The indebted are controlled by debt holders - the Banks are telling the U.S. what to do

Is there a financial collapse of the U.S. and other Western powers underway? I don't know. I do know that collectively the U.S. and other countries have been running up quite a debt. Before someone blames it on Obama, in the U.S. most of the debt came during the Reagan, Bush I and Bush II years. The Bush II years were especially disastrous with running up a debt due to idiotic tax cuts for the rich and wealthy (under the failed Trickle Down Economics theory pushed by Reagan and which Bush I called voodoo economics) alongside running two off-the-books wars simultaneously alongside an unfunded prescription drug program. Obama inherited a mess created mutually by the Republicans and Democrats and everyone else in Washington who's been screwing up the system for years.
The result was this fake drama over "raising the debt ceiling" and with fake ideological stances over whether to have debt or not, etc.
The main thing to take from it is this fact: Over the weekend, even though the debt ceiling was raised, the S&P downgraded the U.S. credit rating to AA from AAA and Moody's threatened to also do so if the U.S. Government did not make steeper cuts in spending.
In other words, the banks and debt system are calling the shots and telling the U.S. Government what to do. And that's because the Federal Government has been malfeasant for years, resulting in huge deficits explicitly because of stupid Republican policies.
A July 13 Assoc Press report (Moody's Warns It May Downgrade US Credit Rating) goes over warning sounds Moody's was making a month ago. Today a Bloomberg News notes that Moody's and Fitch kept U.S. credit rating the same but "also said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens." The same report also quotes two S&P analysts saying that the extremely difficult negotiations leading up to the credit limit deal last week were the primary cause S&P lowered the credit rating. That extremely divided "discussion" was not consistent with an AAA rating. (U.S. Loses AAA Credit Rating as S&P Slams Debt Levels, Political Process)
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating," S&P said. The Bloomberg report also said "S&P put the U.S. government on notice on April 18 that it risked losing the AAA rating it had since 1941 unless lawmakers agreed on a plan by 2013 to reduce budget deficits and the national debt. It indicated last month that anything less than $4 trillion in cuts would jeopardize the rating."
In other words, both S&P and Moody's are dictating to the Federal Government what the Federal Government policies must be. The state of affairs came about because the Federal Government has been ridiculous for years over an extreme level of relying on debt to finance the government. Note: I'm not saying it's because the Federal Government is over-spending, but that the government is relying on debt.
The problem with debt is you're wasting money on the interest payments, and as we see here it means the debt holder has power over you to control what decisions you can make.
It's not just a U.S. crisis, it's a global economic financial crisis. In Europe several countries are having severe problems, Spain and Italy being the current worry spots. A NY Times report mentions the European Central Bank was demanding Spain and Italy to "restructure their economies and cut spending".
(S.&P. Downgrade Is Seen as Adding Urgency to Debt-Cutting Panel) The debt ceiling crisis was resolved by creation of a Congressional "supercommittee" whose job is to "to mute ideological disagreements and recommend a package of deficit-reduction measures". That committee is now seen as having been given extra oomph by an S&P report released last week. The committee is described as having three roles, including "to appease the markets" and restore the AAA credit rating. "Appease the markets" can only mean one thing, right? To do what the market says, in other words the bond holders are calling the shots.
For example: If Congress wants to satisfy the rating agencies — Moody’s and Fitch have so far kept their AAA ratings of government debt — it will need to lock in substantial deficit-reduction measures, without using the kind of budgetary gimmicks that sometimes appear to produce savings under accounting rules prescribed by Congress, several lawmakers said.
(London Sees Twin Perils Converging to Fuel Riot) Over the weekend there was rioting in England. It was a small "anti-police demonstration" over the shooting of an Afro-Caribbean man in an area (Tottenham) that's full of disadvantaged Afro-Caribbean's. It might be nothing other than a riot over police brutality, except for this "Frustration in this impoverished neighborhood, as in many others in Britain, has mounted as the government’s austerity budget has forced deep cuts in social services." The point being that England elected a Conservative recently, who enacted a series of deep budget cuts to straighten out the country's finances, and now the people are rioting.

Other random quotes and links

"Policymakers around the world are trying to come up with a strategy to shore up market worries over the global economy and the levels of debt in the U.S. and Europe."
"S&P said the agencies and banks all have debt that is exposed to economic volatility and a further downgrade of long-term U.S. debt. Their creditworthiness hinges on the U.S. government's ability to pay its own creditors."

Markets Drop As Investors React To Downgrade
S&P Downgrades Fannie Mae, Freddie Mac Ratings
Global Finance Leaders Pledge Bold Action to Calm Markets

Review: I.O.U.S.A. - America's big debt crisis told through a skewed lens

How much is the Federal Debt as a percentage of GDP? Do you understand why that's a critical problem? What does it mean that China is the worlds biggest exporter, and the U.S. is the worlds biggest importer? What do you think is the real cause for the current economic mess? Just how fiscally irresponsible was George W Bush and the other Republicans since 1980?

I.O.U.S.A. is a movie that goes over these questions and go. It's an excellent movie in many respects that I largely agree with. It is also a partisan movie which means I expect it's presenting a slanted point of view, especially considering the main person, David Walker, was President Bush's Comptroller General. The movie focuses on a nationwide Fiscal Wakeup Tour with David Walker and the Concord Coalition going around the country teaching what they said to be a message of fiscal discipline both for the national government and for individuals.

I.O.U.S.A.

The movie begins with a voice saying "I would argue the biggest threat facing the United States is not someone hiding in a cave in Afghanistan, but our own fiscal irresponsibility". Of course at the moment I'm writing this is after the death of Osama bin Laden. We know he wasn't hiding in a cave in Afghanistan, but in a well off lifestyle in a fancy home in Pakistan.

