T Nation

Who's Fault?

America’s No. 1 Export: Debt
By Justin Fox

Japan and Germany make cars. Saudi Arabia pumps oil. China supplies the world with socks and toys and flat-screen TVs. What does the United States produce? Lots of stuff, but in recent years this country’s No. 1 export–by far–has been debt.

When you look at things this way, it becomes clearer what the frenzy in New York City and Washington is all about. There are major quality issues with our nation’s flagship product. The authorities have acknowledged the problem–“This is a humbling, humbling time for the United States of America” is how Treasury Secretary Hank Paulson put it in one TV interview. So now Paulson & Co. are recalling defective financial products en masse, slapping GUARANTEED BY THE U.S. GOVERNMENT labels on some of them and replacing others outright with U.S. treasuries.

It’s textbook crisis management, similar to Johnson & Johnson’s famously forthright and successful reaction to the Tylenol tampering scare of 1982. So far, so good. But while Johnson & Johnson was soon able to restore Tylenol’s lost market share, the U.S. faces a different challenge.

Our quandary is that we are apparently not capable of safely manufacturing $700 billion in debt securities to sell to foreigners every year, as we’ve been doing since 2005. (That this is the same total as Treasury’s bailout plan is just a coincidence.) If we keep trying to borrow that much from overseas–as you’ve probably gathered, selling debt means borrowing money–today’s quality problems may soon seem petty. For now, we can still reassure buyers around the world by slapping that GUARANTEED label on our debt. But as financial crisis and economic slowdown cause government debts to burgeon, and as commitments to Social Security and Medicare loom closer as baby boomers retire, that confidence could easily fade.

So while today’s crisis management makes a certain amount of sense, returning to the borrow-and-spend status quo afterward seems like a disastrous idea. If the U.S. is to have a future as an economic power, its long love affair with borrowed money has to end. Right? “I hesitate to say yes, because people–including me–have been saying that it had to come to an end now for years, and it hasn’t,” says R. Taggart Murphy, an expert on global capital flows who teaches at the University of Tsukuba’s business school in Tokyo. Then he adds, “It looks pretty clearly like we’re in the endgame right now.”

This country’s move into big-time debt exports began with the big-time government deficits of the early 1980s–which had to be financed by somebody. “The Reagan Revolution was essentially an experiment in seeing how much money America could borrow from overseas,” says Murphy, who at the time was an investment banker in Tokyo. The answer was lots. Guided by Murphy and his ilk, Japan snapped up U.S. treasuries and other debt, keeping interest rates here from exploding as many had feared.

In the early 1990s, as the U.S. got its fiscal house in order, the capital inflows from overseas shrank. Late in the decade, they returned, with a twist: foreign investors and companies were buying into corporate America to get in on an economic boom. That boom ended in 2001. But the Bush Administration soon began running deficits, and foreigners discovered an American financial product to which they’d never paid much heed before: mortgage securities.

The result was a staggering increase in capital inflows. The inevitable flip side was a staggering rise in the current account deficit–basically, the trade deficit plus a few other things. It grew from $114 billion in 1995 to $417 billion in 2000 to a record $788 billion in 2006 before falling to $731 billion, or 5% of GDP, last year. Political discussion of this shortfall usually focuses on trade agreements and exchange rates. But if the U.S. simply stopped borrowing so much–that is, if Washington balanced its budget and restrained financial companies from loading U.S. households with ever more debt–the current account deficit would evaporate.

The housing crash and resulting credit crunch are already forcing U.S. households to retrench. Government–fearing disaster if everybody retrenches at the same time–has stepped into the breach. Again, that makes sense in a crisis. But once the panic has passed, the U.S. will simply be steering toward another, even bigger, crisis unless it finds something to replace debt as its No. 1 export.

Of course, less money borrowed means less money to spend. “Can you imagine McCain or Obama going around saying he wants to reduce your standard of living?” asks Murphy. Probably not. But maybe they could just sell it as, say, diversifying our product offering.

Extra Money To read Justin Fox’s daily take on business and the economy, go to time.com/curiouscapitalist

Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.

[quote]AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.[/quote]

Someone didn’t get their nap today.

