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America is Inexorably Destined to Fail

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Message Craig Harrington
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In December 2008 China's holdings of U.S. Treasury bonds increased $14.3 billion.  In spite of the collapsing U.S. economy more and more countries continued to finance our debt.  Outstanding debt holdings from November to December of 2008 grew by nearly $40 billion and now stand at just over $3.1 trillion.

Why the increase in debt holdings?      

The U.S. economy is collapsing around us, but foreign nations continue to finance our government.  The reason for this is simple.  Most of the money that the U.S. borrows from overseas eventually goes back overseas via our addiction to imported goods and commodities.  Our dependence on foreign-made products transfers over $800 billion out of our economy every year.  It is a totally responsible investment for a country like China or Japan to give the U.S. money, because we will turn around and use that money to buy their products.  In essence, we borrow the money, pay the interest on it, and then end up giving it back anyway by purchasing imported goods.

This system is incredibly unproductive and unstable.  It is essentially a grand ponzi scheme on an international scale, but it gets worse.  Not only do we borrow foreign money just to purchase foreign goods, but some of the money that we send overseas every year – over $800 billion in import deficit – comes back in order to buy out our assets.  In the past eight years we have sent $4.8 trillion dollars overseas and much of that money is used to buy American companies.      

Americans in essence pay 210 percent for every dollar we borrow from overseas – 110 percent for the loan plus interest, another 100 percent to purchase foreign goods – and at the same time we finance the acquisition of our own assets by foreign interests.  The collapse of the housing market may have been the catalyst for our economic tailspin, but the American economy was gutted by this and other "free trade" practices long before the fallacy of our stock markets were exposed. 

The United States is trapped in a vicious cycle.  We need lines of credit to purchase goods, and we purchase goods for the same people who lend us our money.  We are hamstrung by our obligations to our foreign creditors and suppliers, all of whom use the American economy for their own benefit rather than our own.

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Craig Harrington is pursuing a degree in History and Political Science at The Ohio State University. He is also a journalist for EconomyInCrisis.org.
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