"We Owe It To Ourselves" Oh, Really?

Discussion in 'Politics, Religion, Social Issues' started by Desertrat, Feb 22, 2008.

  1. Desertrat macrumors newbie

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    #1
    An exceprt from Agora Publishing's "Five Minute Forecast":

    “Can democracy survive when its financial roots have been cut?” asked the economist James Galbraith back in 2006. “The American citizenry has lost its pride of place as creditor of the American state. The proportion of U.S. debt owned directly by Americans has fallen to below 10%; in 1945 (when the debt was more than twice as large in relation to GDP as now), citizen-creditors just about held it all.”

    Combined, financial institutions and foreign nations now own over 70% of U.S. debt.

    “The scale of public debt is not the issue,” contends Galbraith, “but its ownership is. Can a country -- whether the United States or any other -- be truly democratic if it is in hock to banks and foreigners?”

    “We no longer ‘owe it to ourselves,’ as FDR used to say,” opines our Byron King. “The banks and overseas creditors have hijacked the bond process. The citizens have little direct stake in the U.S. government, certainly not as bondholders. And more than half of all citizens pay no taxes at all. Over 50% of all taxes are paid by the wealthiest 3% of households; 90% of all taxes are paid by the wealthiest 10%.

    “I guess the amounts of money were just too large for the citizenry to continue to buy bonds and keep a financial stake in the health of the government. So with no financial stake in their own government, it's all about ‘I get mine.’ From pork at the congressional level to ‘what benefits can I get?’ at the personal. Heck, everyone wants their check from the government. Hey, where's mine?

    “We're doomed.”

    I don't know about "doomed", but it sure looks to me like we have serious problems far beyond what any of Our Fearless Leaders are able to handle. Does anybody here think the above-mentioned items are not serious?

    Anybody got any idea what ANY of the presidential contenders, and/or the Congress can do? Or, will do? (I wonder if they even recognize that there are problems, given their rhetoric on the campaign trail.) Can we avoid a serious backslide from a first-world status?

    How do you have sovereignty--national or personal--when others own you?

    'Rat
     
  2. IJ Reilly macrumors P6

    IJ Reilly

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    #2
    What part is the excerpt? Who wrote this?

    In any event, this seems like a classic blunderbuss argument. Just because you hit everything, doesn't mean you were aiming.
     
  3. Ugg macrumors 68000

    Ugg

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    I would really like to know how much of an impact this has on US foreign policy. Also, how it impacts how creditor countries view us. Do we look like some fat old pig ready for slaughter?
     
  4. IJ Reilly macrumors P6

    IJ Reilly

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    I don't understand what is actually being argued. I've been hearing for decades about how the foreigners "own us," but I've never seen it explained why investors buying our debt makes this true in any important way. Are they preparing to foreclose on the mortgage and steal the deed, like Snidely Whiplash?
     
  5. mactastic macrumors 68040

    mactastic

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    I expect we're going to hear a lot of this "foreign debt is sooo bad" mouth music from the right if, as appears likely, a Democrat is elected to the presidency this fall.

    But where was their concern over the last 7 years? Why didn't any of them speak up when Bush was busy mortgaging our future and our children's future to the Chinese?

    Yep, righties will discover their "fiscal restraint" principles the second they're out of power. It's already happening, with Bush and his surrogates busy castigating Congress for a lack of spending restraint -- never mind that the previous 7 budgets contain some of the highest levels of pork and like 4 of the top 5 deficits.

    With so little else to run on, look for this line of attack to continue.
     
  6. Ugg macrumors 68000

    Ugg

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    Part of it of course is the extent of debt they own. The other part of it is that much is owned by highly secretive governments. Like I said, I'd like to know just how much that indebtedness impacts foreign relations. I doubt we'll ever really know.
     
  7. IJ Reilly macrumors P6

    IJ Reilly

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    Maybe, but my question is still: why does it matter? This debt is available to any buyer. Are we talking about restricting how much can be bought by certain foreign banks? How? Why? I think this is really just one of those bloody flags people like to wave to worry us about "foreign influence" in some generic way, the substance of which they don't ever need to explain, because it hits at a gut level. Notice also the link made to taxes paid by the rich (too much, apparently). That leap of logic is yet another bloody flag.
     
  8. Desertrat thread starter macrumors newbie

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    #8
    It certainly affects corporate policies and the various decisions for the use of resources and in the marketing--which affects lobbying efforts. Lobbying efforts affect Congressional "output"--which means tax policies, among other things. And, of course, anything which might be seen as favorable by a foreign-based corporation.

