Don’t Think The Debt Matters, Think Again

by Scott Morales

We’re $16,000,000,000,000 in debt. Don’t think it matters?  Consider this: who owns the debt, and what is going to happen when they collect?  How are government programs going to remain funded when interest payments on the debt begins to siphon off those funds into coffers of the bondholders?  Ask yourself this question again after you’ve contemplated the return to the historical average interest rate and not the artificial rate we’ve been basking in.  “...from 1971 until 2012, the United States Interest Rate averaged 6.2 Percent…”,  but we’ve been enjoying rates less than 3% for what seems like five years.  The government borrows 40% of every dollar it spends in your name.  Imagine how great the interest payments will be on that borrowed money when we return to the historical average?  Think the interest rates will remain this low?

Permanence is fleeting.

The dollar that would have gone to Social Security, Medicare, Defense or one of the other thousand “necessary” agencies, departments, or programs will go elsewhere.  And not just any elsewhere, but to China.  According to the IMF, China will supplant the United States as the world’s leading economic power by 2016–thanks to us.  (Here’s a link to one report, but it’s really impressive to google: “IMF World Economic Outlook China 2016” and poke around the results.  If you understand history, and you’re old enough, you better accompany that adventure in the googleverse with a bourbon, scotch, or anything else that can deflate the swelling queasiness the perspicacious will surely endure).

Once China is the leading economic superpower, they’ll get all of the accoutrements that follow. They’ll have the largest market and most of the cash and with cash comes power.  Other countries will seek their counsel and consider their concerns when making geopolitical moves.  Trips scheduled for Washington will be re-booked to Beijing. Whether the moves regard military, economic, trade, or environmental concerns, China is going to have a say, and countries will listen. Say it can’t happen? Say America will always be the superpower?

Permanence is fleeting.

Consider the sea lanes as an exemplar that will result from this transition.  Sea lanes are extremely important to the world economy and provide international stability.  They are trade routes where goods and supplies move mostly unhindered throughout the world, at least they do today. They are of strategic interest to many countries, including the United States.  Sea lanes are currently protected by the U.S. Navy, but that will end. China just launched its first aircraft carrier, and many experts believe that China will not be a true deep-blue Navy for some time.  Think China won’t eventually be able to become a deep-blue Naval power and fill the vacuum we leave?  No? Well, think again, because we’ll be funding the effort. Remember the bit above about the siphoning of cash?  Every dollar that goes to China cannot also go to our Navy, but it can go to theirs.  Think you won’t be funding other Chinese endeavors, military or otherwise?

Permanence is fleeting.

Oh, one more thing.  China has knowingly perpetrated crimes against our country (e.g., intellectual property thefts, strategic espionage etc.). China is a totalitarian state and can crush any dissident with whom it disagrees or malbehavior with which it disapproves. Do you think they didn’t know these things were going on?  They’re not yet the economic superpower with heavy geopolitical clout and they behave this way.  Think it’s more likely they’ll change for the better with regards to  U.S. interests when they are or for the worse?

Permanence is fleeting.

 

Note: Skip posted a quote from the President of Iran after I finished writing this.  Ahmadinejad is right.  When the money drains, so does the power.

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