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My friend Fr. John Rausch is a good guy who truly wants to help those unable or unwilling to help themselves. The problem arises, as it does with many of the clergy of all denominations, when he tries to define “help”.
He gives a good example of this problem in the enclosed article when he says that, “People of faith recognize all wealth has a social mortgage, a lien that is payable to the common good. Only appropriate tax laws, and not simply voluntary actions, will promote justice for the least in society.” He is actually preaching against the gospels when he advocates government confiscation of wealth (taxation) from the people who make our economy work to “help” the least in society by welfare programs. His approach would actually lower the level of prosperity for everyone in our country by increasing taxation (a job killer) and by removing the incentive for entrepreneurs to take the risk involved in starting or expanding enterprises that provide jobs.
Christ never advocated a role for government in helping the poor, in fact he told us “to give to Caesar what is Caesar’s and to God what is God’s”. Christ’s beatitudes challenged each of us to help the poor and to show them God’s love, not to subcontract caring for the poor to government. He never said that having our earnings confiscated by Caesar was an act of charity, nor did he say that government welfare would show the poor the love of God.
That said, I believe that government is actually reducing the help for the poor two ways. First, the number of government social programs, which the clergy of many churches lobby for, send a message to individuals that their personal charity is not needed. Food for the poor – there is “Food Stamps”. Shelter for the poor – there is government housing. Help for the disabled – there is Social Security disability. Who needs individual charity that shows others love and the love of God when godless government programs are there to help. And the role of the clergy in advocating for government programs sends a silent message that charity by churches and individuals is not the way to go.
I never saw the love of God in a government program, and I am pretty sure I won’t see any love in the 2,000 plus pages of legislation for Obamacare and the 4,000 pages of regulations in six months that will grow to tens of thousands that will result.
I am proud of our little church. We give over 10% of the annual budget to the poor in cash assistance and more in in-kind assistance of food, clothing, and other aid that is not accounted for. And, we let people know we love them and so does God. When the government has a program that does that, I’ll reconsider my position.
We Need Fewer Billionaires
by Fr. John S. Rausch
Last August 40 U.S. billionaires pledged to give at least half of their wealth to charity during their lifetime or after death. The campaign called “The Giving Pledge,” was launched by Warren Buffett and Bill Gates to inspire more and smarter philanthropy for the future. Many non-profits hurt by the current recession would gladly receive these private stimulus funds to continue their work with education, the environment, health and the arts. However, what seems like an unruffled gesture of giving, actually hides a few wrinkles: some of this money could be forthcoming, but much could take years to distribute.
The whole plan depends on convincing individual billionaires to join the campaign. Buffett and Gates together phoned 70 to 80 of America’s wealthiest individuals to recruit their total of 40. Some who declined to sign the pledge preferred to keep their philanthropy anonymous, though a stronger popular witness might have encouraged more reluctant folks to join the pledgers. Some were unavailable to talk and some were just plain uninterested. While 40 pledges appear newsworthy, Forbes magazine lists 403 U.S. billionaires in its March, 2010 issue.
In reviewing the list of pledgers, Stacy Palmer, editor of The Chronicle of Philanthropy, noted that many of the names are people who are already known for their giving. She hopes the witness of the 40 billionaires will influence millionaires and people of even lesser means to share a portion of their wealth.
Finally, with the voluntary nature of the campaign, Pablo Eisenberg of Georgetown University asks whether the money will benefit those most in need in our society. Eisenberg notes that the wealthy tend to donate to the larger institutions, such as universities, hospitals and the arts, rather than to small non-profits that house the homeless, counsel the addicted and socialize released prisoners. Accountability for the common good, not promoting a pet project, should be the moral consideration when evaluating the plan.
With a total of only 1,011 billionaires in the world, society stands in awe of them. Yet, not everyone invented a better mousetrap. Most billionaires attained their status through finance, insurance or real estate, through building an expansive conglomerate or exploiting new technology. They knew how to work the system, manipulate finances and cut deals to the disadvantage of their competitors–many times legally–but still as an exercise of power in the marketplace. By creating billionaires, neo-liberal policies concentrated wealth in the hands of fewer people contributing to the deepening of inequality in society.
