the key is the china is no longer interested in lending us money.
This Time Its Really Over. We're All Fucked.
the key is the china is no longer interested in lending us money.
July 12th, 2007 10:44pm
Not quite yet. But it's coming, if we don't do anything about it.
Like, we MUST raise taxes. We MUST balance the budget -- or at LEAST change it to 100 billion or less deficit. We must cut the military.
China has been diversifying their holdings since January of last year. Strangely the US still doesn't have a problem selling their treasury notes.
Not to mention that this "article" seems to have a bit of a problem understanding the difference between government debt and trade deficits.
And while I certainly trust The Online Journal for my financial news (out of the way WSJ!), I sure would like to see some sort of bio for Mr. Mike Whitney. As it is it seems that his stock is fear-mongering end-of-the-world rhetoric that sells pretty well to a certain crowd.
Yeah I saw that article. I moved my funds out of liquid form some time ago and have heavier investments in more solid stuffs.
But even if that all goes kaput I'm not concerned since no matter what shit comes down, I know how to make things and so I can sell stuff.
People who depend on employment or a conventional job or playing the markets are going to have a harder time adjusting.
PE-- where are you from? You have a certain je ne sais quoi that I suspect is regional...
I'm sure this is a repost dildo, I read this article after the ones about privatising the commons and fiat money, but I'm not sure how I got to it.
In any case, yeah, we're screwed.
July 13th, 2007 2:08am
Well, not if they are successful in keeping US dollar relatively low.
"Like, we MUST raise taxes. We MUST balance the budget -- or at LEAST change it to 100 billion or less deficit. We must cut the military."
You're getting much closer. Just come out and say it:
We MUST cut spending.
Come on, give it a try! It won't hurt. It's like cutting the military, but with a broader view. For example, there's the entire Department of Homeland Defense, 3/4 of which can probably go away.
(BTW, I wouldn't cut "the military" - I'd cut military R&D and spending on expensive platforms we don't need; I'd add manpower)
We should just bite the bullet and cut social security too - shifting SSA to needs-based and lifting the cap on FICA would probably solve a whole bunch of problems.
July 13th, 2007 6:45am
> Strangely the US still doesn't have a problem selling their treasury notes
What has happened to rates this year?
"They have begun to figure out that we have no way of repaying them and that the “full faith and credit” of the United States is about as reliable as a Ken Lay-managed 401-K retirement plan."
That's what you get with the blatant and consistent lying. People won't take your word for it any more. Debts will be collected and probably not in dollars.
>Debts will be collected and probably not in dollars.
What will they be collected in? Is China going to invade the US to get their money back?
What's actually going to happen-
-The US is going to pull out of Iraq in the near term, whether Bush likes it or not. Iraq will flare up and then settle down, probably reverting to being despot controlled again.
-George Bush is going to wile away the twilight of his presidency quietly.
-A new president will take control, the US will start to become fiscally responsible again, the dollar will skyrocket (I'm investing in US $ based securities because I consider the CDN $ strength an anomaly).
The world financial markets have spoken that they don't appreciate the Bush administration. Instead of a "beginning", the current weakness of the US currency is the result of that lack of faith.
>Strangely the US still doesn't have a problem selling their treasury notes...
Well, the last sale of 10-year treasury bonds had zero sales to Asian central banks. Normally, about 40% of those sales would have gone to the central banks of Asian countries, yet this time they bought zilch. Which also went unnoticed in MSM.
After the 1997 Asian financial crisis, those countries built up massive holdings of US currency/treasury notes. I suspect significant changes in the June column of this page: http://www.treas.gov/tic/mfh.txt when they publish June's numbers on Monday.
When the Asian countries needed help, the IMF nailed their testicles to the floor. When Argentina needed help, the IMF over-reacted in the opposite direction. When it comes time for the US to need help, I suspect that the IMF members will just laugh.
>They have begun to figure out that we have no way of repaying them and that the "full faith and credit" of the United States is about as reliable as a Ken Lay-managed 401-K retirement plan.
The Soviets defaulted on their government bonds in 1998. They were gone as a superpower the following year (the Wasaw Pact nations broke away, Berlin Wall came down), and the country broke up 3 years after the bond default.
> The Soviets defaulted on their government bonds in 1998. They were gone as a superpower the following year (the Wasaw Pact nations broke away, Berlin Wall came down), and the country broke up 3 years after the bond default.
