The Captain's Journal » The National Debt and A Loan Shark Named China

The National Debt and A Loan Shark Named China

BY Glen Tschirgi

13 years, 10 months ago

This article in CNBC.com yesterday highlights the lengths to which the U.S. government went to appease China during the fiscal crisis of 2008 and 2009.

Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China’s growing influence as America’s largest creditor.As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms — from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.

The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S. Treasury Department.

In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.

Lest anyone think that China’s obvious leverage does not affect our foreign policy, there is this:

The concern in certain influential Washington and Wall Street circles is that Beijing would leverage its position as the main enabler of U.S. overspending. And the cables provide a glimpse into how much politics inform relations between the world’s two largest economies.

One cable cites Chinese money managers expressing concern that U.S. arms sales to Taiwan — a major, longstanding irritant in the relationship — could sour the Chinese public on Treasury purchases.

Get that? It is the “Chinese public” that is so concerned about arms sales to Taiwan. The authoritarians in Beijing are at the mercy of public opinion. Who knew? I guess another Tienanmen Square is about to break out any time now.

Is there any better example of the malignancy of our soaring debt than this?

China has the Treasury Secretary running to them with assurances that their investments will be protected, at a time when American pension funds and ordinary American investors are taking massive losses.

Not only that, China more or less demands that its plan to buy over $1 Billion of Morgan Stanley shares get immediate Treasury Department approval (rather than wait the customary 2-week review period) and, magically, the approval is obtained the next day, without any formal application having been filed.

And, oh, by the way, the Chinese public is very concerned about arms sales to Taiwan so the U.S. had better knock that off, too. (And the Chinese public is also very concerned about any actions that might interfere with Iran’s nuclear weapons program).

One of the unmistakable messages from this article is that China exercises enormous leverage simply by threatening to stop buying up U.S. treasury bonds. Although the article also claims that China needs to buy treasuries, the article never explains or supports that claim. The “need” is clearly a one-way street. China has other places to invest their cash whereas the U.S. cannot find any, other investor that can buy up treasury bills on anything like the scale of China.

This should serve as an urgent wake-up call, particularly to those in Congress who are debating the remaining funding of the federal government for 2011 and the budget for 2012. The U.S. simply cannot afford to get any deeper into debt, especially not with China.

In our own, personal lives, it is one thing to take a short-term loan from a friendly relative. No one in their right mind would get deeply in debt to a hostile co-worker. What the U.S. is doing amounts to getting into deep debt with a loan shark. Even a community organizer should have some experience with that outcome.

Make no mistake, the only reason that the U.S. has not gone off the financial cliff at this point is because we continue to enjoy incredibly low borrowing costs for our bond sales. The article makes clear that there is a direct connection between China’s actions in the U.S. debt market and the interest rate that the U.S. has to pay on its short-term and long-term borrowing. If the cost to the U.S. of borrowing rises in any substantial way, interest payments will eat up huge amounts of the federal budget. At that point, the U.S. will either have to default on that debt which would have calamitous consequences, or the U.S. will have to print huge amounts of money which would likely result in the kind of hyperinflation that hit, for example, Argentina in the late 1990’s.

Of course, China has to be careful. It is not in their interest to push the U.S. into default or devaluation of the dollar. And, as the article notes, the U.S. is the single, biggest purchaser of Chinese exports. All the same, this is not “mutually assured destruction.” This enormous leverage that China now holds over the U.S. can render us paper tigers, afraid to take any action that might upset or anger our Chinese overlords. To put it in loan sharking terms: while it may not be in China’s interest to kill us, there is plenty of pain that they can inflict short of death.

So, bearing all of this in mind, we are confronted with a President proposing a $3.8 Trillion 2012 budget that requires over $1.4 Trillion (!!) in new borrowing from China, among others.

This is beyond a “lack of leadership” as some have said. Given the realities of our fiscal situation, I suggest that the President’s budget comes very close to a “high crime and misdemeanor.”

Obama Administration Tags: China, hyperinflation, National Debt —

Comments

On February 18, 2011 at 10:46 am, Warbucks said:

When you play the Hasbro game, “Monopoly” … http://www.hasbro.com/monopoly/en_US/ …. enough, it eventually turns into a game of life lessons. One such lesson is the perception that “winning everything” may have some very destabilizing consequences …. particularly if the one you always beat, is the player that owns the game board.

