Thursday, October 25, 2007

America’s Trillions

Here are the numbers:

- Iraq Afghanistan war on terror: 2+ trillions
(when 0.7 trillion interest cost of borrowed money is included)

- Housing market mortgage losses: 1+ trillion
(for 7 million defaults out of 14 million ‘exotic’ loans in 2004-6 at an average price of $200K per home)

- China’s foreign currency reserves in dollars: 1+ trillion
(build by years of trade deficits with America)

So it seems that suddenly in Bush era, America has decided to talk in terms of ‘trillions’ only; ‘helicopter’ Barnankee feels no problem in continuing ‘easy Al printing press’ policies and American Congress feels no need to fulfill its basic responsibility of managing the public money well.

Americans understand that Dollar has collapsed and hence some of these numbers are inflated due to the debasing of the ‘greenback’. They are not ‘that’ dumb’. They also understand that some of this currency dilution would help America in overcoming some of their economic ills:

- with high import content in housing construction, the basic construction cost of a single house itself is going up and that in itself will work as the single most strong market force to put a bottom in declining housing prices at some point in future;

- Chinese dollar reserves quite likely look like ‘Weimar Republic wheelbarrow of currency notes to buy bread’ circ 1932 (reduction of America’s debt in real terms); and

- finally falling dollar will help America in reducing it’s trade deficits by increasing export of cheaper American ‘iPods, iPhones and Boeing Dreamliners’.

But Americans also see the flip side of the falling dollar – crude oil at $90 per barrel and slowly creeping ‘inflation’.

So the question is what Congress wants to do. King George – the ill fated President of America – will vehemently protect his only legacy: wrongly conceived and long term damaging Tax Cuts of GOP Congress era. So are Democrats ready for the political fight to ensure that:

- there comes ‘accountability’ in financing the war on terror by the borrowed money and

- wealthy Americans start paying more for financing of these wars by way of increased taxes.

Will Democrats be ready to understand that this is not 2004 or 2006 when King George ‘tricked’ them by blaming ‘soft on security’? Will they boldly tell Americans that the whole ‘supply side economics of perennial tax cuts’ as perpetrated by GOP is a sham when rabbit GOP attacks of ‘soft on terror mantra’ hurled against Democrats? (‘Tax Evasion’ by James Surowiecki, New Yorker,

The whole American Public Economic Policy debate has gone to such a pathetic level that when ‘trillions’ are talked, elected representatives yawn and do not feel like taking a stand and doing their duty. The question is why Nancy Pelosi is wasting her time in condemning Ottoman Empire of past for their Armenian genocide when she and her majority in house need to take a stand to ‘slash’ war funding? It is good politics to keep on juxtaposing under funding of SCHIPS by King George while he burns trillions in his wars; but it is all that only – some political theatre. Of course SCHIPS should get money, but why are Democrats abducting their responsibility in controlling war financing? If Pelosi and her majority do not sign these trillion dollar checks, King George is going nowhere regardless of how much he attempts to berate Congress. That is what is needed now – Congressional Democrats to make a stand on war funding and be fearless in the GOP on slaughter off ‘soft on terror’ mantra. Democrats can withstand such propaganda this time because American Public has moved beyond the Fox Channel type ’24 Hours’ sitcoms and Anna Coutler of the world. Americans have had enough of those.

Umesh Patil
Cupertino, CA 95014
October 25, 2007.

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