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A weird kind of poverty
August 8, 2011 - Stephen Browne
The United States is officially "the brokest nation in history" and rapidly getting broker.
The vaunted budget deal congress and the White House arrived at last week did little of substance to correct this. The government is still spending roughly twice as much money every year as it takes in. The budget deal merely slowed the rate of growth of the deficit by an almost insignificant amount. It could be a good beginning though if there is sustained follow-through...
Well perhaps I don't believe it either.
Standard and Poor just downgraded the country's credit rating, meaning that borrowed money will come at a higher interest rate.
Joy forever unconfined! Debt service, the money the government pays every year just for the interest on the debt, is already 14 percent of the federal budget. The entire military budget is 15 percent. Obviously debt service will soon exceed the military budget, and won't that feel weird?
Times are tough, unemployment is high (meaning what the Europeans consider normal for good times,) and corporations are sitting on their cash reserves rather than invest in expansion and hiring because they are concerned about regulatory uncertainty. (That means they're not sure anything they commit their capital to won't be declared illegal next week.)
And yet, what a strange time we live in when we consider people officially poor who have:
Refrigerators - 100 percent.
Color TVs and video players - 100 percent.
Cars - as close to 100 percent as doesn't matter have one. Around half have two.
Food - in America, the stigma of poverty is obesity, not emaciation. American doctors who have not worked abroad in the Third World seldom learn to recognize the signs of nutritional diseases such as beri-beri, pellagra, or scurvy.
And as bad as things are, or might get, America is still the destination of choice for money people want to hide away, and people who want a better chance at life. Of all printed U.S. dollars, two-thirds are circulating outside the country.
If the economy of this country collapses, it'll most certainly drag much of the rest of the world with it. But I'm betting some folks may have to tighten their belts a notch or two, but nobody is going to starve to death.
If the auto industry shuts down entirely, I think our mechanics and salvage yards could keep a fleet of rebuilt cars and trucks on the road for years.
But I also think the rest of the developed world won't be so lucky, and on the day the dollar collapses I shouldn't like to be an American living abroad.
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