If you want to continue to play, never cause a “calamity.” Let everyone come out ahead some time or the other.

But that’s just a game. Surely there is no parallel to real life… right?

On February 18, 2011 at 11:50 am, Burk said:

Hi, Captain’s Journal-

I believe you miscontruct the situation, and it would be sad indeed if our officials believe that they somehow owe any favors to China for these financial reasons.

China is buying and sterilizing dollars for their own reasons- to keep their export machine going, keep employment high, and civil strife at bay. The cost to them is that their living standards are lower than they otherwise would be if they actually spent all those dollars.

We routinely beg them to lay off and let their currency float, which would have the effect of lowering their treasury purchases, but also of raising employment and trade balances here in the US.

We benefit from cordial relations with China, but we don’t owe them anything in a financial sense. Their classic mercantilist strategy is already damaging and adversarial enough, though it does indeed enable, allow, and even require us to run eye-popping deficits for the time being.

On February 18, 2011 at 12:47 pm, Herschel Smith said:

Burk, I’ll let Glen respond more fully to your other points, but let’s be clear about one thing. Nothing – NOTHING – requires us to run eye-popping deficits. We don’t have to be off of the gold standard, we don’t have to engage in trade with China, we don’t have to sustain debt and make interest payments, we don’t have to operate according to failed Keynesian economics. We choose to do many things we don’t have to do. Or should I be clearer in my emphasis: FAILED Keynesian economics. It cannot possibly succeed in the long run. Believers in Keynesian economics are fools.

On February 18, 2011 at 1:25 pm, Burk said:

Hi, Herschel-

Indeed we don’t have to do any of these things. We don’t even have to use money. We could live in caves and barter. But if you take some time to understand macroeconomics, you might realize that we benefit greatly from trade with China, and they benefit as well. We get different things, but would all be yet better off if the trade (and financial flows) were more balanced.

And insofar as we promote free trade and benefit from it, and run the world’s reserve currency and benefit from that as well, we have to run large deficits. It really seems like a small price to pay, whatever one’s view of the morality or immorality of a deficit position.

With regard to Keynesian economics, it has been the only thing keeping the current recession from turning into a depression. All economists will concur, except the most rabid Austrians/Republicans. It is also generally superior in its analysis of macro economics, but obviously we don’t have the space to get into that in any detail. Our prosperity of the 50’s and 60’s was run by Keynesian economics. Conversely, the decline of the middle class over the last few decades is directly due to an institutional forgetting of how we got to that prosperity in the first place. Here is a good paper on current aspects:
http://www.levy.org/pubs/wp_580.pdf

On February 18, 2011 at 1:46 pm, Herschel Smith said:

Burk, your tone is condescending, and for no good reason. You don’t know as much as you think you do, and I have taken some time to understand economics.

My views are too involved to attempt to outline in a comment, but I didn’t say that Keynesian economics couldn’t work FOR A TIME. It certainly can. It’s fun for me to spend more money than I have, too, for a while.

The alternative to Keynesian economics is not living in caves. You’ve given us a Hobson’s choice, which is what people do when they really don’t want their own views to be opened up to scrutiny.

I’m saying that you are closed-minded person.

On February 18, 2011 at 3:55 pm, Warbucks said:

Dr. Milton Friedman had a way of simplifying the complex and bringing economics down to my level: http://www.youtube.com/watch?v=p88XH11R7J0&feature=player_embedded

On February 18, 2011 at 5:28 pm, Burk said:

Here is recent coverage of Bernanke’s thinking. Now he ain’t perfect, but he does understand what I am talking about above. Read his actual remarks as well, where he excoriates China for saving too much, for sterilizing its trade surpluses, and putting deflationary pressure on the rest of us (i.e. the US). He isn’t thanking them for buying bonds.. quite the opposite.

http://www.marketwatch.com/story/bernanke-defends-qe2-on-global-stage-2011-02-18?dist=countdown

http://www.federalreserve.gov/newsevents/speech/bernanke20110218a.htm

Note as well how Bernanke comments on the structural problems of the gold standard.. a relic we are well rid of, which led to a century of booms and busts prior to the great depression. Sure, fiat money puts marginally more responsibility on the federal government. But unless we lose our minds to crackpot economic theories, we have the expertise to deal with it, and benefit greatly from it.

