Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Uncle Sam Borrows, China Invests

Politics / US Politics Apr 26, 2011 - 10:23 AM GMT

By: LewRockwell

Politics

Best Financial Markets Analysis ArticleEric Margolis writes: Once, while driving in rural Virginia, I saw a billboard that proclaimed, "Jesus Saves." Some wag had scrawled across the bottom, "But Moses invests."

Today, change that to "the US borrows while China lends."


As my friend and veteran columnist Arnaud de Borchgrave writes, while the US has wasted $1.5 trillion on its Afghan and Iraq Wars, China is busy winning friends and customers and buying companies around the world.

The Economist magazine just estimated that China’s total foreign exchange holdings now exceed $3 trillion. That’s more than enough, says the Economist, to buy the Pentagon and all its arms, or all of America’s farm land – and still have lots of change left over.

China accumulated this cash horde two ways: by exporting low cost goods and earning interest on the $1.1 trillion it has lent to the US government.

The US financial crisis is picking up speed. As the once mighty US dollar continues to sink, gold just hit $1,513 an ounce. World financial markets and investors are taking fright.

A leading credit rating agency just warned the US AAA credit rating might be downgraded. How the mighty have fallen.

While Rome was burning, President Obama and the Republican-controlled US Congress traded childish taunts and bromides, or fulminated against wicked Col. Gaddafi. Both parties refused to tell Americans the painful truth: their government’s yawning $1.4 trillion US budget deficit must be slashed to prevent a financial meltdown. That would mean pain for everyone.

But the two political parties are deadlocked: Obama’s Democrats want to raise taxes. Republicans demand tax cuts and want to cut health, education and welfare, all three sacred cows to the Democrats. The GOP urges increasing military spending at a time when 40 million Americans use government food stamps.

This fatuous debate mostly ignores the 800-lb gorilla in the room: America’s bloated $750-900 billion annual military spending. Some experts put total annual US military and intelligence spending at $1.2 trillion.

Few American politicians, the courageous Rep. Ron Paul excepted, dare suggest seriously trimming the Pentagon’s runaway spending.

The US National Priorities Project estimates that in 2011, out of one dollar of US federal spending, 27.4% is military; 21.5% health; 13.8% interest on the debt; 10.9% social security; benefits; 3.5% education; and 23% on everything else. The US spends $450 billion annually to finance its ever-growing deficits. Some estimates say that $.40 cents of every dollar Washington spends must be borrowed, mostly from China and Japan.

In 2010, US military spending exceeded by 50% the average spent in the Cold War years when America had a serious rival in the Soviet Union. Since 2000, US military spending has grown by 67% (all figures adjusted for inflation). Yet today America has no real military rival.

The US now accounts for almost half of total world military spending. Add America’s wealthy allies in Europe and Asia, and the total rises to 80%.

And yet Americans are incessantly barraged by wild claims their nation is under dire threat, the latest and most preposterous being that dirt-poor Myanmar (former Burma) is getting nuclear weapons. China, with a military budget only 1/10th the size of America’s, is the only future threat the Republicans can come up with.

It’s too bad most Americans think of "defense" spending rather than calling it "military spending." This gives the totally mistaken impression America’s shores are somehow being threatened by enemy invasion.

In reality, the Pentagon’s vast budget sustains US world military domination, with over 100 overseas bases, air and naval fleets, two wars, numerous smaller "police actions" in Africa and Asia, rented allies, and a strategic nuclear arsenal at least 75% larger than possibly needed.

President George W. Bush started two wars, cut taxes, and spent billions in farm and medical subsidies - without funding these expenditures through tax increases or spending cuts. These costs were simply loaded on to America’s huge debt – our maxed out national credit card.

If American taxpayers had to actually pay through taxes for the so far $1.6 trillion wars in Afghanistan and Iraq, these conflicts would quickly be ended.

President Lyndon Johnson also financed the Vietnam War through debt. The result: a worldwide wave of inflation that took a decade to overcome. The same thing is happening today thanks to the profligate George Bush who doubled US government spending.

The US has been exporting inflation around the globe by debauching the dollar and massive borrowing to finance its deficits.

Bush and now Obama’s unpaid-for wars, recklessly low US interest rates, flooding the US economy with cash, commodity speculation, and China’s overheated economy are fueling the rising tide of world inflation.

A few politicians have recently had the temerity to gently suggest modest cuts in military spending. But they are terrified of being accused of the ultimate sin in hyperpatriotic US politics, being "soft on defense" and "not supporting our boys."

Yet unless the Pentagon’s budget is cut – perhaps by as much as half or more – the US, dangerously top-heavy with debt, may capsize.

Runaway military spending is undermining, not reinforcing, US national security. History amply shows that more empires were done in by poor finances and debt than invasion by enemies.

Alas, America’s governing system, dominated as it is by powerful, self-enriching special interests and advocates of empire can’t seem to escape from our nation’s addiction to war and debt.

Eric Margolis [send him mail] is contributing foreign editor for Sun National Media Canada. He is the author of War at the Top of the World and the new book, American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World. See his website.

Copyright © 2011 Eric Margolis

http://www.lewrockwell.com

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in