Thread: Subprime Nation

Subprime Nation

Since it began to give credit ratings to nations in 1917, Moody’s has rated the United States triple-A. U.S. Treasury bonds have been seen as the most secure investment on earth. When crises erupt, nervous money seeks out the world’s great safe harbor, the United States. That reputation is now in peril.

Last week, Moody’s warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation’s credit rating will be down-graded within a decade.

Our political parties seem oblivious. Republicans, save Ron Paul, are all promising to expand the U.S. military and maintain all of our worldwide commitments to defend and subsidize scores of nations.

Democrats, with entitlement costs drowning the federal budget in red ink, are proposing a new entitlement – universal health coverage for the near 50 million who do not have it – another magnet for illegal aliens. Moody’s is telling America it needs a time of austerity, while the U.S. government is behaving like the governments we used to bail out.

California has already hit the wall. With an economy as large as a G-8 nation, the Golden State is looking at a $14 billion deficit in 2009 and a $3 billion shortfall in 2008. Gov. Schwarzenegger has called for slashing prison staff by 6,000, including 2,000 guards, early release of 22,000 inmates, closing four dozen state parks and a 10 percent across-the-board cut in all state agencies. The Democratic legislature is demanding tax hikes, which would drive more taxpayers back over the mountains whence their fathers came.

Meanwhile, Washington drifts mindlessly toward the maelstrom. With the dollar sinking, oil surging to $100 a barrel, the Dow having its worst January in memory, foreclosures mounting, credit card debt going rotten, and consumers and businesses unable or unwilling to borrow, we appear headed into recession.

If so, tax revenue will fall and spending on unemployment will surge. The price of the stimulus packages both parties are preparing will further add to the deficit and further imperil the U.S. credit rating. This all comes in the year that the first of the baby boomers, born in 1946, reach early retirement and eligibility for Social Security.

To stave off recession, the Fed appears anxious to slash interest rates another half-point, if not more. That will further weaken the dollar and raise the costs of the imports to which we have become addicted. While all this is bad news for the Republicans, it is worse news for the republic. As we save nothing, we must borrow both to pay for the imported oil and foreign manufactures upon which we have become dependent.

We are thus in the position of having to borrow from Europe to defend Europe, of having to borrow from China and Japan to defend Chinese and Japanese access to Gulf oil, and of having to borrow from Arab emirs, sultans and monarchs to make Iraq safe for democracy.

We borrow from the nations we defend so that we may continue to defend them. To question this is an unpardonable heresy called “isolationism.”

And the chickens of globalism are coming home to roost.

We let Europe to get away with imposing value-added taxes averaging 15 percent on our exports to them, while they rebate that value-added tax on their exports to us. Thus, the euro has almost doubled in value against the dollar in the Bush years, as NATO Europe begins to bail out on Iraq and Afghanistan.

We sat still as Japan protected her markets and dumped high quality goods into ours and China undervalued its currency to suck jobs, technology and factories out of the United States. Now, China and Japan have $2 trillion in cash reserves. The Arabs have an equal amount of petrodollars. Both are headed here to spend their depreciating dollars snapping up U.S. assets – banks, ports, highways, defense contractors.

America, to pay her bills, has begun to sell herself to the world.

Its balance sheet gutted by the subprime mortgage crisis, Citicorp got a $7.5 billion injection from Abu Dhabi and is now fishing for $1 billion from Kuwait and $9 billion from China. Beijing has put $5 billion into Morgan Stanley and bought heavily into Barclays Bank.

Merrill-Lynch, ravaged by subprime mortgage losses, sold part of itself to Singapore for $7.5 billion and is seeking another $3 billion to $4 billion from the Arabs. Swiss-based UBS, taking a near $15 billion write-down in subprime mortgages, has gotten an infusion of $10 billion from Singapore.

Bain Capital is partnering with China’s Huawei Technologies in a buyout of 3Com, the U.S. company that provides the technology that protects Pentagon computers from Chinese hackers.

This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches.

You are seeing the economy do what it does. It takes time to even things out, but eventually they will become more even. China could not be poor forever because there is a high demand in rich nations for the labor and products of poor ones. This is natural wealth redistribution. When things become "too even," there is always someone brighter or more powerful (at the moment) to take things for himself so he can be ahead of equal.

Attention, all planets of the Solar Federation. Attention, all planets of the Solar Federation. Attention, all planets of the Solar Federation. We have resumed control! We have resumed control! We have resumed control!

Originally Posted by Howe Itis

You are seeing the economy do what it does.

I am seeing my country's economy collapse before my very eyes, with the unreserved blessings of the federal government all the way. Sorry, I don't accept your hypothesis that this is just the way things must be.

Attention, all planets of the Solar Federation. Attention, all planets of the Solar Federation. Attention, all planets of the Solar Federation. We have resumed control! We have resumed control! We have resumed control!

Did your brain just malfunction or something?

Originally Posted by Defensor

Did your brain just malfunction or something?

Rush 2112.

Originally Posted by Howe Itis

Rush 2112.

And it is related to this thread how exactly?

If you are not familiar with 2112, Google the lyrics and read them. The first half of the album is a story about Communism.

Wealth distribution and principles of communism and capitalism make 2112 relevant. 2112 ends with a tragic restoration of order under a Communist regime.

Originally Posted by Howe Itis

If you are not familiar with 2112, Google the lyrics and read them. The first half of the album is a story about Communism.

Wealth distribution and principles of communism and capitalism make 2112 relevant. 2112 ends with a tragic restoration of order under a Communist regime.

Uh, yeah, maybe you could start your own thread elsewhere to discuss communist music lyrics. Right now America is facing a serious impending economic catastrophe and there's no sign of improvement coming about anytime soon.

My main point is that wealth begets consumption, and more consumption begets less wealth for the consumer and greater wealth for the producer. It is not an easy task to try to manage this basic economic principle by legislation or policy - especially in a "free market." There was once a powerful Greek empire, a powerful Roman empire, a powerful French empire, and so on.... It has been our turn, but the ride only lasts so long.

Originally Posted by Defensor

Uh, yeah, maybe you could start your own thread elsewhere to discuss communist music lyrics. Right now America is facing a serious impending economic catastrophe and there's no sign of improvement coming about anytime soon.

No need to. It's not that important. What is important is for you to learn how not to be a victim of this "collapse." Even poor nations have rich inhabitants. Not that I desire to go that way, but I will tell you all I can do is give some advice here and there, and mostly look out for myself.

This fiasco is not government's fault so much as it is America's fault. Borrowers did not have to go overspend themselves. Nobody made them take the loans. The sad part is, it doesn't matter because the masses will chalk it up to "bad times" and go and repeat it all over again.

Originally Posted by Howe Itis

My main point is that wealth begets consumption, and more consumption begets less wealth for the consumer and greater wealth for the producer. It is not an easy task to try to manage this basic economic principle by legislation or policy - especially in a "free market." There was once a powerful Greek empire, a powerful Roman empire, a powerful French empire, and so on.... It has been our turn, but the ride only lasts so long.

Greece, Italy, and France are all relatively peaceful and prosperous today without being 'powerful empires.'

Politicians have actively worked to destroy America's economic strength for past century or so. Your basic non-argument seems to be "oh well, its our turn to become a third-world nation." No thanks, Howe.