Huge deficits and debt rob the government of any flexibility it might have had in controlling the domestic economy. Normally, when he United States suffers a recession, the government can spend more to help get things moving again. But, Not now. The government is already spending 40% more than it takes in, and adding to that deficit will hurt, not help the economy.
Monetary policy also gets derailed by debt and deficits. Government usually tries to keep interest rates low in order to promote investment and consumption and fuel economic growth, but continually financing our large deficits will require the government to keep interest rates high enough to attract the capital, especially foreign capital, that it needs to finance its debt and deficit.
In other words, the government has already lost its ability to use fiscal policy, government spending and taxation, to keep the U.S. economy on a more-or-less even keel, and it has diminished its capital to use monetary policy, control of the money supply for the same end. What's coming next is external control, that is, other nations telling us what we may and may not do, just as the IMF now gives developing nations their marching orders. We can cure our deficit, or the countries that hold our debt will take control of our economy and cure it for us whether we like their methods or not.
Foreign countries haven't yet pressured us as hard as they might to mend our ways, because we still play a powerful, if reduced, role on the world stage as protector of the free world. Moreover, some nations, though they may publicly state otherwise, wouldn't be unhappy if the America dream collapsed and they could step in as the new, dominant world power.
Nonetheless, our allies have been lecturing us about our deficits for more than eight years. Japan points to the U.S. deficits as the cause of their trade imbalance. When our debt reached such propertion that we no longer make the interest payments due,as it will in a few months, then the holder of our debt, probably a group of nations, will dictate terms of settlement to us. We'll be in the same situation as many African countries, Suedan, Somalia, on-and-on. As recipients of IMF and World Bank support, WE have no choice but to abide by strict limitations on its fiscal and monetary behavior.
We're almost in the same fucked-up situation as Greece; the deficit ties the government hands, and ours to. HELLO! It's difficult to cut spending because DEBT INTEREST IS A VERY BIG Part of it, Okay? And we got one hellofa problem with ENTITLEMENTS!! They’re just too damned hard to reduce, as we've seen. The need for revenues makes it impossible to control inflation and as soon as they raise taxes to lower the deficit, the prices go up, not your pay, and Obama wants to tax you more.
Throughout history, the world's greatest powers, And Super-powers have been exporters of capital, as those nations became debtors, they lost their ability to influence world affairs to their on advantage. That, America, is what we're watching, it’s not a TV show played for your entertainment, you're about to start marching to that beat. I'd love for a "Liberal to defend Obama's reason for handing the rest of our financial future, and our children, grand-children, possibly our great-grandchildren future over to say China, Saudi Arabia, it's nolonger out of the scope of possibility, so while you're learning all about Sharia law and Chinese style labor colonies, hopefully you'll think back and remember, I voted for this.
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