Private Portfolio – World War III in full swing?
A friend of mine remarked during a conversation this week that we are currently experiencing World War III and instead of canons, tanks and aircraft, the weapons of this war are interest rates, austerity measures and debt. And we in Namibia are also getting hit by the collateral shrapnel of this war.
This week the ninth political leader in Europe became a casualty of this war when people who are suffering under the austerity measures voted France’s Nicolas Sarkozy out of office.
Political leaders in France, Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia and the Netherlands were all elbowed from their posts.
There is a true saying that you become the slave of the person you owe money to. Keep this in mind when you want to take a bet on the future rolls of super powers on our planet.
If you agree with this statement, then you can be assured that the US has become the slave to some countries that may not be too demanding and some who may be more demanding, depending on the circumstances. The enslavers of the US or the largest holders of US debt are the central banks of China, Japan, Brazil, Taiwan, Switzerland, Russia, and the United Kingdom.
The United States has a total debt of about US$15 trillion and growing as you read. Over the last year, the government borrowed approximately $2.5 million every minute. That’s the equivalent of 8 244 flat screens HD-TVs it cannot afford! Every minute!
To put $15 trillion into some kind of perspective; it is larger than the total economies of China, the UK and Australia combined!
The US owes China more than US$1.1 trillion. This puts China in an immensely strong position when it comes to negotiating anything with the US. Literally anything. It will be very hard for the US to take a hard line against China should the need arise.
The US has put a big, scary weapon in the hands of the Chinese. What will trigger them to use it, I will not speculate on, but I also do not believe that it will be beyond them to at least threaten the US that they might pull the debt trigger to get their way. Only the future will tell.
The other scary part in my view is the fact that the US borrowed something like $4.6 trillion from itself by taking up reserves from e.g. the social security system and the medical care system in the country. And we know that we do not repay money that we owe to ourselves.
In fact, the money owed by the US is such a ridiculously huge amount that I do not believe that it can practically ever be repaid. It’s just way too much. The debt has become a theoretical amount of money that can only be repaid in political terms.
Much of the same is going on in Europe; affecting almost the rest of the world because it is affecting the price of commodities and export products via market cycles of supply and demand.
Debt has become a political commodity without economic or fiscal payback solutions and governments will keep on falling while the public is having a hard time as a result of the austerity measures.
The lesson for us, while we try to escape the shrapnel flying around, is to borrow money responsibly when we spend it on consumables and preferably spend borrowed money on capital assets that will increase in value over time. Rather save up the money needed to pay for consumables.
That is what the people in the US and Europe did not do and that is why they now cannot afford tin hats to save them from the shrapnel that is flying around in this war.