MyDD :: Strong wind ahead, avoid the fan

Strong wind ahead, avoid the fan

by Jerome Armstrong, Sat Apr 02, 2005 at 11:46:47 PM EST

In 2004, the United States imported a record $617.7 billion more than it exported, a 24.4 percent increase over 2003. The annual deficit with China was $162 billion, the largest trade imbalance ever recorded by the United States with a single country. Equally important, as of March 9, 2005, the public debt of the United States was just over $7.7 trillion and climbing, making us easily the world's largest net debtor nation. Refusing to pay for its profligate consumption patterns and military expenditures through taxes on its own citizens, the United States is financing these outlays by going into debt to Japan, China, Taiwan, South Korea, Hong Kong and India. This situation has become increasingly unstable, as the United States requires capital imports of at least $2 billion per day to pay for its governmental expenditures. Any decision by Asian central banks to move significant parts of their foreign exchange reserves out of the dollar and into the euro or other currencies in order to protect themselves from dollar depreciation will likely produce a meltdown of the American economy. On February 21, 2005, the Korean central bank, which has some $200 billion in reserves, quietly announced that it intended to "diversify the currencies in which it invests." The dollar fell sharply and the U.S. stock market (although subsequently recovering) recorded its largest one-day fall in almost two years. This small incident is evidence of the knife-edge on which we are poised.

China sits on a $609.9 billion pile of U.S. cash. As William Greider is quoted, the "adverse balance of power accumulating" is alarming.

These are not good times for the financial picture of the US. In the life just before I became a political consultant, I was a day trader (actually, more of a swing trader). I've not played the markets at all for the previous 5 or so years, but about a month ago, with the market around 11,000, it looked pretty obvious that the trend was peaking, and I went back in, investing into PRUDENT BEAR funds. No matter how much homework you do trading always still has guesswork, but it seems correct.

Meanwhile, symbolically speaking, it doesn't seem a coincidence that the Republicans were all focusing on legislating to keep death at bay. Things are rotting, financially speaking, in DC. Plutonium Page had a telling graph the other day on DailyKos, of increased military spending for higher-cost weapon items. What I found ironic, was the GAO projecting flat spending for the next four years. Chalmers Johnson is right, Wake Up!

Update: Also, Opening a New Front in the Economic Debate, by Simon Rosenberg and Robert Shapiro, deals with the same economic reality that the delusioned Republicans have created. I agree that "...it is essential that Democrats agree only to proposals which deal substantively with the long-term structural problems created by recent Republican policies." And those legislative proposals must begin from Bush. This is the Republicans chance at governing, there's no need for the Democrats to come to the table without a Republican plan offered-- 2006 will reckon the cost of Republican failure.

Tags: Money (all tags)

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Huge deficits, peak oil (3.00 / 1)

More and more, day after day, I believe we are being set up for an epochal shift in our day to day lives...

We are in Iraq to establish a forward base of offensive operations in the middle of what will increasingly be THE epicenter of a new geopolitical chess game.

Matt Gross links to a great Rolling Stone article regarding how peak oil will change our lives...

comparatively, deficits are chickenshit. I'm thinking that the neocons are thinking the same thing. If the world economy is about to collapse anyway, we might as well run up the bill... this would also explain the push for SS reform - if they plan on writing off the t-bills, why not expand the debt by another coupla trillion dollars and spend the money on our military - a military that will mitigate the unrest that may come as cities become unviable and modern agriculture collapses...

I'm in a funny mood tonight... my blackest thoughts escape into the blogosphere for all to read... it probably isn't helping my credibility any, but hell... if I'm right, my credibility will be the last thing I worry about...

by Mike Stark on Sun Apr 03, 2005 at 12:04:46 AM EST

The shift we need (none / 0)

While it may not end up being the shift we get, the shift we need is away from despoilating the world and popping out kids we cannot support. Markets can achieve this if prices go so high that people cannot afford to buy toys from China, SUVs, etc. But what will people do without their opiates? The instinctually unburdened will still pop out kids unless forced not to. Politicians will still put the short term hue and cry of their peoples for a stronger economy above long term considerations for the environment, especially in poorer countries. Tumult will ensue.

Markets and such will be unattractive to those who have nothing to barter with. The burden of unskilled and semi-skilled labor will be shunted onto robots. What work will remain for men is the control (politcal and otherwise) of the teeming hordes of the disposessed and what we call skilled labor: those technologists who can operate and improve the technocratic system.

Some say we need an alternative to markets, something like the New Deal, but bigger. OK. Fine. But together we need to think long and hard about human passions and drives: the drive to dominate, the drive to populate, the drive to consume. A modern church-equivalent will be needed to inculcate acceptance of what is ostensibly a new spiritual order. Even if such a thing could cohere, it would, like every other religion prior, have to establish itself with some display of martial prowess, most likely in a showdown with the established religion(s) (think China, but with robots).

