Christmas At The Havemores
Recent business news has been loudly touting the rising stock indices as proof that the American economy is really fine and doing swell. And yet, if one chooses to look beyond the headlines, there are signs that everything isn’t as it seems on first glance.
The dollar is dropping relative to most of the world’s currencies, and Bush adminstration officials are over in China hoping to relieve some of that downward pressure. Unfortunately, the Bush administration isn’t the irresistable force they like to believe they are. They have run full steam into the Chinese immovable object.
But as it is the beginning of the real holiday season at the end of this week, the parties have already begun - and some have much to celebrate. They are so busy doing so that they are blind to the bigger picture, which is that where we are headed is going to put us outside the boundaries of polite concern on the part of other societies.
This is a long post, so refill your holiday drink of choice and venture onward.
“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
- Henry Ford
To begin with, the top 0.1% had themselves a very good year in 2006:
Richie Rich: When a Two Million Dollar Xmas Bonus is Chump Change
by Blake Fleetwood
12.16.2006
We live in a Winner Take All Economy. A Gilded Age of conspicuous consumption. It’s all very gauche and nouveau riche. All over town the newly minted millionaires are already laying out their plastic cards on the come: fast cars, big apartments, paintings and sculpture, beachfront Hampton getaways, and sparkling diamonds as big as the Ritz.
And all the courtiers to the rich are dancing in the aisles. The real estate brokers are especially ga ga at the prospect of pumping up the wilting housing bubble in the Hamptons and Manhattan. If half the bonus monies goes into real estate, that’s a cool three billion in fees for brokers. There is a new residential building proposed for Lower Manhattan by Santiago Calatrava where the average apartment will cost $35 million. The repercussions of this financial Tsunami will be felt as far away as Aspen and Cabo San Lucas.
Christmas is when the money tree explodes in Manhattan. Twenty-nine year old Bonus Babies are scurrying to their brokers to find two-bedroom, 1200 square ft. “starter” apartments with their $5 million bonuses. Secretaries, a few years out of Katherine Gibbs, are getting $200,000 to $300,000 from their bosses.
Hey, what does it matter? If you are a senior partner with a $25 million bonus check, and you are asking your office-wife to fill out the deposit slip. …. Wouldn’t it seem kind of chintzy not to toss a couple of hundred-grand chips her way… One percent?
Yesterday Morgan Stanley gave its chief $40 million for 2006. Bear Stearns and Merrill Lynch are slated to fork up similar booty for their honchos.
They are just playing catch-up with Goldman Sachs which is giving bonuses of more than $100 million to several of its top traders — out of a record $16 billion total bonus pot announced earlier this week. This figure averages out to $622,000 for every one of their 26,400 employees including: messengers, clerks, junior accountants, secretaries, copy people and maintenance men.
But monies are not distributed evenly, … of course.
How the Goldman payout shakes out:
*$50-100 million goes to a score of big traders, who bet on futures, mainly money, oil and gas. They earn 10% of what they make for the bank.
*$25-50 million is what 20-30 senior partners and bond and derivative traders get.
*$5-20 million is what 300 other partners and other company executives get.
24 year-old associates, a year out of school, will get a paltry $250 -$350 thousand. But if they hang on a bit, they will be up to a million or two,,, in five years.
The 280,000 workers in the financial industry collect half of all wages paid, even though they only hold one out of every six jobs in the borough. The average weekly pay for finance jobs in Manhattan was about $8,300 in the first quarter of 2006. — an average of five times what other 1.5 million Manhattan workers earn. Ordinary people have to rely on trickle-down economics: waitresses, artists, museums, publishers, the theatre, universities and other businesses.
But even the take of the top investment bankers seems paltry when compared to the loot that many hedge fund managers rake in. In 2005 a couple of hedge fund managers took home more than a billion dollars in pay, while the average hedge fund manager (on the Institutional Investor Magazine’s list of 25) earned $130 million. If you throw in the hedge fund mangers, the top law firms, and the financial consultants, … all in all, Christmas should add a $100 billion bonus bonanza to the local economy.