Robert Reich, former Secretary of Labor, attributes much of the structural reason for the current “Great Recession” less to debt than to inequality. In 1928 the richest 1 percent of Americans received 23.9 percent of the nation’s total income. During the era of prosperity following WW II–with the G.I. Bill, rising wages and union power–the top 1 percent received only 8 to 9 percent of the national income by the late 1970s. However, in the past 30 years stagnant wages caused by dismantling workers’ bargaining power, globalization, deregulation and privatization together with tax breaks for the wealthy moved the richest 1 percent back to 23.5 percent of the national income. Too much concentration for the wealthy means too little purchasing power for the rest to buy what the economy is capable of producing, i.e. less demand means fewer new jobs.
People of faith recognize all wealth has a social mortgage, a lien that is payable to the common good. Only appropriate tax laws, and not simply voluntary actions, will promote justice for the least in society.
Thomas Sowell is one of the nation’s most thoughtful writers. This reflection on the “Duty to Die” speaks to the “values clarification" that has flourished in many of our colleges and universities in the last several decades and questions the value of this contribution of academia …
One fashionable notion among some of the intelligentsia is that old people have "a duty to die," rather than become a burden to others.
This is more than just an idea discussed around a seminar table. Already Britain’s government-run medical system is restricting what medications or treatments it will authorize for the elderly. It seems almost certain that similar attempts to contain runaway costs will lead to similar policies when US medical care is taken over by the government.
Make no mistake: Letting old people die is a lot cheaper than spending the kind of money required to keep them alive and well. If a government-run medical system is going to save any serious amount of money, it is almost certain to do so by sacrificing the elderly.
There was a time when some desperately poor societies had to abandon old people to their fate, because there was just not enough margin for everyone to survive. Sometimes the elderly would simply go off to face their fate alone.
But is that where we are today?
Talk about "a duty to die" made me think back to my early childhood in the South, during the Great Depression. One day, I was told that an older lady — a relative — was going to come and stay with us for a while, and I was told how to be polite and considerate toward her.
"Aunt" Nance Ann had no home of her own. But she moved around from relative to relative, not spending enough time in any one home to be a real burden.
At that time, we didn’t have things like electricity or central heating or hot running water. But we had a roof over our heads and food on the table — and Aunt Nance Ann was welcome to both.
Poor as we were, I never heard anybody say, or even intimate, that Aunt Nance Ann had "a duty to die." I only began to hear that kind of talk decades later, from educated people in an age when even most families living below poverty level owned a car and had air-conditioning.
It is today, in an age when homes have flat-paneled TVs, and most families eat in restaurants regularly or have pizzas and other meals delivered to their homes, that the elites — rather than the masses — have begun talking about "a duty to die."
Back in the days of Aunt Nance Ann, nobody in our family had ever gone to college. Indeed, none had gone beyond elementary school. Apparently you need a lot of expensive education, sometimes including courses on ethics, before you can start talking about "a duty to die."
Many years later, while going through a divorce, I told a friend that I was considering contesting child custody. She urged me not to do it. Why? Because raising a child would interfere with my career.
But my son didn’t have a career. He was just a child who needed someone. I ended up with custody of my son and, although he was not a demanding child, raising him could not help impeding my career a little. But do you just abandon a child when it is inconvenient to raise him?
The lady who gave me this advice had a degree from the Harvard Law School. She had more years of education than my whole family had, back in the days of Aunt Nance Ann.
Much of what is taught in our schools and colleges today seeks to break down traditional values, and replace them with more fancy and fashionable notions, of which "a duty to die" is just one.
These efforts used to be called "values clarification," though the name has changed over the years, as more and more parents caught on to what was going on and objected. The values that supposedly needed "clarification" had been clear enough to last for generations and nobody asked the schools and colleges for this "clarification."
Nor are we better people because of it.
By Kelly O’Connell Sunday, May 16, 2010
We live in times of rank, unchallenged errors of thought forcefully expressed in print and spoken word. Political movements, in particular, traffic in purposeful verbal trickery. In fact, some especially depend upon fallacies to drive their message since their essential convictions are defective or even diseased. Such groups as the Nazis, Fascists and Communists immediately spring to mind here.
Barack Obama peppers his rhetoric with a veritable buffet of verbal trickery. But why? If Obamatons are correct, and Barack is one of history’s great speakers, why must he use cheap rhetorical tricks to win support? The answer is Obama offers ideas which, on their face, are either counter-intuitive, or false to the average listener. Speakers do not mislead unless they sense an inability to otherwise persuade their audience. Therefore Barack needs extra help to persuade. What other explanation can there be for such incongruent methods?
