A Skeptical Survivalist

With U.N. coalition forces bombarding Libyan leader Muammar el-Qaddafi from the sea and air, the United States’ part in the operation could ultimately hit several billion dollars — and require the Pentagon to request emergency funding from Congress to pay for it.

The first day of Operation Odyssey Dawn had a price tag that was well over $100 million for the U.S. in missiles alone. And the U.S. military, which remains in the lead now in its third day, has pumped millions more into air- and sea-launched strikes targeting air-defense sites and ground-force positions along Libya’s coastline.

Here’s one guy wishing for the default on the national debt to just go ahead and happen. Let the Shit Hit the Fan he says.  :) Not likely to happen this way, but if it ever did it would be ugly.

Some staggering numbers in this report.

WASHINGTON — Leaked diplomatic cables vividly show China’s willingness to translate its massive holdings of US debt into political influence on issues ranging from Taiwan’s sovereignty to Washington’s financial policy.

China’s clout — gleaned from its nearly $900 billion stack of US debt — has been widely commented on in the United States, but sensitive cables show just how much influence Beijing has and how keen Washington is to address its rival’s concerns.

Somebody’s numbers are off - this report says 4 billion in December. This report says 34 billion. One of them has the numbers off. 

China slimmed its net holdings by $4 billion to $891.6 billion, following net selling of $11.2 billion in November.

Instead of pulling back suddenly, they will pull out steadily. :) 

Most experts say if there were signs of this happening, the U.S. government would go for a combination of persuading Americans to buy more U.S. debt, the same way they did in World War II, and finding friendly foreign governments to make additional purchases.

 Banks could be called on to increase their holdings of treasuries, and as a last resort, the Federal Reserve could also be called on to fill the gap, though this could risk turning any dollar weakness into a slump.

 “The U.S. government should have and maybe still could call on the people of the U.S. to invest in U.S. debt,” said David Walker, a former U.S. comptroller general who heads an advocacy group calling on the government to curb the U.S. budget deficit and borrowings.

 To be sure, the idea that China would suddenly sell its U.S. debt holdings is almost unimaginable to some.

 After all, any weakening in the U.S. debt markets and the resulting global markets turmoil, including likely weakness in the dollar, would bounce back on China and could hurt its economy badly, especially as the United States is such a huge Chinese export market.

 It likely would take something like a massive rise in tensions over an issue like Taiwan or oilexploration in disputed areas of the South China Sea, including possible military confrontation between the two nations. Such a confrontation would also make it easier for Washington to appeal to the American public to buy its debt for patriotic reasons.

But Beijing could also justify pulling back sharply from U.S. Treasuries if the dollar were to plunge, perhaps because of Washington’s failure to curb its budget deficit and debt.

“I worry that we could be at a tipping point,” said Eswar Prasad, a Brookings Institution economist and former International Monetary Fund official with responsibility for China.

 “If the Chinese say ‘We’re not buying any more Treasuries,’ this could act as a trigger around which nervous market sentiment coalesces,” he said. “People could start wondering how the U.S. is going to finance its deficit.”

China sold $34bn (£21.5bn) worth of US government bonds in December, raising fears that ­Beijing is using its financial ­muscle to signal that it has lost confidence in American economic policy.

US treasury figures for the period ending in December 2009 show that, following the sale, China is no longer the largest overseas holder of US treasury bonds. Beijing ended the year sitting on $755.4bn worth of US government debt, compared to Japan’s $768.8bn.

Since the sub-prime crisis that began on Main Street USA grew to engulf the global economy, China’s leaders have repeatedly expressed concerns about US policy. December’s $34bn sell-off made only a tiny dent in Beijing’s total holdings of US assets, which amount to well over $1tn when stakes in American companies, as well as treasury bills, are taken into account.

But the news intensified concerns about China’s appetite for bankrolling ever-widening American deficits. Premier Wen Jiabao told reporters last year: “We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried.”

Ron Paul constantly reminds us that money is created out of thin air, which is to say it’s an illusion. Therefore, the debt must be an illusion too, correct? Yet, fiscal conservatives still use the debt as a tool of fear to make budget cuts that they selectively deem expendable.

Sure, they may think these cuts make them look “responsible,” but ultimately it is still collectivism — just more on their terms.  Make no mistake; budget cuts in our corrupt system are just another form of wealth redistribution. After all, that money is being eliminated to pay off the debt, right? Thus, that money is removed from programs that employ people to pay off the issuers of credit (banks).

Additionally, the costs of the national debt, bank bailouts, war costs, and unfunded liabilities are fundamentally impossible to pay off.  So, the notion that cutting a “historical” $100 billion will have any positive affect on the long-term economy is absolute fiction.  And although many conservative lawmakers feel like it’s the right thing to do, they know it will have no measurable affect on the debt. It’s a scam, and if the history of modern lawmaking is any indicator, the establishment will surely stick it to the poor and middle classes with these cuts while the oligarchs continue to flourish.

The huge national debt and budget deficit are not sustainable long term and fiscal reforms are critically important for the government, a deputy chief of the International Monetary Fund said Wednesday.

The warning from the IMF came as Japan has been under growing pressure to restore its fiscal health, the worst among major developed countries. The central and local governments’ gross debt is approaching 200 percent of the nation’s gross domestic product.