[quote]AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.[/quote]
You’re an idiot.

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.

[quote]Inner Hulk wrote:
AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.
You’re an idiot.

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.[/quote]

The problem is that it encourages no effort by the person being “helped”…“it’s ok…you don’t apply yourself, we will make the people who do apply themselves pay for you.”

It encourages weakness and dependancy and in time, we have generations of losers looking for the next government buck…by having kids they can’t afford…oh wait, we’ll give them MORE for being irresponsible!!!

The time for Welfare should be OVER.

If I don’t have a job, like my job, have a low wage job, a job without health benefits…you know what I do???

I get another FUCKING JOB!

[quote]Rockscar wrote:
Inner Hulk wrote:
AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.
You’re an idiot.

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.

The problem is that it encourages no effort by the person being “helped”…“it’s ok…you don’t apply yourself, we will make the people who do apply themselves pay for you.”

It encourages weakness and dependancy and in time, we have generations of losers looking for the next government buck…by having kids they can’t afford…oh wait, we’ll give them MORE for being irresponsible!!!

The time for Welfare should be OVER.

If I don’t have a job, like my job, have a low wage job, a job without health benefits…you know what I do???

I get another FUCKING JOB!

[/quote]

Why, that is just mean spirited guys. If you are doing ok and the waitress is struggling - what’s wrong with helping her out? Common guys, be patriotic and hand over that money. It’s time to jump in and be part of the deal. Where did I hear that???

[quote]Inner Hulk wrote:

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.[/quote]

Nothing’s wrong with private charity organization helping people volentarily. These needs were better taken care of by community organizations, church groups, etc. The gov’t has not only taken over these obligations in the most inefficient way possible, but it has taken away the statification the community and individual get from helping others. Now instead of feeling compassion for those in need, we feel contemp every time we see 40% of our salary stolen from us.

[quote]Inner Hulk wrote:
AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.
You’re an idiot.

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.[/quote]

Yeah - there’s nothing wrong with that except it’s legalized theft

[quote]AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.[/quote]

Your a fucking idiot. Especially when you consider that the greatest increases in government have come under Republican presidents.

I think you would choke on your own words if you saw the spending that has increased the deficit, and welfare was a small part of it.

[quote]bald eagle wrote:
Rockscar wrote:
Inner Hulk wrote:
AynRandLuvr wrote:
Under the guise of helping the poor, you libs created a system that simply destroys everyone. Good job!

You fulfilled Abe Lincoln’s prediction that we would be brought down by our ‘vandals from within’. You libs created that, you dumb fucks.

Yeah, spending and debt, to help the aged, the poor, the minorities. Look where it got you, country-killing bastards! Now go suck OBama’s dick in your favorite Larry Sinclair imitation.
You’re an idiot.

And nothing’s wrong with some programs to help people HERE in the UNITED STATES. Smaller countries with less resources pull it off with ease.

The problem is that it encourages no effort by the person being “helped”…“it’s ok…you don’t apply yourself, we will make the people who do apply themselves pay for you.”

It encourages weakness and dependancy and in time, we have generations of losers looking for the next government buck…by having kids they can’t afford…oh wait, we’ll give them MORE for being irresponsible!!!

The time for Welfare should be OVER.

If I don’t have a job, like my job, have a low wage job, a job without health benefits…you know what I do???

I get another FUCKING JOB!

Why, that is just mean spirited guys. If you are doing ok and the waitress is struggling - what’s wrong with helping her out? Common guys, be patriotic and hand over that money. It’s time to jump in and be part of the deal. Where did I hear that???
[/quote]

O’reily interview…Obama said “Why can’t we be Neighborly?”

The hell if my success will be stymied by other losers not carrying their own weight.

It’s time for Captalistic Darwinism to take center stage!

[quote]AynRandLuvr wrote:
Now go suck OBama’s dick in your favorite Larry Sinclair imitation.[/quote]

Barney Frank is already in line on his knees.

Why does every post by a lib seem to start with “you’re an idiot” or “you’re a fucking idiot”?

I always thought liberalism was a mental illness

[quote]Razorslim wrote:
Why does every post by a lib seem to start with “you’re an idiot” or “you’re a fucking idiot”?

