Billions in Bailout

So the US Government is talking about a $700 billion (with-a-B) taxpayer-funded bailout to end the ongoing mortgage company problems and stem the gushing flow of money flowing from the US economy. This would push the US National debt to its highest level since the second World War. The US debt would amount to 70% of the country’s gross domestic product! But what will this short-term solution do to the economy in the future? Are we looking ahead to blue skies and rainbows or massing thunderheads and destruction?

Startling Observations

As of September 2008, the total U.S. federal debt was approximately $9.7 trillion. [source: Wikipedia] Each citizen’s share of this debt is $32,336.00. The National Debt has continued to increase an average of $2.32 billion per day since September 28, 2007. [source: US National Debt Clock]

Forget “original sin,” we’re talking “original debt.” A child born in the USA today will have a $37,000 debt before they even finish taking their first breath! What happens after an additional $700 billion is spent to bail out Wall Street?

The government reaching the requested debt limit would entail every man, woman and child in the U.S. owing more than $37,000 each. The median U.S. income last year was $50,233. [source: The Toronto Star]

The Government Accountability Office (GAO), Office of Management and Budget (OMB) and the U.S. Treasury Department have warned that debt levels will increase dramatically relative to historical levels, due primarily to mandatory expenditures for programs such as Medicare, Medicaid, Social Security and interest. Mandatory expenditures are projected to exceed federal tax revenues sometime between 2030 and 2040 if reforms are not undertaken. Further, benefits under entitlement programs will exceed government income by over $40 trillion over the next 75 years. The severity of the measures necessary to address this challenge increases the longer such changes are delayed. These organizations have stated that the government’s current fiscal path is “unsustainable.” [source: Wikipedia]

This means that if the United States of America does not stop spending more money than it generates that it will self-destruct, and soon. And we’re not talking about 2030, we’re talking closer to 2015. You cannot keep printing more money to cover today’s debts, just look at the current crisis in Zimbabwe where they are facing an inflation rate of 11.2 million percent. If you think gas is expensive now, just wait…

Once upon a time you had to have a dollar’s worth of gold to guarantee your printed dollar, now all you need to do is print up as much money as you need. What is a dollar worth these days? What happens when countries all over the world bring in their bits of paper and start demanding payment for the “promissory notes” that you’ve printed up?

Where Does the Money Go?

The President’s budget for 2008 totals $2.9 trillion. Just a few examples; they’re spending $608 billion on Social Security, $386 billion on Medicare, $481 billion on National Defense, $145 billion on the “War on Terror” (which might as well be under DoD), $34 billion on Department of Homeland Security (again, DoD), $56 billion on Education (which is just over one third of what they’re spending on this “War on Terror”), and only $20 billion on Agriculture. [source: Wikipedia]

So we’re looking at something like $660 billion on “Defense and Security” or nearly one-quarter of the budget.

Bailing out Wall Street

So now the whole world is waiting for the big bailout of Wall Street. Why should we in Canada care if the US goes under? Well, unfortunately a lot of our economy is tied to America’s. Every time the US Stock Exchange takes a dive, the Canadian stock market (and the UK markets, and the EU markets, and the Asian markets) get sucked down with them. This sort of thing needs to stop. In my opinion, Canada needs to start thinking about Canada and stop sniffing after the US markets. How about us up here in Canada start dictating terms to the USA in regards to imports and exports instead of the other way around? NAFTA did nothing good for us here in Canada despite what the “experts” say. Talk to the man in the factory and ask him what NAFTA did for us.

Everyone is waiting to hear what is going to happen in Congress. The fear-mongering continues. Bush is flapping his lips about “shoring up the economy.” I mean, who started this slide into oblivion in the first place, Georgie? It was you and your little “War on Terror,” wasn’t it? You were so busy screwing around in someone else’s country that you let yours go to hell. Nice job.

It should be “interesting times” for the next few days, that’s for sure.

_{(Some images from the stock.xchng, manipulated by Herne.)}

Canada and the USA then…

I live in Canada. The Canada/USA border is approximately 8,891 kilometres (5,525 miles) long and runs roughly along the 49th parallel. Canada has had a friendly relationship with the USA for more than two centuries, once we got over that little skirmish called “The War of 1812,” where Canada beat the US. The border was demilitarized shortly afterwards and became the “longest undefended International border in the world.” We had always enjoyed a large volume of trade and migration which helped strengthen the ties.

