CSMS Magazine Staff Writer
Listening to a variety of financial experts suggest that many of the worried investors owning bank toxic assets are in fact sovereign wealth funds (SWF)s. A SWF invest/manages foreign government liquid assets, in this case excess US dollars.
As Americans purchased products made in other countries billions of US dollars stacked up in foreign treasuries. What to do with that money became a dilemma.
Either higher federal taxes, which would reduce the US consumer’s purchasing power and throw a wrench into the global economy, or an alternative source of funding was need for Washington to finance two wars, social programs, and wasteful earmarks. In other words, we allow foreign governments to finance our wars, national debt, and maintain Americas spending binge.
There is no FREE LUNCH! Someday you will repay that debt.
For fifteen years I traded commodities and I assure you, regardless of fundamentals, when SWF money enters the market it moves like a tsunami sweeping aside anyone in its path. To learn that the SWFs are on the hook for our indulgence, ‘makes my day’. We should feel zero compassion or responsibility to compensate bad investment decisions by a foreign entity or our own home grown speculators who ultimately desire to raise their standard of living at your expense, bankrupting you.
We should allow Wall Street’s investment banks or our commercial banks to stand or fail. Let them work out their problems with their shareholders and their creditors. If a commercial bank fails, FDIC compensates depositors. Shareholders and speculators know the risk of failed investments and stand prepared to absorb their loss. It is not the US taxpayer’s responsibility to bailout bad investment decisions.
China owns $682 billion of US citizen’s debt, or 12 percent of the U.S.’s outstanding marketable debt. Japan is next, with $577 billion, followed by the U.K. at $360 billion. Do the math, that is over a trillion dollars financed by non-Americans. The interest US taxpayers owe is humongous.
Small investors have been locked out of the risk process. The federal government has artificially lowered interest rates paid bank depositors and at the same time made available taxpayer money, our money, to banks at 5% and required ownership rights repaying the federal government even higher yields.
The government’s plan is to force interest rates so low that you crawl deeper into debt and stimulate the economy.
The stimulus package is intended to encourage US consumer to buy, buy, buy!
How are you going to pay for all that junk? It’s not only foreign made products, but if you overpay for a home, who will have the dollars to buy you out? For example, 10,000 General Motor’s salary employee jobs are gone. Restructuring will require pay cuts for other employees and suppliers. The pay cuts are in addition to millions of workers becoming unemployed. There is a domino effect here. Just as water seeks its own level employers see lower wages offshore. We are in a global economy and that means the standard of living for many Americans will drift downward.
Note: CSMS Magazine and the author are not in the business of providing financial services or advice. Prior to investing, readers should seek professional assistance.
Andrew Robbins is the author of: It Took My Breath Away; One Man’s Experience May Save Your Life. He may be reached by email at: firstname.lastname@example.org