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China Calls Our Bluff: "The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation but [U.S.] Rating Agencies Still Give it High Rankings"
America's biggest creditor - China - has called our bluff.
As
the Financial Times notes,
the head of China's biggest credit rating agency has said America is insolvent and that U.S. credit
ratings are a joke:
The head of China’s largest
credit rating agency has slammed his western counterparts for causing
the global financial crisis and said that as the world’s largest
creditor nation China should have a bigger say in how governments and
their debt are rated.“The western rating agencies are
politicised and highly ideological and they do not adhere to objective
standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating,
told the Financial Times in an interview.***
He
specifically criticised the practice of “rating shopping” by companies
who offer their business to the agency that provides the most favourable
rating.In the aftermath of the financial crisis “rating
shopping” has been one of the key complaints from western regulators ,
who have heavily criticised the big three agencies for handing top
ratings to mortgage-linked securities that turned toxic when the US
housing market collapsed in 2007.“The financial crisis was
caused because rating agencies didn’t properly disclose risk and this
brought the entire US financial system to the verge of collapse, causing
huge damage to the US and its strategic interests,” Mr Guan said.Recently,
the rating agencies have been criticised for being too slow to
downgrade some of the heavily indebted peripheral eurozone economies,
most notably Spain, which still holds triple A ratings from Moody’s.There
is also a view among many investors that the agencies would shy away
from withdrawing triple A ratings to countries such as the US and UK
because of the political pressure that would bear down on them in the
event of such actions.Last week, privately-owned Dagong
published its own sovereign credit ranking in what it said was a first
for a non-western credit rating agency.The results were very
different from those published by Moody’s, Standard & Poor’s and
Fitch, with China ranking higher than the United States, Britain, Japan,
France and most other major economies, reflecting Dagong’s belief that
China is more politically and economically stable than all of these
countries.Mr Guan said his company’s methodology has been
developed over the last five years and reflects a more objective
assessment of a government’s fiscal position, ability to govern,
economic power, foreign reserves, debt burden and ability to create
future wealth.“The US is
insolvent and faces bankruptcy as a pure debtor nation but the rating
agencies still give it high rankings ,” Mr Guan said.***
A
wildly enthusiastic editorial published by Xinhua , China’s official
state newswire, lauded Dagong’s report as a significant step toward
breaking the monopoly of western rating agencies of which it said China
has long been a “victim”.“Compared with the US’ conquest of the
world by means of force, Moody’s has controlled the world through its
dominance in credit ratings,” the editorial said...
China
is right. U.S. credit ratings have been less than worthless. And - in
the real world - America should have been downgraded to junk. See this,
this,
this,
this,
this,
this,
this,
this
and this.
China
is not shy about reminding the U.S. who's got the biggest pockets. As
the Financial Times quotes Mr. Guan:
“China is
the biggest creditor nation in the world and with the rise and
national rejuvenation of China we should have our say in how the credit
risks of states are judged.”
Might Makes Right
Economic Collapse
Indeed, Guan is even dissing America's
military prowess:
“Actually, the huge military
expenditure of the US is not created by themselves but comes from
borrowed money, which is not sustainable.”
As I've
repeatedly shown,
borrowing money to fund our huge military expenditures are -
paradoxically - weakening our national security:
As
I've previously pointed
out, America's military-industrial complex is ruining our economy.
And
U.S. military and intelligence leaders say that the economic crisis is
the biggest national security threat to the United States. See this,
this
and this.
[I]t
is ironic that America's huge military spending is what made us an
empire ... but our huge military is what is bankrupting us ... thus
destroying our status as an empire ...
Indeed, as I pointed
out in 2008:
So why hasn't America's
credit rating been downgraded?Well, a report
by Moody's in September states:
"In superficially
similar circumstances, the ratings of Japan and some Scandinavian
countries were downgraded in the 1990s.
***
For reasons
that take their roots into the large size and wealth of the economy and, ultimately, the US military power,
the US government faces very little liquidity risk — its debt remains a
safe heaven. There is a large market for even a significant increase
in debt issuance."So Japan and Scandinavia have
wimpy militaries, so they got downgraded, but the U.S. has lots of
bombs, so we don't? In any event, American cannot remain a hyperpower
if it is broke.
