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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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