America is almost broke, with (almost) no capacity to become solvent again

This is a very strong editorial by Mark Steyn (published in today’s The Australian, also found here). 

Key extracts

[The year] ended with President Obama making a pro forma request for a mere $1.2 trillion increase in the debt ceiling. This will raise government debt to $16.4 trillion – a new world record! 

America … has dug deeper into a cocoon of denial. Tens of millions of Americans remain unaware that this nation is broke – broker than any nation has ever been.

A few days before Christmas, we sailed across the psychological Rubicon and joined the club of nations whose government debt now exceeds their total GDP. It barely raised a murmur. Public debt has increased by 67 percent over the past three years, and too many Americans refuse even to see it as a problem. 

Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they’re borrowing all this money, they have no serious intention of paying any of it back. That’s to say, there is no politically plausible scenario under which the 16.4 trillion is reduced to 13.7 trillion, and then 7.9 trillion and, eventually, 173 dollars and 48 cents.

At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done.

[Americans and] the starry-eyed young share the same cobwebbed parochial assumptions of permanence as their grandparents: we’re gayer, greener, and groovier, but other than that it’s still 1950, and we’ve got more money than anybody else on the planet, so why get hung up about a few trillion here and a few trillion there?

In a mere half-century, the richest nation on Earth became the brokest nation in history, but the attitudes and assumptions of half the population and 90 percent of the ruling class remain unchanged.

The sooner we recognize the 20th century entitlement state is over, the sooner we can ring in something new. The longer we delay ringing out the old, the worse it will be. 

There is one law in economics that can never be violated for long (despite the Keynesians’ urge to keep “stimulating” the economy with borrowings): that there is no free lunch.

America wants a free lunch – big time!

It can’t. No one has that kind of money to feed America’s gluttony for debt.

In this horrible, self-created, Keynesian nightmare, China is moving VERY QUICKLY to the top of the world stage. Not a good thing for the world (according to most of us), but America’s Keynesians are staunch socialists – they would love being ruled by the Chinese. Maybe (if I were a conspiracy theorist I’d say that) this destruction of America’s freedoms was part of their “plan”.

Anyway, who wants to hold on to US dollars? Not me.

Buy the yuan (if you can! – it is not available outside China), or (in its absence) the Australian dollar. A good proxy.

Related posts:

1. Keynes broke the first law of economics hence was a fool
2. The Keynesians have worked hard to destroy the savings habit in America. And they are winning.
3. Americans are fed up with America. How about making India free and offering them Indian citizenship?

Read more at Sanjeev Sabhlok’s Occasional Blog-Economics