The world of the merely human has extended its needy hand out like Oliver Twist at the workhouse, hoping that there just might be “more”:
From the year-end bonus pot, the City is expected to collect a small payout of about $500 million in extra taxes which will support [one of]:
19,919 Firefighters
19,919 Cops
18,317 Emergency Medical Technicians.
383 Subway Cars
10,980 Public School Teachers.The State will gain $1.1 billion in tax revenues from the bonuses and much of these monies will be going to the distressed industrial regions upstate. The checks will be coming in January.
What distresses New York so?
Once New York was a great port and factory town. We imported raw materials, made things and sold and shipped them to the rest of the world. That New York of old does not exist any more. The dustbins of history are littered with once successful economies and nations that that were unable, or unwilling, to adapt. New York is now a machine that thrives because a small nucleus of highly skilled professionals live by creating, processing or exchanging ideas.
How can we justify such enormous payouts when millions are losing their jobs in the industrial belt, when 40 million Americans can’t afford health insurance? There is no justification. You can’t stop the future. Globalization is here to stay.
The human costs of change — lost jobs, disrupted broken lives — are enormous and must be alleviated, but if we outlaw or tax these moneymakers out of existence, they will move out of town, just like the shoe makers moved out of New England to Brazil, so many decades ago. London, Toronto, Hong Kong, Shanghai, Bombay and Greenwich would love to gobble up our financial services industry. They are already nibbling away pieces of it and are waiting in the wings like vultures ready to pounce. The top $100 million bonus earners at Goldman work in Hong Kong and London.
I honestly hope that they enjoy their additional wealth because it isn’t going to hold its value very long:
Weak American dollar has mixed outcome for U.S. businesses these days
by ASHLEY HEHER
December 16, 2006
Throughout corporate America, companies said they’ve been able to gird for the dollar’s downward spiral, where the greenback hit its lowest level in 20 months against the 12-country euro while brushing a 14-year low against Britain’s pound. This year, the dollar has lost nearly seven per cent of its value against an index of major foreign currencies, according to the Federal Reserve Board.
And experts don’t expect the drop to end any time soon. The dollar fell further against the Euro and the British pound on Tuesday after the Fed, as expected, left interest rates unchanged for the fourth month in a row, citing slow economic growth.
There is a more tangible effect of this loss of value that is more understandable to most of us:
Because crude oil is sold worldwide in U.S. dollars, a decline in the value of the currency diminishes oil producers’ buying power in Europe and Asia, making them more likely to limit output in order to raise prices.
You do remember what happened when gas went over $3/gal. last summer, right? Or have you been watching Fox “News” in order to forget?
Those who make it their job to know what kind of economic condition is coming are trying to determine the direction the economy is headed. For those who really don’t know where to look, this is the happy talk they hear:
Euro, British Pound Gain on U.S. Dollar
The Associated Press
Dec. 15, 2006
The markets are watching economic reports to gauge the future course of interest rates in the new year. While some analysts were predicting rate cuts in the first half of next year, the Federal Reserve is not likely to ease credit if the economy proves to be expanding at a moderate rate.
Personally, that line makes for an enchanting holiday fable. The real experts already know where the economy is headed:
Currency funds rise as dollar falls
BY TIM PARADIS, Associated Press
Dec. 16, 2006
The dollar’s recent weakness has stirred concern among some investors that the greenback is only pausing before ceding further ground to other major currencies. Concerns about the dollar have taken on a new urgency in recent weeks after it hit a 14-year low against the British pound and a 20-month low against the euro.
Does this mean that the entire world economy is facing ruin? Not according to this view:
Expert View: The world can still prosper as the dollar slides
By Rob Holgate
17 December 2006
Analysts have been predicting the dollar’s demise for some time. This view was based on the stubbornly high twin US deficits of trade and budget, the prospect of the American economy slowing down and the belief that foreigners would start withdrawing funds from American assets.
While it is fair to say that traders outside the US were giving the greenback a right spanking while their American counterparts were tucking into turkey and apple pie, meaning that the market was thin in terms of volume, the pressure has got worse since the holiday.
