WheretheMoneyWillComeFrom

This is a very brief but pointed blog. The US Federal government yesterday announced that they were working on a plan to buy toxic and worthless debt from the American banks struggling under a mountain of the poisonous paper.

This will cost many hundreds of billions of dollars.

Putting this into context, this month the American government had its defense budget, for $612.5 billion waved through the legislature.

There are innumerable other costs mounting up for America that are beginning to look insupportable.

I have one question, where is all this money going to come from?

If the Feds print it we will end up with runaway inflation, which could ruin the lives of future generation.

If they borrow the necessary funds we will find ourselves owing money overseas, where it would have to come from potential foes in Asia and Arabia. We cannot be in hock to people who could pressure us to do things against our long term, strategic interests.

If the decision is to raise the money through taxing us we will be crippled by the size of the debt.

Unquestionably the announcement by President Bush that the Feds were going to take this action did relieve some of the huge anxiety that had built up in the stock markets of the world but we do need to question where the money is going to come from and what are the long term ramifications of this probably essential action.

You can’t help believe that this might well be the long heralded beginning of the end of America as the key financial superpower. Maybe the baton is being reluctantly pried from America’s grasp by hungrier, richer, more successful Asian powers. This would result in the USA and possibly the EU, being relegated from a long held and easy assumption of pre-eminence.

There is no doubt that when a country’s financial muscles atrophy and fail it’s military and political dominance will also wither to a similar extent.

Therefore, unless the Western powers are ready to abdicate their long held hegemony they will have to do more than survive, they have to find a way to prosper. That is going to prove extremely difficult.