Obama supporters, aka Obamatons, have created a human ocean of fallacies to buoy their leader, threatening to engulf the globe in a terrifying flood of logical errors. The following is a short list of some of the most persistent members of this false-argument tsunami.
A fallacy is generally an error in reasoning. Fallacies are common, yet fraudulent arguments. The most popular are mistakes that occur when people don’t think clearly. The most typically used have given names to aid in their detection. Certainly, we all tend to use fallacious thinking daily. But for important topics, such as politics, religion, and law it is imperative we do not employ these flawed logical structures as we will end up with unacceptable results.
The following fallacies are employed by Obama, his administration and his rabble of fervent and often intellectually challenged fans.
This fallacy claims if someone is “morally pure,” or has the “right” motivations, then their actions cannot be questioned.
Example: Obama claims his foreign policy is better received and more effective because it is not “arrogant.” Further, he implies both his economic policies and health care plans will succeed because they are not based upon “greed,” but instead on altruism, as the wealthier are forced to share with the less afluent.
Analysis: Obama repeatedly employs the fallacy of Self-Righteousness (perhaps a logical result of his apparent embrace of a semi-messianic self-identity). Describing Obama as the furthest thing from pure, former House member Dick Armey summed him up, saying, “You’re intellectually shallow. You’re a romantic. You’re self-indulgent. You have no ability.” He added Obama was “…the most incompetent president perhaps in our lifetime.”
2. You’re Another (Tu Quoque)
Here’s the famed “you too” fallacy, which states an action is acceptable simply because another person has previously performed it.
Example: When Obama began ramping up giant deficits, and was criticized for profligacy, his followers defended him with statements like, “Bush started the deficits!” Or, “It’s OK for the last administration to do this, but not Obama’s?”
Analysis: Clearly, if Bush’s deficits were a problem, it was because such spending is irresponsible, not simply because it was W. doing them. So, if Obama quadrupled Bush’s deficits, he has fourfold culpability under the same analysis. If this dynamic is not true, imagine another example. For instance, what if Wendy’s restaurant argued they had a right to put four times the amount of cyanide in their burgers, since it was discovered a madman at McDonald’s was doing the same. This argument is utter nonsense.
3. Personal Attack (Ad Hominem)
This fallacy is committed when a person is insulted for delivering criticism.
Example: After broadcaster Rush Limbaugh launches a blistering attack upon Obama, claiming his actions were “socialist,” Obama asks a friend to respond. US Senator Al Franken officially replies, pointing out that claim is wrong because… “Rush Limbaugh is a Big, Fat Idiot.”
Analysis: Even the most ponderous commentators can deliver accurate critiques of politicians. Further, doing counter-commentary like explaining Sarah Palin is a transparent “moron,” or that Dick Cheney is clearly “evil” is not so much a way of sharing genuine information, as a manner of circling the wagons against officially denoted enemies to destroy them. It’s a tribal response designed as a defensive maneuver.
4. Damning the Origin (Consider the Source)
Damning the Origin is an Ad Hominem fallacy claiming defective sources cannot express truth.
Example: When FOX’s Bret Baier gave Barack a tough interview on Obamacare, badly exposing a lack of answers, the left erupted in fury over FOX’s bias and Baier’s “lack of decorum” and “rudeness.”
Analysis: Even a broken clock is right twice a day. If only “perfect” people were allowed to speak, all communication would cease. This defensive fallacy is lately applied to Obama’s “enemies.” The belief that comments by such monsters as Glenn Beck or religious believers, etc must be dismissed out-of-hand is absurd. After all, if cogent criticism of liberalism is articulated, it probably won’t be by the left.
5. The “Good Reason”
The “Good Reason” is a fallacy where something unacceptable is made agreeable after substituting a “good reason” in place of the actual purpose for which the thing was done.
Example: When Obama canceled America’s promised Polish missile shield, he claimed he “…supports deploying a missile-defense system when the technology is proved to be workable.” And when the DC School Voucher Program was stopped, Barack said it was because of “funding.”
Analysis: Question: Is it possible Obama really canceled missiles to curry Russian favor at the cost of the Poles? Or, could he have blocked vouchers to please the teachers unions to the disadvantage of DC kids? The Good Reason tactic is used often by Obama. Any administration priming the policy pump by arguing “No crisis should be wasted” must be watched with an eagle’s eye.