I don't think the chronology here is not right.
Did you mean 1988?
July 13th, 2007 11:37am
looks like a typo. the question is: did the Soviets even offer government bonds? Weren't they doomed the moment they did something that outrageously capitalistic?
The Soviets used to be extremely reliable in the payment of their debts.
They even repaid most of the pre-1917 Czar-debts.
They had the highest possible credit rating of all countries in the world.
July 13th, 2007 11:57am
If the US wasn't paying $9 billion per month for the Iraq war, they could buy out every dollar of Chinese owned Treasury Notes in just 3.8 years, just on the savings of the Iraq war.
Bush's 2001 tax cut was estimated to reduce taxes by $2.5 _trillion_ dollars over 10 years. This tax cut hardly changed the landscape of the US.
The point being that that the idea that the US is backed against the corner is really far from the mark, and any dooms-daying built on such scenarios just don't seem reasonable.
oh, interesting about credit rating. why did they fail on debt then? couldn't they easily have borrowed more at (slightly) higher rates? I guess they couldnt ask the Americans to bail them out like Mexico did in 1995.
They did expropriate a lot of private equity in the years after 1917, so I guess they had the liquidity. Not to mention reparations for a war they did not win.
> oh, interesting about credit rating. why did they fail on debt then?
Until Gorbatjev. Then they lost their AAA rating.
July 13th, 2007 12:33pm
The Soviet Union collapsed because of a paucity of wheat and an excess of oil. The short version. To pay for food, they had to sell oil. To sell oil, they needed buyers. The buyers said we'll buy only if you collapse. They collapsed. http://www.aei.org/publications/pubID.25991,filter.all/pub_detail.asp
> Until Gorbatjev. Then they lost their AAA rating.
Like a three-year old child I will extend the questioning one more step ... why? why couldnt they borrow off the AAA rating they had in 1985 (I looked it up!) just a few years later?
My theory (of about a year) is that they did not know how to deal with risk. They did not have the risk markets (ie, derivatives) the West had. And the volatility (not the price itself) of the oil market wrecked their central planning. Derivative markets take the edge off uncertainty.
oo, wait that aei.org site concurs:
Due to the unusual elasticity of supply and demand of the oil market, prices fluctuate widely and are prone to immense external shocks. Here the Soviet leadership was fortunate again: oil prices began to rise sharply in the mid-1970s.
Soviet leaders, however, did not heed the historical lessons of resource dependency. The only way they knew how to control oil prices was through manipulation. According to materials in the KGB archives, then-KGB head Yury Andropov discussed with Arab terrorists the possibility of attacking oil fields to keep prices high. Furthermore, the Soviet leadership unwisely decided to spend much of the oil profits waging an unnecessary war in Afghanistan.
Thus, the timeline of the Soviet downfall begins not in August 1991, but on September 13, 1985. Sheik Imani, the Saudi Arabian minister of oil, declared that his country would radically change its oil policy, ceasing to protect oil prices. Over the next six months, production in Saudi Arabia increased fourfold in real terms. In turn, the Soviet Union began to lose approximately $20 billion annually. Short on hard currency, the Soviet Union had to choose between ending subsidies to Warsaw Pact countries, radically cutting food imports, or drastically reducing military production. None of these were seriously discussed by the Soviet leadership. They chose to close their eyes and hope the problem would magically disappear.
Some, like Gorbatsjev, were trying to reform the economy, but didn't quite know what they were doing.
And I bet that a lot of powerful men there where already preparing for their own wealth in a new capitalist future, without caring about the state.
Today Moscow has the most ultra-rich people in the world.
They robbed the state and all savings and pensions of the workers by introducing hyperinflation during the 1990's.
July 13th, 2007 1:14pm
why did the economy need reforming?
why did the Party bosses feel that dismantling the whole Soviet empire would be more beneficial to them ** in 1985 ** than trying to fix it?
I don't give the Party people that much credit. For foreseeing the future. I think the average Communist Party member had more power (relative to his neighbor) than he had in 2005. The ruling class rarely wants a revolution. Too risky.
> The ruling class rarely wants a revolution.
With the Gorbatsjev generation being an exception.
Or actually there are a number of examples where a long time dictatorship ended from the inside.
