Mainstream media is reporting today that China is showing some concern over the political paralysis that has struck Washington DC.
As the United States’ primary creditor, China seems worried that the US is poised to default on loan payments.
To date, there is no agreement to raise the debt ceiling so Washington can borrow the money it needs to make its payments on the national debt. Not only has movement towards raising the debt ceiling stalled, Washington has also not been able to agree upon a new budget and that has temporarily shut the government down partially, until the two parties can agree upon a formula that will include deep austerity cuts along with defunding Obama’s health care reforms.
China invested in the US because it may have seemed at some point that the US would overcome all of the economic woes we have experienced since 9/11, which includes the bursting of the real estate bubble and the scandals that followed, including massive bank fraud, foreclosures and bank failures.
This suggests that China realizes that the United States is able resolve its economic woes. It also suggests that China realizes that our failure to resolve our economic challenges is not due to our country’s inability to create wealth. China’s continued faith and investment in the US and its call for the US to have a solution in hand by the 17th means that China knows what is holding us back is not money, or the lack thereof.
China knows that what is plaguing the US economy is a lack of vision and an unwillingness to challenge the entrenched powers, making them see things differently and encouraging them to be willing to try new ways to tackle our economic problems.
There is no reason for the US to be satisfied to merely pay debts and finance the functions of a dysfunctional government that has less than a 10% approval rate. There is no reason for us to move like zombies from one financial crisis to another all created by our unwillingness to do what is needed to break free from the cycle of debt and austerity that has been prescribed for us by the Federal Reserve. The United States is able to create the economic momentum that is necessary not only to break free from control and a destructive cycle of increased debt and austerity, we are able to restart the engines of our economy and to create wealth and economic growth.
To initiate this new approach we must first tackle our massive debt.
We can do this by refinancing our government. We can combine the amount needed to balance the budget without any austerity cuts, with the amount of the national debt, minus the interest owed, and include an additional amount that would be approximately 20% of GDP. We can take this proposal for refinancing to the Federal Reserve and request a new loan in the stated amount without compound interest but with a simple flat fee paid in gratitude for the loan. This fee should not exceed 15% of the requested amount. We would immediately pay off the national debt, fully fund the government so it can reopen and function without any financial pressures or major changes to entitlements and social programs. With the additional money we can begin an investment project, the goal of which is to get the US back into manufacturing, create jobs and become competitive in the global market place.
We also have major infrastructural issues that can now be resolved while also creating real jobs. Once these pressing issues are resolved, we can begin the process of returning US monetary policy to the US Treasury Dept. as instructed by our Constitution, while repealing the laws that created the Federal Reserve banking system in the US. That along with the refinancing of our debt will make the dollar rebound and become stronger than ever.
If Wall Street and China decide to carry out a bond rebellion, the US would simply need to sweeten the bond deal for new buyers who will buy up the bonds turned in for payment.
I think we have every reason to expect that when China and other US bond holders see the new approach, they will realize that the economy is on its way back, and that with a new economic plan, and new enthusiasm the US will soon begin to create wealth and our economy will grow. A solvent US is key to the rebirth of western economic growth and prosperity.