America: spending itself to death
If you’re keeping a running tally of the institutions and nations that are warning America to stop spending or else, I’m up to three, but maybe I missed a few. Last week it was Standard & Poor’s lowering the boom on America’s debt. Well it’s only Monday and we already have two more warnings: one from our banker, China, and one from the International Monetary Fund. The end of America?
Last week, when Standard and Poor’s warned there was a 33% chance that the United States would lose its AAA rating, the left wrote it off as an unreliable rant from unbelievable investment bankers. Obviously a plot from the right to make the young president look bad. But I wonder how they’re going to shake this one off? Today the international monetary fund issued a report that predicted the end of America’s economic dominance by 2016. From WSJ MarketWatch.
According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates …
The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Maybe that’s why China came out swinging today, beating its ever larger economic chest and sending a message to the United States that your debt is just no good for us anymore.
China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.
That’s a $2 trillion dump of US debt. Ed Morrissey at hot air notes they won’t do it overnight but make no mistake if the news agency says they will do it, they will do it.
China won’t dump the dollar any time soon. They need the value of the dollar to remain strong to protect the reserves they already own. The collapse of their high-speed rail bubblemeans they can’t afford to go to economic war with the US at the moment, assuming that they were inclined to do so at any time. It does mean, however, that Treasury will have to work much harder to sell its bonds, which will force yields up and increase the debt service, and may mean that we won’t find many buyers at all. If China stops buying, the next best customer is Japan, which won’t be able to afford more bonds for years; in fact, they may have to sell theirs to fund their recovery efforts from the quakes and tsunamis of 2011.
Who else will come to our rescue? The Saudis? Don’t bet on it.
One plus one plus one equals uh-oh! don’t say you haven’t been warned you my little mobsters. And don’t let Congress tell you they didn’t know the problem was this big. We need to hold Congress and the White House accountable and insist they get their fiscal house in order and that means cut the government down to size.
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There are several “The day the dollar died” scenarios on youtube, this appears to be of German origin with subtitles:? http://www.youtube.com/watch?v=AuPgdZeAFjA???
But on the bright side, at least we’ve pulled out of Iraq and Afghanistan, we’ve got cradle to grave healthcare, and government transparency like never before!
Try this SNL skit:
http://www.youtube.com/watch?v=XGlbRrF_Bas
the following is just funny
http://www.youtube.com/watch?v=on1xPlV-rhs
Hold the White House and Congress accountable: that’s funny! Meanwhile the “fiscal magicians” who took over the House last November have done what? A proposal that has no chance (but I could be wrong….not).
One thing they did do was waste an unfortunate amount of time formulating and fighting over a budget that should have been finished before the current Congress came to office.
Sammy, this congress did not “take over the house” until January. Did you already forget about the? horrible, self serving, lame duck (Democrat) shenanigans last December?
Can anyone put your finger on why? How? It’s the people “we” voted into office. Even if there ar2 20,000 votes in a 15,000 adult town.
I think Howard Beale said it best in “Network” (1976): http://www.youtube.com/watch?v=90ELleCQvew? The movie was prescient.
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Jim reminds me of Howard Beale…? 😉
I’ve not been surprised about the chain of events since they all lead to a new One World Order currency!!!? Was it last year that the IMF – who has enjoyed our gold – predicted this would happen?? Ted was there – and in China – discussing a new global currency.? To make it happen faster, S&P just came out with their announcement.? The BRIC countries are on board.? I’m sure that Soros has done his best to make this happen since it fits in quite well with his goal of a one world order.? At first, I thought this sounded like a bad sci fi movie – but NOW I’m scared.? PS I saw copies of the new coinage – very attractive.? We will be as luck as those who “enjoy” the euro.
I seem to remember at a G8(?) summit barry was telling everyone to spend more and they all told barry to quit spending and make cuts. They made cuts and they’re econonmies are holding and barry keeps spending and now the warnings are out. If we made cuts and got our act together it would strenghten the dollar reducing the cost of oil and then drill baby drill and the price of oil would tank.
I thought the President spent the money that Congress (read the House) authorized. Or has the Constitution been amended while I was on vacation?
You mean the veto proof democrat majority, hope you enjoyed your vacation.
I think you meant “upended”, not amended.
Maybe the Constitution was not amended after all, but the excuses keep coming. Now you need a veto-proof Congress too?? In the recent past? there was a Republican President, a Republican House and a Republican Senate. Still the spending went out-of-sight.
But it paled in comparison to that of the Democrat controlled WH/Congress.
Let’s see what you guys can do this time around.
Might be hard for just the House to undo what the House, Senate and Presidency have wrought.
To All Polititions:
Stop the INSANITY!?
I know you?may be frustrated…but do you all realize how foolish and incompetent politicians look to the rest of us?? What angers and frustrates us the most is to standby and watch as the American Dream evaporates right before our very eyes.? How do we explain why we let this happen to our children?? By what logic can we justify our lack of dealing with this problem that has been staring us in the face for 30 years to our forefathers?? Will history say the children of the “Greatest Generation” had not the guts to deal with tough issues and destroyed the most precious gift they were left….prosperity?
Debt and the overprinting of money has devalued our currency resulting in higher prices, lost tax revenue and lost jobs, this hurts the very individuals who are most vulnerable the most.
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We need energy to grow, since when does the EPA have the constitutional authority to regulate our ability to get that energy for growth?? Looked in the constitution, can’t find that anywhere.? Curb the EPA and encourage energy producers to produce!
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Like many of out states, make a balanced budget not to exceed 20% of GDP LAW!
Support Ryan’s plan 100%
Save money by eliminating the IRS with a fair/flat tax!
More TAXES on top of the devalued dollar will KILL all growth!
I don?t want my children and grandchildren to be doomed to a life of government servitude.
Demand compensation from nations we assist!
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What is humorous, in an ironic way, is that we will be owned by the most ecologically indifferent country on Earth: China.
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When did all the rails become “the third rail of politics”?
Supreme Rant…. I couldn’t agree more.