Much of the recent US economic data has been poor. Witness November manufacturing numbers that showed the sector shrinking for the first time since April 2003, due to a slowdown in the housing and auto markets. Construction spending slumped faster than at any time in more than five years in October, led by the residential market downturn.
We should also bear in mind that the slump of the past few weeks is tiny when put in the context of the dollar’s 45 per cent loss in value against the pound over the past five years, and that strong UK corporate profit growth has continued even for US-focused companies.
So what are the savvy investors doing with their portfolios?
Rogers: Sell U.S. dollar, buy real and yuan
By Gertrude Chavez-Dreyfuss
Dec 12, 2006
The dollar has so far lost nearly 12 percent against the euro this year, around 14 percent against sterling, and roughly 9 percent versus the Swiss franc, as investors became concerned that U.S. economic growth was slowing and that the interest rate differential with Europe may narrow. It’s only a matter of time before the beleaguered U.S. dollar loses its status as the world’s reserve currency and medium of exchange, U.S. fund manager and author Jim Rogers told Reuters in an interview.
“We owe the rest of the world over $13 trillion. And that’s a terrifying thought.
“Our foreign debt is increasing
at the rate of $1 trillion every 15 months,” he added.
Rogers said the Chinese yuan could potentially replace the dollar as the world’s reserve currency in about 15-20 years provided the currency becomes freely convertible. “The renminbi would go higher over the years. they have a huge balance of payments surplus and it’s the largest creditor nation in the world.”
Aren’t the aforementioned Bush adminstration officials in China to try to correct this imbalance? Sure! But they don’t seem to understand what they are up against:
Yuan appreciation will not reduce US trade deficit
Xinhua Opinion
17-Dec-06
Ronald McKinnon, a professor of economics at Stanford University, said in an article published on Wednesday by The Wall Street Journal, that a major reduction in the RMB value of the US dollar will not correct the saving imbalance between the two countries.
“However, it could cause a major bout of monetary instability with def lationary consequences in China itself,” the professor said. “And if China is the linchpin, such that other countries in Asia and even Europe follow with their own appreciations against the dollar, the inflationary pigeons may well some home to roost in the United States – as in the 1970s,” McKinnon said.
For those of you whose parents hadn’t gotten around to making you yet, that time was when the first signs that the end of the era of American dominance was upon us. Japanese imports approached, if not exceeded, the quality of American products at lower prices, and the Gulf Oil States were showing us who was really in control by dramatically upping their prices. America went into a decline that didn’t ease until the Clinton years.
That time period put us behind the camel caravan, picking up the droppings as we travelled the Sow’s Silk Purse Route to China. Because of our profligate spending since the rise in energy costs, we are deep in hock to our hosts at the destination of this journey:
In China’s pocket
By Robert Kuttner
December 16, 2006
THE HIGH-PROFILE mission to China of key administration economic officials headed by Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke looks like another predictable fizzle. That’s because the Chinese have learned to play their American trading partners like a soothing violin, and the Americans are all too willing to dance to the tune.
Despite the precarious condition of the U S dollar, the Chinese central bank keeps lending us dollars by the hundreds of billions, so that we can keep buying their cheap products. The more we owe them, the less leverage we have. If the Chinese actually did what Paulson and Bernanke say they want and stop pegging the yuan to the dollar, it could trigger an international run on the dollar.
So our government goes through the motions of protesting China’s subsidies to industry, its theft of American intellectual property, its coercive demands for the transfer of sensitive technologies by U S business partners and hardly bothers to protest the slave-like labor conditions in many Chinese factories. The Chinese make soothing noises, not much changes, and the US-China trade imbalance keeps going through the roof.
So, when the final toasts are held, once again nothing much will change, and we will be deeper in hock to Beijing than ever.
China’s view of our dilemma isn’t what Bernanke and Paulson want them to see. This is what the Chinese want Bernanke and Paulson to see:
Dollar will continue to depreciate
People’s Daily Online
December 15, 2006
The weak dollar is a reflection of the long-term depreciation of the US dollar. Over the last three years, the US dollar against the Euro has depreciated by 35 percent and against the Japanese Yen, 24 percent. Since February 2002 against a package of currencies, the US dollar has depreciated by 23 percent. Various indicators suggest that the US dollar will continue to depreciate. Why?
