“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Saturday, July 10, 2010

More Americans are employed in government than in manufacturing and construction.

"If you really want to see when an empire is getting vulnerable, the big giveaway is when the costs of serving the debt exceed the cost of the defense budget." Niall Ferguson

If you get over the fact that the dopey David Gergen is the moderator, this is a very worthwhile lecture. Our decisions regarding China, started under Nixon, have been a cumulative disaster for America. The biggest mistake of all time was the decision to allow non-restrictive holding of US sovereign debt by foreign governments. That is reversible and should stop.

Let me explain why:

The debt is not the problem, the interest payments are. If you stop the further accumulation of Chinese holding of US sovereign debt, the interest payments in dollars being sent to China will have to be spent in the US by buying US equities and products. If you do not stop it, the Chinese use the interest payments to buy additional debt, bypassing the import of American products and further weakening America.

Shrinking the market for US debt will force the federal government to restrain spending.

In a perverse way the current inept rule by Obama will force the US to recognize the disastrous consequences of runaway federal government. It is late but not too late to change.



  1. In my little world, I'm having an argument with my little government, to whit, the City of Moscow wants me to provide even more detailed drawings of my development and when I first went in I just wanted a simple zone change and let the market allocate it out. But o no we've got a 'city planner', with ideas from California, and a city engineer who doesn't do anything, he could just as well mark up the final plans, but no no we've got to do it their way, and I'm sick of it. I know probably nothing will get done in my lifetime, because the market rules, so I sit here negotiating with these bastards, month after month, and they make each of them, a hundred thousand a year, and for what? I ask? They are bureaucrats and they have to do something, but it gets laughable sometimes. I've been at this now for two years, neighborhood meetings, planning and zoning, city council, blah, blah, blah, finally I just hired a woman lawyer to handle it and get it out of my hair. blah, Blah. BLAH!

  2. Well, here's the deal, as seen from here.

    Budgeted net interest on the public debt was approximately $240 billion in fiscal years 2007 and 2008. This represented approximately 9.5% of government spending. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare.[

    Despite higher debt levels, this declined to $189 billion in 2009 or approximately 5% of spending, due to lower interest rates. Average interest rates declined due to the crisis from 1.6% in 2008 to 0.3% in 2009

    But more than the decrease in actual interest payments, during the first year of the Obamamerica reign, there is this tid bit of data, to mull.

    U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens and institutions held 44% of federal debt held by the public.[20] About 66% of that 44% was held by the central banks of other countries, in particular the central banks of Japan and China. In May 2009, the US owed China $772 billion.

    So, the total we owe to Charlie, in interest payments, for the $772 BN at the current average rate of .3% ...
    Back of the envelope ...
    $2,316,000,000. That's $2.3 Bn

    Now, that is a sizable chuck of change, to be sure. But let's compare it to what we are spending in Iraq and Afghanistan, annually.
    Oh, yeah, that amounts to almost $100 BN, per year, which we have spent each year, for the last ten years poured onto the sands of the Persian Gulf.

    The interest payments to Charlie, that is two days worth of US military operations in Iraq and Afghanistan.

    We send the Wahhabi of the Persian Gulf almost a $1 Billion USD, each and every day. For fuel we burn.

    The $2 Billion, annually to Charlie Chi-com, in interest payments on our sovereign debt, that is peanut money.

    A strawman.

  3. That the $772 Billion USD that we owe the Chinese is almost equal to our total expenses in Iraq, tells the real tale.

  4. Re: the War on Terror. We didn't get our money's worth.

    Now, with the hard times, we'll be looking for ways to raise revenue and cut spending. I'm pretty sure the military is going to go through some significant shrinkage pains.

    We're faced with a conundrum. Shut off the stimulus spigot or keep running up the debt with social spending.

    Riots and crime rampant in our increasingly potholed streets or debt passed on to our descendants. What to do?

  5. The news today:
    Five American service members and at least a dozen civilians died in attacks Saturday in Afghanistan's volatile east and south, adding to a summer of escalating violence as Taliban militants push back against stepped-up operations by international and Afghan forces.

    NATO said one U.S. service member died as a result of small-arms fire, another was killed by a roadside bombing and a third died during an insurgent attack in separate incidents in eastern Afghanistan. Two other U.S. troops died in separate roadside bombings in southern Afghanistan. Their deaths raised to 22 the number of American troops killed so far this month in the war.

    I hate those frickin' 'roadside bombings.'

  6. Obama's also being slammed from the left.

    This is bad news in the run up to the midterm and 2012 elections. Or maybe not.

  7. Paying a little interest is no problem when you're flush. It's when money's tight, that it becomes a burden. You can cut here and there until you've pared down to subsistence living. Then as you continue paying that interest, you realize you're a slave to debt. That's a bitch.

  8. Well, that's an hour of my life I'll never get back. What a bunch of blovious horseshit.

  9. You want a "problem?" Here's your problem. Bank of America Commits Fraud to the tune of $10.5 BILLION!

    You want "Moral Hazard?" No Bankers are going to jail; There's your problem.

  10. Blowing a Billion Dollars/Day keeping alive our ability to blow Another Billion Dollars/Day on Foreign Oil. There's your problem, Houston.

  11. Do you know what we've spent to replace 10% of our gasoline with ethanol?

    About $25 Billion.

    Another $125 Billion replaces the amount that's refined from Foreign Oil.

    We'll blow that much this year "guarding the poppies."

    Just so a couple of lifer assholes can get another star.

    There's your fucking problelm, Houston.

  12. Without knowing the exact holdings of China , it is hard to determine the actual interest. It is certainly closer to $40B than $2B.

    The actual Chinese holdings have given them a significant capital gain as the value of their older long term holdings have increased as interest rates have declined.

    Ultimately these bonds will have to be redeemed or rolled over. There is no way to predict interest rates when that occurs. We do know that the money paid will not be going into the US economy.

    It can get worse. The necessity for the US to raise interest rates in order to service foreign debt will also raise interest rates for domestic borrowers. That becomes an additional tax on the US economy.