Who owns the US?

[RangerX]

http://finance.yahoo.com/banking-budget ... management" onclick="window.open(this.href);return false;

China was a no brainer, but some of the others were surprised.

[colt1rgr]

There's no way out of that mess!

Sure there is! Same as when your household gets out of control, you buckle down. But I venture to say it won't happen with this "Assclown-in-Chief".

[Lefty]

So much I could write about this, but I will try to be brief.

We are looking at this from the debtor's/borrower's point of view, much like when you go to a lender for a car loan or mortgage loan. You want to prove you are creditworthy, able to repay the loan, etc.
Turn it around and try to see it from the lender's point of view. If you are a bank, savings & loan, credit union, etc., you want to be careful about who you lend your money to. You want to lend only to those you are fairly certain will pay you back, on time, without having to chase them for the payments.
Those countries who lend money to us do so because the US, despite all the rhetoric and political infighting, is the best credit risk in the world. We are still the world's best customer. The world economy is significantly affected by rises and falls in the US economy.
For example, the Great Depression of the 30s became a world depression because the US couldn't continue the loans to Germany, who had to pay huge WWI reparations to France and England. When Germany couldn't pay, England and France suffered financially. It was the old domino effect. It is a little more complicated now, but much remains the same.
Even though China is considered a communist nation, their attitude toward industry and trade has changed dramatically. They lend to us because we buy so much from them and we are still considered a good credit risk. Same with Japan, the UK, Canada, and the rest.
I don't know if it is still true, but not so long ago the largest foreign owner of US real estate was the UK. Japan also invested heavily in US real estate but bought in at the peak of the market values, then lost equity big time when US real estate values dropped. Britain had wisely invested long before, and did not lose as much equity.
I am sure some smarter person than myself can sharpshoot my explanation, but again I am oversimplifying this. Bottom line is that they lend to us because we are the best credit risk and have historically been the most politically stable government of modern times. Things are changing, but the US dollar is still a world standard of currency.
It is actually a vote of confidence for our nation that other countries lend to/invest in the US. If that ever changes, and other countries lose faith in the creditworthiness of the US, the world will be a much different place.

[RangerX]

Lefty, you certainly seem to have a better understanding of this than I do. I can't help but feel all these numbers are little more than a game of three card monte, with no real value associated with the "debt". I also can't help but feel that we only seem to be borrowing more, rather than "living within our means". At what point do we stop borrowing?

I'd also be interested to know how much is owed to the US by whom, to put things in perspective.

[Lefty]

This business here in Wisconsin has been interesting. The public employees and their unions suddenly realized the governor meant what he said about reining in public spending. I won't recap what has been written and broadcast these past days but I will pass along this: My stepdaughter is a primary school teacher who was rabidly pro-union and anti-Governor Walker from day one of the fuss. She was vehemently, loudly, and hysterically outraged. Then she got notice from her school district - due to budget cuts happening regardless of the state budget, her district has to drop 7 teachers. By union rules dictating seniority, she was fifth from the bottom and will lose her job. Then the principal and administrator told her she was one of the highest rated teachers in the district. If the governor's bill passes, the school district will be able to retain teachers by their rating, not by dictated union seniority. She will be, they told her, one of the first they would retain. Her outrage is much diminished. She is totally confused now. (Color me behind her back)
The issue has divided a lot of people here and, as one radio broadcaster stated, has pitted brother against brother. There are HUGE arguments here in the office among employees, and this is a private non-profit agency without any union presence.
For you movie fans, this reminds me of the scene in the beginning of "Bridge Over The River Kwai" where the British officers refuse to work as common laborers, the Japanese march the enlisted men away, and the Jap colonel has a truck with a machine gun run up to where the officers are standing. William Holden is watching from the prison hospital and says to the British doctor "He's going to do it. Believe me, he's really going to do it!"

Believe me, Gov. Walker is really going to do it.

[Lefty]

Hey, what happened to the post I was responding to? The one where someone brought up the union fight in Wis.?
Someone deleted it, I guess. Didn't mean to do a total hijack.

[F.S. Corey]

A good thing to keep in mind with stuff like this is that the national debt is close to 14 trillion now and only 4.4 trillion is foreign countries. Yes we are in debt to other countries but the biggest chunk of debt is just to the American people, which is almost 50% of the 14 trillion. How we are in debt like that is from taking money from programs that are doing well, such as Social Security and moving it towards programs that aren't doing to well and probably shouldn't even exist.

I am saying this stuff just as a patriotic notion of pointing out the title of the news article is misleading, and WE own the USA not other countries. In terms like Ranger Lefty used, the other countries are investors but so are taxpayers and we hold the majority of the shares.

[Lefty]

Lefty, you certainly seem to have a better understanding of this than I do. I can't help but feel all these numbers are little more than a game of three card monte, with no real value associated with the "debt". I also can't help but feel that we only seem to be borrowing more, rather than "living within our means". At what point do we stop borrowing?

I'd also be interested to know how much is owed to the US by whom, to put things in perspective.

Can't answer who owes us right now, but I could probably find it.

