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Jun 25

U.S. national debt, China is not the issue

Written by dewang on Thursday, June 25th, 2009 at 7:50 am
Filed under:General, media, politics |
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As of today, the U.S. national debt is $11+ trillion.  When the U.S. media talk about this debt within the context of U.S.-China relations, they usually talk about trade imbalance, currency manipulation, and anxiety over whether China is going to dump her treasury holdings and trigger a collapse of the USD.

I’d like to share with you some graphs (based on numbers I got mostly through Wikipedia, and I believe their “ballpark” to be about right):

U.S. Key Metrics

With the U.S. bailouts, Obama’s plan will add $1.7 trillion to the U.S. national debt, bringing the total to $13 trillion by the end of 2009.

U.S. Debt Owned By

China and Japan are two of the top holders of U.S. debt.  Rest of the debt are held by oil producing countries, U.K., and just about every other country on this planet.  Note that China’s holding as of January 2009 was $739 billion vs. the $3.178 trillion owned by all foreign countries combined.  The vast majority of the U.S. national debt are held by the American public.

U.S. Trade Volume in 2008 with Key Partners

The chart above shows the top trading partners for the U.S..  Note that Canada and Mexico are on the top 3 due to their proximity to the U.S..  China’s $345billion for the first 10 months in 2008 is only about 12% of total U.S. imports and exports.

Bottom line: The American public wanting to tackle their national debt, more aggressive trade policies with China will not yield much difference.


There are currently 2 comments highlighted: 40816, 44071.

71 Responses to “U.S. national debt, China is not the issue”

  1. Charles Liu Says:

    Agree. We should focus more on the national debt and domestic policy, rather than trying to scapegoat China (currency, trade imbalance, human rights).

    My god have we forgotten how many billions per week GW Bush spent on the Iraq war? Where’s the WMD? How about our WASP homeboy CEOs and decision makers that’s outsourcing jobs? If they don’t go to China they’ll go elswhere.

    Weak RMB actually help us keep our debt serviceable.

  2. TonyP4 Says:

    It happened before: Japan, oil-exporting countries… They have too much US treasure bills as they do not want to kill their customer, US. When they invest in US companies, properties, they win in general, otherwise they got stuck with depreciating debts as China today.

    It is partly true that Chinese manipulate the currency. However, it has no effect on American export to China. As American culture (or all others too), it is easy to blame others than ourselves: it is nothing wrong with my government and our citizens (both are big spenders and fight the wars we cannot afford), but the ‘evil’ Chinese.

    – Chinese currency and I think Hong Kong too were basically pegged with US’s, so it would not affect import/export with currency fluctuations. Now, it is pegged mainly with US and EU.

    – Most countries would like to increase the value of its own currency. If you borrow from me with my country’s currency and it increases its value by 10%, you need to pay me 10% more with your own currency.

    For the same scenario, I can buy your country’s assets (like land, factories…) 10% cheaper.

    – The drawback. It discourages import from US to China in theory if Chinese currency is adjusted to the market.

    It is not true as US and China are perfect trade partners. The majority of Chinese goods are of cheap, low-cost consumer products and US goods are of high-tech and agricultural products … In a sentence, they do not compete with each other in general.

    China keeps the currency close to US, so it has to eat their profits by reducing jobs loss. The US consumers benefit by low cost consumer goods. If you argue the jobs also go to China. With the US high salary, it would go to other developing countries if not go to China. So, it is a win-win situation for US.

    – “to adjust to the market”. One way is go back to the gold standard that was removed by US. Basically your currency value is adjusted by the gold reserve in your central bank.

    It is over-simplified for discussion.

  3. admin Says:

    in case some of you are wondering, the post author “huaren” is not the same person who made some nasty comments a while ago.

  4. huaren Says:

    @Charles, #1

    “We should focus more on the national debt and domestic policy, rather than trying to scapegoat China (currency, trade imbalance, human rights).”

    Exactly.

    “How about our WASP homeboy CEOs and decision makers that’s outsourcing jobs?”

    My view is U.S. corporations tend to be less “political” in their thinking. They are more strictly business – which I personally prefer. Them “outsourcing” is not a big problem in my opinion – its absolutely natural if you believe in capitalism.

    To me, “outsourcing” is another loaded term mainly created by the media to get people all paranoid and this concept egged on by those who looses out when trade expands.

  5. huaren Says:

    @TonyP4, #2

    “When they invest in US companies, properties, they win in general, otherwise they got stuck with depreciating debts as China today.”

    It is widely known that China is hording commodities now – this is to combat a depreciating USD. Many in the U.S. are mistaken on this notion that the U.S. government can literally print its way out of debt. No doubt the Fed is printing money like there is no tomorrow, but take a look at this article (you are an investor type, so you are probably reading Seeking Alpha already):

    http://seekingalpha.com/article/141571-china-shipping-and-the-great-commodity-carry-trade

    Btw, on “currency manipulation” – I think this is also a smokescreen created by the U.S. media (and some politicians) to divert American’s anger and attention at China. Every country have currency policies to affect FDI, trade, and domestic consumption. What do you call it when Fed simply prints $1 trillion?

    “China keeps the currency close to US, so it has to eat their profits by reducing jobs loss. The US consumers benefit by low cost consumer goods. If you argue the jobs also go to China. With the US high salary, it would go to other developing countries if not go to China. So, it is a win-win situation for US.”

    I completely agree.

  6. anon Says:

    this post is very misleading. most of what this post looks at is gross numbers rather than net numbers. for instance, the thrid chart is Total US Trade (EX + IM)…a gross amount. on a net basis, the US imported 335bn from China and exported 70bn during all of 2008…btw i have no idea why the author only used from jan-oct…nevertheless, gross trade is a useless number (see here: http://www.census.gov/foreign-trade/statistics/highlights/top/top0812yr.html) ..that 5x imbalance is by far the largest imbalance. Totally inexcusable. Again this post is very misleading and i wouldn’t use it for much.

  7. TonyP4 Says:

    Hi Huaren,

    I read and sometimes comment in the seekingAlpha forum. It has some good ideas, but as in most investment articles (esp. the freebies), read and evaluate. Everyone has its own agenda – like selling gold coins, newsletter, trade system…; and generally they exaggerate and lure you to buy their stuffs.

    China was a nobody in the world commodity markets 20 or so years ago, and now she is the major buyer. With this recession, they cannot possibly consume as much as they buy. They’re in storage together with tanks of oil (some in an island close to SH).

