After America’s
Bankruptcy
Richard Salbato 10-24-2010
The primary
reason for the massive Tea Party revolution and the change in congress was when
the people realized that we have a growing National Debt that cannot be
sustained even for a few more years. I
will show that in the past the people would have been kept in the dark about
debts because of the controlled News Media.
Today because of cable TV and the Internet, you cannot keep this
information from the people.
After November
2nd I was confident that the new congress would bring us out of this
mess and we would be saved from a National Bankruptcy. But now I am not sure
they have ideas that are radical enough to save us. They are going to start
with going back to the 1980 budget, which was also a deficit. And Obama will
probably veto this. The truth is that in
order to save America
we must take in a half trillion dollars in taxes more than we spend for the
next 20 years. That will cut the debt by
only 10 trillion and if we add the future debts of Medicare, SSI, Fannie
May-Freddie Mack and Government pensions, our present and future debt over that
20 years is 200 Trillion Dollars.
We could fix
this problem and I will explain that in a minute but first let me predict
that in the coming year over 100 counties, cities, and even states will go
bankrupt. One already has and that is Prichard,
Alabama.
Two months ago all their money ran out and they stopped paying all their bills
including their pensions to government workers who are now retired.
Let us think of how a National Bankruptcy could happen in the next two
years. Throughout the world every nation that buys or sells oil does it in
dollars. So these nations have to have a
large reserve in dollars to
pay their oil debts. America has relied on confidence in
our Dollar for the last 50 years, when we were the last one standing after the
war. No other currency was trusted as
you will see below.
But now there are secrete meetings going on all over the world of large
nations talking about dumping the dollar as an exchange for oil. What would happen if all that money came back
to America
and they demanded our exchange be in other currencies. They would send this back to us by demanding
that we exchange the dollars they have for other currencies. We would be flooded with worthless dollars.
Fixing the Debt
If you think I am very negative about saving America from bankruptcy, you are
right. In other to take care of this debt, drastic things have to be done both
on spending and on taking in more taxes. We know from history that by razing
taxes the government gets less. The way
to have more government income is to raise the GDP, the gross domestic product,
the amount of money the people make. This is done by making America business
friendly.
We know that we will never be able to compete in the world with low
educated labor intense businesses. However, we have the largest deposits of
natural resources in the world and could be exporting up to a trillion dollars
a year in taken from our ground and waters.
In California alone we have 40 trillion
dollars in the ground at Monterey
in oil shale but the state does not let if be drilled. In Utah,
the fields of oil shale are being drilled so fast the state cannot keep up with
the construction that is needed for the new labor coming into the state, and
many are living in their cars in order to have the jobs. But this is just state
owned or privately owned land and the feds have the most of it and do not let
them drill. When you put North and South
Dakoda and Colorado
together with that, we could be exporting oil all over the world. That does not even consider off shore and Alaska. The next thing
we have in such abundance that we can export is coal, natural gas, and steel.
A massive government and business partnership could use this to get rid
of all unemployment in less than a year because of the housing, roads,
pipelines and new cities needed to do this.
The next thing we need is foreign educated workers and foreign companies
coming here because of the friendly business government we could become. I am
not saying to be friendly to all millionaires.
I would tax the hell out of those billionaires and millionaires who make
money without owning a business and produce nothing. They make money by having others loose money
in the markets and produce nothing for society.
The other side of this is to reduce spending, and we must correct
Medicare and SSI now and that will eliminate the 190 trillion of unfunded
liabilities over the next 20 years. Then cut the fed so much that we have a
half a trillion in excess per year to pay the debt we have now. Outlaw
government unions.
Now you see why I am not encouraged that we can save America. These things can be done, but you and I know
they will not be done. But some just do not believe America could
go bankrupt.
History of National bankruptcies
National
bankruptcy is a popular discussion topic of late. In light of the global
financial meltdown and the runaway deficit spending of the United States
in particular, observers are predicting that national bankruptcy is entirely
possible. Those who insist this could not happen would do well to look at
history, and all of the national governments that have gone bankrupt over the
years.