6. Appeal to Pity (Argumentum ad Misericordiam)
This fallacy is another Special Pleading argument, stating pitiable groups should receive unique status and ala cart rules.
Example: Those pushing Obamacare argue the poor must be put on equal footing with the wealthy in health care choice since they lack funds. Further, it’s claimed making the rich pay for them is a morally enlightened choice.
Analysis: To argue the poor deserve more wealth, simply by virtue of their penury, creates a de facto socialist state.
7. Condemnation of Hypocrisy
A fascinating error which is again Special Pleading, is the Fallacy of Condemning Hypocrisy. This error claims the worst and maybe only moral failure is claiming to stand for a rule, then violating it.
Example: Barney Frank mounts the House floor podium, harshly condemning Larry “Wide-Stance” Craig for opposing gay marriage while practicing homosexuality. Later, when criticized for allowing a gay brothel in his DC townhouse, he states, “Let me be Frank, I’ve never lied about my orientation.”
Analysis: Hypocrisy is not the only crime in the universe. Marxist Saul Alinsky’s book, Rules For Radicals, states, “Make the enemy live up to their own book of rules.” While socialists may only want others to live transparently moral lives, all people are under the same expectation.
8. Appeal to Anger
This fallacy suggests anyone truly angry over a subject must be correct, or they couldn’t have become furious.
Example: Incensed opponents of Bush’s decision to invade Iraq, after WMD’s were not discovered, met and shouted, “Bush Lied & People Fried!” Then, when Obama was elected, war protesters decamped despite him not keeping promises on ejecting Iraq troops, closing Guantanamo and increasing efforts in Afghanistan.
Analysis: Anger, no matter how artfully expressed, is not argument. Fury is no proof the person expressing it is correct in their position. The left believes secularized holy anger is a great purifier of debates. This is an example of the Fallacy of Emotivism, claiming emotions are a signpost for truth.
9. Purified Opinion (Appeal to Political Correctness)
A fascinating recent Western development is the rise of Political Correctness (PC). Generally, PC contains a number of formerly verboten activities and groups; having gone from rejection, to protected, and now morphed into representing unassailable truth.
Example: An obese, vegetarian, Marxist lesbian boasting a peace-sign prison tattoo flips-off Conservative war hero Juan McCrane as his motorcade flies past her electricity-free commune cobbled together from recycled milk jugs and egg-crates. Officer Duerite observes, arresting her for public indecency, transporting her back to jail. But boss Chief Brawnoz insists she be released without charge.
Analysis: Under the PC umbrella lie many subgroups and arguments. Since each different group, set of beliefs, or practices must be defended upon its own merits, PC is a logical fallacy (based on the Compound Question fallacy and also an inversion of the Cultural Bias fallacy. The latter is the flawed instinct to rate one’s cultural practices as universal truths).
The very phrase “Politically Correct,” first used by Chairman Mao, is an oxymoron. “Political” doctrines are prima facie open for debate; to suggest any are “correct,” or beyond dispute, is a self-abnegating contradiction. Only a one-party system can accommodate such a theory. PC’s Marxist origins, from the Frankfurt School, are well documented, as are its goal of sowing chaos and disorder into society.
10. After This, Therefore Because of This (Post Hoc, Ergo Propter Hoc)
This fallacy says that a second event occurring after a first event must be caused by the first.
Example: Obama has pointed out how now, after his Stimulus was passed, we are finally ending the recession.
Analysis: The Stimulus is a near-billion dollar job creation bill. Despite misspent funds, no strategic plan, and a many-years spending schedule, Obamatons claim all current economic recovery is Stimulus-derived. But classical economics states such “stimulus” does more harm than good. The “Rooster Fallacy” applies here, which credits the rooster’s crow for the rising of the sun.
What happened to America’s former superbly-trained intellectual class, once patriotic and reflexively intelligent? That generation is gone, their dull replacements a zombie army of unthinking leftists simply following State command. The US is battling the debilitating effects of John Dewey’s humanistic, socialist educational vision. Dewey’s theory dismembered our once world-class, Puritan-derived pedagogy, now devolved into simple inculcation of youth in Political Correctness, instead of the classics.
