As IF Times

link Analysis: What is Plan B if China dumps its U.S. debt? | Reuters.

This topic has been the source of hand wringing for the past decade and recently, getting more and more play.  While there is no doubt the U.S. has been profligate in its spending habits and irresponsible in ramping up total national debt, particularly the past 2 years, the fear of the Chinese dumping debt is not the issue it has been played up to be. 

While large, the entire debt holdings of the Chinese are about 9% of the outstanding amount, the vast majority still being held by domestic American holders.  At 9%, 900 billion of U.S. treasury holdings is still a large amount of course.  But the Chinese are in a precarious situation themselves.  Unless their own domestic consumption can absorb the production pushed out by their low cost factories, they themselves will be unable to sustain them.  Without the benefit of a willing consumer market like the U.S., a market like no other, the Chinese cannot sell their goods.  Only the Americans have the idiot mentality of buying something just for the sake of buying something.  It’s very catch 22.  Metaphorically, the Chinese run a bar which extends credit to it’s main frequent customer, America.  Sure the bartender can cut off credit from the patron, but they would also cut off their main customer.  What to do. 

In the case of foreign exchange, if the Chinese were to place all their export loot into their own currency rather than U.S. dollars, their currency would skyrocket, undercutting their export advantage.  As far as things are now, the Chinese are held captive by this trading dynamic.  That doesn’t mean they can’t exert influence on U.S. affairs and it is in this area that things get tricky.  We have to fully acknowledge that they are helping to maintain financing of U.S. debt at an artificially low rate.  They may not pull their support, but there may be concessions sought on tricky trade issues.  Taiwan for instance.  Sensitive technology transfers as well.   In effect, the Chinese have as much interest in selling U.S. debt as the bartender has of losing his best customer.   They are buying market share.

It’s not as if the Chinese can sell refrigerators, T.V.’s, sofas, toys, video games and jeans to anyone else in the world on the scale at which they sell to the Americans.  So the worry about debt dumping is woefully misplaced.  The real dark side of the debt bomb is when they decide to start buying U.S. assets with the money.  That’s the lurking problem.

link Deep Layoffs Take Effect In Camden « CBS Philly – News, Sports, Weather, Traffic and the Best of Philadelphia.

When attending university, one of the main tenets of logic taught is the concept of cause and effect.  While that concept can be very fuzzy in the social sciences field, in the realm of hard sciences, where results do matter, this leads to discovery and knowledge.   In fact, one of the foundations of the scientific method is the ability to replicate a result given a set of variables.  At no time in my undistinguished school career did achieving the same dismal result from the same flawed inputs garner me any academic accolades.  Quite the contrary.  If I was expected to achieve result A on an experiment, it behooved me to find variables X, Y, or Z that would lead to the desired outcome.   Continuing to input variables U, V and W would not lead to desired outcome A.  In fact it would lead to the very undesirable outcome of  D, or F.

In the real world, this logic is apparently discarded as soon as the cap and gowns are returned to the rental company.  When you observe the behaviour of people in their everyday lives for example, it is clear that for most, the logic of cause and effect has been discarded as a quaint educational relic, like cursive writing.  In the real world, people somehow lose their ability to reason with any clarity and are easily swayed by those who offer an impossible logic.  The mesmerizing allure of lottery tickets are but one example of mass delusion.  It is in the area of politics however that we find the most delusional behaviour. 

According to the linked article, the City of Camden, New Jersey is now on the verge of having to lay off police and firemen in their bid to stem their budget deficit.   Naturally, this makes headlines because in the “most crime ridden city in America”, this is incongruous.  I know nothing about Camden, New Jersey, but from all accounts of articles relating to this city, it isn’t exactly Disneyland North.  What we do discover is a pattern that seems to appear among  major cities struggling under enormous budget deficits.  That common denominator is that they are all run by governments controlled by the Democratic party.   Coincidences happen of course, like having the only lighter in a bar when Charlize Theron pulls out a cigarette.  More likely however, there is a cause and effect thing happening in the case of big deficits and Democratic governments.  Exhibit A, a list of some of the largest US cities and their accompanying deficits:

Los Angeles, budget shortfall of $408 million

Chicago, budget deficit of $655 million

Philadelphia, greater than $1 billion dollar deficit

San Francisco $380 million dollar budget deficit

Washington DC $688 million dollar deficit

New York city, $4 billion dollar deficit, not to mention an unfunded pension liability of $59 Billion!

Is it purely a coincidence that all of these cities are controlled by Democratic party governments?  I include New York because for decades, until Giuliani, it was a Democratic stronghold.  Even Bloomberg, who now casts himself as an Independent leans convincingly left.  The question is, why do they keep putting Democrats in office?  There’s ample and glaring evidence that those affiliated with the party are incapable of sound fiscal management.  They run on the same platform of Something For Nothing, or SFN (which could also mean Same Fricking Nonsense ) and people continue to believe them.  The price paid for them getting into office however, always seems to be borne by the weary taxpayer.  The fix seems to be predictable; raise taxes or ‘lay off teachers, police and firemen’.  Somehow, excessive entitlements and waste never get laid off.   As this is being written comes news that the city of Berkeley in California wants to make transgender surgical procedures a perk of employment. 

If people want a different result, they’d better stop pursuing the same input.  Maybe try option B.