The fact that America spends
more than the rest of the world combined on our military means that we
can keep an artificially high credit rating. But ironically, all the
money we're spending on our military means that we become less and less
credit-worthy ... and that we'll no longer be able to fund our military.
The
Scary Part
I chatted with the head of a small investment
brokerage about the China credit rating story.
Because he gives
his clients very bullish,
status quo advice, I assumed that he would say that China was wrong.
To
my surprise, he simply responded:
They're right.
What's scary is that China knows it.
In other words,
everyone who pays any attention knows that we're broke. What's scary is
that our biggest creditor knows it.
Tricks
Up Their Sleeves?
China has been threatening
for many months to replace the dollar as the world's reserve currency
(and see this).
And China, Russia and other countries have made a lot of noises about
replacing the dollar with the SDR. See this
and this.
Gordon
T. Long argues
that the much talked about gold
swaps are part and parcel of the plan to replace the dollar with
the SDR. Time will tell if he's right.
China, of course, is not without its own problems. See this and this.
In related news, Germany's biggest companies are starting to shun Wall Street as too risky.
»
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China's been bitching about us since before I started reading these sites (2004). I've been waiting since then for them to back up the talk and stop buying our toilet paper.
What they put me in mind of are the girls in high school who say, "That Biff is such a fucking asshole - I wouldn't touch him with your pussy". What this translates to is: "I've been blowing him behind the bleachers every day for two months and the asshole still hasn't asked me to the prom."
I'm not complaining about this article itself, but I'm tired of them shooting off their mouths and not walking the walk.
And the US doesn't yammer about a bunch of crap? Oh yeah, they just walk the walk and drop bombs on people, I forgot!
The Chinese aren't in debt. They aren't sticking a gun to people's faces in an attempt to garner resources, they're actually PAYING for them, and they're using recycled US dollars to do so BECAUSE the US has set the playing field up such that the world only really takes US dollars! China mops up US Treasuries with the excess cash.
Heaven forbid that your solutions are applied to YOU. Late a payment? Bomb the fucker! Yeah! <beating manly US chest> that's the way you do it!
Why so mad bro?
You call these guys stupid but you can't form an argument without attacking people? You seem to have just confirmed everything they were saying about a lot of people in America.
I've moved to China too,and have never regretted it once. If you could see whats going on at ground level here you would realise that they are not wasting the money they spend on a paper thin military, but rather investing in the futures of the whole population. SDR's or not..
this is LOL-able, but i have made the mistake of ingesting caffiene so will rant uncontrollably.
head of china's credit agency calling america insolvent. uh-uh. insolvent means you don't have any currency circulation. except the USA has heaps of currency circulation. just press them into existence at the fed.
BZZZT. no points, mr Guan.
So, how many of you have done business with the Chinese? they order 100 of your product, and they take delivery and then they don't pay. they say "we like your product and want more...we pay when the second order for 100 arrives."
Kiwidor Ratings Assessment Protocol gives all of China a B-sharp-minus for trustworthiness and creditworthiness. Do not deal with these people unless they agree to ESCROW.
China is so smart, they forgot to read shakespeare
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
And it follows with China left holding the monkeys, and the USA having reached gew-gaw saturation,
that they must attend many dinner parties together
and smile a lot because otherwise all is lost.
Maybe another coffee will rectify my madness.
<K>
"So, how many of you have done business with the Chinese? they order 100 of your product, and they take delivery and then they don't pay. they say "we like your product and want more...we pay when the second order for 100 arrives."
You have described exactly how small businesses in America used to operate. It was called '90 days same as cash'...There was no bank between the distributor and the retailer. Banking was accomplished between the distributor and the manufacturers.
Long term relationships between the small business and the distributor allowed trust to develop. In slow years '90 days same as cash' might be stretched out to '180 days same as cash' and the distributor would be on the phone a couple of times a week trying to get some payments from his retailers. I good years the distributor would be paid back in less than 30 days.