As for the three card monte, our whole financial system is built on a nebulous concept of confidence. Because we all believe in our system and have no practical alternative to basic barter, everyone believes in using the paper scrip we call currency. It is backed by our government and our complex system of banking and finance. Everyone believes in the power and strength of our government, therefore we accept that which has the full backing of the federal government regardless of which party is in office. Expand that to the rest of the world - the major currencies have the full backing of their governments and all of those governments back each others currencies. The currencies are mediums of exchange used to assign an agreed upon value to goods and services. Actual currency, the printed paper, is carefully controlled by the treasuries who print it. This ensures there is just enough in circulation to keep it relatively scarce, and thereby desirable by everyone. If our treasury, or any country's treasury, printed too much, it would lose its value/desirability, and you would have staggering inflation like Germany in the 1920s, where it took literally a wheelbarrow full of money to buy a loaf of bread.
If suddenly everybody said "Hey, I don't believe in this stuff (dollars, pounds, euros, yen, etc.) anymore, I don't want it", and the government would waver in its "full backing", the entire system would collapse.
Debt between nations involves nothing more than exchanges of official documents. It is all based on mutual confidence in each country's perceived financial strength. If China suddenly lost confidence in the strength of the US financial system and in the strength of the US government to back the US monetary system, there would be world chaos. For all the posturing and huffing and puffing over Korea, Taiwan, the South China Sea, etc., neither side really wants armed conflict because it would cause too much financial disruption to each party. The arms buildup is more for influence by potential threat than actual planned use. China will reign in N. Korea just enough to prevent outbreak of war, but will allow them to make credible threats to keep Japan and the US guessing and maybe a little off balance, allowing them (China) to expand influence some more.
I could write more about what happens when monetary powers actually fight as in WWII, but that fills books and is for someone smarter than me.

[Troglodyte]

Lefty,

Brilliant, and very clear. I am kept up at night worrying about what happens when the world decides to stop using the dollar as the reserve currency of choice. China has already called for it, and there are a lot of bad actors who would fall into line, potentially including the Gulf oil nations, Russia, and Venezuela. And where will North Africa stand after the current dust settles?

Time to buy ammo and (reusable) bowhunting gear, plant a garden, and stock up on Scotch.

Trog

[colt1rgr]

Time to buy ammo and (reusable) bowhunting gear, plant a garden, and stock up on Scotch[/b].

Trog

I like your thinking Brother!

[Troglodyte]

Hey, just because societal collapse will suck for the oiks, doesn't mean it has to suck for us!

[Lefty]

I am kept up at night worrying about what happens when the world decides to stop using the dollar as the reserve currency of choice. China has already called for it, and there are a lot of bad actors who would fall into line, potentially including the Gulf oil nations, Russia, and Venezuela. And where will North Africa stand after the current dust settles?


Trog

Please note the second last paragraph of my initial post in this thread. For the past century and more, the US has had the most stable political and financial system in the world, the Great Depression notwithstanding. During and after WWII, the US became even more of the financial rock the world looked up to. Although there has been the posturing and tough talk by China, to date they still depend upon US financial strength. The US still has the most stable political system to back its financial strength. How much confidence would the world have in the currency system of any OPEC country's government compared to the US? The only other historically stable political force is the UK, but they are on a smaller financial scale than the US, China, and Japan. (BTW, these are the top three financially as measured by GDP, in that order as of 2010). France, Germany, Italy, the Scandinavian countries, etc. either do not have the political stability or do not have the financial clout to supplant a major currency. Although China is enormously powerful financially, there is still a lingering uncertainty about political stability. They have opened the door to private ownership, however limited, and they cannot go back. Private enterprise and asset ownership are threats to the communist government. Dissidents still exist. There are still cracks in the facade of the monolith. IMO they are not stable enough to gain complete world confidence in their currency as the standard.
The big problem, as I see it, is the unprecedented financial tipping point we now face. IMHO, we are facing a real threat of the loss of world financial confidence, which could bring unimaginable chaos and instability to a nation that has been complacent, comfortable, and smug for 65 years. Oh, sure, the Cold War was always in the back of our minds until the collapse of the Soviet empire, but it didn't really detract from our daily routine and suburban status symbol life. If the world loses confidence because of our inability to reverse the very real possibility of a national bankruptcy, life as we have known it will never be the same. That would give the advantage to China and possibly Japan. I cannot comprehend, nor do I think any of us can comprehend, the enormity of the cataclysm that would result.

[Lefty]

http://online.wsj.com/article/SB1000142 ... _Video_Top" onclick="window.open(this.href);return false;

After my last posting I began to question my accuracy and wondered if I should edit or delete the post. Then this morning I found this article on the Wall Street Journal online edition.
It re-affirms my thoughts, especially about the tipping point of US debt and its effect on the dollar vs. other monetary systems. It does show that I may be wrong about the world's acceptance of the yuan, although the author states the Chinese have a long way to go before it happens.
I strongly recommend this article. The author is more optimistic, however, than I am about the fall of the dollar as the world standard of exchange. I believe things will be far worse for us than the author concludes.

[Ranger Ron]

Lefty you are one smart son of a gun!!!!! I do think that there is more to this "Reserve Currency" question than just economics. In fact, probably more dangerous in the long run. IMO there are many around the world and many within the US that want a new world order and it would certainly speed up that process if the US dollar was no longer the world reserve currency.