Friday, August 13, 2004

Will the U.S. default on its loans? 

The trade deficit last month was an astonishing $55.8 Billion. That's $180 for every person in the U.S.--$720 for a family of four (on pace for nearly $9000 this year for a family of four--imagine building up this much on a credit card).

The U.S. trade deficit widened much more than expected in June, hitting a record $55.8 billion on the biggest drop in exports in nearly three years and record imports, the government said on Friday. ... Analysts said the unexpectedly large gap will lead the government to lower its reading of second-quarter economic growth, which it had put at a 3 percent annual rate in a snapshot late last month. Before Friday, economists had been thinking the GDP figure would actually be bumped up.

"It's extraordinary, I've never seen this big a swing in one month," Kevin Logan, an economist at Dresdner Kleinwort Wasserstein in New York, said of the worsening trade picture.
The Bush administration said the widening gap reflected weak growth overseas, while Democratic presidential hopeful John Kerry's campaign faulted Bush for failing to vigorously enforce trade agreements.

This is the expected outcome of giving money "back" to people that doesn't exist in the first place. Printing money to give to the rich to buy goods from other countries. Who will eventually pay for this? Interestingly, many months after we showed it here on The Bite, the CBO report on Bush' tax breaks prove that they favor the rich at the expense of the middle class and poor.

As Yahoo! reports,

"Today's report by the nonpartisan CBO confirms what Democrats have been saying for years -- President Bush's tax cuts squeeze the middle class by unfairly favoring the rich.

"Republicans are playing Robin Hood in reverse, shifting the tax burden away from the rich onto the already overstretched middle class. For example, under President Bush and the Republicans, millionaires get 70 times more from the Republican tax breaks than middle class families according to CBO. And Republicans are using the tax dollars paid by middle class Americans to pay for it.

"Not only are the President's policies unfair, they are ineffective. 1.8 million private-sector jobs have been lost over the last three and a half years. The U.S. trade deficit is at an all-time high. Record federal budget surpluses have become record deficits. And whatever economic recovery there may be on Wall Street is not reaching Main Street -- middle class families are still being squeezed by falling paychecks and rising gas prices and health insurance costs. Through all of this, President Bush wants to stay the course."

The stark reality is that America is now running the risk of defaulting on its loans. The U.S. government is bringing in far less money than it can ever hope to operate on, and US treasury bonds have at this point the same feeling as any other junk bond out there. Linked with the very real possibility that Bush will "win" again in November, and you have a situation in which the U.S. is actually running the risk of defaulting on its loans.

Not that this would bother those who wish to see the government convert from a Republic to an Empire any. After all, default of the current government gives an opportunity to change the nature of the government, remove the middle class, and seize absolute power. Stick around, anything could happen in the next three months!


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