The system worked very well and many small business got their start and managed to stay in business because they were not paying interest to a vampire squid bank.
I know it worked because I did it. I started with a $1,500 loan and never borrowed another penny. The biz was grossing close to 1/2 million$ a year when I sold it after 8 years...that was a lot of money when a nice home on three prime acres cost $65K.
America was truly a land of opportunity then. Try pulling it off now.
The US is fucked, dude, get over it!
Casting aspersions elsewhere is a bit silly, especially given that the US has pretty much have full control of the earth and near-earth for some time now. How good or bad the Chinese are is really besides the point. But yes, trusting anyone who talks their book is a bit problematic; but then again, the US _IS_ pretty fucked; sometimes the truth just needs to be accepted, even IF it comes from "evil doers."
Gotta love what 40 years of globalization has done for America. Go JPMorgan-Chase and all those great lib-tards!!!!
Forty years of globalization?
Funny.
Lets play the game. I tell: three years of globalization. Globalization only started three years ago.
40 years of globalization, laughable...
I hope you mean Libertarians. Their "No government is good government" stance is what led to the deregulation that has put America into bankruptcy & destroyed our industrial base.
Profit-seeking and robots killed "our" industrial base. It's all as Karl Marx foresaw, though he missed out on the actual fundamentals (as always seems the case with idealogues).
THE key wrong turn was in adopting Hamilton's notion of governance over that of Jefferson. Of course, had Jeffersonianism had its way we'd be doing a lot more farming, something that will happen in due course...
Id like to see what China would like in 30 years if they allowed their citizens the freedoms we possess in America. Id bet they would end up very "western" in many ways.
"I'd bet they would end up very "western" in many ways."
How right you are, look at IRAN( under the Shah).................once the General Populace got a taste of freedom, they are only kept in control by the gun.
Same with China, Once Capitalism WAS unleashed, it's like a virus to the people.
China will (it's leaders), are going to have their hands full.They have unleashed the spirit of Independence, they will NEVER get that Genie back in the bottle.
IF we have 30yrs left,( I think we have less than 15), I am betting China is facing a real problem, with a population of 1.6 Billion, when the 1 Billion see the 600 Million moving up the Food Chain,and their left behind.............there's going to be hell to pay.
A big recurring fact in Chinese history is the awesome power of the Chinese people when they rise up. Every emperor (or dowager empress) was secretly scared shitless by the potential & most dynasties ended with an awesome flood of sheer numbers of human beings. There are now such vast numbers of Chinese citizens that if they rise up you will be able to hear their angry voices in America without radio or TV. I'll bet the Chinese leadership doesn't sleep very well.
And, I'd think that enventually the people will wake up to see the "The American Dream" is a bunch of BS and they'll kick out all the capitalists (fox let into the henhouse) and upend their leaders; once that's done it'll be back to the land, back to farming, just like they've done for centuries... and, here in the US, when people realize that it's all BS, people will do what? run around shooting at each other believing that the "Commies," "socialists," "anarchists," "atheists," "non-'christians'," "left-handers" and all others as a way to blame for their own inability to accept the truth.
Western? Overweight, self-absorbed, and loaded in debt?
I am fine with the Chinese as long as they continue to deliver food to my apartment within 10 minutes. Eat shit Domino's...
http://www.hulu.com/watch/1441/saturday-night-live-trump-promo-shoot
I couldn't resist adding a real life experience related to Chinas "high tech" abilities . My wife didn't like the old outside light fixture at entry to our cottage . So I bought one she liked at LOWES . - of course on the box it stated "Made In China" , so I was assuerd of a quality product . Upon removing old light,( put on house in 1950 ) which was painted black , I found all the metal parts to be solid copper !! Trying to install the new "high tech" light found things that did not line as light was assembled. I had a good laugh , having read comments on this post earlier in the afternoon. If you expatriots think China has an edge on the USA , you are dumber than the idiots who made this light. You are welcome IMHO to stay there with the intellectual giants whom can't even design a light fixture properly. Super power my arse !!! Super tech , my arse !!
OK, then that's the measure, your cheap outdoor light, got it, thanks for the heads-up!
