Friday, March 13, 2009

China Could Destroy the US

I'm a little surprised it took this long to come out, but from the headline China Worried about US Treasury Holdings,

China's premier didn't say it in so many words, but the implied warning to Washington was blunt: Don't devalue the dollar through reckless spending.

"Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried," Wen said at a news conference Friday after the closing of China's annual legislative session. "I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

China has lent more money to Washington than any other lender, with loans totaling an estimated $1,000,000,000,000 (that's a trillion). Right now the dollar is relatively strong, as people are buying treasuries since they are considered to be the safest of all investments. The strength of the dollar is keeping inflation at bay.

So what would happen if China were to begin a concentrated effort to sell their treasuries? This could begin a wave of mass selling of treasuries at their current high price in order to lock in profits. This selling would have a couple effects. First, the price of treasuries would fall, which would make it more expensive for the government to borrow money, and would induce further selling of treasuries. Second, as foreign entities cash in their treasuries, they would want to convert dollars into another currency. This selling of the dollar would weaken the currency. The entire problem could become a downward spiral that would lead to a large devaluation of the dollar, which in turn would lead to an inflation problem.

As was stated in the paragraphs above, China could decide that holding treasuries is too risky for their liking and begin selling. Another reason China may begin selling is discussed further along in the article,

Wen expressed confidence the world's third-largest economy can meet its official growth target of 8 percent this year and emerge from the crisis "at an early date." But he said Beijing is ready to expand its 4 trillion yuan ($586 billion) stimulus if needed.

"We already have our plans ready to tackle even more difficult times, and to do that we have reserved adequate ammunition," he said. "That means that at any time we can introduce new stimulus policies."

Communist leaders worry about rising job losses and possible unrest amid a trade slump that saw Chinese exports fall 25.7 percent in February from a year earlier. They have promised to spend heavily to create jobs and boost exports.

In other words, China could decide that their money is better suited by spending within their own economy rather than collecting a minuscule amount of interest from the US Government.

The decisions China makes regarding the US debt that they hold could be the deciding factor for the direction the finances of the US take. This is something to watch and be wary of.

Questioning Politics

Thursday, March 12, 2009

"Alternative" Political Parties

The following is an excerpt from the Monday Message mass email from the Libertarian Party dated February 23, 2009. My hope is that someday the general population will realize that there is a political party that more closely follows their own viewpoints than do the Republican and Democratic parties. We have a choice that extends beyond those two overly powerful parties. Learn about these "alternative" parties and make a more informed choice.

Backed by a growing swing vote that decides elections and support for its economic plans, the Libertarian Party is not an “alternative” political party. “Alternative” implies something outside the mainstream or an unconventional choice. The Libertarian Party, with its sensible balance of fiscal responsibility and social moderation, is, in fact, the nation’s only mainstream political party.In a nation where a vast swath of the electorate define themselves as generally fiscally conservative and socially liberal, it is the Democrat, Republican, Constitution and Green parties that find themselves isolated on the extreme left and right. Not only are these the voters who decide elections, poll after poll finds these voters generally agree more with the Libertarian Party than any other.

In their 2006 study of the American electorate, The Libertarian Vote, Cato Institute scholars David Boaz and David Kirby find between ten and twenty percent of the electorate is generally fiscally conservative and socially liberal – in other words, libertarian. A 2006 Gallup Governance Survey puts the “libertarian” vote at 21 percent, tied with the “liberal” vote and behind only the “conservative” vote at 25 percent.

That growing libertarian vote is getting close to the same percentage as those describing themselves and liberal or conservative and large enough to assemble a
winning coalition in election races. Many of the “unaffiliated” or “non-ideological” voters agree more with libertarians than with conservatives or liberals.

Much of the blame lies with ballot access laws placing an intolerable burden on citizens who wish to vote for something other than Republicans or Democrats. The Libertarian Party is hard at work in state legislatures across the country changing those laws.

Those same polls show majorities support the libertarian solution of reducing the size and government and expanding regulatory and tax relief for employers. They know it does more to create jobs and renew faith in the economy than spending $30 million on the “salt marsh mouse,” as Democrats propose, or spending $700 billion bailing out unsuccessful businesses and trillions more expanding government, as the past big-spending Republican administration and Congress did.

