Bailout

Bailout

I wasn’t surprised to learn that our President chose to not veto the latest bailout of American institutions. Whether people want to admit it or not, a new precedent of “go ahead and we’ll cover you” has been set. Don’t be fooled though, the Government has it’s limits too and once resources are stretched so thin there will be an outcry of “whoa is me.”

The simple fact is that the ‘good times’ are over. The days of getting a lot for the minimum price has peaked and what’s ahead is long arduous work. To put it in reality America has been making half of what it spends on an average scale. This means that more assets from the pockets of Americans have been flying out to foreign countries then we’re able to retain. So we’re left with a deficit of cash in-country that we can’t fill, because the world has restructured to sell to Americans—not buy.
One solution that I’ll call “the easy route” is to devalue the American buck so that our debt is reduced by half. Half a debt is easier to pay off then a full debt, but that means that there will be a rush of people to rid themselves of American bucks in exchange for items of real value like land.

Think of it this way… If you own a million US Dollars that has a value of a million 2008 US dollars that is legal US tender for all debts, public and private in the US. The clause here is that it’s a note and that it’s governed by the US Treasury. If the US devalued it’s dollar by half (via pumping lots of cash out as well as other methods) that stack of a million dollars would half to only 500,000. If you knew that in advance what would you do? Chances are you’d trade that cash in for something that wouldn’t devalue… Something like property. Property has a perpetual resilience to certain economic crisis simply because of its unique supply and demand quality—i.e you can’t make more of it very easily.

This could cause a rush to buy US assets with US cash so that foreign investors don’t get ripped off by America’s cheap tricks. My suspicion is that is what was behind the Anheuser Bush deal, the Chrysler building deal, and Trump’s property deal. Those assets are likely to weather out an inflation storm better then simply hoping your wad doesn’t become worthless soon. This means in real dollars and cents that our money is also in jeopardy. When the US Dollars’ worth plummets so does the money you own behind a locked vault. Essentially it’s taking away the buying power of your cash abroad (and locally). Supply and demand as a principal will be twisted as the supply will remain the same, as will demand, but as grocers buy food across borders the cost per pound will go up since grocers buying power in cash won’t buy as much as it used too. Factors such as these will influence the cost of a bushel of X all around the world and prices world wide will inflate. It’s a bad lose lose situation just to settle a debt. However, the alternative solution may just be as worse.

The other solution is just to work twice as hard as we do now. In perhaps literal micro terms as double shifts or macro terms as greater output of resources. Either way to keep the doomsday from happening we need to pitch in. The answer simply isn’t buying more American stuff… It’s getting the world to buy American stuff other then property so that we can get back the money we loaned. In addition, we need to start acquiring more real foreign wealth and leveraging it against our debt abroad. That means more production of goods and making it less easy for American companies to operate outside the US. Not to limit US Corporate growth, but we need the cash. Honestly it doesn’t matter who gives us back our wealth only that is happens and happens soon.

Unfortunately that means a lot of work for me and my peers as gain back the squandered wealth of America. Call it…. Our Economic Olympic challenge

~J

 

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