Russia’s Bankruptcy
Few developed
nations have had economic histories as complicated and challenging as Russia’s.
When Gorbachev took office in 1984 Russia was so broke it could not
pay its army and riots were braking out. Because of the control of the news
media, not even the CIA saw this coming. They had to quickly get rid of all the
surrounding nations they were supporting and dump major industries into private
hands. This was the real fall of communism and not any real outside force.
Then again in
1998, the former communist country suffered another financial crisis unlike any
it had experienced prior. This time period was also known as the “ruble crisis”
because of the ruble’s central role to Russia’s struggles. Following months
of downward pressure on the ruble by currency speculators, Wikipedia
states that “Russian stock, bond, and currency markets collapsed as a result of
investor fears that the government would devalue the ruble, default on domestic
debt, or both” in August 1998. Inflation
soared past 80% before the year was out, with many banks closing down and
the ruble losing over two thirds of its value from August to September alone.
Nor has the crisis been forgotten, with the UK’s
Telegraph
wondering in November 2008 “will Russia go
bankrupt again?”
Yugoslavia’s Bankruptcy
Nothing
pushes a bankruptcy faster than fear so when Yugoslavia went bankrupt and people
were rioting in the streets, the international news media called it separatist
movements. Like Russia
it broke up into many separate nations each with a new monetary system. And
none paid their foreign debts.
Between
1982 and 1999 Most of South American Nations went bankrupt
As I wrote
about last week in The World is Bankrupt Now all
the South American countries accepted Socialism as a way of government and as
always is the case, within 30 to 40 years they all went broke around the same
time. The IMF, the International Monetary Fund lent them billions of dollars,
but unknown to the people, these nations put up for collateral their natural resources,
water, electric, oil, gas and lumber. In
time they had to refuse to pay, go bankrupt and reform new capitalist
countries.
Argentina’s 2001
Bankruptcy
In their
article “The Ghost of Argentina,
Spiegel tells the story of Argentina’s
bankruptcy in 2001. There was a run on
banks following a collapse of the country’s national currency. So desperate
and panicked were Argentina’s
citizens that “many spent nights sleeping in front of the automated teller
machines.” Eventually, the situation became so chaotic that President Fernando
de la Rúa fled an enraged mob by helicopter. Despite all
the protests and bank runs, the nation simply could not repay its $145 billion
in foreign debts.
Iceland’s 2008
Bankruptcy
An even more
recent national bankruptcy than Argentina’s
2001 fall from grace was Iceland,
which became a casualty of the global financial crisis in 2008. According to BusinessWeek, the cause was a rapidly devalued
currency: “the country cannot pay back its external debts, and the Icelandic currency, the krona, has become essentially valueless in the rest of the
world.” The upshot of a worthless krona was that Iceland could
no longer pay for imports, on which the country is heavily dependent. Worst of
all, BusinessWeek notes, is that “with Iceland sitting
outside the major currency trading blocs, there may be no one with the
incentive or ability to save it.” Despite going hat in hand to the
International Monetary Fund and Russia,
the UK
reportedly threatened to sue Iceland
over unreturned money.
Germany’s 1920 and
1945 bankruptcies
Germany has the dubious distinction
of having gone bankrupt not once, but twice in recent memory. The first
bankruptcy came in the 1920s as a result of losing World War I. The “crushing
reparations payments” (reportedly three times the value of all the property in
the country) imposed by the Treaty of Versailles reduced Germany to a
state of being “completely, hopelessly broke”, according to WebOfDebt.com.
Unfortunately, this led to severe
hyperinflation of German currency, which eventually got so out of control that
“a wheelbarrow full of 100 billion-mark banknotes could not buy a loaf of
bread.” The end of World War II produced another bankruptcy in 1945, as
most of Germany’s
industrial capacity and factories were destroyed by the allies.
