BPO Elite Blog Post #2 – A recent conversation

The article suprised me.

http://finance.yahoo.com/news/biggest-holders-of-us-gov-t-debt.html

You hear so much in the news about how we owe so much debt to China. However no one ever seems to talk about the full picture. Its more sensational to just point the finger to China. Nothing like subtle racism and xenophobia to fuel an election campaign. The best thing about this article though is the conversation it started between myself and two friends. All smart and worldy men who are well read and articulate… wouldnt it be amazing if the Presdential debates actaully sounded something like the following and not a bunch of canned responses crafted to mislead and misinform?

TW: Also, If we Americans just stop selling most of our properties away, then we don’t get China or Japan owning our Country… So I’m all for getting rid of “Walmart” ….hahahaha

MH: The Fed is a privately held company,not a public institution. They purchased long term treasuries to keep interest rates low (Operation TWIST). China is the largest owner of US debt; the majority are short term (< 2 year durations). Selling our properties? We keep borrowing from them so they have a claim to us, that simple – lets wake up and stop pointing fingers when we’re the ones who continue to borrow.

TW: Unfortunately the only reason we borrow is because our dumb government can’t cut back on the spending it does. Weather it is in entitlement programs or anything they decide is a means to get a vote. Our govt. should at this point be spendin…g only 80% of what it takes in, save 10%, and use 10% to pay down the debt. Or something like that. The problem is they want to spend on projects so they need to raise taxes to do it which kills our ability to boost the economy. Cut useless and redundant programs, reduce the entitlements, reduce the number of govt. employees, figure out what the govt must provide and cut the rest of the crap. Then we wouldn’t have to borrow so much to begin with and you can’t spend your way out of debt.

MH:  Unfortunately it’s not as simple as cutting expenses and/or raising taxes. We have over 220 trillion in debt an unfunded liabilities…simple finance: we can never pay that back. Ever. In every view from a basic business analytic standpoint… we’re bankrupt and we’ve technically defaulted every single time we’ve raised the debt ceiling. The only thing that’s keeping us chugging along is we’re the reserve currency. That’s already going away as countries are moving to non-dollar transactions like baskets of currency or, you guessed it, Gold.

TW: you are correct that it isn’t that simple but you have to start somewhere. We know the monetary system and our banking system is nothing more that a ponzi scheme. Do you deal in gold?

MH :we continue to think that the US is going to endure as-is forever. This is not the case; all empires are born, grow, decline and some go away. We’ve just decided to accelerate our change. If you don’t think this is the case, remember t…hat the British Sterling was the reserve currency for over a century before we took it over…as for empires, Rome, Egypt, Africa – they’re all shells of their former selves. Things are already changing and we should just accept. As for Gold, yes, I have over a third of my portfolio in precious metals and have been buying since ’06. for transactions i convert it to US dollars.

Dan Meyer: I’m enough of an irrational optimist to think America isn’t done for yet. The data says we are in what appears to be an irreversible decline, but the data is missing one key element… Faith. I still cling to faith that America stills stand…s for things that no other country in the history of mankind stands for. And that fuels the faith behind my irrational optimism. This post as served its purpose.., it’s made all of us reflect a little more than we may have without it.

TW: I personally don’t believe we should just accept decline. The rest of the world isn’t exactly in a position to de-throne the US so to speak. China has enough political turmoil and isn’t exactly financially in the greatest position, Europe i…s having enough problems themselves. I believe if we as a country can effect enough change from the way we have been going and keep doing things that truly make sense we can resurrect this titanic but if our elected leaders keep doing the same thing with a different name or face then yes the band will just keep playing while the ship sinks. I also deal with gold which is why I asked. Dore gold out of Ghana and various bullion sellers and buyers.

MH: that’s the kind of mentality that keeps us from adjusting. The “pull ourselves up by our bootstraps” and “we can innovate ourselves out of a mess” or something of the same nature. Nowhere do i see that anyone has “written off” the US, …all i mentioned is that we’re changing. I’m all for positive outlook on things. Yet,  from an entirely objective standpoint we cannot choose to remain a superpower: others choose that now. We can not prevent China from dumping all of that debt causing an immediate jump in borrowing costs. We can not prevent oil from reaching $150/bbl. We can not use the world’s resources for x amount of dollars while other countries are locking in multi-decade deals to secure lines of energy… I would recommend actually using our expertise (process) and creating flexibility in our systems (personally and business) which will handle the change.

Dan Meyer I disagree. That’s the kind of mentality that had made this country different than every other one. I do agree though that our best chance of success comes from accepting reality and focusing on what we are good at. Thats my whole point… We as a nation need to wake up.

Could you imagine Romney and Gingrich and Santorum actually having a conversation like this? It sure wouldn’t make for great sound bites, but itd be amazing to get them to really talk about solving problems and not just trying to make political points.

I will continue to dream on!

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