One of the main reasons for the depreciation of the US dollar depreciation is the slowdown of the domestic economy. Various indicators suggest the US economy will slow between the end of this year and the beginning of the next…
It was anticipated that some countries with large foreign exchange reserves in US dollars would be looking to reduce their US dollar reserves. The European Central Bank increased the interest rate again to encourage investors to sell their dollars and buy Euro. The US real estate market has slowed leading to a significant downturn in consumer confidence.
Analysts say the US government has been compliant in the depreciation of the dollar. The US hopes the dollar will depreciate in an orderly fashion, but are not willing to announce this openly. If they did so, the rate of depreciation would accelerate and the country is unwilling to let the dollar fall so quickly.
US decision-makers believe the depreciation is a good way to resolve imbalances in the US economy. However, the American people are complaining.
The US dollar cannot depreciate too quickly as this would be a big problem for the world economy. British economists say that if the US dollar depreciates too quickly, it will affect the “global bubble”. It will cause new inflation pressure so that the banks will not be able to shield the collapse of the real estate market. If that happened, the whole world would be affected.
If the dollar depreciates on a large scale, the global economy would have to bear the consequences and emerging economic powers like China would take a heavy blow as much of their foreign exchange reserves are in US dollars.
Foreign exchange managers can see this, and they are already beginning to reduce their exposure to the American Economic Disease:
U.S. dollar direction confounds experts
Morris Beschloss
Special to The Desert Sun
December 14, 2006
[T]he precipitous drop of the dollar against the euro and the British pound could increase the cost of goods from America’s large European trading partners, hopefully shrinking the import deficit. The danger is that such trends could get out of hand, and eventually shift overseas investments from the dollar.
This has already occurred by the actions of some Arab countries and Russia in starting to make the switch to the euro and pound. A further deterioration of the dollar could also reignite crude oil prices, which have been pegged to the dollar since the middle of the 20th century. The importation of other vital raw materials could suffer the same fate.
A statement by Nouriel Roubini, chairman of Roubini Global Economics, states that “The danger is that the willingness of foreign investors to buy dollars is shrinking. If the fall of the dollar accelerates, investors could start dumping U.S. assets, which would accelerate interest rate increases and usher in an economic hard landing.”
It isn’t just the investors that are considering ditching the dollar. Some of our suppliers are as well:
Hyundai Motor plans to increase euro transactions on U.S. currency’s fall
Yonhap News, Seoul
Dec. 15
Hyundai Motor Co., South Korea’s top automaker, is planning to increase euro transactions as its profitability deteriorated on the South Korean currency’s sharp rise against the U.S. dollar, the carmaker said Friday. So far this year, the won has gained more than 9 percent against the dollar. Early this month, the won hit a nine-year high against the dollar, with 915 won equal to US$1. The won’s rise against the U.S. dollar undermines Hyundai Motor’s profits when the company converts profits into the local currency.
When things are going good for some when they aren’t for someone else, the polite course of behavior is to not make much of a fuss about it - especially if your actions helped to bring it about:
Europe calmly looks at sliding dollar
By DAVID McHUGH, AP Business Writer
15 December, 2006
Economists say the large U.S. trade and budget deficits are putting long-term pressure on the dollar. The most recent dollar slide accelerated after comments by ECB head Trichet in October that the bank might need to raise its key rate from 3.25 percent to combat inflationary pressures from an increasing money supply. At the same time, expectations have grown that the U.S. Federal Reserve Federal Reserve may cut interest rates sometime next year.
With the European economy on the upswing, companies and governments are shrugging off the dollar‘s renewed slide against the euro this week — a phenomenon once dreaded as potential poison for the continent‘s many exporters. Economists say the general acceptance could change if the euro hits $1.40 or $1.50 next year, or if the slide moves so fast that businesses can‘t adjust.
In America, where the so-called media is only pumping out the “good news” written for it by the current regime and their corporate owners, one has to look elsewhere for information about the economy that one can trust. This next blogger has put the sorry economic tale into some perspective:
Dollar danger directly ahead
by Garrett Johnson
16 December 2006
Last Wednesday the NYT reported an event that few noticed, but has immense historical significance.
