I.O.U.S.A. Excerpt #1

In the US, the concept of sacrifice and building for a better tomorrow has been pushed aside by our live-for-today, easy credit and consumption-oriented society. As many are beginning to see, low savings rates can be a problem. In healthy, productive economies (like China?), savings result in increased investment, additional R&D, a stronger overall economy, and an improvement in the average citizen’s standard of living.

Think of the central bank (Federal Reserve System or Fed) as the bank of banks – the gatekeeper of the US economy. The Fed’s two main goals are to help stimulate economic growth and to try (yes, try) to keep inflation low. The Fed has a tremendous amount of power and a monopoly control over money and credit. The chairman of the Fed is more powerful (or accorded with more power?) than even the president because he (or she) has so much control over the economy. The Fed is the key to how much money and credit is in the US economy in any given time. This is due to the fact that the US currency (with due respect) is a fiat money – in other words, it is not backed by anything tangible, and therefore it can be created out of thin air. (The Bretton Woods lasted until 1971. Since then, the US dollar is used as a faith-based currency – the global economies just assume that the dollar possess a certain value useful for international trade and transactions. No coinciding amount of tangible treasure, for example gold, is used to back the dollar.)

It is important to understand how the international money system works. In the 19th century, and up until 1971, gold was beneath the paper money floating around the world. You can’t create gold. You have to dig it out of the ground; it’s hard to get; and there’s not very much of it. But paper money (fiat money) is different. Since 1971, with no gold to back up the paper, all we have is paper. That means that you can create a lot of paper and you don’t have to connect it to gold. They’ve been creating US dollars like crazy for the last 20 years (1988 onwards) and now they’re creating them even faster. They’re not down in the Treasury Building, with a little-bitty glazier printing press, printing out bills; they’re created by electronic transaction. They can just credit a bank with money and then the bank lends out money.

The whole thing now has gotten so out of control. Too much easy credit for too long can create a false sense of wealth, as we saw in the tech and real estate bubbles.


Our whole society is in trap where it is spending more than it can afford and is transferring its assets. Foreigners end up with our money and they use the money to buy US assets, and so Americans become less and less likely to own their own property. And we’ve seen this, of course, in a very fundamental and simple way in the housing market. The average American (barely) owns half of his (or her) house. Who owns the other half? The neighborhood bank has sold the mortgage to a financial company, which probably sold it to a hedge fund. Now it’s floating somewhere in the great wide world. It may be in the hands of the Chinese financiers or London speculators (what speculators?!). It doesn’t seem fair to me (Bill Bonner) that these poor children coming into the world should come in with so much debt on their shoulders.
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I.O.U.S.A. - One Nation. Under Stress. In Debt. is written by Addison Wiggin and Kate Incontrera (2008: John Wiley & Sons, Inc., NY)
Pix source:http://www.bulldogblog.net/articles/wp-content/uploads/2009/02/money.jpg

I.O.U.S.A. Excerpt #2

Most politicians enjoy being somebody important, and the best way to do that is promise people something for nothing and not have to worry about really paying for it. Today, if we had to pay for fighting this war and financing our welfare state, there would be a tax revolt in this country because it would cost so much. But they can delay this by borrowing, by inflating. That is literally just creating money out of thin air to pay the bills and delaying the payment. When you print that money, the value of that dollar has to go down and then one of consequences of inflating the money will be higher prices (besides financial bubbles and unemployment.)

Washington wants the dollar to be worth only 5.5 yuan instead of 8 yuan. Washington thinks that this would cause US exports to China to increase, as they would be cheaper for the Chinese, and for the Chinese exports to the US to decline, as they would be more expensive. This would end the large trade deficit that the US has with China. In order to force the yuan revaluation, the US was threatening to impose trade sanctions on Chinese goods. In response, China threatened to dump its Treasury holdings – a move that would destroy the US dollar. This struck a cord with US officials who were well aware (?) that the Chinese has them over a barrel.

If a politician wants to get reelected, he’ll get reelected by giving people something. And if you have to take it from them first, it’s not a very good deal. A voter will say, “Wait a minute, you took $10 in taxes from me, and now you’re giving me back $10? That’s not a very good deal.” The politician gets the vote when he gives the person $11. And where does the politician get that other dollar? He has to borrow it from somewhere. That’s a good deal for the taxpayer. But that one dollar is now hanging over the heads of the whole society. Over time, this system of buying power and buying votes becomes institutionalized and entrenched (see, for example, http://wallstreetwatch.org/reports/part2.pdf).
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I.O.U.S.A. - One Nation. Under Stress. In Debt. is written by Addison Wiggin and Kate Incontrera (2008: John Wiley & Sons, Inc., NY)

I.O.U.S.A. Excerpt #3

In the beginning, all the Earth was America. It was just open, and it was free, and it was available. When people came to America originally, they came for a lot of personal reasons, but they came with nothing, generally, and they came expecting to find a place where they could build a life that they wanted for themselves. They didn’t ask for a government handout (entitlement?), or a subsidy, or a license. They didn’t ask for anything; they just wanted to be left alone to do their own thing. It was a place where people could come and live freely. And it meant that they were free from the burdens of centralized government.

The fundamental difference that used to separate America from the rest of the world no longer exists, and that difference was that America was a free country. The rest all had their governments, they had rigidity, structure, establishments, institutions, and these required people to be a certain way. If you were in a certain segment of a society you had to play that role but in America you could be anything you wanted.

The US is an empire of freedom. It is an empire of the human spirit where people search for opportunities. The essence of the American Dream is allowing each of us and all of us the opportunity to discover and then develop our talents to the fullest. That is what opportunity is about.
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I.O.U.S.A. - One Nation. Under Stress. In Debt. is written by Addison Wiggin and Kate Incontrera (2008: John Wiley & Sons, Inc., NY)
Pix source: http://www.imigracjadousa.com/images/usa-01.jpg