China is drawing up the foreclosure notice

The only remaining question: Will they serve the notice?

The International Monetary Fund states their position that the United States is as good as bankrupt. Many of the biggest players on Wall Street are behaving as though bankruptcy has already been declared.

Laurence Kotlikoff, professor of economics at Boston University, stated on August 11 that the United States is bankrupt. He said that spending less or taxing more would not bring us out of bankruptcy. Instead, what we must do is to radically simplify our tax, health care, retirement and financial systems, each of which he calls a “complete mess”.

China already has eminent domain over the United States because much of the foreign debt sold to foreigners is backed by United States’ real estate and China holds the bulk of that debt. China, in the event of a collapse of the United States, could simply demonstrate their ownership and make us a colony.
Furthermore, some observers note that China is already diversifying their reserve holdings by the use of short positions and derivatives and credit default swaps, so they may bring down the United States’ economy financially because waging a military war is very expensive and in a financial manipulation, the spoils go to those who are willing to pay the price to win that struggle.

As Thomas Heffner pointed out in his column for Economy in Crisis, China and other foreign countries now hold 44% of the United States’ debt, allowing them to have the leverage to change our policies on which war we fight, which bill we pass and what standard of living we are allowed to enjoy. Our Congress, supposedly educated individuals, seems oblivious to the avalanche that threatens to change America. They just keep exacerbating the problem by spending more and increasing our debt.

The young bankers and budding economists in China are a frustrated generation, especially as it pertains to the debt owed to China by America. So, notes Jim Landers in The Dallas News. They benefited from the sacrifices of their parents and now they want to collect their due – from the US.

The Council on Foreign Relations estimates every single American owes China $4,500. If China decides to sell its US dollar holdings, we would see a tremendous spike in our interest rates and we would be pushed back into another recession. The Keynesians in Washington respond by simply printing more money – but the young bankers in China don’t want to see their holdings further devalued by more dollars being printed. They feel they have enough dollars already. They don’t want more. Instead, they seem to be buying American hard assets rather than investing their money in Federal bonds. They are building wind energy farms in West Texas. They are making significant investments in petroleum exploration firms. They are taking a stronger position in gold.

But the educated young in China are clamoring for more investments at home. They are faced with mounting real estate costs where the average condominium in Beijing is now $172,500 against their average salaries of $21,000 a year. One of the things that irritate the younger generation in China is that purchasing bonds of the Federal government of the United States means that they only receive interest payments and they cannot call the bonds in the event of default or sell them profitably to another investor when economic news is bad.

Guan Jianzhong, Chairman of Dagong Global Credit Rating told The Financial Times: “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China, we should have our say in how the credit risks of states are judged”. This is an open criticism of Moody’s and other credit rating firms in the United States who too often overstate the safety of investments and who offer better ratings than their competitors in an open market of credit rating shopping. He said that the credit rating system created the collapse in the American real estate market. So now, Dagong is beginning to publish its own credit rating ranking. Its results were dramatically different from Moody’s, Standard and Poor’s and Fitch showing China ranking higher than most other major countries. He said in his statements: The United States is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies all still give it high rankings. Is it just another manipulation to lie to American citizens and the world or is the desire to form a global government the motivation behind all these actions?

Perhaps the triggering device will be the domino effect of cities and states declaring bankruptcy forcing major changes in the United States fiscal policies. Already Illinois is paying off billions in loans that it got from schools and social service providers last year. As noted by Michael Cooper and Mary Williams Walsh in The New York Times Arizona has stopped payments for certain organ transplants. Many states are releasing prisoners early to cut expenses of housing them. Newark has laid off 13% of its police officers.

It is the long-term problems of California, Illinois, New Jersey and New York that worry economists the most. The federal stimulus money that supported many state budgets in the past year is set to run out next summer while revenues are lower than in years past due to fallen real estate values and the persistent unemployment problem.

Perhaps the relevant question ought to be: “Should I learn Mandarin or Cantonese?”