By W.S. DeArment
The United States is in an exceedingly vulnerable position as a nation.
We may have lots of aircraft carriers, nuclear warheads, guns and ammo ... but, if we were ever in a financial war none of the former is of much use.
We have, today, amassed more debt as a country than history has ever known.
We have politicians with the sensitivity/awareness to this of wooden duck decoys.
Realize that our livelihood literally rests on the good graces of other nations’ willingness to continue to invest in the greatest Ponzi scheme ever — buying U.S. Treasury bonds sold by the U.S. Federal Reserve Board of Governors.
Some of these places in the world like us ... many, however, do not. I guess that is a function of our own arrogance and actions. Seems that ever since the end of World War II, we have been running all over the world playing international policeman, acting in some cases like a schoolyard bully hitting up smaller kids for their lunch money. Problem is, those little kids become big kids that relish the moment when they can bring that bully to his knees.
I am afraid that day is soon coming.
Do you realize this? Do you care?
China, for its part, has been diligently gobbling up physical gold. It is reported that the amount now exceeds half the world’s annual production. Historically the value of gold and the U.S. dollar traditionally move in opposition. That is very convenient for a nation that might want to pull the ultimate attack on America: Accumulate a vast hoard of physical gold, then dump all the dollars you own to purposefully undermine your enemy’s economy. Such a move would devastate an American public that is already weak financially. Prices would dramatically rise for all goods we import. Countries would abandon the U.S. dollar’s reserve-currency status, and commodities that are priced in dollars — think oil — would soar relative to the dollar — severely impacting the cost of our daily living.
Yes, the value of that huge pile of U.S. Treasury paper that China owns would plunge as the dollar value dives. But the value of those thousands of tons of gold bullion China has been buying — a perfect hedge — would soar, offsetting all or at least a large portion of the Treasury losses. China will have, in short, created a financial Pearl Harbor: attacking America’s greatest weakness, its reliance on both debt and an increasingly tenuous reserve-currency status.
To many this is an imaginative, Hollywood-style scenario — but it seems to me that the possibility of this financial “black swan” exists.
So what’s to do? Buy small denomination gold coins, build a bomb shelter, buy ammo, guns and dehydrated foods?
Well, you can, but there is a better solution.
Let’s go to work and scrap the tax code. Set in place a flat tax where we all pay something, even if it is 2 percent. We should all have some “skin” in the game. The flat tax system would allow business to feel confident about reinvesting their capital in their businesses and hiring people into good paying jobs.
Let’s go to work creating our own energy dominance. Do the Keystone Pipeline. Convert our excess natural gas into liquid natural gas and export it. Build some new nuclear plants. And for goodness sake don’t continue to hammer the coal industry! We have oil. We have natural gas. We have coal. Let’s use them.
Internationally, we need to start to treat our real allies as friends by respecting them. Conversely, we need to treat our not so friendly nations as, well, enemies. Quit funding them.
Let’s go to work and close our borders and put in place an effective immigrant citizenship program. Get control of this whole issue. Not amnesty. Good honest citizenship. Maybe triple the places people can go for citizenship programming. Maybe we could use the laid off IRS agents to implement this.
Let’s go to work rebuilding our infrastructure (that’s roads and bridges) with funding to private sector contractors. They will bid the projects. They will get the contracts and, then, have to find people to do the work — called generating lots of good paying jobs — reducing unemployment rolls.
Last, let’s go to work and elect a Republican Senate in November and stop the hideous, job killing, over regulating, over taxing, divisive Obama administration policies — until we can elect (2016) a competent leader who will surround him or herself with competent administrators who “get it.”
And while I’m at it, let’s go to work and convert some of the huge public sector union defined pension liability to more reasonable payouts and lower funding costs by freezing the defined benefit plans and converting to 401(k) style programming. The private sector has had to do this already, so why can’t the large government sector do it?
What does all this do? 1) Trashing the tax code will provide fairness, stability, simplification, lower tax collection cost, more economic stimulation via greater capital investment — leading to job creation. 2) More people working leads to lower unemployment, lower welfare, lower food stamp/social cost, greater Social Security collection (support) — generally, lower big government cost. 3) Ultimately this leads to a balanced budget and real national debt reduction. 4) This leads to international confidence in the U.S. dollar/U.S. economy which will strengthen the U.S. dollar vs. other currencies.
This is exactly what the Chinese do not want if they are ever going to pull a financial “black swan” trigger.
It really is not that complicated. It is called putting in place policies that will create real, good paying jobs and all the benefits the country will derive from these positive changes. These are the right things to do and the time is now.
Ignorance and apathy are not good. Let’s go to work and try and help people understand the real issues and, then, stay focused on solving them.
Thanks to Jeff Opdyke for helping to write this.
W.S. DeArment, a Meadville resident, is the president and chief executive officer of Channellock Inc.