Great Britain’s 1945
bankruptcy
Germany was not the only country to
go bankrupt after World War II. Following suit, Great Britain demonstrated that
even winning a war is accompanied by significant losses. Indeed, a New
York Times article reported in 2006 that the UK was only then making its
final payment on $4.34 billion in loans extended by the U.S. all the way back
in 1945. To put that sum in perspective, $4.34 billion in 1945 is roughly
equivalent to $140 billion today, a sum that was “double the size of the
British economy at the time.” So ravaged
was the British economy following the war that almost all national resources
were dedicated to paying war debts for five full years after its completion.
Pakistan’s 2008
bankruptcy
Russia isn’t the only country that
has been dragged into default by a decline in the value of rupees. In 2008, BusinessWeek reported that Pakistan “faced default on its huge
foreign debt” amidst the beginnings of the financial crisis late that year.
Remarking on the effects of looming default on the country at large, BusinessWeek states that “electricity goes out for as much as 12 hours a day, the gasoline lines
get longer, and depositors rush to banks to pull out their meager savings.”
Much of this trouble owes to Pakistan’s
foreign exchange reserves dropping to $4.3 billion (a 75% free fall over the
year prior) primarily because of soaring oil prices, which comprise roughly a
third of Pakistani imports. Topping things off, the rupee lost about 25% of its value in 2008 alone.
Zimbabwe’s 2008
Bankruptcy
Zimbabwe offers perhaps the most
tragic story of national bankruptcy. In 2008, CNN
reported that the embattled African country was “in the midst of an outbreak of
cholera, food shortages, hyper inflation, and renewed calls for President
Robert Mgabe to step down.” Unable to repay its $4.5
billion debt and struggling with an astounding
80% unemployment, Zimbabwe’s
plight eventually worsened to such an appalling degree that one informant told
CNN “most areas hadn’t had water for at
least a year.” Yale
University’s Center For The Study of Globalization
reached similar conclusions back in 2005, dubbing Zimbabwe “the world’s fastest
shrinking economy.”
Ecuador’s Six Bankruptcies
Ecuador is another nation
unfortunate enough to have gone bankrupt twice in its history. In fact,
according to Bloomberg,
Ecuador’s announcement that
it would default on $30 billion in interest payments was the second such
announcement in this decade alone. Addressing the world with defiance and
self-righteousness, Ecuadorean President Rafael Correa flatly stated “I have given the order that interest
payments not be made. The country is in default.” Arturo Porzecanski, an international finance professor at American University
in Washington, spoke for much of the
international community (and certainly Ecuador’s creditors) by calling the
country a “serial defaulter.” “A lot of other countries have had one or two
defaults”, Porzecanski explains, “but Ecuador tops
them all.” All told, the South American
country has gone bankrupt six times since its 1830 separation from Gran Colombia.
France’s Many Bankruptcies
In an article
entitled Can European Countries Really Go Bankrupt?, the San Francisco Sentinel
uses pre-twentieth century France
as an object lesson. As the Sentinel reminds us, “France became
insolvent eight times” between 1500 and 1800. While it is tempting to
dismiss such long-ago events as irrelevant to modern considerations, we should
remember France’s
place in the world during those times. Because the United
States either did not exist or was still forming from 1500-1800,
France (along with England) was
one of the world’s foremost superpowers. Indeed, it was largely France’s
exorbitant financial support for the American War of Independence that made the
country “so deeply in debt as to be effectively bankrupt” in the late 1700′s,
according toWikipedia
New
Zealand’s 1950 Bankruptcy
New
Zealand sold off most of its state owned assets, electricity and
communications, to pay its foreign debt.
After America’s
Bankruptcy
I have given all these
examples to show that a Nation can go bankrupt.
But I also show that it can come out of it and sometimes better off and
in every case a new and improved government.
All have the same cause, governments that got to big.
If we do go bankrupt but
have a socialist government at the time, it will nationalize everything and
things will get worse. If we go bankrupt
with capitalists in power, we will have pain but will come back quickly and
will be stronger and better off.
What all of us have to
worry about is the value of the America Dollar after a bankruptcy. Considering
that Europe will also go bankrupt, I cannot
answer that question.