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How Foreign Nations Now Pay For All Of America's Defense And Education - U.s.

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http://www.businessinsider.com/us-debt-disaster-2010-7

Here's an ugly dose of perspective. America is so dependent on foreign financing for its budget, that things like defense, homeland security, education, and unemployment benefits are pretty much funded by foreign nations such as China.

Why?

According to former Republican senator and committee co-chairman Alan Simpson, federal revenue is, already, completely chewed up by the three nasties: Social Security, Medicare, and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries."

Foreigner creditors truly hold America by the neck these days. They effectively finance everything beyond the three programs above.

Worse yet, even strong GDP growth wouldn't be enough to save the U.S. from its debt proglem. Committee co-chairman and former Clinton chief of staff Erskine Bowles estimates, "We can't grow our way out of this. We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

The other reality is that we won't get double digit GDP growth. So the cuts will need to be deep.

Still I'm sure it's all contained....

So China is financing the American war machine. I wonder what happens when they ask for the cash back, will they get the Carriers?

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So China is financing the American war machine. I wonder what happens when they ask for the cash back, will they get the Carriers?

They're more likely to get another revolution.

In the last revolution, the successor government repudiated its predecessor's debts.

In the coming revolution, the successor government will have to forgive its predecessor's loans.

Edited by huw

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Unfortunately I can't find the original paper but the timeline in this article makes interesting reading (written in 2005!):

http://info.hktdc.com/econforum/hkma/hkma050101.htm

Last month I came across an interesting research paper by an investment bank on the outlook for the US dollar. The paper includes some interesting philosophical reflections on the sustainability of a currency as the world's reserve currency. The paper gives a brief account of the long history of reserve currencies and draws attention to the interesting phenomenon that, as in the case of the position of a country being the superpower of the world, it seems to be a "natural cycle" of around 100 years long. This has held true ever since the middle of the fifteenth century, with the Portuguese supremacy spanning about 1450-1530 to the Spanish (1530-1640), the Dutch (1640-1720), the French (1720-1815), the British (1815-1920) and the US from then.

Both the UK in the 19th century and the US in most of the 20th century were big net creditors.

In both cases this put them at the heart of the world's trade system, which did two things:

1. Made their currency the reserve, which gave them cheap borrowing rates.

2. Gave them a big interest in defending trade routes throughout the world.

So you get a cycle of:

New nation, active economy, low defence spending, lots of saving and investment

Steps into shoes of previous bloated empire

Expands rapidly based on worldwide trade

After fifty years or so gets complacent with rising costs defending empire

Starts borrowing big time

Fights big wars to defend position (UK; Boer/1st/2nd, US; Vietnam/Iraq/Afghanistan/Iraq)

Suddenly has cash crisis and has to retrench big time

Hands on to next new empire builder.

etc

I would be interested to see if the same pattern was present in the previous cycles.

off to brush up on my mandarin now

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What the former senator is NOT telling us is that Social Security and Medicare have been "pay as you go" and have run surpluses since the day of their creation. They were never meant to be "on budget" , but to be self sustaining from the taxes drawn from workers paychecks for SS and Medicare and from the Trust fund interest payments.

So why does the US government now claim these programs are a burden? Well, because all the trust fund money was stolen and replaced with US treasury debt. That debt is now due for paying out as benefits, but there is nothing there but US treasuries. The government must pay back those treasuries as SS and Medicare cash them in. Thus government must come up with the cash.

Lets be clear, all the money was stolen, these programs are hundreds of billions in surplus, but the surplus paid for Vietnam war and the cold war build up, tax cuts for the rich, Iraq war etc. etc.

To claim that these programs are a burden is a LIE. The burden has been placed on the tax payer who paid in big SS and medicare taxes their whole working lives, only to find the money looted. It's a crime, but no one will be punished except the little people who paid the taxes to fund these programs and did fund them including huge surpluses. Which are now nothing but US treasury debt.

Edited by hallander3

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They can't grow their way out

They can't tax their way out

Even slashing spending is unlikely to work

Anyone got their money on default?

They'll simply print their way out. As long as the Dollar is the global reserve currency, the petro-currency, the gold currency and the general commodity currency they have a massive advantage and can get away with a lot more printing than any other country.

Of course the danger is that if they overdo it, the dollar may not retain its special status as listed above so they need to be clever going about it.

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What the former senator is NOT telling us is that Social Security and Medicare have been "pay as you go" and have run surpluses since the day of their creation. They were never meant to be "on budget" , but to be self sustaining from the taxes drawn from workers paychecks for SS and Medicare and from the Trust fund interest payments.

So why does the US government now claim these programs are a burden? Well, because all the trust fund money was stolen and replaced with US treasury debt. That debt is now due for paying out as benefits, but there is nothing there but US treasuries. The government must pay back those treasuries as SS and Medicare cash them in. Thus government must come up with the cash.

Lets be clear, all the money was stolen, these programs are hundreds of billions in surplus, but the surplus paid for Vietnam war and the cold war build up, tax cuts for the rich, Iraq war etc. etc.

To claim that these programs are a burden is a LIE. The burden has been placed on the tax payer who paid in big SS and medicare taxes their whole working lives, only to find the money looted. It's a crime, but no one will be punished except the little people who paid the taxes to fund these programs and did fund them including huge surpluses. Which are now nothing but US treasury debt.

Any links for this.

If this is the case I'm surprised there hasn't been uproar amongst the populace.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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