Friday, February 19, 2010

Ballooning Federal Foreign Debt

Lech Walesa is worrying about American declining influence. I quote him, "The world has no leadership. The U.S. was the last resort and hope for all the nations. Today, we have lost that hope." And less hope today if you listened to President Obama make another of his rambling speeches filled with dozens of promises of CHANGE while blaming it all on the "folks across the aisle" while the stock market dropped as he spole. (I believe he sounds more and more like those "leaders" from Venezuela and Cuba)

One reason for former president of Poland, Lech Walesa worry? As a starter, China holds approximately $755 billion in U.S. Treasurys-one fifth of the total held by foreign nations. China is now the largest creditor nation to the U.S.
"Just imagine if China buys less of the Treasury bonds or stops buying Treasury bonds for a couple of months," says noted Victor Gao, a former top official in the Chinese ministry, In fact, they may have already begun to do so.

To lose confidence in U.S. capital markets is to lose faith in democratic capitalism. We are the nation most trusted around the world to champion free markets and free people standing up for the principle and coming to the aid of beleaguered allies is part of the American creed.

To remain a global leader, we must ensure our own financial; viability going forward. The volatility that continue to plague our markets reflect an existential sense of insecurity arising from the nation's precarious fiscal outlook. We simply have too man bills and not enough growth (what growth?), to generate needed revenues.

Unless we radically cut entitlement and non-priority type spending, take dramatic steps to increase growth, and quit monetizing budget shortfalls as if they didn't matter and start paying back the federal debt; 46% owed to foreign countries, we will not be able to overcome the timidity that comes from being reliant on the kindness of others. (Obama feels his meeting with the Dalai Lama is a step in the right direction but most likely not) and the weapon sale to Taiwan, would Obama really come to the aid of Taiwan if China decided to take it back to the homeland? How and with what resources? Money borrowed from China?

Most of the Tea Party people have it right. I believe they believe that democracy relies on the wisdom of its citizens to select representatives who share their values and aspirations. I believe the voter is losing the wisdom to select the right voter partially because those who lead the political parties put up the ones who they think can get elected, not the ones who would do the best job.

And no, I like Sarah but would not support her for the position of President of the United States of America, unless, of course, she was running against our current president, vice president or an of his cabinet.

Some of this material used in this blog comes from Judy Shelton, a senior fellow at the Atlas Economic Research Foundation.

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