from Blake Fleetwood - HuffPo
Of George Bush, Soros says, "Unfortunately this administration shows no understanding of the predicament in which it finds itself."
If Soros is right and foreigners lose confidence in the U.S. economy, they will want their money back, the dollar will fall, and foreign investments will tumble. To an amazing extent, the U.S. economy has relied "on the kindness of strangers" to fuel its domestic and international investments and the recent real estate boom.
The consequences for our American Empire may be disastrous and swift, if the kindness and confidence of global investors is shaken. Will America succumb to the same imperial overstretch as the Roman, Dutch, Spanish, Soviet, and British? Hubris does not allow us to see much in the future. Every empire thinks that it is different, but....?
More after the click ...
My comment:
In Washington they say of politics "if you want a friend around here, get a dog." I think that's true in world economics, too. We don't have any friends when there's money involved. As soon as the global investors, countries who buy the debt of other countries, sense there's no longer an advantage to buying additional American debt, that source of cash will dry up as quickly as Bear Sterns fell - virtually over the course of a weekend. Up to that point, everything will look hopeful ... then suddenly, someone, somewhere will make a decision and when that decision is made by one of the big holders of American debt, like China, it will create a fiscal tsunami that will travel around the world at the speed of a telephone call as all the other holders of American debt find out.
Not only will that source of cash through the sale of debt dry up - leaving us unable to sell further debt - the existing debt that's already out there will will be up for sale on the world market at discounted prices because the last one holding is is going to be screwed.
Well, how about we buy our debt back? We arranged to borrow the money (incur the debt) when the dollar was strong. Now the dollar is weak thanks to conservative fiscal responsibility over the last seven and a half years. In 2000, lets say a dollar was worth ... well, a dollar. If we're willing to accept that, then based using Normal GDP* as a standard, the dollar is currently worth $0.71. What it means is if you wanted to buy back our debt you'd have to pay about $1.30 for every $1.00 out there. You can't blame that decline on Bill. You can, however, make a case for blaming 15 years worth of self-proclaimed conservatives controlling Congress (you know, purse strings and all?) coupled with the last seven and a half years of conservatives controlling no only Congress, but also the White House and the Supreme Court. Funny coincidence - that the decline of the value of those dollars in your pocket can be plotted against the time fiscally responsible conservatives have held the power and - DAMN! - if it doesn't fit! If it feels like you have a hole in your pocket and you're working harder and harder just to keep your nostrils above the water line ... guess who's to blame?
The so called fiscally responsible conservatives love to frame the issue in terms of "tax and spend liberals" - then they cut taxes and borrow us into the biggest hole since the Dust Bowl Depression of the 1930s! Heaven forbid that they frame the opposing opinion for what it is - "pay as you go!" But, by golly, they saved us from the evils of socialism! You know, that socialism they practice in Europe? That socialism that provides universal health care for its citizens, and free educations, and decent working conditions with all those nasty vacations. They made sure that pure and wonderful, unregulated, unrestricted capitalism ran unchecked. Well, that's going to be small consolation to you when you loose your job and then your condo or house - when the economic ship you've been sailing in sinks as you watch that economic ship you were told could never float goes sailing merrily by.
But aren't those capitalists in the same boat? Not on your life! They've gone multi national. They've moved their headquarters off shore so they don't have to pay taxes here and they've shipped your job some place else where they can get it done cheaper. They talked you into taking two mortgages to leverage your way into a MacMansion that you couldn't really afford on the premise that "things that go up NEVER come down" and you believed them. Well, things that go up do come down! Now you owe more on your house than you can sell it for, your home is worth 20-30% less than it was a year ago and they're telling you its all your fault because you borrowed more than you could afford while they look to those wonderful fiscal conservatives who control Congress to cover their shell game as it unravels ... with the dollars YOU paid in taxes. Well, THAT sound fair!
After all, you know how it goes ... "People! If you can't make a profit on 'em ... screw 'em!" (Kind of a "heads I win, tails you loose" proposition when you come right down to it.)
Aren't you glad that you voted for them ... and so enthusiastically, too!
* GDP expressed in current market prices, which is GDP not corrected for inflation. This may also be called "money GDP", "current-price GDP" or "GDP at current prices". Nominal GDP over time incorporates both real-output change and price change (inflation).
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