    The irresponsible printing of money leads to 2 problems: (1) inflation (funny that we’ve deflation with cheap housing prices but wait for 2 years), (2) high taxes (if they need to balance the budget). If you have 1 million dollar, it will worth $500K or half the value in 10 years. It is a kind of invisible tax. Our children and grand children will pay for our instant gratification of easy bailouts.

    Thanks for the article.

  8. TonyP4 Says:

    Here are some articles (satires, facts or just jokes) related to the topic.

    Dear Employee. http://tonyp4joke.blogspot.com/2009/03/dear-employees.html

    How to save the airline (small portion original). http://tonyp4joke.blogspot.com/2009/02/how-to-save-airline-industry.html

    I wrote Bailout Happy but could not find it in my blog. Have a good laugh!

  9. TonyP4 Says:

    Dear fellow FMers, do you remember I wrote to buy oil (via ETF) when per barrel is less than $35 and now it’s more than double. Any one took my advice? If you did, do not forget our agreement: (1) when you make some money, you need to send me a small portion (you can send it to your charity or the one for falling heroes), and (2) if you lose money, do not bother me. Haha.

  10. Steve Says:

    @ Tony: Since I’m sure you took your own advice, by now you should be fabulously rich! How’s life on your luxury yacht?

  11. TonyP4 Says:

    Steve, I’m like the shoe-maker’s son who still does not have shoes. I’m far better than the underwear-maker’s son. 🙂

  12. Chalres Liu Says:

    My Dad must be making shirts now, lost my shirt last October on Wamu.

    “It can’t fail right? Let’s buy down our base…” 😥

  13. Randall Says:

    Huaren, sorry, I work as an macroeconomic analyst looking at China and I’m going to have to beat up on you for this.

    Your interpretation is flawed. China (and as a proxy, the rest of Asia) is indeed a key part of the problem of global imbalances. To assess imbalances, you should not look at the total trade balance, but instead the imbalances (i.e., surplus/deficits). Asian policies aimed at ensuring production and employment growth at home have necessitated what is essentially vendor financing of the US and artificial propping up of the US dollar. This in turn, suppresses consumption and domestic demand. If you are an average Chinese person (and I happen to live in China as well) then you realize that your purchasing power is much less than it ought to be. This is very much the result of policies.

    Yes, there are some products the US would not have a comparative advantage in even at a fair exchange rate for the dollar. But that’s the entire point of exchange rate adjustments. They are suppose to adjust, over time, to a point where there are comparative advantages. American labor is more expensive, but American productivity is higher so there are many goods and services Americans should be exporting to the world.

    Look, developing countries try to export their way to growth is a fine model for some period of time, but Japan and China are simply too large as economies to not be expected to enact some structural transformation of their economies. Chinese policymakers have acknowledged this goal, but of course, it’s not easy.

    Sure, I also agree that knee-jerk trade barriers or others reactions from Congress won’t likely have the intended result in the short-run.

  14. huaren Says:

    @anon, #6

    I appreciate you commenting. Just couple of clarifications:

    1. The Jan – Oct ’08 were simply info I got through Wikipedia. No intention of not using the whole year – I simply didn’t search hard enough to find it, so thanks for the link.

    2. Yes, I agree with you, the trade imbalance between China and U.S. are HUGE. But as Randall #13 comment mentioned, China is kind of a proxy also for rest of Asia, so this extra earned income is passed along to enrich the entire region.

    Anyways, my point is even with this imbalance, and even if the U.S. is successful in tilting to U.S.’s favor some type of new trade arrangement with China, Japan, etc., that won’t amount to much impact against the U.S. debt.

    At some point, I will start a thread about this trade imbalance. For now, I think the U.S. public cannot afford to take their eyes off this massive national debt.

  15. huaren Says:

    @TonyP4

    Yeah, an option is to park money in China on realestate, but new laws passed there couple of years ago requiring residence makes it almost impossible. Also, parking cash inside China after conversion to RMB is fine, but getting them out is hard. My vacations to China are budgeted for many years to come. 🙂

    And, yeah, in the U.S., the strategy is to acquire real property.

    Thx for the jokes. The funny thing is:
    1. My company few months ago DID offer those 40 years or older extreme early retirement.
    2. I have a co-worker named HUI.

    What’s the chance of that?!

  16. huaren Says:

    Steve, TonyP4, Charles,

    I highly recommend “CAF” or one of the computer game companies, like “GA”.

    As of today:
    CAF = 33.74
    GA = 8.56

    Come back to this thread in 2010-06-25.

  17. huaren Says:

    Hi Randall,

    Thx for chiming in. Its okay if you “beat” me up over this article. I strive to learn (though I have to remind myself I can be ignorant, probably more often than not).

    “Your interpretation is flawed. China (and as a proxy, the rest of Asia) is indeed a key part of the problem of global imbalances. To assess imbalances, you should not look at the total trade balance, but instead the imbalances (i.e., surplus/deficits). Asian policies aimed at ensuring production and employment growth at home have necessitated what is essentially vendor financing of the US and artificial propping up of the US dollar. This in turn, suppresses consumption and domestic demand. If you are an average Chinese person (and I happen to live in China as well) then you realize that your purchasing power is much less than it ought to be. This is very much the result of policies.”

    To me, the U.S. consumes/spends more than it can afford. The U.S. has a choice to not borrow. It is not the Asians who are forcing the U.S. to take the loans, if you will. While I agree with you this effect of “vendor financing”, I don’t think you fix the root cause of the problem by fixing China or Japan.

    Maybe I should ask: has there been a study done to see what effect a free floating RMB against the USD would yield in the next few decades?

    “American labor is more expensive, but American productivity is higher so there are many goods and services Americans should be exporting to the world.”

    This is very true, especially with China. But with Japan, a case in point with GM vs. Toyota, I think Japan is both cheaper AND more productive.

    “Look, developing countries try to export their way to growth is a fine model for some period of time, but Japan and China are simply too large as economies to not be expected to enact some structural transformation of their economies. Chinese policymakers have acknowledged this goal, but of course, it’s not easy.”

    I don’t buy this argument. China’s GDP is vastly made up of internal consumption. Their trade with the US is only about what, 19% (?) of their total trade with the world. China’s net import/export is pretty much balanced.

    So, my view with this trade imbalance is that its a effect of spending more than you can afford.