I am a registered Libertarian. I am strongly fiscally conservative. I am only moderate on social issues. If I were not a Libertarian, I would most likely be a Constitutionalist. For those of you who are both fiscally and socially conservative, I would strongly suggest checking that party out.

The point don't have to settle for the lesser of two evils.

Questioning Politics

Wednesday, March 11, 2009

Thomas Jefferson Said It Best

The following are some interesting quotes attributed to Thomas Jefferson, from BrainyQuote:

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

My reading of history convinces me that most bad government results from too much government.

No free man shall ever be debarred the use of arms.

The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Questioning Politics

Tuesday, March 10, 2009

Intervention Required

The Senate has passed a new spending bill in the amount of $410 billion. President Obama is expected to sign the bill immediately.

I know promises really have no place in politics, but you will recall that one of Obama's primary campaign promises had to do with eliminating earmarks, pork, and wasteful spending.

The omnibus spending bill includes more than 8,000 congressional "earmarks," which total almost $8 billion. The earmarks have caused critics to question President Barack Obama's pledge to end wasteful spending, but Obama administration officials say the bill is a holdover from the previous Congress.
I guess Obama is taking a free pass on this first budget of his? And, not surprisingly, the Republicans are having just as much fun on this spending spree as any of the Democrats.

Many groups, including the Libertarian Party, and requesting (as a hopeless formality, I'm sure) that Obama veto the bill.

America’s third largest party urged President Barack Obama Tuesday to live up to his promise to “end politics as usual in Washington” and veto a $410 billion spending bill. The legislation includes 8,570 earmarks totaling $7.7 billion, a practice Obama pledged to end as part of his pitch to voters during the 2008 election.

“Republicans already broke their weeks-old promise to stand for fiscal responsibility by fighting to have their fair share of earmarks included in the bill,” said Libertarian National Committee Communications Director Donny Ferguson. “Will Obama keep his promise to end earmarks by vetoing this bill, or will this be the latest in a long string of broken Obama promises? Is Barack Obama a man of his word, or just another politician?”

The White House has indicated Obama will sign the bill, despite his earlier promises to oppose earmarking.

“Republicans are banding together to grab taxpayer cash and Obama is ignoring his own pledge to stop the practice. With Republicans and Democrats working together to continue wasteful spending it’s abundantly clear the Libertarian Party is the only party agreeing with the American people that earmarks must be abolished,” said

Passing large spending bills is acting like a drug for our government (GOP & Dems alike). They are getting such a rush from finding "new and improved" ways of spending our money. But the system is growing immune to the rush, so each new spending program is going to have to be more monumental than the last in order to get the same rush. Our government is on a downward spiral. It's time for intervention!!

Questioning Politics

Monday, March 9, 2009

What Went Wrong with AIG?

The following was originally posted by John Carney on The Business Insider. This analogy explains in simple to understand language what happened to AIG to make it such a drain on taxpayer money. Enjoy.

Still confused about how AIG lost its shirt by going into the securities lending business big time? We understand. It's terribly complex and full of words that make your eyes glaze over.

So we decided to break it down into the simplest terms Wall Street transactions can be explained: the two cows story.

You have two cows.

John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral.

You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John's $10 to make up the rest.

You brag to everyone about your financial health. You have assets--two cows you own, plus one Paulson owes you--worth $300, and liabilities of just $100.

A third of the country goes vegetarian.

You thought your two cows were worth $200 and now they are worth $140.

You express confidence in your financial health. Your assets are now worth only $200--your two cows plus the one John owes you--but your liabilities are still only $100. If necessary, you could sell the assets at this distressed price and pay off all your loans.

You hold onto your cows because you are sure the market is "dislocated." Some day someone will want to eat beef again.

The rest of the country goes vegetarian. Your two cows are now worth $2 each to guys who want to make dog food.

John Paulson buys a cow in the market for $2 and he gives it to you as repayment of the loan. You now have three cows worth six bucks.

John wants his $10 back.

The bank calls. It wants its $90 back.

You call the Federal Reserve and ask for a bailout.

Questioning Politics