The United States Mint, concerned that rising metal prices could lead to widespread recycling of pennies and nickels, has banned melting or exporting them.Until 1982, pennies were made of 95 percent copper. The commodity metal value of one of those coins, which still make up a large percentage of the pennies in circulation, is 2.13 cents, according to the Mint.
My point is that whenever the government starts putting restrictions on currencies, or on metals, there is reason to be concerned. You should be concerned.
Up to this point all the focus on currency levels have been on China. This past week Treasury Secretary Paulson, Federal Reserve Chief Bernanke, and an entourage of leading American banking figures are all meeting in China. Why? Most likely it has to do with two facts: 1) China holds nearly $1 Trillion in American bonds, and 2) China’s central bankers have recently made noises about diversifying away from the dollar. Since September 2005 the Chinese have been gradually loosening their currency peg to the dollar. It hasn’t happened quickly enough for many American politicians, which is why our banking leaders are in China.
Attention instead should be focused on the Persian Gulf and what they plan to do.
What doesn’t get reported is that all six members of the Gulf Co-operation Council, or GCC (Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Oman and Qatar) still peg their currencies firmly to the dollar. Yet there is absolutely no outcry from American politicians and industry leaders for them to remove those pegs. Why is that?
The oil-producers of the middle east have been diversifying their reserves away from the dollar for a couple years now, but as long as their currencies are linked to the dollar and the oil they sell is priced in dollars then no major changes will happen.
“Counting only the Middle East oil exporters, the surplus has surged from $30 billion in 2002 to an estimated $280 billion this year. One reason why this gets much less attention than the smaller $160 billion increase in China is that only a fraction of it has gone into official reserves, which are publicly reported. Most of it is stashed in government oil-stabilisation or investment funds, such as the Abu Dhabi Investment Authority, which are much more secretive than the People’s Bank of China — but which probably hold just as many dollar assets.”
In other words, China holds about $1 trillion in US assets, which is about what the Gulf economic investment entities hold. This is, believe it or not, a problem for them:
The fact is that those oil producing nations simply don’t have the domestic infrastructure to handle such massive current account surpluses. That means they have to recycle that money back into American debt.
To manage these currency pegs the Middle East (like China) has had to maintain artificially low interest rates and massive printing of local currency. This has led to an outrageous real estate bubble (like China) in places like Dubai. All this cheap and easy money has also led to price inflation (like China). And with all those dollars flooding back into America, this has led to lots of cheap and easy credit which has also flooded into real estate. But now that is approaching an end.
And yet, while Bernanke and Paulson are besieging the Chinese finance ministry, there is an attack on the American economy forming in another quarter:
These gulf nations have another plan - a common currency.
“The six-member Gulf Cooperation Council countries are committed to issue the GCC common currency in the year 2010, Finance Minister Dr. Ibrahim Al-Assaf stated yesterday.
According to a study, the new currency
will be the world’s most important currency union
after the euro.Once established, the GCC leadership may decide to invoice their hydrocarbon sales in the new common currency, moving away from the current dollar pricing system. It could also become the reserve currency of choice for Islamic and Arab central banks for a combination of religious and political reasons.”
To put it simply, once the GCC has a currency union they will no longer need to peg their currencies to the dollar, nor keep their currency reserves in dollars, nor recycle their trade surpluses into American debt. This will drastically reduce the demand for dollars around the world.
And this is important why?
Until recently, every nation had to buy dollars in order to buy oil on the world markets, thus making a worldwide demand for dollars.
But that isn’t going to be the case much longer as this news indicates:
Russia, another major oil producer, has already diversified their currency reserves out of dollars, and created an oil Bourse that is priced in Rubles.
Venezuela is making moves to price their oil in Euros.
However, one thing won’t change - [America] will still have to buy Mid-East oil. But if they no longer need our dollars what will we be able to buy their oil with, especially if they are selling it in a currency other than dollars?