I always thought liberalism was a mental illness[/quote]

I just had a good firend e-mail me back “Don’t talk to me about this, I don’t want to discuss this with you anymore”. He got so frustrated with the facts and didn’t want to deal with it. Usually it ends with swearing and name calling because that’s all the sand they’ve got.

Most people with illnesses of this sort tend to deny it. It can be treated if they just chose to accept it.

[quote]AssOnGrass wrote:

Someone didn’t get their nap today.[/quote]

I did. About 30 minutes. I hate taking naps because they make me feel groggy, and I have to so squats in 30 minutes and I feel fuzzy. My asshole neighbor was blasting his fucking stereo all night long, so I got only 4 hours of sleep last night. I hate him. What an asshole. i hate him. I wish he would fucking die.

[quote]Rockscar wrote:
AynRandLuvr wrote:
Now go suck OBama’s dick in your favorite Larry Sinclair imitation.

Barney Frank is already in line on his knees.[/quote]

ZING!

[quote]Ren wrote:
Your a fucking idiot. Especially when you consider that the greatest increases in government have come under Republican presidents having to deal with liberal congresses

[/quote]

You evidently forgot to finish your thought, so I finished for you.

[quote]Rockscar wrote:
Razorslim wrote:
Why does every post by a lib seem to start with “you’re an idiot” or “you’re a fucking idiot”?

I always thought liberalism was a mental illness

I just had a good firend e-mail me back “Don’t talk to me about this, I don’t want to discuss this with you anymore”. He got so frustrated with the facts and didn’t want to deal with it. Usually it ends with swearing and name calling because that’s all the sand they’ve got.

Most people with illnesses of this sort tend to deny it. It can be treated if they just chose to accept it.[/quote]

“The Liberal Mind: The Psychological Causes of Political Madness,” by Lyle H. Rossiter; Jr.; M.D.

Product Description
Are Liberals Out of Their Minds? Why do modern liberals think and act as they do? The radical left’s politics and its destructive effects on our basic freedoms have provoked many to speculate on what makes these people tick. The Liberal Mind answers the question. This book is the first systematic analysis of the political madness that now threatens to destroy the West’s greatest achievement: the American dream of civilized liberty. In his penetrating analysis, Dr. Rossiter reveals modern liberalism’s assaults on: The freedom of adults to make good lives for themselves by cooperating with others, The ability of families to raise children to be self-reliant and mutual, and The morals, rights and laws that protect our freedoms. Modern liberalism’s irrationality can only be understood as the product of psychopathology. So extravagant are the patterns of thinking, emoting, behaving and relating that characterize the liberal mind that its relentless protests and demands become understandable only as disorders of the psyche. The Liberal Mind reveals the madness of the modern liberal for what it is: a massive transference neurosis acted out in the world’s political arenas, with devastating effects on the institutions of liberty.

Republicans have been ignoring facts since Reagan. On top of that, they sucker a dim-witted public into voting against their own best interests. You’re not the fiscally responsible party, you’re not the morally responsible party, you’re not the Christ-like party. You talk out of both sides of your mouth as well as your ass, and right now the public is starting to get with those facts.

[quote]Iron Dwarf wrote:
Republicans have been ignoring facts since Reagan. On top of that, they sucker a dim-witted public into voting against their own best interests. You’re not the fiscally responsible party, you’re not the morally responsible party, you’re not the Christ-like party. You talk out of both sides of your mouth as well as your ass, and right now the public is starting to get with those facts. [/quote]

So Barney Frank is a Republican? Cause there’s this video of him in a hearing, where I could swear he was doing alot of ignoring.

[quote]Iron Dwarf wrote:
Republicans have been ignoring facts since Reagan. On top of that, they sucker a dim-witted public into voting against their own best interests. You’re not the fiscally responsible party, you’re not the morally responsible party, you’re not the Christ-like party. You talk out of both sides of your mouth as well as your ass, and right now the public is starting to get with those facts. [/quote]

LMAO!!

There were never enough republicans in congress under Reagan to consider your partisan crap anything but a total fucking joke.