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Is American Domestic Policy Being Formulated in China?
Is American Domestic Policy Being Formulated in China?
Are Chinese politicians dictating to American President Obama what to do inside the United States? Many political observers are quietly beginning to wonder what is going on between these two former adversaries. Something has been happening quietly over the past few years, with no one paying any attention to what has been going on.
Our nation is in crisis. The federal government has been shutdown and lawmakers are showing no signs of resolving this impasse. News leaked out recently that the federal government will hit the federal debt ceiling sometime in October as opposed to December 2013. At this rate we are headed towards another fiscal crisis like the one we averted last spring. Hold on to your wallet tightly because that can only mean bad news for you.
It is interesting to note that the Chinese had steadily been buying up American Treasury Notes for the past few years, until very recently when they stopped buying these investments and have instead developed a taste for gold bullion as a means of both investment and in settling debts. This change in philosophy is noteworthy on several fronts. Not only will it impact on the level of the dollar as well as the price of gold in international currency markets, but it also raises the very real spectre that the Americans may now be somewhat disadvantaged in their trade relations with the Chinese and that China would be in a better position to dictate to the United States better terms of trade in their trading activity but conceivably in other aspects of their relationship as well.
Just what that could mean remains to be seen, but consider this.
China is clearly abandoning their support of the dollar and are hoarding gold bullion instead. China is the largest holder of US Treasury Notes in the amount of $ 1.2 trillion. With many believing that a crushing Treasury collapse is in the offing in early 2014 China will clearly be looking to dump on the open market all those Treasury Notes that they will no longer want, but nobody else will want them either. And the US treasury has no more gold to re-buy those notes, so what will ultimately happen is a further push downwards on the dollar, with an attendant increase in the interest rate in the market. A bad combination in anyone's book. to say the least.
If China insists on getting paid for their notes, the US will have little choice but to raise taxes in order to get the money to repay the Chinese or to do the unthinkable and default on those notes. This is something that no one in the international community contemplated only a few years ago, but many today are not so sure it won't happen.
So where will the money come from to repay the Chinese?
It will come from people under 30 who will be expected to pay the bill for their government's past profligate spending. The US debt at the end of Obama's term in 2016 is forecasted to be $24 trillion, up from the current $17 trillion. The "Obama Debtor Generation" as one writer has called it will experience a lower standard of living as a result of these taxes yet to be assessed. When one compares the prospects of this generation with their parents or grand parents' generation it is clear that the American dream has turned into the American Nightmare. The Obama debt cliff has taken many families off the prosperity road and put them on the depravity road as they have lost their jobs, homes, and all hope. The post Obama Debt World will be populated by the children of the Gen X'ers who have long since lost all hope for economic advancement and are pre-occupied with surviving the world that has been left to them in addition to paying for the debts of previous generations and their forefathers.
Like their government, the majority of their disposable income will go to servicing the bills of their past, with nothing left to fund current or discretionary spending.
China could throw a monkey wrench even more into this equation, if they take an aggressive stand against the Americans in demanding concessions for their debts in the event that the US cannot repay them. Just what sanctions, favours, or other considerations the Chinese could exact from the Americans in repayment of their debts is any one's guess. The moral of this story is to not leave yourself and your family exposed to the vagaries and decisions of one government, let alone two, so the only thing to do is to insulate yourself from everything that the government could do.
One such option is to do what the Chinese are doing.
Buy gold. Keep gold. Invest in gold. Preserve and protect your wealth by doing what the institutional investors are now doing. The sooner you start the sooner you will profit.
The Chinese seem to have gotten a jump start on the rest of the investing world in this regard.
Perhaps we can follow their lead and learn to protect our wealth and future.
China Embracing Private Entreprise
1. Chinese economy growing
2. Living conditions improving
3. Stable employment market
Chinese Ascendency in World Commerce
Do you think China will overatke America as a world economic power?
China Hoarding Gold
1. 235 tons in 2012 alone
2. Eliminating dollar from their invesments
3. Rising economic power
China playing dominant role
1. Dictating terms to America
2. Recommending elimination of dollar in international trade
3. Opeing up economy to other countries