We would need create a currency reserve of other nation’s currencies (like every other country does) in order to buy the oil. But how can we build up this reserve if we don’t sell things to the rest of the world that they want?
That is the $64 billion dollar question! It looks like America will be looking to our First Ladies to rescue the dollar:
New series of gold coins will honor U.S. first ladies
Associated Press
Dec. 16, 2006
Starting next year, Martha Washington, Abigail Adams and all the rest will begin appearing on a new series of gold coins. While a new presidential series will be $1 circulating coins, the wives will be on half-ounce gold coins with each likely to sell for more than $300.
Both coins were authorized by Congress in 2005 with lawmakers modeling the $1 coin series after the Mint’s extremely popular 50-state quarters. The hope is that changing the images on the presidential coins every three months will spur greater interest and help the maligned dollar coin finally achieve acceptance with Americans.
In reality, they are hoping that foreigners who like gold will accept these coins. The rest of us have other economic concerns:
Five ways the falling dollar affects you
1. It can boost returns of international stocks and bonds. So far this year, international stock funds are up more than 20 percent on average, while large-company domestic stock funds are up only 7 percent. Much of this gap is due to the declining dollar.
2. It makes imported goods more expensive.
The U.S. trade deficit with China hit a high for the third-straight month in October, rising 6.1 percent to $24.4 billion. U.S. stores are stocking their shelves with imported electronics, toys and clothes. As the dollar falls, these goods become more expensive for U.S. consumers.
3. It may spoil that European vacation. One week of lodging at a 100-euro-per-night hotel now costs $112 more than it did just a year ago.
4. It makes foreign currencies a more appealing option, but only for aggressive investors.
5. U.S. interest rates could rise if the low dollar reduces foreign buying of Treasuries.
[M]ortgage rates and credit-card rates go up.
Foreign citizens can see that the United States isn’t the horse to hitch their wagons to anymore - and why.
The author of this next excerpt is a citizen of the UK:
The End of U.S. Dominance In The Middle East - What Dominance?
by Liam Bailey
December 17, 2006
[T]he U.S never really had much influence in Middle Eastern affairs. The little it did have [came] from supplying financial aid to needy countries… In Iraq’s case, we all know the current scenario. The U.S has as much influence in Iraq now as any of the rival militia factions. The Iraq war in 2003 [shows] that U.S military force was useless against sporadic Jihad’s guerrilla warfare.
The question should be: did the U.S ever dominate the Middle East? Saudi Arabia’s condemnation of Israel during the Israel/Hezbollah conflict and rhetoric of going to war showed that the U.S doesn’t hold much influence over Saudi Arabia.
The U.S has enjoyed 70 years of good relations with Saudi Arabia’s monarchy, until 9/11 put a significant strain on the “special relationship”. The rich and influential Middle East countries are exploiting the exposed weakness [of the United States] to secure their own hegemony.
The Middle East and its rich oil reserves have always been at the fore-front of U.S policy. So much so that they have taken their eye off the ball elsewhere; allowing China to become the main influence in Asia and enter the fight for global supremacy.
At least some Americans can see this Chinese economic puzzle:
Why China Is Rising And The U.S. Is Declining
By Lester R. Brown
12-16-06
I know Santa Claus is Chinese because each Christmas morning after all the gifts are unwrapped and things settle down I systematically go through the presents to see where they are made. The results are almost always the same: roughly 70 percent are from China.
The Christmas tree itself may come from China. Eight out of every 10 artificial Christmas trees sold in the United States are made in China. Last year Americans spent over $130 million on plastic Christmas trees from China. This year Americans will spend over $1 billion on Christmas ornaments from China. And in perhaps the greatest irony of all, even nativity scenes are made in China. Last year Americans spent more than $39 million buying nativity scenes shipped in from the East.
That the U.S. Christmas is made in China is a metaphor
for a far deeper set of economic issues
affecting the United States.It’s not the fact that our Christmas is made in China, but rather the mindset that has led to it that is most disturbing. We want to consume no matter what. Underneath the American Christmas spirit and good cheer is a debt-laden society that appears to have lost its way, marred in the quicksand of consumerism. As a society, we seem to have forgotten how to save so we can invest in a better future. Instead of leaving our children a promising economic future, we are bequeathing them the largest debt burden of any generation in history.