    Even if U.S. trade with Asia is fully balanced (assuming no change in spending habits by the US government) – zero net import export – that adds $300billion (in the ballpark I hope) each year to U.S.’s income – at that rate, over $12trillion, that’d take 40 years!

  18. Raj Says:

    This is very true, especially with China. But with Japan, a case in point with GM vs. Toyota, I think Japan is both cheaper AND more productive.

    Maybe, but a number of Japanese companies have factories in the US. If they’re exporting goods abroad too then America benefits as well.

    As for studies, you don’t need to be an expert to know that if the Yuan appreciates then Chinese people will be able to afford more imports and therefore American goods.

    Overall I disagree with the idea that American debt has nothing/little to do with China. It has everything to do with China, just as it has everything to do with the US. Randall has made some points on China’s role. But, yes, of course trade barriers won’t resolve much.

    There’s also spending habits, which Randall touched upon. Asians need to spend more and save less – Americans need to do the opposite.

    All very simplistic stuff, and I don’t pretend to be very knowledgable on US-China trade relations.

  19. TonyP4 Says:

    Hi all, after reading the posts, my random thoughts are:

    * There are always ways to move money back to US. When I convert to yuan in China, they always give me receipt in case I want to change back to US I guess. I can sell them to some who want to get the money back to US. You can think other similar ways but in larger quantity. Smuggling gold is another one. Opening a US account is another one by Chinese citizens (I know some for real). Remember the golden teeth of the Vietnamese refugees, haha.

    * US can set a rule to sell weapons and other dual use technology to China as long as they can get same from Russia to balance their trade imbalance.

    * China has trade barriers. I saw a lot of Chinese tourists bought a lot of electronics here – there must be high tariff in China.

    * Manufacturing in US has gone unless you’ve been living in a cave for the last 10 years. $20 an hour cannot compete with $1 per hour elsewhere. The generous social welfare system and the union both make the matter worse.

    * China views job is more important than rate of return. Some products are obvious being dumped as charged. Just like Microsoft, you dump the product but return to full price after you capture the market.

    * Being an older person, I have my shares of co-incidences.
    – At 2 am and on my way to MA. from CA, I met one of my best high school mates at Albany, NY. He was on his way to Toronto. He, the best man, married the lady of honor in our wedding.

    – The husband of a lady I knew in my summer job married a guy with my same birthday (day and year).

    – The Indian guy in my commuter bus was my co-worker in same project.

    – I took the wrong hydrofoil from Macca to HK, and met a guy in my commuter bus in Boston.

    Life is a mystery to me.

  20. huaren Says:

    Hi Raj,

    Thx for chiming in as well.

    “Overall I disagree with the idea that American debt has nothing/little to do with China. It has everything to do with China, just as it has everything to do with the US. Randall has made some points on China’s role.”

    The stats I compiled shows that the U.S. national debt and its budget deficit are so gigantic compared to even the entire trade volume between China and U.S., so the priority for the American public lies in curbing U.S.’s spending.

    “But, yes, of course trade barriers won’t resolve much.”

    I like people who generally think this way.

    “There’s also spending habits, which Randall touched upon. Asians need to spend more and save less – Americans need to do the opposite.

    All very simplistic stuff, and I don’t pretend to be very knowledgable on US-China trade relations.”

    I agree with this to some extend. Sure, encouraging the Asians to spend more helps some. However, if we encourage the Asians to consume at the same per capita level as the average American, I think we will bankrupt the natural resources we have on this planet lot sooner.

    So I think it is cutting back on spending that is within more direct control of the U.S..

  21. GNZ Says:

    “To me, the U.S. consumes/spends more than it can afford. The U.S. has a choice to not borrow.”

    Over consumption is not just an inherit charachteristic of the USA, it is a result of factors like policy.
    To end the conversation with a statement like the above would be to effectively say you don’t want it to change.

    If the US was to fix the USD against the RMB at a much lower rate or if it was to insitute a complex red tape form of trade barrier, there would be price signals to the market and their behavour would change – the question is just whether the costs would be worth it.

  22. Steve Says:

    @ huaren & Raj: It seems to me like you’re both saying the same thing in different ways. If the States cut down on spending, both individual and government, the trade deficit with China will go down on its own and the natural increase in China’s domestic spending should take up most or all of the slack. Trade barriers on either side are not a good idea, and lately both countries have erected a few. Let’s hope they did that for political reasons and not as some part of a broad based change in economic policy.

  23. Shane9219 Says:

    @huren #17

    “the U.S. consumes/spends more than it can afford. The U.S. has a choice to not borrow.”

    I read and hear similar remarks everywhere. The truth is that western consumerism and entitlement is a pair dear products from capitalism and liberal democracy. Neither US government or its politicians can do anything about it, until an utopia like that going bust by it own.

    China right now has the right mind set with sustainable growth.

  24. raventhorn4000 Says:

    Shane,

    I agree with you.

    US’s argument about imbalance of trade with China and Japan is total bunk.

    If China spends money like US does, the world economy would collapse in a mountain of debt.

    The true imbalance is in US borrow and spend habits.

  25. huaren Says:

    Hi GNZ, #21,

    Good point.

  26. huaren Says:

    Hi Steve, #22,

    Yes you are right we are basically saying the same thing.

    But I have a simple caveate: this imbalance is not significant in the grand scheme of the U.S. national debt as well as its budget deficit.

  27. huaren Says:

    Hi Shane, raventhorn4000,

    Thx for chiming in. I am curious what you two think the U.S. can do to throttle back their spending?

  28. Steve Says:

    @ huaren #26: I completely agree with your caveat. They are two different situations causing two different results. The biggest problem in the US at this time is federal spending.

    I always get a kick out of hearing the Republican mantra “cut taxes”. They never mention that cutting taxes vs. increasing income is a bell curve. Yes, when JFK became president and the rich had a 90% tax rate, they were at the far side of the bell curve and cutting taxes helped immensely. Even in Reagan’s time, tax cuts made sense though spending went up even faster than the increased income.

    But when does the bell curve start to dip in the other direction? According to the “cut taxes” logic, we’d have maximum income by cutting taxes to zero, except at a zero tax rate we’d have zero income. Seems they want a consumption tax to replace the income tax, but when they tried that with luxury goods the sales of those good dramatically lowered.

    If they want to dramatically decrease spending on the federal side, they’ll have to do a few things:

    1) Tackle entitlement programs. (known as the third rail of politics)
    2) Stop passing laws that require additional spending without providing additional income to offset said spending.
    3) Stop passing laws that require additional spending that force the states to come up with the money. It doesn’t matter whether it’s federal, state or local, every tax dollar is another dollar out of my pocket. Which agency it goes to is irrelevant to me.

