There are already plans in the works by the Republicans to cancel America's
national debt outright.
Sadly, it seems the Japanese will lose the most, since they hold so much of
these US debt notes (US Treasury bonds).
Such canceling of a country's national debt is not a new phenomenea. That
the Japanese have been foolish enough to purchase these paper notes from the
Federal Reserve is probably more the Japanese's fault for being so gullible.
Everyone knows there is absolutely no way America can pay these outstanding
Treasury bonds. It is only a matter of time before the Republican plan comes
to fruition and these Treasury notes are canceled.
"Julianarosa" <julianarosa@aol.com> wrote in message
news:20040618131844.23018.00000204@mb-m07.aol.com...
> America Deep in Debt, Caught in a Net
>
> This old English proverb concisely describes the financial condition of
many
> Americans. Household debt is rising at an 8.8 percent annual rate, home
> mortgage debt at 14.2 percent. Total debt in the United States doubled
from
> 1998 to 2002, from $16 trillion to $32 trillion and may double again in
the
> next five years. The Federal government, which sets the pace, reported a
$555
> deficit for the 2003 fiscal year; its total debt is given at $6.783
trillion.
> For the next two years the budget deficits are estimated at $566 billion
to
> $644 billion each, which should increase its total debt to more than $8
> trillion, or some $27,000 for every man, woman, and child.
>
> Economists make an important distinction between "productive" and
"consumptive"
> debt. Although the difference may not always be clear and exact and,
therefore,
> may give rise to much controversy, it is significant as to motive and
effect. A
> debt incurred for productive purposes, e.g. a commercial or industrial
> investment designed to earn future incomes, may cover its interest costs
and
> even yield entrepreneurial profits. In contrast, new debt in the form of a
> second mortgage on a home may finance the purchase of a vacation home, new
> furniture or another automobile, or even a luxury cruise around the world.
The
> debtor may call it "productive," but it surely does not create capital,
i.e.
> build shops or factories or manufacture tools and dies that enhance the
> productivity of human labor. Similarly, a debt incurred for the purpose of
> expanding Medicare may improve the health and looks of many elderly and,
> therefore, be deemed "productive," but it does not create capital that
makes
> workers more productive and raises the levels of living of all. It
actually may
> consume capital and thereby depress standards of living.
>
> Private debtors may find it difficult to pay for bread that has been
eaten. It
> is likely to become ever more difficult in the future as the cost of debt
is
> likely to double and triple. At the present, interest rates are far below
> market rates due to massive monetary and fiscal stimulation by both the
U.S.
> Treasury and the Federal Reserve System. The basic Fed rate stands at one
> percent, three-month money market instruments at 1.11 percent, one-year
paper
> of 1.78 percent, and two-year government notes at 1.77 percent. For a
while,
> government may ignore and even outlaw market prices, market wages, and
market
> rates of interest and mandate its own, but price and rate edicts
invariably
> disrupt the smooth functioning of the market order. They cause business
> misdirection and maladjustment that lead to ever more business losses and
> failures. In economic disarray, the Fed may have no choice but to raise
its
> rate to market heights that enable businessmen to readjust to the
judgments and
> wishes of the people.
>
> Public debtors may view their debts in a different light. They may call
them "a
> national bond" which, in Franklin D. Roosevelt's words, is "owed by the
nation
> to the nation". In reality, it is unlikely that future generations of
taxpayers
> will willingly bear the bond of debt. Like so many before them, they may
choose
> currency depreciation which offers the most advantageous escape from a
burden
> of debt. It depreciates all debt and, in terms of purchasing power, may
even
> reduce debt faster than new deficits are added. In the end, no matter how
large
> the budget deficits may be, debt depreciation may outpace the deficits,
which
> benefits all debtors, public and private, and defrauds all creditors.
>
> Many creditors are exposed to yet another danger. The currency
depreciation may
> accelerate if foreign creditors should begin to question the quality of
the
> American dollar and liquidate their dollar claims, seeking refuge in other
> countries and other currencies. While many domestic credit institutions
are
> legally barred from investing in foreign currency claims, foreign
creditors
> usually have no such limitation; they are free to shed dollar investments
at
> any time and search for profitable opportunities elsewhere. Every such
> liquidation would reduce the demand for dollars and aggravate its
depreciation.
> Moreover, it would cast doubt on the special position of the American
dollar as
> the world's primary trade and reserve currency. For many years this
special
> position has allowed the Federal Reserve System to provide the world with
ever
> more of its notes in exchange for ever more goods and services. If the
world
> should ever lose its trust in the U.S. dollar and convert some of its
holdings,
> more than $7 trillion of American assets and claims, the consequences
would be
> too calamitous to contemplate.
>
> Our debt generation is a sad generation misguided by false notions and
> doctrines, and preoccupied with its own needs and wants. When economic
> conditions begin to deteriorate it may grow ever more egocentric and
wretched,
> which tends to aggravate the social tension and strife. Clinging
tenaciously to
> its transfer claims and rights, the unhappy society thus may deteriorate
into a
> militant assembly of diverse pressure groups feuding and fighting each
other.
> When the political conflict finally explodes into violence, the transfer
> society urgently needs a peacemaker who is prepared to suppress violence
with
> superior violence. In the end, a society that can no longer work together
in
> peace must submit to the dictates of a strong president armed with an
array of
> emergency powers. In other places, at other times, he would be called
Caesar.
>
> Hans F. Sennholz
>
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