But seriously, I seem to recall American Flag-Wavers yelping about crappy Japanese products back in the day. Will China ever be as quality-oriented as Japan? No, for the simple reason that the world doesn't have enough industrial (growth) days left for it to polish its processes... Oh, and do you really think that anyone, even in the US, is manufacturing affordable copper light fixtures these days? So, there's one advantage to the cheap crap, thieves and desperate recyclers won't be targeting the cheap shit! :-)
Cheap crap comes from a culture of larceny. That takes generations to change.
Mukka Hai my little china apologist.
I hear Rosetta Stone is offering a special discount to Americans on their Chinese language package.
Who do you want guarding the straits of hormuz? How about the panama canal, and the horn of africa? Who is putting .50 cal in the engines of somali pirate ships?
America
I heard somewhere, or possibly read it somewhere, that there were already over $250 Billion worth of SDR printed and ready to go. Possibly more than that now, becuase its been several months ago that I found out about it. They could have trillions printed by now.
Lets see how they handle a Housing bubble 10 x larger than the US. The Chinese CB makes Ben look like a spendthrift. But my Daugther just came back from a month studying their and liked it very much. I'd like to live in the East but not China or Japan. Hawaii. lol
Unlike the US housing bubble, their's is purely internal. I don't believe that China was running around the globe selling pure crap to everyone...
But, yes, it'll be interesting to see what happens. As China tightens up the US will be forced to run the printing presses; and, at that point there'll be no reversing course, it'll be the end of the game for all.
Time to nuke Beijing?
The Chinese aren't stupid - whether you like their political system or not. Of course what they say about the US is true - but since when does the truth matter - at least in the short run?
What I found interesting in the article is the fact that the Chinese understand that they are financing our war of World hegemony - which is definately not in their interest. What do you think that looks like from their point of view? - An extremely undesireable situation I would imagine.
While the Anglo-American economic machine is based on international corporations and their control of national military forces to perpetrate their agenda the Chinese currently have neither. It is (at least for the time being)a relatively weaker position. But I suspect the Chinese, as well as the Russians and others, understand that the Anglo-American establishment's worst nightmare is relative peace and cooperation on the Eurasian land mass. That leaves us here with the Canadian tar sands and some Mexican gardeners. Such a development would be extremely detrimental to Western interests - and extremely favorable to those in Asia.
What do you think the world power game is all about? Those of you reduced to "commie" name calling better get a clue.
p.s. And, oh Augustus, dear. You're getting your buttons pushed. It does appear that Matt Simmons has lost his mind. But what does that have to do with what is really going on in the GOM? Staring at this computer screen doesn't seem to help me figure it out. As the dead lyric goes "Please don't dominate the rap Jack if you've got nuthin' new to say".
Give it a rest - - - - - -
So... Mr. Vain
1. We are not allowed to call a Communist Fascist a Communist Fascist or what ??
2. America, for all her faults, will long survive the removal of Communist Fascist crap from retail shelves. The i-phone, i-pad, etc. are as vital as a wart on your butt. Apple creates 10 times more foreign jobs than American jobs- no pun intended.
3. The only reason China has a currency surplus (almost entirely USD) is her economic bullying of the U.S.and Europe, by dumping Chinese crap through non-existent quality control, and currency manipulation (tiny Tim notwithstanding).
Pull the American and European market out from under China and watch the revolution live from Tianamin Square.
Pal-you should get a clue.
A wee bit touch are we?
Fact: the US is going to collapse. All empires do. This is especially true when one is so over extended such as the US is: an infrastructure built to operate on $20/bbl oil not only operating on $70+/bbl oil, but also having to grow? Yeah, right!
Like I stated earlier, the Chinese are less far removed from the land. Look around at what you see in the US, an obesity level that's around 30% (I'd wager that this is a conservative figure), an aging population, and HUGELY in debt. Yeah, quick, let's cast aspersions elsewhere, that'll make us better!
And pulease, "economic bullying!" That's reall good! The US runs the world's printing presses and manupulates EVERYTHING in site and you have the nerve to blow this BS out your hole?