  29. raventhorn4000 Says:

    Huaren,

    There are lot of simple things US can do to throttle back the spending.

    But simple things are often not as EASY as one would like.

    It’s like quitting smoking, it’s simple, just stop, but it’s not EASY, because one has developed habits.

    So I shall only say about the “obstacles” in US that stops the simple solutions:

    (1) Entrenched government politics on “spending” and taxes. Social welfare programs that were designed to provide safety net for the society, are now becoming the biggest burdens on society. The ad hoc nature of US social welfare programs mean that they are neither effective in output, nor meaningful in psychological impact. In other words, they are “half-assed”. Full blown socialist programs may not be top quality, but they are adequate for 80% of the needs, and they are cheap, like some universal health care programs, they don’t provide the BEST care, they just provide sufficient care for most of the people, and they are on the cheap. Full blown no social welfare is also cheap. Either solutions might be viable, but US is unable to choose. A “half-ass” solution is neither effective, nor cheap.

    (2) Entrenched Lobby interests. They impede effective policy making, and they should be stopped, but that’s unlikely, because there is already too much corruption influence and money.

    (3) Entrenched Industry interests in forcing consumers to spend.

    This factor is actually very big influence on US consumer spending habits. and it is a “dirty little secret”.

    Marketing industry of US is designed to keep the consumers spending one way or another.

    High tech industries especially, form their marketing and product development to 6-9 “product cycle”, and guaranteeing only 1-2 years of life on their warranties, and charging consumers within “disposable spending” cash amount of around $200. Result is naturally, every 1-2 years, consumers have a habit of buying a new gadget for $200.

    This creates a huge amount of waste and consumption.

    US consumers should get into the habit of recycling old products that should be designed to last 10 years. This would reduce waste and spending generally.

    But the industry’s entrenched interest will oppose any attempt to reduce spending.

    *
    unfortunately, I do not see any viable solutions to these 3 ‘entrenched obstacles” in US.

    In conjunction with each other, they will continue to cause US spending to spiral out of control, until the point of collapse.

  30. Chalres Liu Says:

    Randall @ 13, “China/Asia is key part of the problem of global imbalances”

    Like a lot of folks here I’m not a economist, Randal, hope you can help us out:

    – Is it true China runs a net trade deficit? Does that mean China is a net importer in global trade?

    – Is it true the US-China biliteral trade deficit we see is merchandise trade? Would the true deficit figure be lower, when considering the surplus in services we export to China?

    – Is it true America’s current account deficit is largely the result of domestic policy, rather than biliteral trade relation with any given country? US also import large quantity of oil from middle eastern nations, for example.

    – I have heard of the “too thrifty” rationale you cited elsewhere, that somehow nations with large reserves lent back to US/UK is the culprit of the global economic meltdown, not the lack of regulation in investment banking, complex financial insturments, or outright criminal actions. Forgive me for using laymen’s term – but it seems to me a bit “ass backwards”.

    Thanks!

  31. Wahaha Says:

    Lot of people have claimed China’s economy is depending on exporting. Have anyone thought of why it seems China is OK even though export has dropped significantly ?

    I read somewhere that although the goods is made in China, but part of it (especially the expense part of goods) are actually imported from other area like Japan and Germany. Therefore even it should be China that suffered most from this recession, it caused far more damage to countries like Japan and Germany.

    Also China provides cheap talented people which no other country (except India, but their infrastructure lags far behind)) can offer. That is why China has huge FDI every year, the result is obvious : China has exported lot more than other country. If other countries couldve provided cheap talented people and infrastrue, westerners wouldnt have invested in China. So blaming China wont solve problem, unless westerners are willing to live in a lower standard,…. no1 is willing to.or the rich are willing to make less.

  32. raventhorn4000 Says:

    Because right now, China is the best game in town.

    All the people with money, they want to put the money somewhere that will give some return of investment. Some pulled out of China, but later went back in.

    China might be risky for its export dependency, but its government is not in massive debt!

  33. Shane9219 Says:

    @Wahaha #31

    “no1 is willing to.” ==> “no one” or “No. 1″ ?

    My English is not that good, but I swear I could never ‘degrade” myself to your level 🙂

    Please continue to read this interesting report by Kate Humble

    “A natural state of mind

    Our vocabulary has changed so much in recent decades that our grandparents would now wonder what we were talking about. In the 1980s we got stuck in a language of acronyms, full of yuppies, dinkies and nimbyism. By the 1990s we’d become subversive, flipping “wicked” on its head and turning “mobile” from an adjective to a noun.

    As we entered the new millennium, we retreated to our computers and started blogging and googling for all we were worth. Busy, busy words for a busy, busy society. Shorthand terms for those short of time. As the pace of our lives has increased, so the rate of our linguistic change has comfortably managed to jog along beside it. And where has this heady hedonism led us? We’ve made up a new phrase for that, too. The credit crunch has the ability to affect all our lives, yet, again, previous generations would have no idea what it meant. Good heavens, most of them weren’t even able to get credit in the first place.



    http://www.chinadialogue.net/article/show/single/en/3106-A-natural-state-of-mind

  34. huaren Says:

    Steve, #28

    “1) Tackle entitlement programs. (known as the third rail of politics)
    2) Stop passing laws that require additional spending without providing additional income to offset said spending.
    3) Stop passing laws that require additional spending that force the states to come up with the money. ”

    I hope the American politicians wise up to your prescription.

    I vote for politicians should get their pay deducted if they fail to balance the budget.

  35. huaren Says:

    raventhorn4000, #29

    I generally see the challenges the same way you characterize them.

    “High tech industries especially, form their marketing and product development to 6-9 “product cycle”, and guaranteeing only 1-2 years of life on their warranties, and charging consumers within “disposable spending” cash amount of around $200. Result is naturally, every 1-2 years, consumers have a habit of buying a new gadget for $200.”

    I can personally attest to this too from my work.

    I have a friend who is a product line manager at a networking company – he tells me that European customers are lot more conscientious about what they buy and they tend to keep networking gear they buy much longer than their American counterparts.

    On the other hand, I don’t want to paint a complete doom and gloom picture for the U.S. either – I believe U.S. is very technology driven, and you’d expect a place like this to have fast product cycles. For more mature products like a typical desktop PC, it used to be obsolete every 2 years or so, but I think many people keep their PC 4-5 years now.

