1115.org

Aside from the manufactured state of fear the Bush administration has used since 9-11, the most impressive collective hallucination has been the “America first, with us or against us” mentality that has soiled just about every corner of our existence. Gone are the days of the internet making the world smaller and more cooperative, replaced by scenes of people pouring wine down drains, giving ridiculous new names to food, and economic boycotts.

While this has given cover to the administration and endless page-two stories to media outlets across this country, it obscures the fact that the United States has never been so dependent on foreign countries.

Before 9-11 we needed help from foreign governments in enforcing U.S. copyright and trademark laws against piracy. After 9-11 we need help catching terrorists and staunching the flow of their funding.

But all of that pales in comparison to the financial help we need every day and in ever increasing amounts.

The United States federal government spends $2 Billion per day. That’s 2,000,000,000. 90% of that comes from foreign governments who buy U.S. bonds. The result of all this borrowing?:

The United States’ foreign creditors hold an estimated $11 trillion in U.S. “paper,” or 43 percent of the superpower’s privately held national debt, up from 30 percent since George W. Bush became President. China, Japan and Saudi Arabia are among the biggest dollar stakeholders, and they have seen their assets fall 35 percent against the euro and 24 percent against the yen.

What would all the flag-waving red-staters think of being at the mercy of China, Japan and Saudi Arabia and their willingness to continue taking loses of 20-40% on their investments in the United States?

They didn’t get the message before the election, but the smart money says they will find out soon enough, we all will:

[Morgan Stanley chief economist Stephen] Roach’s argument is that America’s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.

The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.

Great news for everyone who financed Christmas on plastic: Higher interest rates and stagnant (or falling) wages are going to extract a heavy toll. The President’s insistence on cutting taxes and increasing spending is going to hurt more than the medicine proposed by John Kerry during the campaign, but “values” and “security” carried the day for Bush.

The problem remains: China, Japan, and Saudi Arabia don’t give a damn about our values, and are only concerned about our security to the extent that it allows them to be repaid. And they are starting to question our ability to repay:

“There is an emerging consensus that banks around the world are moving to expand their reserves of euros at the expense of dollars.”

The American people abdicated their responsibility to keep this country economically strong. Now bankers in other countries have the vote, and they are not quite as loyal to Old Glory. At some point this President or the next will have to make choices that will either satisfy the citizens of this country or financiers elsewhere. The good ol’ boys aren’t going to like that anymore than we will.