The United States is beholden to China, financially. The dirty secret is that our government keeps overspending by selling debt to China. But most people don't know about it. Perhaps we can't stand the truth!
Too many of our leaders would rather pull the wool over our eyes than try to fix the really big problems that threaten the future of the United States.
Bill Bonner explains "Why an Empire that Borrows from its Rivals is Doomed to Fail" at the Daily Reckoning. Excerpts below.
We’re still Number One, right?
Yes…in the sense that we can, in theory, kick any butt in the world. That is, if the Chinese let us. They’ve got so much of our money and so many of our bonds, if they decided to dump them, we’d be in one helluva fix. Because we don’t pay enough in taxes to fund our social programs and the Pentagon at the same time. We can’t afford it. So the nice Chinese lend us money.
But don’t worry. They’ve promised not to dump our bonds. And we’re sure they’ll honor that promise for as long as they want to.
As far as we know, no empire that had to borrow money from its rivals has ever lasted very long. Britain got itself in that position in WWI. It could no longer afford the carrying costs of the empire – including the huge cost of the war itself. So, it borrowed from the US.
Under the weight of growing social welfare programs and a shrinking empire, Britain’s economy sagged. Its old allies – France and the US – boomed in the post-war years. So did its old enemies – Japan and Germany. Soon, not only were its friends richer and more powerful…so were its adversaries.
Is that what we have to look forward to in America…a post-imperial decline, where our standard of living stagnates…our economy limps…and our place in the world frays and crumbles?
Yes. Most likely.
Why? Because the government is taking a larger and larger role in the economy. Because US social programs are too costly. Because we don’t have enough money to pay for them. Because not enough money has been invested in productive business. Because our military burden is too heavy…and difficult to escape. Because we have no savings. Because we will likely spend the next 10 years paying down private debt. Because the rest of the world is racing ahead. Because we are growing older. Because our leaders are corrupt and incompetent. And because the whole society becomes more zombified every day.