We want to spend now and let our children pay.
At the personal level, credit card debt just keeps climbing, and at the government level, we have the largest deficit in history. In the United States we are so intent on consuming that personal savings have virtually disappeared. We have an average of five credit cards for every man, woman, and child. Of the 145 million cardholders, only 55 million clear their accounts each month. The other 90 million cannot seem to catch up and are paying steep interest rates on their remaining balance. Millions of people are so deeply in debt that they may remain indebted for life.
At the international level, we have a trade deficit that moves to a new high month after month. The official national debt, the product of years of fiscal deficits, now totals $8.5 trillion — some $64,000 per taxpayer. By the end of the Bush administration in 2008, this figure is projected to reach a staggering $9.4 trillion.
We are digging a fiscal black hole
and sinking deeper and deeper into it.Each month the Treasury covers the fiscal deficit by auctioning off securities. The two leading international buyers of U.S. Treasury securities are Japan and China. In this role, China is now also becoming our banker. This developing country, where income levels are one sixth those of the United States, is financing the excesses of an affluent industrial society. What’s wrong with this picture?
China’s success in attracting foreign investment capital and mobilizing this huge workforce has made it the workshop of the world. We have lost influence in world financial markets simply because of our mounting debt, much of it held by other countries.
If China’s leaders ever become convinced that the dollar is headed continuously downward and they decide to dump their dollar holdings, the dollar could collapse.
The United States is fast losing its leadership role in the world. The question we are facing is not simply whether our Christmas is made in China, but more fundamentally whether we can restore the discipline and values that made us a great nation — a nation the world admired, respected, and emulated. This is not something that Santa Claus can deliver, not even a Chinese Santa Claus. This is something only we can do.
From some of the articles I’m finding in the foreign media, America has begun to lose the respect of foreign commentators - and maybe their readers as well:
$10,160 per year is poor in US? That’s rich
by Chidanand Rajghatta
16 Dec 2006
America has its poor, although poverty in the US is nothing compared to the grinding, sub-human existence that defines poverty in the Indian sub-continent. What is defined as poor in the US would actually be classed as rich in India…
According to US government guidelines, as of 2005, an individual with an annual income of less than $10,160 or a family of two with annual income of less than $13,078 is considered to be below poverty line.
That translates to about Rs 37,600 per month for an individual, which in India would be considered being in the upper-income bracket.
The World Bank defines extreme poverty as living on less than US $1 (PPP) per day, and moderate poverty as less than $2 a day.
In the US, the poverty line is based on the dollar costs of the US Department of Agriculture’s “economy food plan” multiplied by three — because research showed that food costs accounted for about one-third of the total money income.
So if the monthly expense on the USDA’s food basket came to $282, poverty line was set at $846 per month. A recent survey by the US Census Bureau showed that 46% of those in “poverty”in the US owned their own home! No wonder Americans take their “poverty” so lightly.
The Indian measure for determining poverty is absolutist. Official estimates of the poverty line are based on a norm of 2,400 calories per capita per day for rural areas and 2,100 per capita per day for urban areas. Translating it as money for food, it comes to around Rs 600 per month, as of 2005.
So technically, anyone earning more than Rs 600 is considered above poverty line. Yet, 28% of India’s population is considered below poverty line.
The way I read this, when the American economy declines enough that the average Foc “News” viewer can feel it, we aren’t going to be getting a lot of sympathy from the world. Our arrogance and disdain for those we’ve exploited since 1945 left us the last industrial nation operating as World War II ended is going to be returned to us - with interest.
It’s probably as tardy to do much about this as it is to stop the Bush cabal from destroying what remains of our nation before they are removed from power.
But if we had read history as well as we should have, we would find that we were warned about this back in the time when the corporation became the dominant economic and political entity in our society:
“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its REIGN by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.”
- President Abraham Lincoln, 1863
That was well underway when President Eisenhower attempted to warn us - too late - about the Military-Industrial complex, made up of those who would destroy this nation in order to save their own wealth.