BF2S Forums Americas obsession with debt.

The Australian wrote:

Robert Lusetich, Los Angeles correspondent | October 04, 2008

DESPITE all the hand-wringing about the Wall Street bailout, the reality is that a measly $US700billion ($895billion) won't save Americans from what ails them most: themselves.

The Bush administration's rescue of Wall Street - which will, temporarily at least, allow crippled banks to keep lending, thereby sustaining the vicious cycle which started this mess - is but a band-aid applied to a gushing wound, decades in the making.

It doesn't take the Scottish father of modern economics, Adam Smith, to understand how unsustainable the US has become; a nation which buys anything and everything at a manic pace and in turn produces only debt.

It's a maddening place to raise children and attempt to instill in them the idea that they can have what they can afford, because no one around them can afford anything that they have.

High school students drive new BMWs - purchased on credit, of course - because heaven forbid they have to suffer the social ignominy of arriving at school in a used car.

I have watched this deterioration for 15 years and its extremes never cease to amaze, or depress, me. The mother of my brother-in-law's infant son may be perpetually broke, yet she is the proud new owner of a marvellous set of breasts.

Her cosmetic surgeon, it turns out, has a finance company at the ready and encouraged her to take advantage of low introductory interest rates. Buy now, pay later is the American mantra.

Pointing the finger is useless because there is enough blame to go round.

Americans can't restrain themselves from spending money they don't have - timely considering this week is the 50th anniversary of the first American Express credit card - and financial institutions can't stop lending them money because new business propels a bank's stock and fattens those executive bonuses.

So everybody wins (not really) while the country - and the generations to come - lose.

The mortgage crisis, which triggered what is the biggest disaster since the Great Depression, was just the latest symptom of a terminally sick system.

Why is anyone surprised that the house of cards came tumbling down when irresponsible people bought homes they couldn't afford because banks that knew they couldn't afford them lent them the money, anyway? It's insane.

And in Washington, the same culture exists, just on a much grander scale.

New spending programs - aimed at getting politicians re-elected - or tax cuts or wars or Wall Street bailouts are just thrown on a very large credit card.

If anyone gets jittery, the government just prints more money because among Richard Nixon's noxious legacies is the fact that he removed the US dollar from the gold standard in 1971.

So how is the US now different from Zimbabwe, or Argentina a few years ago? Or for that matter, the British Empire, which died the day the US threatened to sell off its vast holdings of pounds unless Britain, France and Israel gave control of the Suez Canal back to the defeated Egyptians in 1956?

What if Japan, China, Britain and the Saudis - nations that hold trillions in US currency and treasury notes - decided to sell today? The US would crumble.

George W. Bush's legacy has been not just to double the size of the national debt - to a staggering $US11 trillion by the time he leaves office - but to destroy the mystique of America in the world.

Add to the financial crisis the erosion of US military standing by allowing Iraq to become a quagmire. The all-volunteer military of the world's biggest superpower could not handle another theatre of war, which only serves to further dilute the idea of America.

David Walker, who spent 10 years as the comptroller-general of the Government Accountability Office - essentially, the US's financial watchdog - until leaving the office in disgust in March, is a keen student of history and understands what he's seeing.

"Rome fell because of declining morality and political incivility, an overconfident and overextended military in foreign lands, fiscal irresponsibility and an inability to control its borders," he told The Australian. "Does that sound familiar to you?

"This sickness started in the 80s when Americans became addicted to debt. Conspicuous consumerism went up and savings went down. Before that, since the beginnings of the republic, America only took on debt in times of war or national disaster, but now in Washington, on Wall Street and on Main Street, spending is out of control."

Walker says $US11 trillion isn't even the real debt facing the US - more than half of which is held by foreign nations - because it does not include the future promises of social security and medicare, which right now stand at $US41trillion.

Except, of course, those deposits will be empty within a decade or so, leaving nothing for workers contributing to them now.

"One of the fundamental aspects of the American Dream is toprovide more opportunity tothe generations to come," Walker said. "If we don't change course now, what are we leaving our children and our children's children?"

The short answer is more than half a million dollars in debt for each household.

If the American Empire is to be saved, the first step is a simple one: cut up those credit cards.

And if your breasts aren't big enough, try padding a bra.

Last edited by Burwhale the Avenger (2008-10-03 18:23:59)