A glorious example is of course Spain, where Franco already in his testament prepared for the return of democracy.
July 13th, 2007 1:30pm
When was there any democracy in China?
July 13th, 2007 2:13pm
Then why should we not forget Mr. Deng?
July 13th, 2007 2:20pm
"Some, like Gorbatsjev, were trying to reform the economy, but didn't quite know what they were doing."
Luckily Deng knew how to not kill people who know how to do it.
(1989 is an exception. It slowed things down but didn't grind it to a halt.)
I think he meant Deng engineered the destruction of the ruling class he was a member/chief of.
The AEI site compares China in 1980 to Soviet Union in 1930. But Stalin's solution (forced collectivization) was different from Deng's.
Maybe it is a bit rosy/naive... but can it really ever be *really* fucked?
I guess the main point is just whether inflation really matters. Inflation changes your neighbor's dollars too. It would seem the end result is just numerical changes, not concrete changes in what products you consume or can afford to.
Sure, if your paycheck keeps up with the increased cost in goods and services, who cares?
Show me an employer that indexes pay against inflation in real time.
Your savings are gone.
July 13th, 2007 3:34pm
Ok, so your employer doesn't keep up. If there are (and always were) 20 rolls of toilet paper, and 20 people to consume them, then does that matter?
I guess people stop making toilet paper? Like in the depression, there just weren't jobs...
Yeah, typo, should have been '88.
>In turn, the Soviet Union began to lose approximately $20 billion annually. Short on hard currency, the Soviet Union had to choose between ending subsidies to Warsaw Pact countries, radically cutting food imports, or drastically reducing military production. None of these were seriously discussed by the Soviet leadership. They chose to close their eyes and hope the problem would magically disappear.
Likewise, the regime in power in the US isn't interested in cutting back on imports, ending subsidies to friendly dictatorships (usually called "democracies"), reducing military production, nor ending the unnecessary wargasms in the middle east.
>Bush's 2001 tax cut was estimated to reduce taxes by $2.5 _trillion_ dollars over 10 years. This tax cut hardly changed the landscape of the US.
Borrowing and deficits have gone way up. The dollar has fallen significantly against other currencies such as the euro. Does the stock market look wonderful? Only if you measure it in dollars. Measure it in euros and it looks sickly and flabby. In addition, the current regime in the whitehouse, in collaboration with the republican'ts who ran congress for 6 years, managed to dismantle or corrupt most measures of financial health. Want to look at M3? Can't, they made it go away. Because they wanted to close their eyes and pretend bad things aren't happening. Do NASA satellites show global warming? Cut funding for earth-facing satellite programs and divert it all to the moondoggle and marsdoggle.
The war and a lot of other things aren't measured as part of the federal budget. The entire wargasm is off-budget. So if we stopped spending money over there (sent all the troops home and left the theocratic dictators alone), the budget wouldn't change at all.
The last thing this regime wants is for ~any~ fiscal responsibility to exist. They want to destroy the US government because they hate the US. Starve the beast, and all that. They intentionally want to jack up the deficits and fuck over the military so that there is no one who can stand in their way. And now they're all pissed off that China won't devalue their currency with respect to the dollar, because they want the dollar to crash and burn. You know that shit in Left Behind: tribulations. It ain't happening fast enough, so they started that wargasm in Iraq.
yes, I extracted the text from the AEI article because the parallels to the current situation of over-extended American empire are too obvious not to notice.
-----"A glorious example is of course Spain, where Franco already in his testament prepared for the return of democracy."-------
Totally and completely false. Franco set up the son of the king in exile as his successor (the king in exile was considered anti-francoist and thus untrustworthy). Juan Carlos was bought up in Madrid to follow the tenets of fascism, but simply wasn't convinced. When Franco died, after a few months, he hand-picked Adolfo Suarez, a young falangist to be his prime minister because there was a secret understanding between them that Suarez would bring in democracy.
Spanish democracy was the birthchild of young fascists and old socialists and communists. The older fascists were viciously against it, and the younger socialists, such as Gonzalez, showed little or no enthusiasm for the transition.
So we disagree over the motives of Franco, but it was his self-chosen successor with the cooperation of the ruling Falangists who brought democracy back.
Which was the essence of the statement: dictatorship turning itself into democracy without a revolution.
July 14th, 2007 5:37am