Once ascendent, what mischief would this new order bring? People would be vexed at being told when and how many kids to have. They would chaffe at the constant indoctrination needed to maintain the order psychologically. They would lament the days when material goods (things they could understand) could bring respite from an otherwise empty universe. They would resent the inequality of power that the new priesthood has above and beyond the "common man" who must "know his place" and more importantly stay in it. What will people say? At least the Earth hasn't been destroyed? At least we haven't had genocidal wars of depopulation? That's reason talking, instinct will tell us otherwise.

It is my opinion that liberty et. al. (everything good) was born in those times and places where humans were few. As population expands, these liberties et. al. are lost. After all, when we say that you or I are free, from what are we free? From the need to sleep? From gravity? No, by freedom we mean freedom from people. First we move away; that failing, we build walls; that failing, we fight. The fight creates space wherein the survivors can happily breed, and we repeat the process again.

by Paul Goodman on Sun Apr 03, 2005 at 01:10:56 PM EST
[ Parent ]

Re: The shift we need (none / 0)

Are you aware of Malthus's Dismal Theorem Sounds like you would agree with Malthus!

One possible summary goes like this:

The lot of most of mankind had been, was then, and would always be, to live in misery on the edge of starvation. Any improvement which allowed living standards to rise above subsistence would be absorbed by population, restoring the equilibrium to the subsistence level. Changes which caused standards to fall below subsistence would result in die-offs, again restoring the dismal equilibrium.

by NG on Sun Apr 03, 2005 at 04:28:32 PM EST
[ Parent ]

Liberty et. al. (none / 0)

It is my opinion that liberty et. al. (everything good) was born in those times and places where humans were few.

There are three fundamental political ideas. Those ideas are Justice, Liberty and Equality. All other political ideas flow from those three building blocks of a political society.

The greatest of those three ideas is Justice. The proper equilibrium is achieved by thinking of a triangle with Justice at the top, and Equality and Liberty forming the base.

The reason that Justice is the greatest political idea is that you cannot imagine a society with too much justice. A society with too much liberty is anarchy. A society with too much equality is communism. It is impossible to define or imagine a society with too much justice.

by Gary Boatwright on Sun Apr 03, 2005 at 09:25:47 PM EST
[ Parent ]

A Plug for an Old Classic (3.00 / 1)

A blast from the past, circa 1993, Who Will Tell the People? by Will Greider.

Lou Dobbs has been doing a nightly series on "Exporting America" for about a year.

This is one more Open Secret that everybody knows about but the RWCM and the American people.

I don't know what it's going to take. The RWCM keeps feeding the American people the latest Crime Story Soap Opera Du Jour and the latest update from Love Brother Bush's Traveling Salvation Show.

I guess a little fascism never hurt anybody. The media's response to trampling the Constitution, What, me worry?.

Hold the phone! Are they waking up? Check out dhonig's diary, Democrats Are Cowards, a collection of editorial opinions from around the country that aren't real happy with our DLC Democrats.

hmmmmmm. Bush admits he doesn't read the newspaper. How about Harry Reid and the DLC? Do they allow their staff to read newspapers? Do they have the slightest clue what's going on in this country?

by Gary Boatwright on Sun Apr 03, 2005 at 01:21:40 AM EST

public debt (none / 0)

>>Equally important, as of March 9, 2005, the public debt of the United States was just over $7.7 trillion and climbing

Just a minor nitpick, but this is not correct. The public debt is about $4.5 trillion, the remainder is debt owed to various trust funds like for instance Social Security and Medicaid.

by Paul on Sun Apr 03, 2005 at 04:28:25 AM EST

Re: public debt (none / 0)

There is some confusion of terms. It is our national debt that is over $7.7 trillion. That also seems to be what is meant by public debt. What is the $4.5 trillion you are referring to?

One precise economic term is Current Account Balance.

The Current Account Balance is a combination of our Budget deficit

Plus our Trade Deficit.

The combination of these two is commonly referred to as our Current Account Deficit.

Our Current Account Deficit is causing Worries about the dollar.

Our trade imbalance worries our trade partners and devalues the dollar.

If we had followed these policies in 2001, our economy would be far stronger than it is now.

by Gary Boatwright on Sun Apr 03, 2005 at 05:25:06 AM EST
[ Parent ]

Re: public debt (none / 0)

An overview of the budget data can be found here:

http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0

Note the 'debt held by the public'-column.

The remainder of the national debt is, as I mentioned before, debt not owed to the public, but to for instance Social Security (which is required by law to lend its surplus to the Treasury).

by Paul on Sun Apr 03, 2005 at 05:37:19 AM EST
[ Parent ]

Re: public debt (none / 0)

Thanks for the clarification. They confused me by using the term public debt as well. I appreciate your link.

by Gary Boatwright on Sun Apr 03, 2005 at 05:49:04 AM EST
[ Parent ]

Another happy, happy, fun thought (3.00 / 1)

As I discussed a few weeks ago the twin deficits, which combine to drive down the value of the dollar, have a nice synergystic ally in peak oil:

Another interesting thing about oil is that it is one of those commodities whose trade is done in US dollars.

So now there are actually two things at work driving oil prices: the laws of supply and demand for oil, and the laws of supply and demand for US dollars.

So even as increasing demand for a limited supply of oil drives prices higher, it also takes an increased number of devalued US dollars to purchase that oil.

