Friday, March 6, 2009

Reality vs Dreamland

I just read a very interesting article posted by the Associated Press on Yahoo! News. Titled, "China Sees Signs of Economy Responding to Swift Help."

Here is the direct link if you want to read the full article:;_ylt=ArxhFkWRVPMfHgdzlVHNsVjv5rEF

From what I can gather, it is fair to venture that China's successes are now revealing more of the United States' weaknesses. Last week, China announced their government would be injectiong another $585 billion US Dollars into their economy. But top officials stated otherwise today claiming, "extra measures might prove unnecessary because substantial fiscal and monetary stimulus is already coursing through the economy."

In other words, China's economy is showing signs of a real recovery. There are many reasons for this, so it really shouldn't come as a surprise. The Chinese economy is based on real value, as in, actual, real world production. This is quite the opposite of most of the US economy which has been built on the false premise of decades of cheap credit and minimal actual production.

When our politicians say that the government bailouts are necessary in order to lend for future jobs, they are suggesting that jobs alone will create real value in the economy. This couldn't be further from the truth. A job for the sake of a job simply doesn't provide any true economic value, especially if the tab is simply being paid by freely printed money and poor lending standards. At best, these government stimulant plans are mere attempts to postpone more necessary economic pain (at worst, and more likely, these massive expenditures will provide minimal aid while drastically lengthening and deepening are current situation).

Another example of just how paper thin our economy is can be seen in the Secretary of State Clinton's recent journey to China. Traditionally, a new Secretary of State's first journey overseas is always to Europe. Its quite telling that Mrs. Clinton's first trip is through East Asia. While in Beijing, Mrs. Clinton angered many of her most faithful supporters when she suggested that human rights issues with China are no longer a priority. In reality, she was stating a fact. The US is in no position to belittle China, lest we forget that China has near single handedly paid for our government's adventures in Iraq and Afghanistan. How? Well, they bought all of the Treasury Bonds that our government was desperate to sell to raise the capital.

So if Clinton wasn't in Beijing to criticize China's domestic policies, what was she there for? She was pleading for China to continue to buy more T-Bills in the coming years. If this was her central purpose, then we can consider her mission a failure. China suggested that they have no interest in buying more of our nation's debt. This makes sense, since the likelihood of us repaying the trillions we already have sold them is hard to imagine.

In closing, here is a very telling excerpt from the aforementioned article:

"But I believe that, with the measures that we've taken or will take, we can have full confidence that we can escape the current hardships and fully respond to this crisis, because in the long term our economic conditions have not fundamentally changed," Zhang added.

The officials made it clear that China still had plenty of ammunition to fire if necessary.

China's national budget deficit will jump more than sevenfold this year to over 1 trillion yuan. But that will still be less than 3 percent of national income. The United States, by comparison, is budgeting for a deficit of 12.3 percent of GDP."

Please keep in mind, something to the tune of 70% of our nation's GDP is nothing more than consumer spending. That's right, our GDP is overwhelmingly based on consumerism, not valuable production. Now that the carpet has been pulled from under the consumer...what's left of our GDP...and how is our bankrupt government managing to bailout all of these bankrupt institutions?


PS: For a great, 10 minute video that really sums it all up and provides a direction for hope, check out this YouYube clip titled: Ron Paul and Peter Schiff Were Right.

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