    The Golden Rule has always applied: "Them with the gold, rule." The gold is coming to be centralized in Beijing and Dubai, not NYC or London.

    No "horribles" will happen overnight, but as a nation we're getting poorer. Our consumeritis has enabled the growth in others' economies, and they're getting stronger. It's not gonna be a straight-line deal; ups and downs, but for now we're definitely on a downslope.

    It's easy enough to keep track: Just follow the currency rates. Our assets get cheaper, day by day. Sure, our assets are profitable, which is why they're bought, but a goodly percentage of those profits go outside the country.

    'Rat
     
  9. IJ Reilly macrumors P6

    IJ Reilly

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    An argument against excessive public debt, I can understand. The argument that the problem with excessive public debt is that a lot of it is bought by people who are not Americans, I don't understand. Debt is not an asset. In fact, it's the opposite of an asset. My basic questions about why foreigners buying US debt is a problem and what we should be doing about it aren't answered.
     
  10. Desertrat thread starter macrumors newbie

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    #10
    IJ, if you have some sort of note with a lender, and I buy that note, I've bought your debt. You pay me, not the original lender. If I buy the note for cash, it's discounted, so there is then a double profit for me: The discount off the face value of the note, plus the interest. If I'm outside the country, the profit goes outside the country, leaving less in-country for reinvestment.

    Corporations borrow, just as do indivduals. Same for the government, selling bonds/TBills in the open market. These are debt obligations of the government, and just China, e.g., holds some $400 billion of US government debt. Add in the other central banks who've bought US government debt because we've been the world's Safe Haven and you have Very Large Numbers.

    I'm behind the curve as to the total dollar amount, but the great fear in D.C. is that if all our paper starts being sold at a faster rate as the dollar declines, the decline will then accelerate. Many countries are selling dollars at a slow rate, so as not to drive down the value too rapidly and lose money. However, if the dollar drops a lot more, the fear is that they'll cut their losses and run--and that will seriously bring about a collapse. We've been the world's reserve currency, and the world is getting tired of losing money thereby.

    Serious troubles here won't be limited to just here, of course. That's another concern, and is part of the "make haste slowly" for folks getting rid of dollars.

    There's nothing secret or arcane about all this. The folks at Agora Publishing (Strategic Investment, The Daily Reckoning, Whiskey & Gunpowder) have been publishing the numbers for years. They talk about oil and gas and commodities in general, about debts and Dubai construction and beaucoup other subjects including food prices and currencies. The difference between Agora and MSNBC is the lack of happy talk when happy talk isn't warranted. And they've been running about 90% correct on predictions for some ten or so years, now. They were talking about the coming sub-prime housing bust in 2004/2005, fer cryin' out loud!

    Nighty-bye...

    'Rat
     
  11. IJ Reilly macrumors P6

    IJ Reilly

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    So the problem isn't so much that they buy US debt, but that that might stop. I've been hearing this cry of wolf for decades, which isn't to say that it will never come true, but that it does get old after a while. So maybe that stopped clock will be right some day. Who really knows? And once again, I don't see any hint of a remedy, and the reference to income tax rates is completely off the wall. Also not mentioned is the reason why so many foreign interests buy US Treasury debt: (1) it's the most secure in the world, and (2) they have huge cash reserves in dollars driven by trade surpluses that have to be invested, and (3) it's in their financial interests to keep buying it. I don't see any of these factors changing soon, or any evidence that they will.
     
  12. stevegmu macrumors regular

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    #12
    Seems we do owe ourselves.
     

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  13. Desertrat thread starter macrumors newbie

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    #13
    Damfino. The pie chart was published in April, 2007; no idea of when the data was compiled. Could be some difference in definitions; I dunno. I'd agree that it's not reasonable for the percentages to change in only a year or two.
     
  14. solvs macrumors 603

    solvs

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    Yes, but how much of the income do they have, let alone the money? I keep hearing this, but I also keep hearing the middle class is shrinking while the rich are getting richer. I also keep hearing about how too much of our debt is owed to foreign markets as you posted (though some links would have been nice), and I guess I should be worried about that too, though to be honest I'm more worried about the excessive debt period. I guess the conservatives could make noise about this mac, but since so much of it has has occurred under their watch, I don't see how. Guess they always find a way, not that I think it'll work this particular time for them.

    And since you disagree with stevegmu 'rat, look for him to slam you as a liberal partisan or something. :p
     

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