Tuesday, March 31, 2009

When America ruled the world

Thoughtful article by James Quinn:
... America has squandered the human sacrifice, blood, sweat and tears of two generations in less than seventy years. We have been an independent country for 226 years. From 1783 until 1946 was an unrelenting upward trajectory for the beacon of the free world. With the end of World War II, America was the last country standing. Germany and Japan were in shambles. Russia had lost millions of citizens, with Stalin about to murder millions more. Great Britain was a shell of its former self. The American Empire had been born. We were the manufacturer to the world. We rebuilt Europe and Japan. Our military was dominant. We made the best automobiles. We built 41,000 miles of national highway over two decades. In 1946, one in three U.S. workers was employed in the manufacturing industry. Today, less than one in ten workers makes something.

In the years following World War II, the United States ran trade surpluses of 2% to 4% of GDP. We regularly ran surpluses until the late 1970’s. Since the late 1970’s, the United States has run increasingly large trade deficits, reaching 6% of GDP in 2007. For the last three decades, Americans have tried to spend their way to prosperity. The government politicians and their moneyed backers have sold the idea that Americans could be the thinkers for the world, while other countries could do the menial work of producing stuff. After thirty years we are left with a hollowed out economy of paper pushers. It may be a reach to transition the Wall Street geniuses who created MBSs, CDSs, and CDO’s into jobs building bridges. The manufacturing jobs are gone. Our workers are left to sweep the streets they used to own.

After three decades of burning our furniture to keep warm, we are left owing the rest of the world $2.7 trillion. Many of these countries don’t like us. Ben Bernanke is actively trying to drive the value of the U.S. dollar down, while decreasing interest rates paid on this government debt. As Ben prints trillions of new dollars, the value of China’s, Japan’s and the oil exporting countries’ holdings goes down. The U.S. will run a $2 trillion deficit in the next year. We need these foreign countries to buy at least $1 trillion of our new debt. We are sure they will do so. Our reasoning is, what else can they do. From a purely financial standpoint, it is insanity for a country to make an investment in an asset paying 2.5% interest, when in one day last week the Federal Reserve purposely knocked the value of the dollar down 5% in one day, wiping out two years of interest income.
The Chinese have a long-term plan to rule the world. They are buying up natural resources throughout the world. The walls are closing in on the U.S. The U.S. solution is to print more dollars, borrow from future generations, and tax their citizens more. Ben Bernanke has rolled the dice, but the fear is in his eyes, not our enemies’. We will shortly realize that our castles were built upon pillars of salt and pillars of sand.
It is now time for all Americans to force fiscal sanity upon our government through the use of civil disobedience. Our current fiscal path is unsustainable. The government’s solutions will extend the pain for decades in the best case or result in an abrupt collapse in the worst case. If Americans force a fiscal restructuring upon the world it will be extremely painful, but would result in a more balanced sustainable society going forward. In both cases, Americans will need to accept a reduction in their standard of living. This is the price that must be paid for thirty years of living above our means. Some passive resistance ideas regarding the fiscal sanity movement could be: ...

Read the whole thing here.

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