We are in the fight of our lives for our future. Caught between Obama’s deranged, self-righteous socialist phantasm versus the fading glory of our freedom-boasting past, we must commit to protecting and reviving ourselves via education and political advocacy. We must purchase books on logic, philosophy, politics, history, rhetoric, law, religion, the Constitution, the Founders, and others to gain the intellectual firepower necessary to battle back and regain control of our wildly-careening country.
To paraphrase Karl Marx: America, we have nothing to lose but our chains of ignorance. We have a world to win. Patriotic People of America, Unite!
Fallacy the Counterfeit of Argument, by W. Ward & Holther, W. B. Fearnside
Improving Your Reasoning, by Alex C. Michalos
Bryan Rich of the Weiss organization also has some interesting insights into international economics. In this column he postulates that Japan may race England to be the next big problem that the world economy must worry about …
Japan: The Sleeping Sovereign Debt Giant
by Bryan Rich
Over the course of this year in my Money and Markets columns I’ve presented some compelling reasons why the euro zone and the euro were in for a life threatening crisis. And despite the general consensus along the way that the problems in Greece were contained and that dips in the euro should be bought, I maintained that the euro was in a no-win situation.
Then last week, I suggested that because of the systemic threats represented by the PIIGS countries, Germany and the ECB had no choice but to go all-in to try to save the monetary union.
And last weekend, that’s exactly what they did!
They went all-in, throwing massive funds and dangerous guarantees at the problems, and printing money to support it.
Make no mistake. This is not a bailout. A bailout implies that their response is a problem solver. Not so. Their response is a desperate attempt to stabilize what was clear to European officials … a death spiral of the 11-year old European monetary union.
So what’s next?
One thing is for certain: The sovereign debt crisis will not stop in its tracks.
With the rule book in Europe thrown out like last week’s fish, the euro is in devaluation mode and so is the debt of all euro members. When it’s all said and done, likely years from now, the euro may exist in name, but it will be composed of different members and different rules … i.e. a new currency with an old name.
Now, the focus turns to the UK, the holder of the biggest budget deficit of the G-7 world and the most rapidly deteriorating debt load since the financial crisis of 2008 unraveled.
But I’ve already warned about the UK as the next wobbly domino.
Today, I want to go into more detail about the country that could prove to be the BIGGEST domino to fall … with a gigantic global quake.
Japan, in Trouble …
Take a look at the table below. Notice the aggressive growth of debt across nine advanced countries since the financial crisis and global recession set-in. Also notice which country holds the most government debt in the world. By far — it’s Japan.
In looking at this table, it’s no secret how important it is for leadership in these countries to demonstrate a credible plan to reduce deficits and growing debt loads. All of which was a result of their massive policy responses to the near global depression.
The key word in the above paragraph is "credible." That’s where Japan falls short.
The Bank of International Settlements (BIS) said in a recent report on the growing debt problems,
"As frightening as it is to consider public debt increasing to more than 100 percent of GDP, an even greater danger arises from a rapidly ageing population."
And within that statement are two of the three fundamentals in the Japanese economy that have it between a rock and a hard place, making a fix hard to imagine.
Fundamental Problem #1—
Declining Savings Rate
As I showed you earlier, Japan is approaching 200 percent of GDP … double what the BIS considers frightening. Moreover the BIS projects, under its best case scenario, that debt could shoot up to more than 400 percent by 2040.
So how will Japan finance it?
Now, here’s where Japan runs into trouble …
Japan has historically been a nation of savers. The savings rate in the 80s and early 90s had been steadily over 10 percent, higher than any other developed country. That has allowed the Japanese government to sell nearly all of its bonds to its citizens and institutions … to the tune of 94 percent of total outstanding public debt.
But since the economy in Japan went into stagnation in the 90s and given that interest rates for 15 years have hovered around zero, the savings attitudes in Japan have shifted. In fact, the savings rate is now lower than in the U.S. — a nation considered grossly addicted to spending, not saving.
Here’s the chart on personal savings in Japan …
Now, look at the next chart, and you’ll see …
Fundamental Problem #2—
While savings rates have been declining, so has the population in Japan, putting more pressure on the absolute quantity of savings. And it’s only expected to get worse. The projection for Japan’s population shows a big fall over the coming decades due to its ageing demographic.
And finally there’s …
Fundamental Problem #3—
Non-Competitive Interest Rates
With debt expected to keep growing and revenues and savings expected to decline, Japan will have to turn to the international markets to find buyers of its debt to keep its economy breathing.
But there’s a problem with that scenario: Japan’s interest rates don’t remotely match the risk!
