America’s financial future heads overseas
January 26, 2009 · Updated 7:24 PM
So, our economy is down the toilet, like nothing you’ve ever experienced or can remember – unless you’re around 80 years old. We’ve seen recessions before, but this one is a real doozy. And our new president and most financial experts who are supposed to know about such things tell us the situation will get worse, with even higher unemployment, thousands of foreclosures, extreme Wall Street gyrations, more major corporations going bankrupt and more retail stores going broke. Understandably, the public is a bit frightened.
Government officials and the mass media refer to a financial “meltdown” and the financial “crisis.” Call it what you will. Local old-timers say it looks a lot like the early days of the Great Depression, though I’ve noticed our politicians avoid the “D-word” like a plague. In fact, there are similarities between the 1930s and today’s fiasco, like the inability of interest rate cuts to stop or reverse the downturn.
Yet, before our present predicament can accurately be called a depression, certain key indicators will have to get much worse. According to my research, 30 percent of America’s workforce was unemployed in 1933. We’re nowhere near that today. The last figures I saw put current unemployment near 7 percent. (The Detroit region has the highest figure, around 9 percent.) Furthermore, during the Great Depression the Dow tumbled almost 50 percent in less than two weeks and then continued down. Despite all the publicity given the recent Wall Street freefall, we haven’t seen a decline anywhere near that drastic.
Our new president hopes to reverse the meltdown through government loans and bailouts and by the creation of millions of new jobs in public works programs; i.e., building bridges, schools, highways, “green economic” projects and the new Seattle waterfront tunnel. That’s all well and good but, remember, such programs will be financed on credit – plunging us another trillion dollars in debt. That’s yet another trillion. What the hell, a trillion here and a trillion there and the first thing you know we’re talking big money!
Since Americans hate to pay the taxes that finance our wars and bailouts, last year the United States had to borrow $800 billion from the rest of the world. That’s more than $4 billion every, single working day. (Make no mistake, this enormous debt will greatly limit Obama’s ability to do any of the wonderful things he has promised.)
And who loans us all this capital? Well, China, India and Saudi Arabia, to name three. Last year, while the U.S. tumbled further and further into debt, China was estimated to have a $400 billion dollar surplus, much of which it loaned to us. In many respects, China has become America’s bank. Then there’s Saudi Arabia which, I’ve recently read, could buy Bank of America with the money it makes in one week.
My friends, it seems to me we’re witnessing a major shift in global wealth and financial power – and it’s not in America’s favor.
So it goes.