Seer
Run down to Chinese Wallmart and buy some comforting crap, and hope it lasts long enough to get it home, then get off the China Apologist bandwagon.
The only thing China imports is raw materials and Technology. Their market is closed otherwise. But American Politicians allow free and unfettered access to the U.S. market for all the China Crap that comes into this country.
This beggaring of the U.S.will not last. And China had better work hard inventing the middle class. To date they have done a great job re-inventing Mandarins and Emperors.
Empires do indeed collapse. The Chinese Empire collapsed 2,000 years ago. America is wounded but a long, long way from being finished.
And what, indeed, is the constant Chinese threatening to dump American bonds ? Just a friendly reminder ?
I repeat, without unfettered access to Western markets for Chinese crap, China would not exist.
You do have things reversed.
You introduced open markets to Chinese crap as a kind of courtesy from the US.
It is not.
Read my post above. This comes from an internal pressure which is not related to China. The fact that China is the priviledged recipient is a side effect. An undesired side effect which creates troubles.
You have to reverse the proposition: without China, the US would not exist as they are as China is the enabler of the US keep people together policy.
They are financing our war of World hegemony - but who's to say that isn't in their BEST interest? We've spent a couple of trillion on Afgan. and Iraq - with little to show for it but the debt. They might just be allowing us to grind ourselves down. We've demonstrated our ability to win some world wars, but how's our record at the regional ones? We've shown what it takes to beat our military, and it wears us down. We have vast sums invested in legacy military systems aimed at a Soviet-style war, while they develop the weapons of the next one - cyber-war, missiles, defense systems, etc. How hard will it be to take out an expensive aircraft carrier with a couple of missiles? They're playing the long game, by allowing us to dig our own hole...
They're playing the long game, by allowing us to dig our own hole...
Exactly! Given enough rope... But then again, China's insane growth levels can only lead to calamity. But, unlike the US, the Chinese actually now how to grow food and can return to the land.
There are two types of military ships. Submarines and targets.
3,000+ mph missles flying 15 feet over the ocean for hundreds of miles and exhibiting violent evasive manuvers once picked up by high frequency (line of sight) radar of the target ship. Over the horizon to impact about 12 seconds. Imagine a dozen of these missles approaching the target ship at once. No warheads needed, momentum does the damage.
These super missles can be launched from any platform including subs.
Carriers will have to stand off so far from shore based targets that air refueling will be needed to recover carrier aircraft.
This tactical war game is a lot more complex than most recognize. But, the US Navy Admirals are well aware of the vulnerability of US carriers. Taking a US carrier in harms way into the Persian Gulf or the Tiawan Straits is table stakes poker.
$500 per bbl oil anyone?
And submarines and fast-flying missiles are nothing if not backed by money. The US's penchant for bogus technology in military weaponry (remember the PATRIOT Missile?) is legendary. As history unfolds we'll discover that the US's military prowes was similar to that of the Soviet Union's- lot of bark, but little bite (lots of facade, little building).
And remember this boys and girls: Complex Systems Fail (risk multiplies).
With our current rat bastard leadership, from the top CONgressional/SINate to bottom feeder environmental fungi regulators; jobs will be plentiful for breeders'n feeders! I'd invest in body bags, corpse handling gloves, bio suits, and tents for the cities appearing out of thin air as our dollars!! black plaques cleanup in conjunction with dead head fed goons strong dollar policy will have us spending our way to prosperity until it collapses!!
At Harvard B School back in the late 1970's all we were forced to read in our case studies how Japan was so brilliant because the Japanese government was so clever in running the economy. We were told we must learn Japanese and act as they do, blah, blah, blah. That ended really neat, huh.
There is an arrogance to the Chinese similar to Japan. Right now China maybe where Japan was in say 1965 to 1970. Another 10 or 15 years and let's see what happens. Could this be a Japan type repeat?
The U.S. of course is in terrible financial shape. We will have to wait for the 2012 and 2014 elections to change things and right now that doesn't give me a whole bunch of optimism. We'll fix our mess only when we absolutely have to.