Japan’s 10-year debt pays just 1.3 percent. Apparently that was enough for loyal Japanese investors. But that won’t cut it for attracting international capital. Debt in other competitive advanced economies, like Europe and the U.S. are in the 3 percent to 4 percent range right now.
So what’s Japan’s ticket out?
A Currency and Debt Devaluation
As I said last week, financial crises and sovereign debt crises typically go hand in hand. As do sovereign debt crises and currency devaluations.
In a world where debt has grown dramatically across the globe and economies remain fragile and vulnerable, we’re entering a period where countries will begin competing to weaken their currencies.
Europe is already underway by weakening the euro. The UK is likely next. And then, given the fundamental outlook I just laid out for you, Japan’s yen could be in for a huge plunge.
As for the dollar, the U.S. faces all of the vulnerabilities from bloated debt and deficits. But in a world crisis, capital has to flow somewhere, and that will keep U.S. debt in demand … and the dollar too.
The IMF has published a report on the deficits of difference countries in terms of their GDP. The numbers show that the US is right up there with the worst managed countries in the world – Japan, Italy, and Greece in terms of the debt it owes in terms of the size of its economy. The analysis is scary because of the inexperience of America’s President and the tax and spend ideology of the Democrat majority in Congress.
Earlier this week, the Bank of England Governor, Mervyn King, irked US authorities by pointing out that even the world’s economic superpower has a major fiscal problem –“even the United States, the world’s largest economy, has a very large fiscal deficit” were his words. They were rather vague, but by happy coincidence the International Monetary Fund has chosen to flesh out the issue today. Unfortunately this is a rather long post with a few chunky tables, but it is worth spending a bit of time with – the IMF analysis is fascinating.
Its cross-country Fiscal Monitor is not easy reading and is a VERY big pdf (17mb), so I’ve collected a few of the key points. The idea behind the document is to set out how much different countries around the world need to cut their deficits by in the next few years, and the bottom line is it’s going to be big and hard (ie 8.7pc of GDP in deficit cuts around the world, which works out at, gulp, about $4 trillion).
But the really interesting stuff is the detail, and what leaps out again and again is how much of a hill the US has to climb. Exhibit a is the fact that under the Obama administration’s current fiscal plans, the national debt in the US (on a gross basis) will climb to above 100pc of GDP by 2015 – a far steeper increase than almost any other country.
US gross debt as a percentage of GDP
Compare it with the UK, which is often pinpointed as a Greece in the making. As you can see, gross debt increases sharply, but not by anything like the same degree.
UK gross debt as a percentage of GDP
Another issue is that, according to the IMF, the cost of extra healthcare and pensions will increase by a further 5.8pc over the next 20 years. This is the biggest increase of any other country in the G20 apart from Russia, and comes despite America having far more favourable demographics. It is significantly more than the UK’s 4.2pc.
But level of debt isn’t the only problem. Then there’s the fact that the US has a far shorter maturity of government debt than most other countries, meaning that even if it weren’t borrowing any extra cash it would have to issue a large chunk of new stuff each year as things are. The killer table to show you that is this one, which shows a country’s “gross financing needs” – in other words how much debt it has to issue in the coming years to keep itself functioning.
Click to enlarge
Britain, as you can see from the second column on the left, has one of the biggest deficits in the world. However, because it also has the longest maturity of average debt in the world (far right column), and so doesn’t have to issue as much new debt each year just to keep rolling that stuff over, its gross financing needs are – at 32.2pc of GDP, way bigger than Britain’s, at 20pc. Come to think of it, it’s actually worse than Greece on this measure.
What does this mean? Basically with a large financing need, you are particularly vulnerable if the market suddenly decides it doesn’t want your debt, since those extra interest rates they charge you mount much more quickly. Japan, by the way, is the one with a real problem on this front. It could hardly be any more vulnerable to a sudden drop in investor demand, and many over there fear that the moment domestic savers stop buying JGBs, the country is doomed to Greek-style collapse (though it doesn’t share Greece’s current account deficit and, crucially, has its own currency, so I don’t know about that).
On the flip side, unlike Japan or Britain, the US does not have a central bank with quite such a large stock of government debt. Both the Bank of England and Bank of Japan have done so much quantitative easing (buying bonds with printed money) over the past few years that they have the power to cause a fiscal shock if they decided they wanted to sell off their bonds at once. This table shows you that America, while not entirely guiltless on this front, has less of a shadow hanging over it.