The US had become Canada’s largest market, and after the war the Canadian economy became dependent on smooth trade flows with the US so much that in 1971 when the US enacted the “Nixon Shock” economic policies (including a 10% tariff on all imports) it put the Canadian government into a panic. This led in a large part to the articulation of Prime Minister Trudeau’s “Third Option” policy of diversifying Canada’s trade and downgrading the importance of Canada – US relations. In a 1972 speech in Ottawa, Nixon declared the “special relationship” between Canada and the US dead. [Source: Wikipedia]

From then on, the US-Canadian relationship headed downhill. NAFTA, tariffs on softwood lumber, bans on beef, restrictions on wheat, magazines, and television, it all started looking bad for us here in Canada. The United States had stopped looking to us as a “partner” and started seeing us as the annoying little brother that was always tagging along with the big boys.

Once a Canadian could cross the US/Canada border with only a photo ID or a driver’s license shown to an agreeable US Customs agent at one of our many border crossings, pop over to the US to do some shopping and return the same day without question. Once, in order for a Canadian to fly into the US we only needed to show our ID to the airport agents, answer a couple routine questions and then be waved on through. We were comrades, we were trading partners, we had collaborations and friendships.

No more thanks to the events following September 11th, 2001.

The USA to come?

Here is where I see the USA in 10-15, maybe 20 years if they continue down their current path.

Imagine the entire country encircled by a 20 foot high wall similar to the wall between the USA and Mexico, only imagine it bigger, higher and defended by an armed militia representing “Homeland Security.” Guard towers, video surveillance, nobody enters or leaves the USA without prior written permission from a governmental authority. Imagine random security checks on average people for just walking down the street or for taking a photograph in a public place. Permits required in order to carry out conferences, assemblies or to be out after dark. If you’re thinking of the right of “freedom of assembly” given by the Constitution? Forget it. You happily gave up several of your Constitutional rights in the name of “a safe America.” Imagine special permissions being required to own a motor vehicle, there’s an oil shortage you know, and you can only operate that vehicle during certain times of the day, week and month depending on where you live and how important your job is to the country. Imagine the USA demarcated into “security zones,” possibly broken down along political lines where ordinary citizens are forbidden from crossing state lines without the proper security clearances and permits. Imagine a USA-only Internet, firewalled off from the rest of the world “for your own safety.”

Sound impossible? Improbable? Maybe. But maybe not.

Continued paranoia about the “forces trying to destroy the American way of life” is destroying them as surely as the “terrorists” are. Military spending is out of control. A war (or was it an invasion?) with Iraq started in 2003 continues to destroy the American economy. Technically the war was over about two weeks after it started, but the occupation of Iraq continues because the US claims the region is “fragile.” Billions of dollars of been spent fighting a war based on a lie in retribution for the attack on the World Trade Center. Someone had to pay for those attacks and they did. But where does the revenge end?

The USA is spending more money on a military action in another country that it is spending to keep it’s own people educated, fed, and sheltered. One B2 stealth bomber costs the US approximately $2.1 billion dollars and yet the education budget for the state of Arizona was only $1.5 billion dollars, and they have 30 of these bombers in service. Hundreds of people in the US go hungry, without shelter and without proper health care each day, but instead of spending money to help these people they spend $4.35 million on an M1 Abrams tank and they have approximately 5900 of these tanks in service. Imagine how much good the money from just a couple of these tanks could do.

Thousands of people are employed right now in order to keep this war going. But why? Is it because the war provides a convenient rally point? Is it just to keep them employed and doing something? Or perhaps it provides a convenient distraction from the real problems at hand—The US is destroying itself in order to keep it’s citizens unaware of what is going on around them. Every day we hear about security policy that takes another bit of freedom away from us. Air travel into the USA is becoming more and more impossible, soon we’ll all need to have travel permits and visas in order to cross the border. Normal citizens are under suspicion for “anomalous behaviour.” Everyone is a suspected terrorist until proven innocent.

America will soon cease to be the world’s “big brother” and the European Union will take over as the leader in World economy, if it hasn’t already. The oil standard is sure to switch to Euros in the next 5 years anyway. I see the EU expanding more quickly in the coming years to encompass a third of the planet. Already Iceland, Norway and Switzerland have signed up to be European Free Trade Association states and 10 or 11 other countries are poised to join the Union.

There is a grim future ahead for the USA and the rest of the world, especially Canada, the United Kingdom and Australia by association. With the upcoming election, hopefully the irrationalities of George Bush and his cronies will be reversed or at least diminished. I had hopes for this Obama character, but it seems that he has stopped looking at a “better America” and has started playing into the old political feuds of the old guard. Isn’t it time America started solving America’s problems and let the rest of the world worry about itself for a while? If they continue down the current path, I see America ceasing to be “The United States of America” and becoming “The American Republics” as the country breaks down along political lines and goes the way of the USSR.

The terrorists don’t need to destroy the American way of life, America is doing a fine job all on it’s own.

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