Weird, but I actually agree with your beginning comment. Weird, because you were probably at Harvard B school in the same time frame as Geo. Weasel Bush and fellow neocon, Fred Malek (dog eater extraordinaire).
But don't hold out any hope for the 2012 election. There is a strong movement for a Sarah Palin/Big Bird presidential platform.
Now.....don't underestimate the perfidy and evil of Big Bird! Remember, Big Bird was long affiliated with Sesame Street!
And who was the producer of Sesame Street?
Why, none other than Joan Ganz Cooney, wife of Peter G. Peterson -- longtime familiar (as in witch's familiar) of David Rockefeller.
And what is Peterson's CV?
Commerce secretary under Richard ("I am not a crook") Nixon.
Former head of the Council on Foreign Relations.
Former head of the NY Fed.
Founder of the Peterson (we must privatize everything - especially public education, social security and Medicare) Institute.
Founder of AmericaSpeaks, and similar astroturf firms.
Founder of the Peterson Foundation.
Founder of the Concord (we must privatize everything) Coalition.
Headed the ultra-flaky Peterson Commission.
Hand picked Timothy Geithner to be head of the NY Fed on Peterson's way out of that job.
Director on that Clinton commission to "end welfare as we know it..."
Founder and former CEO and (I believe still) director of the Blackstone Group (that raping and pillaging PE leveraged buyout firm which has destroyed upteen companies, and employment, and conveniently closed refineries to drive up the price of oil, drove the process of privatizing prisons, reduced the tax base in Denmark by an estimated 10% with its LBO of a major telecomm firm there, and perhaps most important of all, discontinued the selling of Schweppes Ginger Beer after it LBO'd Cadbury Schweppes.
(OK, that last item is a personal peeve of mine and may not be so godawful important after all!!!!! But geez, Schweppes made the best ginger beer in existence!!!!!)
So, don't underestimate Big Bird!!!!!
Thanks for your time in reading this riff....
I heard a rumor that one of the parties (to me they are interchangable) was going to run General David Petraeus for pres. Anyone?
Could he be any worse than Palin?
I'd figure that a general would be entirely the thing that the empire needs, esp in its dying days.
What a tangled web we weave when we conspire to decieve...
The question becomes; 'Just who is inside that Big Bird suit?' I have always thought that Big Bird was more trenchant & intelligent than Sarah Palin but overall that person is a cipher. Do we even know if it's a man or woman? The ticket will be much stronger if it's a woman. A double female ticket would clinch the vote of the brainless portion of the fair sex. Just what proof do you have that Big Bird is evil? Is it too late to protect our youth?
It's ben Bernankie inside.
“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards.”
“The Chinese police state is politicised and highly ideological and they do not adhere to objective standards.”
Aw come on David
Do you really mean our own government, our rating agencies, Chinese rating agencies, and the Chinese Communist Fascists lie ?
Darn....
China is at the crossroads that Nazi Germany was at in the early thirties- how to keep the top spinning.... it will end in blood.
Aw come on David
Do you really mean our own government, our rating agencies, Chinese rating agencies, and the Chinese Communist Fascists lie ?
Darn....
China is at the crossroads that Nazi Germany was at in the early thirties- how to keep the top spinning.... it will end in blood.
A few comments:
The terms "Insolvent" and "Faces Bankruptcy", in traditional western accounting, is not properly applied to the US fiat based world reserve money system.
Not Insolvent and Not Facing Bankruptcy;
The FED will simply monetize Treasury debt to pay interest owed and fund government.
The danger is through monetization the currency will be debased to the point of not being accepted, or lose world reserve status.
----------
Most people who understand the US debt position do not trust the rating agencies. To me US health is largely based on state tax payer health. The state's ability to fuel growth and increase federal tax revenue.
Meaning the overall US credit rating should be based on the state's ability to pay federal obligations and fund government expenses.
Mark Beck
Sorry, "insolvent" and "faces bankruptcy" can be perfectly applied to the US :
Insolvent means its assets are worth less than its liabilties. If you calculate the value of all US assets (stocks, Real Estate, etc... approx $ 70 trillion) and all its liabilities (private, public and unfunded.. approx $ 100 trillion) you can see that it is insolvent.