Click to enlarge
But all of the above is what explains why the US, according to the IMF’s projections, has more to do than any other country in the developed world (apart from Japan) when it comes to bringing its debt back towards sustainable levels. Here’s the killer table. The column to look at is on the far right: note how the US needs a 12pc of GDP chunk chopped out of its structural deficit (ie adjusted for the economic cycle). That’s $1.7 trillion. Wow – that’s not far off Britain’s total annual economic output.
So does all of this mean the US is Greece? The answer, you might be surprised to hear, is no. Now, it is true that the US has some similar issues to Greece – the high debt, the need to roll over quite a lot of debt each year, the rising healthcare costs and so on. But it has two secret (or not so secret) weapons. The first is that unlike Greece it is not trapped in a monetary union. The US, like Britain and Japan, can independently control its monetary policy; it can devalue its currency. These are hardly solutions in and of themselves, but they do help make the adjustment a lot easier and more gradual. Second, the US has growth. It remains one of, if not the, world’s most dynamic economies. It is growing at a snappy pace this year (in comparison to other countries). And a few percentage points of GDP make an immense difference, since they make those debts much easier to repay.
Finally, some might be tempted at this point to cite the fact that the US has the world’s reserve currency in the dollar as another bonus. I am less sure. There is no doubt that this has made the US a safe haven destination (people buy US bonds when freaked out about more or less anything), and has meant that America has been able to keep borrowing at low levels throughout the crisis. However, the flip side of this is that because it has yet to feel the market strain, the US also has yet to face up properly to the public finance disaster that could befall it if it does not do anything about the problem. America is not Greece, but if it does not start making efforts to cut the deficit within a few years, it will head in that direction. The upshot wouldn’t be an IMF bail-out, but a collapse in the dollar and possible hyperinflation in the US, but it would be horrific all the same. America has time, but not forever.
Dick Gibson has posted some useful information on offshore oil exploration that makes you wonder about the intelligence or honesty of both of politicians who want to ban oil production off the shores of the U.S. Are they just dumb, or are they on the take from the Middle East countries … or both?
Answers to questions about production in the Gulf of Mexico in the wake of the BP well blowout.
all of the oil that comes from the Gulf (the US sector) is used in the US. Much of that which comes from the Mexican sector is also used in the US. Except for 20,000-60,000 barrels per day that goes to Canada (exports of convenience, from fields near Canadian refineries), all US-produced crude oil is used in the US.
The offshore, including the Gulf of Mexico, California, and Alaska, produces 37% of all the oil the U.S. produces – more than the state of Texas, more than Alaska, more than Louisiana. The total amount (Dec. 2009) is 2,025,000 barrels per day out of 5,460,000 total US production. Of that offshore total (2,025,000 b/d) 60,000 barrels comes from Federal waters offshore CA and Alaska, an additional 230,000 barrels per day comes from state waters offshore CA and AK, and all the rest (1,734,000 barrels per day) comes from the Gulf of Mexico. 19,000 barrels of that is from the state waters of Louisiana and TX, and the rest is from the Federal waters of the Gulf.
So the total percentage of US oil that comes from the offshore Gulf of Mexico is just under 32%.
Mexico’s production totals 3,200,000 barrels per day (2008) and 80% of that (2,560,000 b/d) is from the offshore Gulf of Mexico. It is not possible to specify exactly where in Mexico our imports come from, but US crude oil imports from Mexico total 996,000 b/d (Feb 2010) and it’s likely that most of that is from the Gulf.
Hello – this page http://oceanexplorer.noaa.gov/explorations/06mexico/background/oil/oil.html shows a figure with locations of 3858 platforms in the US Gulf. Each platform would support multiple individual wells, sometimes as many as 20 or more.
According to World Oil (Feb 2010 issue) at the end of 2009 there were 2237 oil wells in the Federal waters of the Gulf (down 418 from 2008) and 242 in the state waters of Louisiana.
I cannot find specifics for offshore state waters of Texas, Alabama, Mississippi, and Florida, but it is probably close to 1500 for Texas and a few hundred at most for the other states offshore.
In addition, there were 1850 producing natural gas wells in the Federal waters (down 603 from 2008) and 141 in the Louisiana state waters. Guessing several hundred to a few thousand in the other state waters.
There’s more good stuff at –