On February 18, 2011 at 6:01 pm, Herschel Smith said:

Oh goodness. Please drop it. You are under the mistaken impression that I (or we) simply don’t understand this stuff. I do. I understand their concern for macroeconomic inefficiencies, under-consumption, under-growth, and so on and so forth. It’s why you (and they) supported the stimulus.

It all goes hand in hand with your overall world view. You are a statist. You believe in the power of the state to do anything and everything, from liberating people, to changing hearts and rehabilitating criminals, to controlling crime by gun legislation, to redistributing wealth, to handling the economy by managing monetary policy, interest rates, cash influx to the system, national banking, and everything else. In short, there is no limit to the expanse of government control for you, because the state is god.

It will all fail. The economy cannot be handled so efficiently and correctly as it can of its own accord. The state cannot create wealth, and the state cannot do anything other than screw something up (other than simple matters of administering justice and providing for the common defense). It’s a matter of world views, Burk. You are thinking myopically by thinking that you can re-educate people into seeing things your way. It’s not a matter of education. I know economic theory and I can solve second order differential equations as well as discuss Hegelian dialecticism and how it influenced Marx and Darwin. Education has nothing to do with it.

Your god will fail you, always and forever. It will always disappoint you since it is merely an idol made in your image.

On February 18, 2011 at 8:14 pm, Burk said:

Hi, Herschel-

It is curious that someone with such anarchic views would get involved in the military, our most socialistic and statist institution bar none.

Our founding fathers were sick of the weakness of the articles of confederation and founded a strong state. The state undergirds everything we do- the legal system that “private” property relies on, the money, the corporate charter, the monopoly on violence. There is no way to get around it and wish it away. The absence of a state (i.e. rules) sends us into the Darwinian situation you saw in Iraq.

It is the old Rosseau/Hobbes debate, (taken in naive form), and I think Hobbes wins hands-down. Not only is the state fundamental to our civilized condition, but our communal decisions, expressed through the state, are always sovereign over individual concerns. Thus the draft, the death penalty, and other state powers.

We may, in our wisdom, communally agree on formal bounds to state powers, and individual rights & freedoms to further our happiness and comity, but these also are creatures of the state, not written down in any celestial or DNA code. They are definitely not inalienable. Without the state, we are left naked, without any rights against the next robber who comes down the road.

With appreciation…

On February 18, 2011 at 11:55 pm, Herschel Smith said:

I’m going to go yet another round with this, and then we’re going to let it go. To be honest, you have a blog (a well-designed blog) and you should advocate your views there.

But I feel that I haven’t been clear enough with you. Obviously I need to be less nuanced, or make fewer assumptions about you and what you know.

(1) My views are not anarchic. You would be surprised how many conservatives there are out there. You need to expand the circle that you “run” in.

(2) It’s interesting that you would refer to the military as a “socialistic” institution. Depending upon what you mean, you clearly have no idea what you’re talking about. The military has the reputation of being the most merit-based organization on earth. As far as being a statist institution, I’m not sure what you mean, but let me clarify your understanding. A Christian like me can easily advocate a less intrusive state on Biblical grounds, but also advocate a strong military and a state that administers justice because Paul granted the power of the sword to the state in Romans 13.

(3) Our founding fathers founded a country that focused power down, not up. You need to read more thoroughly than you have. This is a horrible, horrible misconception, and I’m not sure where you would have gotten such an idea. To cite just one example, each of the states had a formally recognized Christian denomination at the time of the signing of the constitution.

You use the phrase of the state being sovereign over individuals. Right you are in your views. You are a statist. The state confers happiness, and our rights are not inalienable. Thus the state confers, legitimates and protects us. Cradle to grave security. We’re “naked” without the state.

Thus, the state is your god. Your own words damn you. I have been right about everything I said about you.

On the other hand, the debate isn’t really about Rosseau/Hobbes. Study R. J. Rushdoony, “The One and the Many: Studies in the Philosophy of Order and Ultimacy.” Rushdoony explains well why you see things the way you do. The great ontological questions raised by Parmenides and Plato are always resolved into anarchy or totalitarianism. You have resolved the question in the state, or as a totalitarian.

I, on the other hand, need no such resolution because of the ontological trinity. Rights are conferred by God, not the state. The founders saw it the same way, which is why they saw rights as inalienable. You shouldn’t try to amend history. Learn it rather than engage in revisionism. You may not like what they had to say, but don’t bastardize their views.

The state, along with the institutions of the church, family and economics, are all accountable to God. The state isn’t over the family, and the church isn’t over the state. Most of history’s problems have come from domination of one of God’s institutions by another.