And given continued US demand, those same oil purchases will drive increasing US trade deficits, leading to further devaluation of the dollar and increasing costs for oil ad infinitum.

And since nowhere can I see the political will to do what must be done, raise gas taxes and introduce significant conservation measures I have little doubt the downward spiral will continue unabated.

by CaliBlogger on Sun Apr 03, 2005 at 05:12:52 AM EST

Re: Another happy, happy, fun thought (none / 0)

That's why I pulled everything out of my IRA last month except for a token balance that I was required to maintain. I don't know if cash is any better, with the devalued dollar, but I also paid off my car and all of my credit cards.

All of the people who refinanced their homes with Adjustable Rate Mortagages of 1% to 2%, could be wishing they had locked in a 6% Flat Rate a few years from now.

The next couple of years are going to be very scary unless Congress backs off of extending Bush's tax cuts.

by Gary Boatwright on Sun Apr 03, 2005 at 05:30:21 AM EST
[ Parent ]

Do the Democrats have a brain? (none / 0)

They can demonstrate that they are not in a permanent vegetative state by how they respond to a visit by President Bush to Parkersburg, Virginia, which Josh Marshall points out is the home of the Bureau of Public Debt.

If they can scrape together one single, combined, functioning, collective brain between them, Bush's tour of the Bureau of Public Debt will be a media extravaganza for them as well as Bush. Does the Democratic party get copies of Bush's tour schedule? Will they know what to do with it even if they do? Stay tuned, but don't hold your breath.

by Gary Boatwright on Sun Apr 03, 2005 at 05:59:20 AM EST

A very cool issue statement (none / 0)

From kossack and occasional poster at MyDD, ultrageek has a blog where he provides some excellent language and persuasive arguments for progessives in, Republicans should know better than to lunch with me

He also has a dynamite blogroll. Check it out.

by Gary Boatwright on Sun Apr 03, 2005 at 06:43:45 AM EST

I Do Hear, However (none / 0)

that things are booming in the Hedge Fund industry, with assets under management ballooning. Presumably shorting the $ is good business; too bad ordinary Americans can't get involved.

by Bob H on Sun Apr 03, 2005 at 08:07:43 AM EST

Red bait the fiscal conservatives (3.00 / 0)

If handing over America's purse strings to China doesn't scare some Republicans, I don't know what will. Even hapless Democrats should be able to make an issue of this. Point out that Communists are evil and all, yet Communists are bankrolling the Republican's tax cut and spend agenda. Paint the picture of a continuum. On the one end is stifling Communism with a centrally planned economy. On the other is the Republican credit card economy where you spend like mad but don't pay the bills. In the sensible middle are the Democrats who beleive in a strength AND in paying our bills. If they trot out the tired Liberals are half-assed Communists response nail them with "We don't have to beg for money from China to enact our policies. The truth is Republicans give financial power to the real Communists while Democrats keep the power right here in America". Point out the Democratic record of success and the Republican record of failure in fiscal policy. It would be one thing if the massive deficits were at least buying us some decent jobs. We have nothing to show for Republican fiscal policy except crushing debt. How long before the loan sharks start circling?

by TJonBergman on Sun Apr 03, 2005 at 09:54:00 AM EST

Democrats = Success; Republicans = Failure (3.00 / 2)

Michael Kinsley has an editorial in today's L.A. Times on this point. More GOP than the GOP

I stopped watching MSNBC a while back, so I had no idea the vile Tweety had been playing framing games, labeling GOPers the Daddy party and Dems the Mommy party. Kinsley makes an interesting observation for the RWCM:

It has not escaped notice that the Daddy Party has been fiscally misbehaving. But it hasn't really sunk in how completely the Republicans have abandoned allegedly Republican values -- if, in fact, they ever really had such values.

Hallelujah! At least a few in the RWCM are waking up. At the end of his editorial, Kinsley also presents the standard list of Democratic economic performance to the dismal economic performance under GOPers.

I think I've heard a Democrat or two point that out, but they haven't repeated it enough to make it the conventional wisdom.

The conventional wisdom from Boadicea, that every Democrat who appears on every cable show and talks to every reporter should repeat as cant, Republicans Can Not Be Trusted

Republicans can not be trusted with our money, our health or our Constitution and they lie to the press.

If we sent Democrats to speech therapy classes, do you think they could learn to repeat that simple declarative sentence?

by Gary Boatwright on Sun Apr 03, 2005 at 11:19:59 AM EST
[ Parent ]

Proof of life! (none / 0)

Jerome's update is thin, but encouraging, evidence that the Democratic party has recovered from their persistent vegetative state. Will Democrats actually be allowed to say "You can't trust Republicans with our economy"? Will any Democrat be allowed to go on cable shows and criticize Bush's proposed Social Security and Medicaid cuts? Will we actually hear a Democrat say the words, "Bush's tax cuts are a fiscal train wreck"?

Since the DLC has silenced Howard Dean, is there another Democrat who can repeat a simple declarative sentence?

by Gary Boatwright on Sun Apr 03, 2005 at 12:02:18 PM EST

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