Immediately after that quote, with "fiscal irresponsibility" still hanging in your ears, it launches into a series of statements by U.S. Presidents about the need to conquer the national debt. The first being Pres. Reagan, who was one of the most egregious of the national debt builders we've had.

In that series of quotes was Pres. Clinton who, upon signing the first balanced Federal Budget, declared the U.S. was on track for budget surpluses for the next 25 years. Later in the movie they talked with Robert Rubin, Clintons Treasury Secretary, who explained this further. He claimed that they had found a political consensus around fiscal discipline, and when he left office in 1999 he thought it (fiscal discipline) had become a permanent part of Washington. But the next President, GW Bush, threw that all out the window.

The theme of the movie is to discuss four deficits: Budget, Savings, Balance of Payments, Leadership

Budget Deficit: There's a history with federal budget deficits going back to the Revolutionary war, and every war has been funded by running a debt. In the past the government had enough fiscal discipline to pay down the debt after the war was finished. Starting in the 1960's the government stopped that policy. And more egregiously, President Reagan was the first U.S. President to run big deficits for a reason other than war. His theory was the idiotic trickle down give tax cuts to the rich and eventually it'll make us all rich idiocy.

The important measure is the Deficit as a percentage of GDP, or Gross Domestic Product. Essentially that ratio is what determines how sound the economic situation is, and the ability of the country to handle the debt load.

Again the history of Deficit/GDP is that the percentage rose during war-time, and after the war it would drop again. Beginning with Reagan the percentage began climbing, and climbing, with the only pause being the Clinton years. The GW Bush years were a precipitous rise in this percentage.

Low Savings Rate: Much of the movie centers around a low savings rate in the U.S. In the past we were encouraged to have a high savings rate but since WWII the mantra has been to spend, spend, and spend some more. Consumption is what drives the economy today. As a result many people are living paycheck-paycheck with very little savings. Silly people.

David Walker is quoted saying the high rate of foreign ownership of the national debt is because of the low savings rate. Uh... I thought this was because of the high imbalance of trade but I suppose a high savings rate would mean more of the national debt is owned by Americans.

This is a national security issue - the high rate of foreign ownership of the national debt.

Balance of Trade / Payments: This is the ratio of exports and imports. A factoid tossed out during the movie is to list the countries by their trade balance. China exports the most, hence imports the most money, and the U.S. imports the most, hence exports the most money.

A factoid said right after that is: Buying more than you're selling results in your trading partners owning you.

This was demonstrated by an article written by Warren Buffet - Squandersville versus Thriftville. In Squandersville the mantra is spend spend spend, whereas in Thriftville the mantra is Live beneath your means and a high savings rate.

Basically the U.S. is Squandersville and China is Thriftville. The pattern is that Squandersville is exporting money and will eventually run out of money and will have to start selling parts of its hard assets like land and buildings. Eventually Thriftville will end up owning every square inch of Squandersville.

For a practical example they went to a scrap yard showing machines grinding up cars to make scrap metal of the sort used in mills to make new metal. The owner of the scrap yard explained they used to send the metal to domestic (U.S.) mills but nowadays they're sending it to foreign mills in China and elsewhere. In other words, the U.S. has killed off its industrial base and the only export we have is scrap metal.

Another assertion made is the immorality of one generation to spend the next generation's money. That's what happens when the government runs up such a big debt. This generation, us, we who are enjoying the fruits of that debt, we cannot pay off that debt. Who will pay it off? Our children?

Leadership Deficit: The movie talks a lot about the lack of political will to do anything about this. The responsibility lies with everyone involved in government. Earlier I mentioned how it's Republican Presidents who've been the worst about this, and they have, but really it's the whole set of people in Washington. They've become addicted to wasting our money.

The movie was filmed before the crash of 2008.

Given that the main person in the movie, David Walker, was GW Bush's Comptroller General, and hence in charge of the General Accounting Office, it strikes me that this guy has quite a bit of responsibility for the crash of 2008. He spoke a great line of reasoning in the movie about fiscal responsibility, but the GW Bush Administration was anything but fiscally responsible. In fact the movie itself does point a finger at the Bush Administration and while it doesn't outright say they were fiscally irresponsible, it strongly implies this.

Somehow the movie does not lay any blame on David Walker, however. But that could be because the whole thing is an infomercial for the Pete Peterson Foundation and a project which David Walker was hired by the Peterson Foundation to lead. In other words, one slant in the movie is to present the Concord Coalition and the Peterson Foundation and David Walker as saviors of mankind with a mission to educate us on fiscal responsibility.

I personally support having more people educated on fiscal responsibility. I just have a hunch that this movie is slanted towards a partisan message of some sort. In particular I hear in the movie some echo's of some of the Tea Party nonsense.

A recommended movie - just take it with a grain of salt.

America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It N

This is a opinion piece by Warren Buffet warning the U.S. about the dangerous situation we've gotten ourselves into. He uses an analogy of Thriftville and Squanderville, two neighboring communities, one of whom takes over the other through purchase rather than through conquest.

At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat--they have nothing left to trade--but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold.

...More important, however, is that foreign ownership of our assets will grow at about $500 billion per year at the present trade-deficit level, which means that the deficit will be adding about one percentage point annually to foreigners' net ownership of our national wealth.

...The likely outcome of an IC plan is that the exporting nations--after some initial posturing--will turn their ingenuity to encouraging imports from us. Take the position of China, which today sells us about $140 billion of goods and services annually while purchasing only $25 billion.

Article Reference: 

America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It Now

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