    My point is, Americans invent so much so they deserve a bit of slack in this regard. But sure, it becomes a habbit hard to change as you said.

  36. Steve Says:

    @ huaren #34: That’s also my belief. Let’s say the law works this way… politicians who balance the budget get their entire salary. Politicians who don’t balance the budget get 1/3 of their entire salary. Problem solved! 😉

  37. Raj Says:

    huaren, you know that you share your alias with another guy who comments on this blog, right? Are you going to change it to something else? At the least you could add something before/after “huaren”.

  38. raventhorn4000 Says:

    Huaren,

    I think the fast pace of technological innovation in recent years may be not as great as some believed.

    Most products are merely very tiny improvements upon the previous generation.

    And paradigm shifting innovations have not been that many.

    *and I think, we should slow it down more. make less, last longer, buy less. But technology can still advance, but in bigger steps, rather than the tiny steps.

    *If a man is to travel on foot, should he take tiny steps while enjoying the view? At some point, it defeats the purpose of going somewhere.

    Instead, a man should make moderate comfortable steps that keeps him in a brisk pace. That way, he uses his energy most efficiently.

  39. huaren Says:

    Hi Steve, #36,

    Indeed, problem solved. 🙂

    Few threads ago there were discussions about validity of comparing Corporations with Governments. This salary penalty is very much in alignment with how Corporations “incentivize” their leaders. In a more authoritarian government, they can simply make it a crime.

    Hi Raj, #37,

    You know, I have been active here last couple of months. As far as I can tell, those comments were indeed from me. I so happened to not have registered and simply used the alias.

    Admin deleted an existing “huaren” account which has been long time inactive, so I re-registered in its place. I do participate in some other blogs using this alias, so I’d prefer to keep it.

    Hi raventhorn4000, #38,

    “*and I think, we should slow it down more. make less, last longer, buy less. But technology can still advance, but in bigger steps, rather than the tiny steps.”

    I like your thinking on this a lot. Governments should design policies toward this goal. However, it takes everyone to play by these rules, and its really hard. The person who can find a way to get everyone to play along should get the ultimate Nobel prize.

  40. Steve Says:

    @ huaren #39: Maybe this will make the debt easier to understand. Let’s compare it to a National Debt Road Trip. 😀

  41. raventhorn4000 Says:

    Huaren,

    “I like your thinking on this a lot. Governments should design policies toward this goal. However, it takes everyone to play by these rules, and its really hard. The person who can find a way to get everyone to play along should get the ultimate Nobel prize.”

    Hence the inherent problem in Democracy and the current free market economy.

    Recognizing that the prevailing incentive in business is to make money as much as they can. There is no private incentive to “slow it down”.

    Democracy, in this point, cannot dictate a forceful policy to counter the private incentive to be wasteful and over development.

    *We must acknowledge that some economic behavior of the private individual is inherently harmful to society, such as “hoarding of vital resources”.

    Similarly, some economic habits can be inherently harmful to society, such as Opium trade in old China.

    the only real solution to these problems is forceful solution, ie. bans, punitive fines, etc.

    One cannot rely upon opium addicts to vote for the question of whether to ban opium trade.

    And right now, US is a society filled with “borrow and spend addicts”, including the US government itself.

    One cannot rely upon the addict in chief to go cold turkey and set an example for the people.

  42. Shane9219 Says:

    From “California’s Fiscal Crisis: The Legacy of Proposition 13′ by LA Times

    “California’s woes have a set of deeper reasons: direct democracy run amok, timid governors, partisan gridlock and a flawed constitution all contribute to budget chaos and people in pain”

    http://news.yahoo.com/s/time/08599190493800/print

    Keep in mind, California is used to be No.6 largest economy in the world (if counted as a state), a post boy for liberal democracy.

  43. raventhorn4000 Says:

    NY governor threatened to send police to lock the State politicians in the State government building until they pass their budget.

    It’s quite the sign of times for “democracy”, nowadays.

    *
    What happens when the “voters” and dumbed down, and politics are watered down, and bureaucracy runs away out of control?

    Who is left to halt the train? Who will break the stalemate?

  44. hongkonger Says:

    Does anyone agree with this comment? I mean: America hogging of resources and energy consumptions are justifiable? And that they “practically fed the world” ????

    “The United States uses about 25% of the world’s oil energy. It’s hard to calculate exactly, but when all other forms (solar, nuclear, coal, wind, natural gas, etc.) are factored in, the overall percentage used by us is a bit less; maybe 22-23%. This only makes sense when one considers that the U.S. (5% of the world’s population) produces 20% of the world’s economic output, China is second at about 13%. (as of 2007). Additionally, depending on exactly the numbers used; the U.S. is responsible for 20-30% of the world’s GDP (Gross Domestic Pro-duct). In addition to product manufacturing, a large portion of our energy use is devoted to food production; before recent increases in Russian grain production that allowed them to be a net exporter, we practically fed the world. With our usage of lighting, computers, large screen t.v.’s, central a.c , etc. just for residential comfort, it’s no wonder why the average person living in the U.S. consumes more energy than others.
    Next time you hear an environmentalist deride the U.S. for her energy use, ask them about what that energy produces. They will have no idea.”

    http://wiki.answers.com/Q/What_percentage_of_the_worlds_energy_does_usa_use

  45. hongkonger Says:

    Wooh~! I got this in my e-mail just minutes ago.

    Just remind the author of this:
    http://wiki.answers.com/Q/What_percentage_of_the_worlds_energy_does_usa_use

    Fact is…It is the overspending lifestyle of USA that is being financed by practically everyone in the world~! And
    the only way they intend to pay back the humongous debt to people of the world is by printing more dollars. That’s why we’re having this financial meltdown which would eventually make the dollars worth only the paper and ink they’re printed on. So who is supporting who here?
    It’s not just the oil men. It’s everything from head to toe they’re wearing, using and eating and drinking, papers they’re wiping their asses with, and driving and everything that’s making life comfortable and convenient for them. And now they have the gall to turn around to say you guys depend on US to feed the world ? Don’t even bother to rebut BSes like this.

