Wednesday, August 24, 2011

I guess some people don't get it...

Read this article whole and then the following will be in context:

China doesn't have many choices? Of course they do. Dump our money and quit selling all that junk to us and go back to the stone age.

Or keep buying our debt!

Or how about returning to Maoism? (that one worked out well for them, didn't it?)

If by chance they would or could dump our debt, who would they sell it to?

Again, where did China or anyone else  get all this money in the first place? Does the author really believe the world economy doesn't depend on our trade, paid in dollars, and they can willy nilly stop taking our money in trade without destroying the recipients of our dollar trade?

And real estate will recover as soon as all those bad loans are either foreclosed, forgiven, or paid off and we start buying again as new household formation lead by people with good credit and a job results in new purchases!

The caveat here is budget cuts kill jobs and that is the really something to fear as we have the 30's for our historical example.

The only point I agree with is the outsourcing our jobs overseas leaving millions of our under educated people with no hope for a middle class life style. And yes, this is where too much of our government spending is going and needs to be corrected.

But what we'll get is more "free trade" agreements and China funding our welfare system so these people don't end up sleeping in your back yard!

Fake economic recovery and the road to the Greater Depression | Washington Times Communities
Today the American government carries the greatest debt load in history. We have a fiat dollar – money that only has value because the government says it does – and the American economy is structurally unsound. We produce too little and consume too much, and we finance our consumption with debt.

This state of affairs cannot end well. No nation has ever become prosperous through unbridled consumption and borrowing. This is how nations get ruined.

Nations become wealthy when their citizens produce things and save their money.

That is exactly what Chinese are doing now. As a result, they are becoming wealthier by the day while we are becoming poorer.

The Chinese are self-reliant. They work hard and they make things. We, on the other hand, increasingly rely on government to take care of our needs. If you have any doubt about that, just look at the federal budget and see where the endless torrent of money is flowing.

The debt has both the dollar and the economy in a chokehold (National Archives)

What's worse, we cannot pay for almost half of that over-bloated budget. Our government has to borrow heavily to cover the vast shortfall. The Chinese are financing a large chunk of it.

What a twist of irony: A formerly communist country is financing a formerly free-market country. Who would have ever thought that things would get so far?

This anomaly will not last forever. The day the Chinese dump our debt will be the day the dollar collapses. We are lucky that the Chinese do not want to see this happen. They would rather see America chugging along.

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