According to the views Jeff Randal of Sky News, whatever actions US politicians do or don’t take this week, America is already bust. We live in the times when Uncle Sam has fallen into the ranks of the terminal shopaholic; now forced to beg for a higher limit on his plastic. Without a deal to raise the country’s $14.3 trillion debt ceiling, the US will default on August 2.
It is quite remarkable that it has come to this, that the world’s largest economy and home of the financial systems reserve currency can only pay its bills if it borrows more money. America needs to increase its credit limit by $2.5 trillion simply to get through to next year’s presidential election. How did that old saying go…look after the pennies and the trillions will look after themselves?
As Randal outlined: “The bad news is that on top of the $9.7 trillion Washington must repay to outside investors ($1.1 trillion to China), it has $60 trillion of unfunded social security and Medicare obligations, such welfare pledges to its own citizens for which there is no pot of savings, only the taxes of future generations.
“Last year, the difference between what the US paid for imports and received from exports was almost $500 billion. This year, the trade gap with China alone is running at $25 billion a month. As a result of ambitious welfare programmes and military adventures, the Obama administration is running a budget deficit of $1.3 trillion.”
America’s military hegemony comes at a terrifyingly high price to the taxpayer. The total cost of war since 2001 is a figure that increases by the thousands every second. As I write this, the war in Iraq has cost the US taxpayer (since 2001) is $788,799,048,902. The cost of war in Afghanistan is estimated at costing $437,866,800,788. As mentioned, these figures rise exponentially every day.
On a domestic level, it is residents of California and Hawaii whom are the most indebted individuals in America, the average Californian owing $336,169. Residents of Oklahoma were said to be the least in the red, averaging at $127,027 per consumer. As Addison Wiggin and Bill Bonner said in their best seller Empire of Debt, “not many people can afford to live like Americans; the trouble is, neither can they.”
So what is the answer?
Princeton’s Paul Krugman and British-born David Blanchflower, professor of economics at Dartmouth College, have at the core of their fiscal philosophy the belief that government spending sparks growth, and is the essential conditioner of life, liberty, and debt reduction.
But if this were true, why did Greece require 2 multi-billion Euro rescue packages? Was the government guilty of criminal thrift? Or was it because Athens was allowed to borrow recklessly to bribe an electorate with promises of pots of gold the country could never produce over a million rainbows? As Randal stated, America is only different to Greece in two ways: it’s vastly bigger and so are its debts.
According to Harvard professor Kenneth Rogoff “Politicians everywhere like to argue that their country will expand its way out of debt, [but] our research suggests growth alone is rarely enough to achieve that with the debt levels we have today.”
Some even argue that America is already bankrupt, such as Boston University’s Professor Laurence Kotlikoff, who believes US debt is much greater than has been declared: “Congress has been very careful… to label most of its liabilities as ‘unofficial’ to keep them off the books and far into the future… This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.” Of course, when the young are being killed in droves of thousands in unnecessary wars every year, the promises are a little easier to keep.
A Ponzi scheme (named after Charles Ponzi who became notorious for using the technique in 1920) according to Wikipedia,” is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.”
In short, unless America is able to attract increasingly bigger contributions from ever more participants willing to partake in their “dream”, they will collapse under the burden of impossibility. This is where America is heading. It is beyond the point at which it can cut benefits or raise taxes sharply enough to prevent exponential debt growth.
For me the answer is glaringly obvious: The American Government must stop investing in war machines, stop invading other countries, and look after their own people’s domestic needs. American’s need their government to come to peace now, or else, there will be no one left whom they can accuse of hating them for their freedom.
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