Philosophical Musings

Philosophical Musings

Sunday, February 3, 2013

US vs China economically

I think its funny how progressives take something that is historically a negative in an economic system, like trade deficits, public debt, & increasing the money supply, & redefine it as a positive.

'It's not that bad.. we could be imprisoned by nazis & tortured!'

'As long as the credit card isn't declined, we should keep spending!'

The obvious problem is when other countries will not accept our currency. The US is like a successful corporation, with a solid brand name. Think Maytag. They used to have a good reputation & built solid washing machines. But they were bought out, & the name put on some cheaper stuff. They expanded in to other areas, using their name to sell.

This is kind of what is happening with the us. We have a reputation of a solid, dependable currency. Our trade deficit has historically been low or a surplus. Our public debt has also been historically low, until the last decade or so. We are getting by on our reputation of being a fiscally conservative nation, with a solid financial footing. The dollar was the darling of the currencies. But the politicians have been plundering the treasury for many years, now, & that is now an illusion. The problems with the euro have postponed us having to face our deception, & we have been able to keep spending. Even now, the politicians agree to spend more than they will tax, illustrated by the 'fiscal cliff' debates.

Our debt has been historically low.. we had a bit of debt from wars, but nothing that compared with what we have now. If you go back all the way to the american revolution, the central govt has incurred debt, but mostly for wars that threatened the republic. Now, we wage wars indiscriminately, & spend money we don't have.

And fyi, many people have been warning of the dangers of too much debt for decades.. since it started to pile up in the 80's. Just because there is no immediate 'hot stove' reaction, does not mean there are no consequences.

I've already made points about the deceptive use of gdp, & how politicians use it to deceive, rather than enlighten. Govt expenditures, disaster aid, & money shuffling are part of the gdp, when they are not indicators of real production & wealth increase. Both taxes & interest are leeches on the production of a society. They decrease production by robbing the producers of their operating capital.

The true gdp in america IS declining. Real production is down, yet consumption remains high. This is unsustainable & is a recipe for bankruptcy. You cannot borrow your way to prosperity. You can plunder your way, if your war machine is powerful enough, like rome did, but the us is not going that route.. yet.

The basis for the dollar is declining.. we just print more, even though our real gdp does not justify it. Eventually, we will have to devalue, and/or there will be major inflation. China is going the other way. Their economy is getting stronger & their currency is too. Most economists have already forecast that china will overtake the us as the major economic power this century. As that reality sinks in, & as more people believe it, the dollar will be dumped, which will add to the inflationary pressures. This will only worsen the us economy, which is dependent on foreign 'investment' in the dollar.

China is increasing production. The us is decreasing. You can try to spin that, or mask it in phony numbers & statistics that have been crafted to delude people, but reality is not fooled. We WILL have to pay the piper. Economic reality is that spending more than you take in, especially at the rate the us has been doing it, will lead to collapse.

China's economy is on a steep curve upward, while ours is heading down. They have already stopped buying our treasury bills.. for about a year now. They are stuck with dollars in the trade deficit, but they still need oil & other things that the dollars are good for. But if china switches to another currency for their foreign trade, & begins to dump the dollars, it WILL have an adverse effect on the us. Their economy is not dependent solely on the us.. they are expanding into the rest of asia, europe, s. america, & africa. They are not ideological 'friends' of the us, so their actions toward us cannot be trusted. They will do what is in their self interest, & if they can stab us in the back, they will. The current trend of the us is unsustainable. We keep drinking deeply from the deficit jug, yet think we can drive & function. We are a drunkard in denial, stumbling around like a fool, pretending to be a tough guy. But our facade will end & we will pass out face down in the mud.

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