China dumped some of its U.S. treasury bonds late last year so now it only holds about 21 percent of the foreign investment in the U.S. National debt. Its holdings are now only about $755 Billion. I feel better.
Well, I did until the Chinese military, in retaliation for the U.S. selling arms to Taiwan, suggested that their government dump enough bonds to drive down the market forcing the United States to offer higher interest rates in order to raise more money to continue spending like the rich country we used to be when we didn’t spend like we do now. This would have been extremely detrimental to our economy, indeed the world economy, and it still hangs over us. We’ve given China the strings to manipulate us, with no end in sight of the borrowing and spending. And, of course, that’s just a small part of the national debt.
There are, in fact, not enough American dollars in existence to pay off our national debt. Some suggest that we simply print the dollars needed to service the debt, but it doesn’t take an economic genius to figure out that just printing more currency will make the value of the currency shrink. That’s what Germany did in the 1920s leading to inflation beyond comprehension. (Imagine having the price of a cup of coffee go from 5,000 deutschmarks when ordered to 8,000 during the time taken to drink it). We experimented with cranking up the printing presses in the 1970s to help pay for the Viet Nam war and President Johnson's "Great Society" and suffered annual inflation of around 10 - 12% for several years. Prices of everything approximately doubled during the decade. It was nothing like the German experience, but was pretty devastating to the well being of many Americans, especially retired Americans, and to the economy in general.
Just like the U.S., Greece spends too much money on a vast variety of social entitlement programs. Today worldwide loss of confidence in Greece’ ability to pay the interest on its debt has Greece on the verge of announcing bankruptcy. The triggering point in this loss of confidence was having the Greek national debt become greater than Greek Gross Domestic Product – or total economic output for the year. In 2009 America’s GDP was $13.9 Trillion, today our debt stands at $12.5 Trillion and increases by about $4 Billion per day. Estimates are that our GDP will be up a Trillion this year, but even at that it will take less than two years for our debt to outgrow our yearly gross. The investment world might give the United States some leeway simply because we are The United States, but not for long.
These numbers do not include the massive debt we owe ourselves in the form of Social Security, Medicare and other entitlement obligations. Throw those obligations in and our debt skyrockets to around $65 Trillion, but our government hopes against all mathematical models that we’ll be able to pay for them as we go by taxes to be paid by those coming along, including the unborn. It’s kind of like a massive Ponzi scheme that will never run out of victims, but will also not have enough future victims to keep it going.
Fortunately I have a solution. I’ll simplify the explanation by focusing only the debt owed to China. We simply negotiate a settlement with China that does not involve dollars. We give China something else that has value equal to or greater than $755 Billion in return for her bonds and maybe some additional dollars to boot. So it’s simply a matter of coming up with something that China would want…
I’m thinking Yosemite.
Yes, the park. If maybe 80 percent of Yosemite Valley were turned into a giant industrial park making products for the American market (think of the savings in shipping costs), it would be worth at least $10 Billion. The beautiful Ahwahnee hotel could be temporary housing for visiting Chinese officials and diplomats. The less elegant hotels could house middle management personnel. The rest of the valley could become prime high rise housing, shopping malls and other infrastructure required by a large city. This potential should add another Billion or so to the value. But then there’s the rest of the park, some 1200 square miles – over 7.5 million acres. I don’t know how much of this land is suitable for development, but let’s say 50% or about 15 million nice sized buildable lots, though worth maybe only $75K each in today’s depressed real estate market. This adds up to $1.1Trillion. Then there’s the prestige value; the Chinese government would simple love to own their own little piece of the United States, and what a nice piece this is! I’m certain that the United State could negotiate forgiveness of the debt owed to China plus receive enough additional dollars to balance the national budget for a year or two.
Of course China would insist on autonomous control over their new property. It would not be Chinese owned property within the United States, but rather a little piece of China free of American laws and regulations. They would not, for instance, want to be hindered by the EPA in their endeavors to improve their property. The skies over Yosemite Valley would become much like those over Shanghai and Beijing and the Merced River would have to be contained and cleaned before continuing to the San Joaquin. This would have the added benefit of providing jobs for many Californians.
All in all a pretty good deal for America in general. A relatively small percentage of Americans ever have or ever plan to visit Yosemite. They wouldn’t miss it, and those few that would have to see the greater good in this transaction which would seriously help the economic situation of the United States and allow us to continue our entitlement binge including bail outs of Wall Street, Main Street, and Maple Street.
Then Yellowstone with all of its geothermal potential and prestige should be good to retire the debts to both Japan and Saudi Arabia, with some oil reserves to boot.
After that we should be OK to continue uncontrolled spending for several years, which is longer term than any politician thinks these days. Then of course there are other national parks and reserves. Then maybe negotiate a deal on Hawaii or Rhode Island.
No comments:
Post a Comment