If one is not sure if they have enough money to put food on their plate, they should not be buying cell phones and using it to send out text messages asking if they can borrow money for dinner. I mean I am sure AT&T or T-Mobile appreciate the fee that your purchase and contracts will cost you but you will they be pleased with the bill collector that they have to employ to get their money.

My point is, we have gotten away from living within our means. We have become accustomed with living life on borrowed money. This practice has brought us to where we are today. And truth be told, there is no end in site.

I believe that we are about to enter a very tough transitional time that will last for many years. It is a time that will have us getting familiar with living within our means.

Doing so will mean less spending. Less spending will lead to less employment, and so on and so on. But this does not mean that the sky will fall and the economy will ultimately implode. It means that we will endure a difficult adjustment period but once we have become reacquainted with real money, sound personal financial habits and living within our means, the economy will eventually stabilize and growth will again be seen.

I am not alone in this thinking. Former Tennessee Senator Fred Thompson has recently made a video addressing this same issue. In it, he takes a tongue-in-cheek approach to our current “spending solutions”.

Take a moment to view it. You’ll get a kick out of it. It left me wondering where the Fred Thompson, that we see in this video, was when he ran for the G.O.P.’s presidential nomination?

 

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Post Election Toast

The Election Is Over, The Results Are Known.

The Will of the People Has Been Clearly Shown.

So Let All Get Together And Let Bitterness Pass

I’ll Hug Your Elephant, And You Kiss My Ass.

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