We Owe as "Off to Work We Go"

That is if we are able to get a job. Or retirees forced to go back seeking work. Why? Read on.

"The World's Dollar Drug", by Zachary Karbell, author of 'Superfusion: How China and America became one economy', writing in the WSJ today says:

"Over the past decade, the relative position of the U.S. has shifted. It is no longer a creditor to the world, but rather a large debtor to the world. It is a net importer of manufactured goods--though its manufacturing sector remains quite large even while employing fewer workers. Its national economy is the world's largest but it is surpassed by the multinational euro-zone. And China's economy, while still perhaps not much more than a third of the U.S., is growing three to four times as rapidly and accumulating dollars at a torrid clip. Yet the dollar remains the linchpin of the global system.

Because most of the world's trade is conducted in dollars, especially Chinese trade, so governments and institutions throughout the world have little choice but to invest in U.S. assets. The U.S. government has the ability (the Fed) to print that global reserve currency when dire straits demand it. That gives the U.S. considerable latitude to spend its way out of a crisis without confronting real structural changes.

China's peg to the U.S. dollar is currently propping up an otherwise shaky American economy. The Chinese have become the ultimate offshore bank for American capital, and there is no evidence that they deploy it to less American benefit than Americans themselves do.

The U.S. has been able to forestall deep reforms because it has the dollar. But, the U.S. government uses its dollars--ant the ability to print more and borrow them---poorly. Large amounts of debt fund consumption of goods and health care. While today's needs are important, without sufficient investment these dollars will dissipate. You lend someone dollars to open a business or invent but not to go out for dinner and a movie.

By getting the dollars we want we forestall a greater fiscal crisis in the U. S. while allowing for gradual decay of the our economy. This can go on for many years (it has) because the world needs a reserve currency to reduce costs and allow market players to asses value across different countries and economies. But that need for the U.S. dollar shouldn't be confused for American strength.

The ubiquity of the dollar allows Americans to believe that their country will automatically retain its rightful place as global economic leader. That's a dangerous dream, an economic opiate from which we would do well to wean ourselves."

This dangerous dream is one I have been talking about ever since I started blogging. We are investing stimulus, subsidies, grants, entitlements dollars, etc., in what I call the "soft" economy, the one that does not produce a PRODUCT that can be sold to generate profits. Private sector companies like Caterpillar and Keystone produce a product they can sell at a profit so they can pay a living wage to their employees and pay taxes to support ESSENTIAL government.

While spending on "circuses", welfare, health and environment are good, there eventually are only so many dollars to spend. The heavy spending atmosphere we have created does not lend itself to the expansion of product creation. We tend to import what we could manufacture ourselves. In so many cases like here in Peoria, our priorities are askew. The reasons why are obvious and consequences are becming more obvious. Not enough dollars to finish what we start and too many dollars spent on non-priority projects that seemingly all have to be new or expanded.

There are not enough tax dollars or private donors willing to commit to everything being done in the public sector. A reminder again, public entities do not contribute much in the way of taxable profits. On the horizon, I see a continuing rise in taxes and more welfare, if we do not sort out our priorities better than we are doing. On all levels, local, state and national.

As I watch gold in in it's spectacular rise, I agree with my friend Steve that gold may be a better investment than the market. Eventually, land and property will return to some of its past investment values, but overall, not now.

Steve, please send me your email address so I can repond to you as I do not use the tube.