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The US Buck Does Stop Here

Please read How Long Can the Us Count on Foreign Funding?  You may recall the famous quote from Bill Clinton.  After then Speaker of the House Foley explained how the economy really works to him  Bill exclaimed ‘You mean my programs depend on a bunch of ()_(_+&*&* bond traders@!"  Well Bill as a matter of fact, they do or did or will.

IN the 1930s the US was a creditor nation, the world owed us. During WW II, as depicted in Flags of our Fathers, the US went heavily into debt to finance the war.  After the war the US again recovered as the number one manufacturing nation in the world. It would not be until Lyndon Johnson in I believe 1965 that the US had its first $100 B budget prompting Ev Dirksen, Minority Leader of the Senate to famously remark, ‘a billion here, a billion there, pretty soon you are talking real money.’  At that point the US dollar was still backed by gold.  Which is to say that the govt was limited in the dollars it could print, the currency was then redeemable in gold or silver (US dollars used to bear the guarantee, silver certificate). This limits the total amount of currency the country can print, or spend, to a ratio of the money to the metal that backs it. 

Richard_nixon It was Richard Nixon that took the US off the gold standard. That introduced fiat money or money by decree. Today the budget it three TRILLION DOLLARS.

Now, as the article points out, we we spend more than we take in we have a current account deficit consisting of the trade deficit and net investment income we owe to foreigners who own our debt. Right now that is about $70 B a year. But in Dec 2006 we only took in $15.6 B, on an annual basis just enough.

Are you following all this?  Do you think C average John Kerry or George Bush follow all this?  Well anyway, all this juggling of the money in the air only works as long as we can convince someone to loan us the money to do it.  Oil trades are settled in US dollars, or they have been. Iran of course is now asking for Euros, not Dollars. the reason is to weaken demand for the dollar. Should all the oil producing countries do that, the game is over, game set match.  Then US debt becomes banana republic debt. That would require our govt to take drastic measures, like forcing US citizens to fund their IRAs or all pension plans with US debt.  Which of course no one else would want. …..

And that boys and girls is what they  SHOULD have taught you in economics….

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4 responses to “The US Buck Does Stop Here”

  1. Jordan McClary Avatar
    Jordan McClary

    Is it just me or is the Bush administration obliterating any hopes of another republican candidate being in office for several terms? I mean I have lived a realitively short life yet, I can’t remeber any other morons that totally detach themselves from whats right for the American public. Why yes I understand the concept of going to iraq, but it has never made since, and bush has failed to address major important issues at home like the GDP. If he was to continue to be in office, we would eventually have to start using another currency cause the greenbacks wouldn’t be worth dirt.
    Maybe Mr. bush needs to go back to school, cause Im not so sure he learned anything. Maybe if he had more teachers like Dr. Elam he would have failed and wouldn’t have to worry about his goofy ass being in office. He might want to look at his people think of him doing his job everyonce in awhile. Its usually a good indicator of how well he is doing.
    If he could some how manage to turn things around in the next two years, there might be a slim chance for another republican cnadidate, but at the pace he denies answering questions to various scandalsous situations its highly unlikely. Its also highly unlikely for us to see the value of the dollar gain any ground on those foreign currencies either.

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  2. Dennis Elam Avatar
    Dennis Elam

    Don’t give up on the US military quite yet, apparently a lot of folks are tired of Al Qaeda and their continual violence which just disrupts society. I am reading more positives about THE SURGE.
    You are right that the instincts that served Bush as Governor are not working and have not worked in Washington, the wonder is that after six years he has still not figured that out. A Democrat from Dallas is not quite like a Democrat from Chicago. Tom Friedman made the observation over a year ago that Bush was not well served by a VP that was not running, clearly that has resulted in an arrogance that ignores the reality of the next race. But…..Hillary is getting surprised by Barack, Rudy is looking stronger than McCain, and with the primaries moved up, it all be accelerated into next March 5. A chance of success in Iraq is not being factored into the Dems playbook. Will be interesting to see if Bush stands his ground on the AG.

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  3. Jeffrey Burkholder Avatar
    Jeffrey Burkholder

    I’ll make this short and sweet. I am 27 years old. Although I am ashamed to admit this, i have never voted for a presidential election. I would have voted for Gore in 2004 but never got around to it (brillant excuse!). After watching Bush make an idiot of himself and this GREAT nation, I can no longer stand idle… I have to vote this time. To me, Bush is the most uneducated, unprepared, and idiotic man to ever take the postion as president. He needs to do what is right for the american people, not the american elite. This country was founded by the people and for the people…not for your personal agendas Mr. Bush. So i will be voting this time around…but who will I be voting for is the question. We need a great president for this great country…. not some spoiled Texan who never had to work for anything.

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  4. Dennis Elam Avatar
    Dennis Elam

    Ah youth! Gore was raised in a Washington DC Hotel and as far as I know never had anything approaching a real job. Like the Bushes, Clinton, and Ford, he went to Yale. He was unable to carry his own home state of Tenn. as well as the state of Ark, Clinton’s home state. He was issued a handful of Google stock options and got rich off them. He refused to take a personal energy consumption pledge this week before Congress.
    There has been a Dole or Bush or every Rep ticket for about the last six times I think. Now we have another Clinton or Edwards, both names we have seen before running. Kerry was apparently told to stay out. This is the same sort of choice that drove the French to separate Marie from her head.
    In fact other than lawyers, I beleive Bush II is the first person to hold the office that has a masters degree.
    It is nearly impossible for a fresh face or idea to get nominated given our structured two party system and the primaries. Once elected, the budget really only has about 8% that can be changed in it. THe bureaucracy really is not responsive to the President.
    What would you have the next person do? YOu might check out the political science dept….which is quite a bit more political than scientific….

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