  46. real name Says:

    31
    why it seems China is OK
    i’m not economist but maybe compare graph from
    http://online.wsj.com/article/SB124025046322435795.html
    where chinese grow in last quarter 2008 felt to 0
    and graph from
    http://online.wsj.com/article/SB124025046322435795.html
    or maybe
    http://www.cikomodity.com/images/komentare/komentar-090525-4.gif
    where at begin of year chinese banks put double money comparing to year(s) ago

  47. huaren Says:

    Hi hongkonger,

    Thx for chiming here as well. Look, I don’t think the U.S. government is that naive. They know printing more USD causes inflation. They also know holders of U.S. debt such as China and Japan could print more of their own currencies, buy up the excess USD, and purchase commodity or something else with printed money.

    This is why Geitner goes to China to make sure the countries are aligned on some strategy so no one does anything unilaterally to worsen the situation.

  48. huaren Says:

    Steve,

    Funny link, but I had no idea Obama is adding so much more to the debt. When I saw the chart of the presidents and the debt their policies added, it made me realize none of these guys are accountable when they are done with their 4 or 8 years term.

  49. TonyP4 Says:

    Hi folks, read several comments and here are mine.

    * Use of energy for growing food is justified. However, there are many uses are not justified. To illustrate, my daughter’s FIL has at least two acres of land and his house is less than $500K. I try to say it is not an expensive house but has a lot of land (compared to HK’s high rise apartment doubling its price with about 100 square feet of land from my rough estimate for discussion). The big SUV is another one not justified for energy consumption. The 25% will go to 22% after the considerations you mentioned plus the forced savings due to the recession.

    * Printing money is an instant gratification for every one including the president. It is not a long-term solution, but after 8 years he does not really care except from history.

  50. hongkonger Says:

    Thanks Huaren & Tony for your responses:

    The above email from my friend in Japan: “the overspending lifestyle of USA is being financed by practically everyone in the world, ” was in response to the article I’d posted on # 44. “And now [he has] the gall to turn around to say [people] depended on US to feed the world ?”

    This line from a song: “Every creature needs a home – BUT every highway leads to Rome,” is clearly bemoaning the moral decadence that was Rome, and today’s globalized and Westernized upperty middle class. China’s escalating automobile sales is terrible.

  51. hongkonger Says:

    Ops*…For example, China’s escalating local automobile sales is a terrible thing I feel. I have all my life resisted owning cars.

  52. Steve Says:

    @ hongkonger: Why do you feel the rest of the world is financing US debt? Do you feel it is because the return is dependable or strictly to bolster their export sales market? Or some other reason? Just curious…

  53. JXie Says:

    Japan has a much higher national debt level (as percentage of GDP), but it rarely runs trade deficits with other nations. The government of Japan is deeply in debt (far worse than the US government), but it’s mostly indebted to its citizens. Unless a large number of rich Japanese all of sudden decide to move out of Japan, Japan doesn’t have a potential international trading/payment problem.

    The US government owes quite a bit more to the foreigners. The April number shows $3.2 trillion. One may argue that it’s only 22% of the US GDP, but the problem of such argument is that only a very tiny portion of overall US GDP is tradable goods and services that foreigners would ultimately be able to take back as a form of payment. The writing on the wall is that in the long run, US dollar will have to go down a lot, to inflate away the liabilities to the foreigners.

  54. huaren Says:

    Hi TonyP4, #49,

    My view about living space per capita – that’s a tough metric to compare on, because the counter argument from an American is maybe some countries should not produce as many children in the past. I’d prefer we not get into a baby race. 🙂

    I completely agree with the energy consumption metric – or carbon footprint.

  55. huaren Says:

    Hi hongkonger,

    I think it will be more true over time as citizens of this planet become more environmentally conscious – per capita consumption will be discussed more and play a part in each country’s obligations to reduce.

    But I don’t think it is as clear and dry as we would like to think. If GMO foods are indeed proven safe for human consumption, then the Americans indeed deserve a lot of credit for coming up with ways to feed the world.

  56. huaren Says:

    Hi JXie, #53

    Thx for joining in our discussion on this topic.

    I think foreign countries holding U.S. debt can inflate their currencies as well. I think the net effect will be essentially the Americans paying off all the debt eventually.

    Yet another way is this – lets assume oil supply runs out soon for the world. Oil price will soar. The U.S. has military might to secure its oil supply much better than any other country. Other countries will be “taxed” by this fact while the U.S. economy can continue with lower cost. This then will enable it to accumulate more wealth which in turn allows it to pay off the debt.

    (Still, of course, if the leadership is belligerent at that point, they may just decide to not pay.)

  57. JXie Says:

    Huaren, #56, interesting ideas. A couple cents of mine:

    – The US treasuries are a major pillar of the American financial market. A total default would be extremely painful to itself. Technically it’s next to impossible to only default to foreigners or a handful of foreign nations. Let’s say the US government decides to mandate all outstanding bonds to be re-issued so that it can default the foreigners, but there would soon be black markets for the foreigners-owned US bonds.

    – If the oil price is high enough, other energy sources, and other means of extracting oil (e.g. oil sand) will become viable.

    – The bulk of the global oil reserve is in Eurasia, which is reachable by other major world powers on land. On land, the US military advantage is far less significant vis-a-vis other major powers.

  58. TonyP4 Says:

    #50 #54

    HKer, if I do not have a driver, I will not own a car in HK. Parking space is so expensive in HK unless living in rural area. Taxis and public transportation are so convenient and low prices. China should promote public transportation instead of owning cars (I know a lot to do with prestige and first taste of freedom).

    When I first arrived in US, I was surprised by the size of houses and the lots. Places are far apart. When Californians went to supermarket or school, they drove even 2 blocks away. Could be the reason for the supersized Americans. It made sense at that time when energy was cheap and plentiful. Many taxens can drill oil from their houses. Some towns spelled terrible with oil so close to the surface.

    Hi Huraren, you do not want to open a can of worms. Are you saying the Spanish-speaking folks should adopt birth control? Or, the Pope is not right? Or, folks should give up sex as entertainment? Or, teenagers should not touch each other? Or, wars are good as they reduce world population. Or, … 🙂

  59. hongkonger Says:

    PreScript – Post script: This is a rant — I don’t usually nor like writing such posts. So please skip it if such rhetorics infuriate you — I recommend checking out Steve’s China’s Rock N Roll, instead : – )
    Cheers,
    Hongkonger.

    Tony, Huaren:

    “When I first arrived in US, I was surprised by the size of houses and the lots. Places are far apart. When Californians went to supermarket or school, they drove even 2 blocks away. Could be the reason for the supersized Americans.”