This will be difficult for you. But it reminds me of a story. A man walks into an emergency room and claims that he is dead. The doctors argue with him until they come up with a brilliant idea. They ask the man, “Do dead men bleed?” He responds, “Why no, dead men do not bleed.” So they prick his finger and show him that he bleeds. He exclaims, “Why, I guess I was wrong. Dead men do bleed!”

Axioms, Burk. Presuppositions. Pre-theoretical commitments. It all starts there, and your system is built from them. I have them … and here is what will be hard for you to get … you do too. We all have axiomatic irreducibles, upon which syllogistic reasoning is based. If we have no starting point in our philosophy, then we cannot get started. If we can prove our starting point, then it isn’t really our starting point. Something else is.

You must think epistemologically. Think all the way back to what your criteria is for asserting that something has positive truth value. How do you know what you know? What is your source of truth?

You are such a prime example of a statist that it is frankly difficult to imagine that you’re being truthful in the things you say. You must be joking about some of these things, just toying with us. But something tells me that you are being truthful.

But you need to escape from your pedestrian reasoning for just a moment. Stop typing and telling me what you believe. I know what you believe. I knew from the very first comment you ever made here. Slow down. Think clearly and be circumspect.

You have many great question that you need to ask yourself. Do bodies really just cool to ambient temperature when we die, or is there more? If there isn’t more, then what’s the point of life? How would you as an atheist and statist possibly come up with an an ethic that cannot change? After all, Hitler was also a statist.

How does an atheist ever answer for the existence of universal, invariant, abstract entities such as the laws of logic and math? If they aren’t based on the unchangeable nature of God, then why will the first and second law of thermodynamics be the same tomorrow as it is today? If I solve a differential equation today, why will the solution be the same tomorrow?

Again, think presuppositions. You need to go all the way back to starting points. Returning to the point of the post, Glen agrees with me.

Debt is bad, and it is especially bad to be indebted to totalitarian governments.

On February 19, 2011 at 4:08 pm, Glen Tschirgi said:

You have far more patience than me, Herschel.

Burk, you make alot of statements that just do not accord with reality. As Herschel ably pointed out, you have adopted a worldview that sees the state as the ultimate arbiter of all of human life. I doubt there is anything that Herschel or I could say that would convince you otherwise. It is a work of God in the heart. And he is at work in all of us, all of the time. So I leave you to his tender mercies.

To return to this post, I welcome your comments (and anyone else for that matter), but I ask that you avoid exaggerations and name-calling in making a point. That does nothing to further the discussion.

I believe it to be beyond dispute that the continued, deficit spending of the federal government is anything other than ruinous. If you can point to any evidence to the contrary, let’s hear it. The point of the post is that the federal spending is putting us increasingly under the thumb of our largest creditor, China. It is further corrupting our system of government by giving preferential treatment to the Chinese, as shown by the end-run around U.S. laws regarding large stock purchases.

Far from benefiting from the deficits, we are losing our valuable position as the world’s currency.

Bottom line, it is a very simple matter, no matter how you may try to obfuscate: the U.S. is quickly reaching the point where it will lose its ability to borrow or even re-finance at the unbelievably low rates of interest that have, heretofore, allowed us to spend so copiously.

China can have a direct effect upon those rates if it so chooses.

The U.S. cannot afford to have a president who is proposing to spend us even deeper into debt and expose us to ruin if those interest rates ever increase in any significant amount.

I totally disagree with your position on Keynesian policies. The fact of the matter is that the American economy in the 50’s and 60’s grew enormously in spite of such policies, not because of them. Those policies led us directly into the stagflation of the 1970’s from which we did not escape until Reagan broke from them in the 1980’s.

It is quite apparent that the Keynesian attempt to stimulate the economy by Obama and the Fed in 2009 and 2010 has been an utter failure. Mountains of debt and nothing to show for it. But of course, as Herschel points out, ideologues will never be convinced. You will find excuses. It wasn’t enough spending. It wasn’t the right kind of spending. It would have worse if we hadn’t spent. On and on. At some point, America has to make a choice and try something else. That was the November 2010 election and the “something else” won. Keynes is dead and good riddance.

