Saturday, September 11, 2004
The next report on America's trade deficit is in today. A new record - over $50 billion – has been set.
No one at the political conventions - not at the Democrats’ loopy Vietnam-era reenactments...nor at the Republicans’ “Nation of Courage” hullabaloo - had the guts to say so, but this deficit bleeds America of its wealth...slowly, surely...and probably irreversibly. Money trickles over to Asia at a rate of 0.1% of the entire nation's assets per month - including land, stocks, businessesand businesses...everything. In a year, more than 1% is gone. At this rate, in 10 years, more than a tenth of everything we own will be gone.
Asian manufacturers become stronger each year. Asian tools become better, more high tech. Asian workers become more skilled...and better able to do the jobs Americans once had for themselves.
There are some who think the U.S. government should step in and do something to stop this outflow of U.S. wealth. Don't count on it. Because the fix is in. And the Feds are part of it.
The foreigners make money selling things to Americans - whose purchasing power is boosted by Alan Greenspan's bizarrely low lending rates. What, then, do they do with the dollars they’ve earned? Many of them are recycled into U.S. Treasury bonds - in an amount almost equal to the entire U.S. government deficit. In other words, the federal government is beholden to foreign lenders and is an indirect beneficiary of trade deficits. It needs cash from overseas in order to continue spending.
And in the future, the feds will probably spend more, not less. The cost of the Iraq war is already said to come to as much as $200 billion. And the promises made by the Bush administration to old people will cost hundreds of billions more.
But there's more.
Consumers are dangling at the end of their ropes. Wages are actually below what they were a year ago. Homes have already been refinanced - twice. Tax refunds have been spent. The lumpen consumer has nothing left.
Businesses, meanwhile, are cutting back. They're not building new plants. They're not hiring new workers. They're not investing in new technology. In the face of foreign competition, they see few opportunities for expansion. So they're merely trying to build up cash.
Who does that leave to keep the money flowing? Only the federal government. Only the federal government has the means - a printing press, as Ben Bernanke famously noted. Only the federal government has a plausible justification - national defense. Someone at the Federal Reserve must have read Richard Duncan's excellent book The Coming Dollar Decline. They must realize that the only way to stave off a slump is to spend money - money they don't have. They must spend billions - borrowing the money from foreigners, of course - in order to keep the U.S. economy rumbling ahead.
It is rumbling itself right off a cliff - but who's going to mention that?
No one at the political conventions - not at the Democrats’ loopy Vietnam-era reenactments...nor at the Republicans’ “Nation of Courage” hullabaloo - had the guts to say so, but this deficit bleeds America of its wealth...slowly, surely...and probably irreversibly. Money trickles over to Asia at a rate of 0.1% of the entire nation's assets per month - including land, stocks, businessesand businesses...everything. In a year, more than 1% is gone. At this rate, in 10 years, more than a tenth of everything we own will be gone.
Asian manufacturers become stronger each year. Asian tools become better, more high tech. Asian workers become more skilled...and better able to do the jobs Americans once had for themselves.
There are some who think the U.S. government should step in and do something to stop this outflow of U.S. wealth. Don't count on it. Because the fix is in. And the Feds are part of it.
The foreigners make money selling things to Americans - whose purchasing power is boosted by Alan Greenspan's bizarrely low lending rates. What, then, do they do with the dollars they’ve earned? Many of them are recycled into U.S. Treasury bonds - in an amount almost equal to the entire U.S. government deficit. In other words, the federal government is beholden to foreign lenders and is an indirect beneficiary of trade deficits. It needs cash from overseas in order to continue spending.
And in the future, the feds will probably spend more, not less. The cost of the Iraq war is already said to come to as much as $200 billion. And the promises made by the Bush administration to old people will cost hundreds of billions more.
But there's more.
Consumers are dangling at the end of their ropes. Wages are actually below what they were a year ago. Homes have already been refinanced - twice. Tax refunds have been spent. The lumpen consumer has nothing left.
Businesses, meanwhile, are cutting back. They're not building new plants. They're not hiring new workers. They're not investing in new technology. In the face of foreign competition, they see few opportunities for expansion. So they're merely trying to build up cash.
Who does that leave to keep the money flowing? Only the federal government. Only the federal government has the means - a printing press, as Ben Bernanke famously noted. Only the federal government has a plausible justification - national defense. Someone at the Federal Reserve must have read Richard Duncan's excellent book The Coming Dollar Decline. They must realize that the only way to stave off a slump is to spend money - money they don't have. They must spend billions - borrowing the money from foreigners, of course - in order to keep the U.S. economy rumbling ahead.
It is rumbling itself right off a cliff - but who's going to mention that?