    I have friends deep in debts struggling to make ends meet who still insist on driving, owning their own apartments, dine and shop like all is fine. Meanwhile China’s peasantry — almost 3 times that of the entire population of USA — are apportionately increasingly sinking deep in debt from supportng their children thru college, many of whom only to graduate with no earning powers due to lack of job availability. My question has always been what good is money without food?

    GMO foods? We don’t need them~! Monopolizing Capitalism does. Just as Free market is a myth, your “taxens can drill oil from their houses,” is too. Honest Americans have always had to work hard — Remember Donna Summer’s hit song: “She works hard for the money”? The powers that be have always made sure of that throughout history no matter how many carrots-on-sticks they dangle in front of their so-called /belabelled developed and developing countries.

    Recently Venezuelan President Hugo Chávez accuses the Central Intelligence Agency and the “world oligarchy” for leading the military coup against Honduras President Jose Manuel Zelaya. Prez Hugo Chavez – the guy who recommended Noam Chomsky’s book ‘Hegemony or Survival: The Imperialist Strategy of the United States” while addressing the UN General Assemble in 2006 said: “It’s an excellent book to help us understand what has been happening in the world throughout the 20th century, and what’s happening now, and the greatest threat looming over our planet.”

    Declassified documents in mid 1990s and other sources show that the CIA and the U.S. Embassy knew of numerous crimes, including murder and torture, committed by Battalion 316, yet continued to collaborate closely with its leaders….. hundreds of its citizens were kidnapped, tortured and killed in the 1980s by a secret army unit trained and supported by the Central Intelligence Agency……..using the now all too familiar shock and suffocation devices in interrogations. Prisoners often were kept naked and, when no longer useful, killed and buried in unmarked graves. Pardon me, I digress….

    Anyway, all I am trying to say is that the libraries of the world could not contain the volumes of recorded atrocities (let alone those never recorded or destroyed) done to common folks, the destruction to cultures and countries in order that the relative few may prosper. Wake up and smell the shit, the stink is coming from the very charming leopard which as said can’t change it’s spots.

  60. Roadblock Says:

    Sorry for being so frank. But I am astonished by the author’s financial illiteracy.

    “The vast majority of the U.S. national debt are held by the American public.”

    Forget about all the nonsense on Wikipedia. If you want the real story (or I should say “official story”, there’s a distinction between real and official) , just read the statistics published by the US treasury itself. here: http://www.fms.treas.gov/bulletin/
    federal debt: http://www.fms.treas.gov/bulletin/b2009-2fd.doc
    ownership: http://www.fms.treas.gov/bulletin/b2009-2ofs.doc

    As you can see the biggest creditor to the US government is the US government itself, who loaned itself 4.3 trillion dollars. How could the government owe money to itself? Doesn’t make much sense, does it? What’s really going on is that the government has been taking money out of trust funds such as the Social Security and Medicare and so on, to buy its own debt and to finance its own budget. So really there is no money in Medicare or Social Security. All that money has already been spent by the government on wars and other nonsense. They are not much better then Ponzi schemes really. But they tell you not to worry, since I-owe-you notes from the government are real assets. Just don’t try to do the same as a private citizens, because for you that is theft, and you would end up in jail for sure.

    And how can you seriously consider the Federal Reserve and the rest of the American banking cartel as the “American public”? The Fed by itslef allegedly holds more than 1.5 trillion of all kinds of securities and loans, which includes 539 billion in US treasury. That’s how M1 money supply is supposed to be created. But that’s just what they tell you from their books. Statistics from the Fed is not regulated or double-checked by anyone, and they have long since stop publishing key figures like the M3 supply. So nobody really knows how much they own, and how much money they put out there. Of course, ultimately, we are all indebted to the central bank, for the Fed owns us all.

    So that leaves 6.3 trillion to “private” investors. Most of which, over 3 trillion, are in the hands of foreign governments and central banks, just as you mentioned in your blog post. Most of the other 2+ trillion are in fact owned by non-government foreign institutions and “really private” foreign investors. I am afraid that American citizens are just very bad savers. The amount of US debt owned by the real “American public” is simply tiny.

    So I hope you can see the reality better now. The majority of the real and honest investors in US treasury are all foreigners. It’s not too much an exaggeration to say that the US economy is mostly funded by foreigners. Without foreign loans, this country would fall off a cliff and die immediately.

    And lastly on trade, the total volumn of import/export doesn’t matter at all. The statistics you should be looking at is trade surplus/deficit (http://www.brightpointinc.com/flexdemos/ustrade/ustradedeficit.html). There China dwarfs everybody else.

  61. huaren Says:

    Hi Roadblock, #60,

    Thank you very much for chiming in, and its okay you being “so frank.” Hey, I sincerely hope you stay with this thread for a while to further educate us.

    1. I am so glad you shed light on the US government being a creditor to itself. I saw some stats to this, but I was clueless. You are right, I simply lumped all the debt, minus amount owned by foreigners, and call that as owned by the “American public.”

    You are right that obfuscate reality. Based on your explanation, the American public owns very little.

    “What’s really going on is that the government has been taking money out of trust funds such as the Social Security and Medicare and so on, to buy its own debt and to finance its own budget.”

    That makes a lot of sense.

    2. Regarding the trade imbalance: Thx for the link – I’d recommend FM readers to take a look. I then looked up some U.S. “official” numbers. The trade deficit U.S. had with China before 1989 was only 2 or 3 $billion a year, so wasn’t interesting. Since then, each year the deficit grew very rapidly, and the total for the last 10 years is about $1.86 trillion. With the U.S. total national debt at $13 trillion, $1.86 trillion is significant.

    I think you would agree with me, the lions share of the issue is still curbing U.S. spending, as far as the U.S. national debt problem goes.

    3. You mentioned about the “real” story vs. the “official” story. The official story is already kind of bleak, so I am really wondering what your view is on the “real” story.

    4. I have always been curious how does the international community know *how much* USD the Fed prints. Can you share some light on this?

  62. Roadblock Says:

    I guess the real story is way too bleak for the people to hear. What would you say to a patient with terminal lung cancer who is asking for his last cigarette? Refuse his request, expostulate, and scold him for his life-long vice of cigarette smoking? Especially when this guy has a big ego and the biggest bomb in town that can blow up the entire hospital?

    I would just give him a pack, tell some rosy stories or white lies, and let him go away gracefully and peacefully. I would hope he be dead soon enough before he could fully comprehend what was happening to himself and take stupid desperate actions. That would be the best we could do and hope for. And everybody else could be much better off.

