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Unpopular Ideas

Ramblings and Digressions from out of left field, and beyond....

Location: Piedmont of Virginia, United States

All human history, and just about everything else as well, consists of a never-ending struggle against ignorance.

Tuesday, September 23, 2008

Mountains of Debt

In trying to understand a situation, it's helpful to try to find out how it got started, and at no time does this apply more than when contemplating the mountains of all kinds of debt that are piling up in the U.S., more numerous than the peaks of the Rockies.

If you were born with any sense of prudence at all, or if you had any sort of good home training, near the top on the first page of your private bible is the admonition to avoid debt of any kind and to do this religiously. This policy makes life easier all around. It might mean going without various amenities that some might even think are necessities, but if one has the fortitude to ignore the expectations of others, as time goes by, the regrets over this become more and more infrequent.

Even 30 years ago some people thought that the U.S. national debt was disgraceful. If they could only see it now! Whenever this came up a friend would say something like, "I would just like someone to tell me, who in the hell do we owe all that money to?"

From his tone I got the feeling that rarely did he get an answer. No one knew, though when I finally did some research, the answer was simply "the banks." But then a solid brick wall consisting of follow-up questions with unavailable answers would rise up between that and understanding any farther. What banks? Where and how did they pile up all that money originally? If they were to get it back, what would they do with it? Is there even that much money in all the world? Do they really think they will ever get it back anyway?

The miniseries "John Adams" that recently ran on HBO was great for shedding light on how a lot of U.S. policies got started, especially one scene in which Adams and, I believe, Thomas Jefferson, the new country's foremost thinkers, are being informed by Alexander Hamilton on how the fledgling U.S. will make it financially. Hamilton says the answer is simple. In order to gain sound financial footing and so to obtain the large sums of money necessary, they had to go into debt.

Due to your good home training, you expect two characters as sage as Adams and Jefferson to at least blink if not frown, but their expressions stay deadpan, and they keep listening with high interest while Hamilton explains why that apparently drastic and on the face of it even contradictory step is necessary. One must go into debt in order to establish a credit history so that other countries will lend them money.

I doubt that the central banks, who are undoubtedly the ones who extended to the U.S. those enormous lines of credit, ever expect to get more than a fraction of those unbelievable trillions. For one thing, the U.S. has too many guns and missiles. So they settle for taking little slices at a time, though the current Wall Street Bailout Plan looks like quite a good-sized chunk, in order to continue paying for the privilege of running up still more debt.


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