Are we on the Verge of Financial Collapse?
We could be on the verge of a financial collapse in the United States. As interest on the national debt continues to rise this could mean a collapse of the dollar causing a defaulting on our massive debt problem. This was the conclusion of Robert Scott, an economist at the Economic Policy Institute think tank, who appeared on C-Span this morning.
We depend on countries like Japan and China to fund our $2.7 trillion foreignânational debt. Potentially those countries could decide to cash in their bonds leading to a catastrophic financial crisis in America. Scott doesn't believe that is possible. But the potential exists. He believes those countries depend too much on trade with us. I believe that leverage does exists. As one caller pointed out on the program, this leverage could make Chinese aggression towards Taiwan more likely since we would be reluctant to resist given our dependence on that totalitarian regime.
Scott said that interest on the debt was over $110 billion in the first quarter of this year. That was more than we spent on health, education, and welfare. We are "spread so thin" as a society that it threatens our future. That problem is compounded by the fact that over the last 25 to 30 years wages have been stagnant. Wages have been replaced by profits for companies. Many of those companies have gone abroad costing Americans 3 million good paying manufacturing jobs since 2000 alone. Those lost jobs are being replaced by service industry work that pays far less, many with no benefits.
One solution to the problem, according to Scott, is the gradual devaluation of the dollar. This would lower our debt and increase the number of manufacturing jobs in the U.S. and improve the wages picture. If it declines too fast investors in America could become spooked, which could see a collapse of the dollar leading to a financial crisis like that which occurred in Mexico in the 1990s.
Unfortunately complicating the picture is rising inflation which has been primarily the result of skyrocketting oil prices. This year alone $300 billion (half of the trade deficit) was spent to pay for foreign oil. As a result, the Federal Reserve has raised interest rates to avert further inflation. Scott believes continued tightening of interest rates might lead to a recession.
It is a terrible and disgraceful mess that we've gotten ourselves in. And where is the outrage. Where are the politicians and the media (apart from C-Span) in sounding the alarm. Already we've seen our national savings rates at the lowest levels since the Great Depression. There is that word -- depression. We are already seeing repercussions in the case of the government shutdown in New Jersey. Expect to see more of that. We have a President and Congress running up obscene deficits to pay for the quagmire in Iraq. There is nothing left over to pay for essential services. We are already seeing a rise in the crime rate because there are less police and prisons to go around. Our roads and bridges are going un-repaired. And if we have another Katrina disaster (not to mention terrorist attack), which is likely, we won't be able to help the victims. This is the awful reality on this July 4th. I fear for my country.
We depend on countries like Japan and China to fund our $2.7 trillion foreignânational debt. Potentially those countries could decide to cash in their bonds leading to a catastrophic financial crisis in America. Scott doesn't believe that is possible. But the potential exists. He believes those countries depend too much on trade with us. I believe that leverage does exists. As one caller pointed out on the program, this leverage could make Chinese aggression towards Taiwan more likely since we would be reluctant to resist given our dependence on that totalitarian regime.
Scott said that interest on the debt was over $110 billion in the first quarter of this year. That was more than we spent on health, education, and welfare. We are "spread so thin" as a society that it threatens our future. That problem is compounded by the fact that over the last 25 to 30 years wages have been stagnant. Wages have been replaced by profits for companies. Many of those companies have gone abroad costing Americans 3 million good paying manufacturing jobs since 2000 alone. Those lost jobs are being replaced by service industry work that pays far less, many with no benefits.
One solution to the problem, according to Scott, is the gradual devaluation of the dollar. This would lower our debt and increase the number of manufacturing jobs in the U.S. and improve the wages picture. If it declines too fast investors in America could become spooked, which could see a collapse of the dollar leading to a financial crisis like that which occurred in Mexico in the 1990s.
Unfortunately complicating the picture is rising inflation which has been primarily the result of skyrocketting oil prices. This year alone $300 billion (half of the trade deficit) was spent to pay for foreign oil. As a result, the Federal Reserve has raised interest rates to avert further inflation. Scott believes continued tightening of interest rates might lead to a recession.
It is a terrible and disgraceful mess that we've gotten ourselves in. And where is the outrage. Where are the politicians and the media (apart from C-Span) in sounding the alarm. Already we've seen our national savings rates at the lowest levels since the Great Depression. There is that word -- depression. We are already seeing repercussions in the case of the government shutdown in New Jersey. Expect to see more of that. We have a President and Congress running up obscene deficits to pay for the quagmire in Iraq. There is nothing left over to pay for essential services. We are already seeing a rise in the crime rate because there are less police and prisons to go around. Our roads and bridges are going un-repaired. And if we have another Katrina disaster (not to mention terrorist attack), which is likely, we won't be able to help the victims. This is the awful reality on this July 4th. I fear for my country.
posted by End The Duopoly at
11:05 AM | | |
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