Faces bankruptcy means it will not be able to finance its needs in its current currency, whatever the conditions. Monetizing its debt isn't that "simple", if it were, why doesn't it monetize all of it?
As you said, if they did too much, or even gave the impression that this will be its only solution to finance its needs in the future, the currency would become worthless and not become accepted anymore : that's what happens when a country becomes bankrupt : it can't find anybody willing to finance its needs in its current currency whatever the conditions. Then it would have no other choice than to introduce a new currency, backed by a portfolio of hard assest it owns and agree new terms with its creditors, restructure its debt based on its new currency.
Of course, if this were to happen, the rest of the world would become bankrupt too. So we'd end up with a whole shitload of new reserve currencies backed by hard assets and a mega restructuring of worldwde debts of a magnitude never seen before. Remark : that kind of activity generally requires governments with a lot of muscle, meaning totalitaran governments with lots of soldiers and police to try to maintan order in an extremely insecure world... not a nice prospect!
In response;
The problem in your comparison is we are not talking about obligations stated in assets or stated in liabilities. US marketable debt (Treasuries) are priced in fiat dollars. Nothing really to do with assets that the country owns, or better stated, assets the government owns and can liquidate and exchange in trade to settle the debt. It is far easier to just inflate (Monetize) US debt and pay with inflated USDs.
If by way of action the currency is debased to the point of not being accepted, the US government will simply default.
----------
The key phrase we hear all the time;
Treasury securities are safe and secure, backed by the full faith and credit of the United States government.
Well what does this mean?
A US government debt obligation is backed by the credit and taxing power of the US government.
Some might say that our credit is very poor based on not protecting the USD through effective monetary and fiscal policies.
So what we are left with is the ability to tax. But as we know, expenditures out pace revenue by almost 2 to 1, so the US debt obligation is being debased the moment you buy it. There is no reason to have faith.
My point is that there is noting really backing the USD, to demand in its exchange. Fundementally, there is no obligation other than the ability to tax. Which we know does nothing to protect the currency.
----------
The US will never be insolvent while the currency is still accepted. From a cash flow standpoint the Treasury will always be able to pay its obligations in USD, backed up by the FEDs ability to monetize debt.
Also, the accrual approach as you presented for unfunded liabilities, assumes that we will pay our obligations. Obviously, we will never have the money in real worth dollars to pay these benefits. The answer is simple, benefits will be reduced. Either through direct cuts, or inflation (money creation).
A debt that can't be paid won't be paid.
----------
But enough about me.
Lets assume you are right and your analysis correct.
If so, why are we not seeing countries like China sell vast amounts of US denominated debt on the open market?
Why do we see low Treasury 10Y rates, and generous Bid-to-Cover at auctions?
Mark Beck
The US taxpayers are irrelevant on the picture.
As stated by the article, ultimately, that is the US military.
Crisis have this bad they force people at the top to admit evidences. 10 years ago, no one would have outlined the ultimate importance of the US army, prefering to cast in goofs like hard work, innovation.
The situation is clear: the US can emit USD as long as the new emissions meet real wealth in the world.
Pumping USD is pumping resources out of the Earth.
Two limits to the scheme: -countries that give value to the USD by yielding their commodities against USD reject the US currency, because it is damaging to them. Wont happen because of the US military which warrants that the fleeced out stay in the nets.
-Countries that give value to the USD can no longer extract fast enough and large enough to keep the pace with the US emission rate. Will happen but not tomorrow.
China and others buying treasury and such is easy to understand: the USD is the key entry to world commodity market hold under the US military network.
No USD, no commodities. USD has only one manufacturer: the US.
China is Very Smart...
They don't want paper funny money...
Give them somthing tangable..
The USS Abraham Lincoln ( CVN 72 ) Super Carrier
The USS Halsey ( DDG97 ) Destroyer
The USS Hartfore ( SSN 768 ) Submarine
Give them some land in Oregon ( 400,000. acres )
This stuff is better than Fiat Paper hands down..
Yeah, it's great for collapsing an economy...