Cartoon 664: Bargain

The best of intentions can go awry. Faust, of the Goethe novel, lamented his inabilities as a physician to mitigate the suffering during the Black Death. He reasoned that more knowledge would have made him successful. The Devil steps in and offers him great knowledge for his soul. Faust agrees.  It turns into a tragedy with only the intervention of God at the end providing salvation.

The government has used the sale of treasury bonds to fuel American growth.  The bonds represent Federal debt. The Government turned around and spread the wealth from the bond sales to business and industry. This cascaded to the individual.

Recently we find ourselves like in a riddle: “you are losing a dollar on each item sold, so sell more to make it up”. We have expanding debt, so let us increase the debt market. This was accomplished through the exotic financial vehicles proffered by Wall Street. Here is an image to help contemplate the situation.  You have a Salamander that is swallowing its tail and continues to consume ever more of itself as you watch.  You start to wonder is it metaphysically possible it will completely consume itself? This is the visage of the American economy.

The Chinese now hold the keys to the kingdom.  They are the largest holder of American debt represented by Treasury bonds. Japan had been the largest holder, but their appetite has waned.  The newspaper pointed out America is in a precarious position. It has no options on the debt, while China has options on how to effectively invest. China can redirect the spending to its own domestic interests. America will be bankrupt if the American debt is not fueled through continued sales of Treasury bonds to China [the Salamander].

China finds it is in a position to dictate American foreign and domestic policy. But savvy American politicians will make certain the general public believes Chinese initiatives were their own idea and in our best interests.