An American Saga
Let me tell you a story that's sad but true. It's a story about a country I once knew. In this the 237 year of the United States, a country who prided itself on it's citizens self reliance, economic dominance and international esteem has all but vanished in a twinkling of an eye. A tip of an enormous iceberg has surfaced once again that lays proof that the United States like the Titanic is about to sink beneath the ocean of debt, an ocean of corporate greed, an ocean of a corrupt political process and an ocean that has created the largest income disparity gap in all of history.
Like many of us baby boomers we can remember a time when the world was right at our finger tips. Many of our parents enjoyed economic and financial freedoms that today so many not only retirees but younger generations find impossible to attain. But first, let's explain what is actually happening today in America. Recently, just this past week One Chase Plaza in New York, a building of almost a city block wide, 65 stories tall, with over 35 elevators, in other words a very immense building was bought by a Chinese asset management firm. This transaction by itself is no big deal but when combined with so many other transactions just like this one that is happening all over the country a very disturbing trend is afoot right here in America.
This is a story about the massive economic forces that are behind how the United States was packaged and sold to our foreign creditors, mainly the Chinese. For the past three decades piece by piece the United States has been sold to it's bankers, inflation has plundered everyone's wages, and credit rather than savings all are today the dominate factors in our economy. Since 1996, the Chinese have made over 51 major acquisitions right here in the US. They are now poised to own and control major iconic US assets including IBM, General Motors, Smithfield Foods, AES Corporation, Morgan Stanley and The Blackstone Group among others. These corporations have been American owned since their inception. The Chinese have also bought other highly valuable real estate all around the US. They practically have holdings in every state and these deals didn't happen by accident either.
How could this happen in a country that used to pride itself of it's own resilience to foreign inventors? To explain how one foreign country has amassed so much of American industries is a lesson where political expediency, disingenuous governmental policies, and outright corporate greed over the last 35 years have literally sold out Americas heritage. The US now continues to consume far more that it produces consequently our trade deficit like our national debt is intermittently linked to astronomical heights. We have financed pretty much all our consumption with debt that is owned by foreign creditors, mainly the Chinese. When we take a close look at the US Treasury debt nearly $17 trillion, the world's largest pile of obligations, over 60% is owned by foreign creditors. And these foreign debts will only continue to grow more rapidly at a rate of over $500 billion every year.
It is this debt on these obligations that allows foreign creditors to continue to gobble up America's best assets. So today, foreign creditors directly own and control US assets worth more than $30 Trillion. On the flip side, Americans only own roughly around just under $20 trillion with each year Americas overseas assets will dwindle while foreign creditors continue scooping up more of the American pie. They will grow wealthier while we become poorer.
We have to understand and remember that back in the 1950's after World War II the United States was at the height of it's economic renaissance. We controlled over 75% of all the worlds economic activity. We owned the three most important corporations in the world: General Motors, Exxon [Standard Oil] and chase Bank [Rockefeller Bank]. Our country's products were the envy of the world. The United States literally dominated every foreign competitor in manufacturing, energy, banking, and just about ever other industry as well.
It was during this period that the United States was still on the gold standard. By international agreement our foreign creditors could exchange their dollars for gold, at the time gold was $35 per ounce. It was this firm limit on the value of the dollar that protected the middle class in America. It guaranteed that every wage earner in the economy would share in gains from increased productivity. As America expanded along came more productivity which resulted that the dollar bought more goods and services. In essence more disposable incomes all across the American landscape continued. The fulfillment of the Williams Theory of Economic Evolution was realized by the majority of Americas all across the United States.
During this time the firm value of the US dollar also protected the United States from the temptation of credit. By linking the dollar to gold expansion of credit required an increase in gold reserves. Under these rules, the supply of additional gold bullion whether it was through new production or trade limited banks ability to create new credit. This made credit very expensive and encouraged savings. It was through those savings that powered stable investment into the United states economy. Consequently during the late 50's the United States government debt actually declined. This would be the last time the total debt of the US government would ever again on an annual basis.
One of the biggest mistakes in our economy occurred in 1971. When President Nixon took the government off the gold standard in 1971 America started down that slippery slop into a tail spin of financial and economic distress. America reneged on some of it's debts to foreign creditors and banks would no longer be required to back up their loans with gold reserves. Now all the public and private credit would be backed just by Federal Reserve notes. Just think paper money now was the rule of our economy. As a result banks no longer faced any physical limit to how much credit they could extend and the US dollar no longer had any real firm value. Nothing guaranteed the real value of wages resulted. Nothing linked increases in productivity to increases in wages.
In 1971 was a turning point in productivity and the protection of the middle class from rising tide of inflation was gone for good. It actually was the start of the rising power of banks in controlling the nations economic future. Some future, the middle class has been destroyed and whatever gains in our nations productivity now benefit our creditors and not our wage earners.
It is these changes that have transformed our whole economy and the nature of capitalism itself. No longer would our economy be driven by investments fueled by savings. Instead, our economy is funded by debt. Debt of every kind has soared that includes student loans as well. Measured in inflation adjusted dollars the United States total debt has increased by more that $65 trillion dollars since the early 1960's. As a nation we have become delusional into thinking that credit fueled booms equate to prosperity. A very false assumption, and a very devastating one. As with a credit based economy today it must be repaid with interest. The cost of servicing our debts has become so large that our creditors now routinely buy our country's best assets using the debt-service payments we send abroad.
And, so it goes, America has become much poorer. Our ability to generate wealth as a nation has been compromised to the point well, just maybe to the point of no return. We have literally sold our sole. Is it too late for America? It just maybe.