  63. huaren Says:

    Hi Roadblock,

    You have contributed to the understanding on this issue, and I am really curious what you think about items #3 and #4 in my comment #61.

    I did some crunching – even at $12 trillion and 300K in population, that comes out to about $40K per U.S. citizen. The problem is still solvable in my mind.

  64. Roadblock Says:

    Hi,

    I think I’ve already given my view on item 3 on your list. As to item 4, I really don’t know any better than other average Joes out there. You would have to ask Mr. Bernanke for the exact number. But I can assure you that he wouldn’t be willing to tell you anything honest, and that it is going to be a huge huge number anyway. And to be honest, I doubt even Mr. Bernanke knows it for sure. They no longer give you the M3 figure anymore. So it’s either that they themselves have totally lost track of it, or that it’s just too dangerously and/or embarrassingly large a number so that they dare not go public with it. Either way, it is bad, ugly and unpleasant. After all, it is indeed an almost impossible task to track all the Eurodollars that’s been flooding around the entire world for all these decades.

    “I did some crunching – even at $12 trillion and 300K in population, that comes out to about $40K per U.S. citizen. The problem is still solvable in my mind.”

    I am glad that you have managed to find some “hope you can believe in”. As I have stated previously, for the sake of world peace, I don’t want to spoil this precious optimism.

  65. raventhorn4000 Says:

    “Just don’t try to do the same as a private citizens, because for you that is theft, and you would end up in jail for sure.”

    That’s true, but Federal government is “collateralizing” its ownership of the country (mostly its economy), to borrow more money from itself.

    That is legal, like mortgaging your house, or a 2nd/3rd mortgage on the same house.

    Except, in US government’s case, it is also leveraging against Joe Public’s money and income. So really, the Public does own it, and pay for it, more specifically, the FUTURE generations of US taxpayers.

    The real question is, what is the debt to asset ratio?

    In federal government, because the tax base is dependent upon GNP, the current debt to GNP ratio is still quite low.

    But it is becoming a large percentage, and debt is growing at 5X the rate as the GNP of US.

  66. huaren Says:

    Hi raventhorn4000, #65,

    “Except, in US government’s case, it is also leveraging against Joe Public’s money and income. So really, the Public does own it, and pay for it, more specifically, the FUTURE generations of US taxpayers.”

    That’s a really good point. If social security is mostly spent, then indeed, what belonged to the public is now gone. The irony of all this is – in a democracy, the citizens outght to be ultimately “responsible” – because they vote their politicians into office. If their politicians spends all their money like social security, then they are partly at fault.

  67. Roadblock Says:

    I don’t think the housing mortgage analogy works here. The government does not own social security or medicare like you own your property. It is more like a law firm managing some clients’ trust funds. And I can assure you that it would be a crime if your lawyer took money out of your trust fund without authorization, put in his I-owe-Us instead, and spent your hard-earned money on whatever interests him, or whatever he deems beneficial to you. In the case of the US government, your politicians are stealing your welfare money to pay for “emergency” bills on Iraq or some other BS. This is dishonest, and it’s terrible financing.

    The debt to asset ratio analogy is also flawed. If a private business goes insolvent, it can declare bankruptcy, and its creditors can then seize all its assets. That is what makes the debt to asset ratio meaningful. But none of this is even imaginable for any sovereign state, let alone for the biggest economy, biggest net importer and sole superpower. The GNP or GDP is not asset.

    The US is almost insolvent already. And it is absolutely inevitable that it will become completely insolvent in the next few months. It cannot go bankrupt. It cannot produce enough attractive, competitive exports. So what is it going to do about it? For a private business, if it wants to, it may also sell a large portion of its assets to pay off a good sum of debt at once. But how big a percentage of the GNP can the US government sell off? Very very small. The government owns some old railways, crumbling interstate highways, postal service, a lot of waste wild land, and some aircraft carriers that cost more to maintain than they are worth, and some toxic financial “assets” that the banks dumped on it recently. Now who do you think would be dumber than the government to buy these “assests”? The government also has the right to tax. But how much of the GNP can be confiscated as tax? And how much of the tax revenue can be used to pay debt, especially when the democrats are controlling everything? Right now, the US is not pay back any debt with tax dollars. It just borrows more and more. A third world country would be forced to give up some sovereignty to the World Bank. But if the US ever has to transfer its sovereign right of taxation, or any sovereignty for that matter, to its creditors, say the Chinese or the Japanese, I’m sure all hell would break loose.

    The US had to pay about half a trillion last year just for the interest on old debts matured that year, and it could do nothing but issue more new debts to pay off that old interest. That half a trillion will easily grow into a full trillion or more in a few years. There is no honest way the US can pull it off, unless there is some technological miracle much bigger than nuclear power, moon landing, air plane, computer and the internet put together. Realistically there are only three feasible solutions: default, inflation or war. I think it’ll more likely be a combination of the three.

  68. raventhorn4000 Says:

    If you take the pure “government is agent of people” theory seriously, that might be true.

    But, US Common Law clearly allows the Government to levy taxes and eminent domain property as it sees fit.

    In that sense, the Federal government is a “super agent” with durable power of attorney, who can make investments on behalf of the people WITHOUT consultation.

    That means, they can leverage your house.

    Your house/social security is in their “trust”, and managers of “trust funds” can sell or dispose of property as they see fit.

  69. Roadblock Says:

    I say there is a clear distinction between “can” and “should”. I CAN wear a ski mask to an airport and yell “Hi, Jack!” But I SHOULDN”T. I CAN sell all my assets, and take all my money with me to Las Vegas, but I SHOULDN”T. Likewise, the US government CAN do whatever stupid and irresponsible things it wants to do, but it SHOULD not. And if it does, the eventual consequences would be very undesirable for everybody.I think the American public has made a very bad deal with thier government, for which they themselves are probably completely responsible, because they failed to foresee the problems and are still failing to take necessary actions. It is a real shame.

  70. raventhorn4000 Says:

    That’s true enough.

    I definitely wouldn’t mortgage my country like this.

    It’s plainly irresponsible.

  71. luciyahelan Says:

    It is more like a law firm managing some clients’ trust funds. And I can assure you that it would be a crime if your lawyer took money out of your trust fund without authorization, put in his I-owe-Us instead, and spent your hard-earned money on whatever interests him, or whatever he deems beneficial to you. In the case of the US government, your politicians are stealing your welfare money to pay for “emergency” bills on Iraq or some other BS. This is dishonest, and it’s terrible financing.
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