On February 21, 2011 at 10:51 am, Warbucks said:

I love this discussion. It took me nearly 7-decades to land on an extraordinary answer to The Captain’s prime question: “How do you know what you know? What is your source of truth?” http://tinyurl.com/28l5qvq

On May 1, 2011 at 11:16 am, Shephard said:

Why does nobody in US see that there might be a war between USA and China over America’s national debt ‘execution’ in next 20-30 years?

On May 2, 2011 at 6:12 pm, TS Alfabet said:

Shephard:

That which is unthinkable or laughable today, is all too often the reality of tomorrow.

War between Red China and the U.S. ? Easily forseen. And actually, from what I have read, the Pentagon puts quite a bit of thought into China’s steadily rising military power.

It is not difficult to imagine that Creditor China, faced with a default in payments by the U.S. or a radical devaluation of the dollar by the Treasury, decides (as many creditors do when faced with the prospect of non-payment) to seize some “collateral” that has actual value. What collateral belonging to the U.S. might China want to grab? How about oil-rich Alaska? The U.S. sure isn’t using it, so why not? Ridiculous? Maybe. But try projecting 10 or 15 years into the future (maybe less) and see a U.S. military that has been hollowed out like that of the U.K. by years of Leftists in Congress demanding cuts to Defense spending rather than allow even a dime of cuts to entitlements.

The seizure of Alaska, one of the least populated States, would not be difficult if the Chinese military continues to grow and the U.S. military continues to shrink. It seems inconceivable now, but that is because the U.S. has never been in the position of being bullied by a militarily superior foe. And never underestimate what a nation that is ravenously hungry for raw materials and energy sources is willing to do.

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On February 18, 2011 at 10:46 am, Warbucks said:

When you play the Hasbro game, “Monopoly” … http://www.hasbro.com/monopoly/en_US/ …. enough, it eventually turns into a game of life lessons. One such lesson is the perception that “winning everything” may have some very destabilizing consequences …. particularly if the one you always beat, is the player that owns the game board.

If you want to continue to play, never cause a “calamity.” Let everyone come out ahead some time or the other.

But that’s just a game. Surely there is no parallel to real life… right?
On February 18, 2011 at 11:50 am, Burk said:

Hi, Captain’s Journal-

I believe you miscontruct the situation, and it would be sad indeed if our officials believe that they somehow owe any favors to China for these financial reasons.

China is buying and sterilizing dollars for their own reasons- to keep their export machine going, keep employment high, and civil strife at bay. The cost to them is that their living standards are lower than they otherwise would be if they actually spent all those dollars.

We routinely beg them to lay off and let their currency float, which would have the effect of lowering their treasury purchases, but also of raising employment and trade balances here in the US.

We benefit from cordial relations with China, but we don’t owe them anything in a financial sense. Their classic mercantilist strategy is already damaging and adversarial enough, though it does indeed enable, allow, and even require us to run eye-popping deficits for the time being.
On February 18, 2011 at 12:47 pm, Herschel Smith said:

Burk, I’ll let Glen respond more fully to your other points, but let’s be clear about one thing. Nothing – NOTHING – requires us to run eye-popping deficits. We don’t have to be off of the gold standard, we don’t have to engage in trade with China, we don’t have to sustain debt and make interest payments, we don’t have to operate according to failed Keynesian economics. We choose to do many things we don’t have to do. Or should I be clearer in my emphasis: FAILED Keynesian economics. It cannot possibly succeed in the long run. Believers in Keynesian economics are fools.
On February 18, 2011 at 1:25 pm, Burk said:

Hi, Herschel-

Indeed we don’t have to do any of these things. We don’t even have to use money. We could live in caves and barter. But if you take some time to understand macroeconomics, you might realize that we benefit greatly from trade with China, and they benefit as well. We get different things, but would all be yet better off if the trade (and financial flows) were more balanced.

And insofar as we promote free trade and benefit from it, and run the world’s reserve currency and benefit from that as well, we have to run large deficits. It really seems like a small price to pay, whatever one’s view of the morality or immorality of a deficit position.

With regard to Keynesian economics, it has been the only thing keeping the current recession from turning into a depression. All economists will concur, except the most rabid Austrians/Republicans. It is also generally superior in its analysis of macro economics, but obviously we don’t have the space to get into that in any detail. Our prosperity of the 50’s and 60’s was run by Keynesian economics. Conversely, the decline of the middle class over the last few decades is directly due to an institutional forgetting of how we got to that prosperity in the first place. Here is a good paper on current aspects:
http://www.levy.org/pubs/wp_580.pdf
On February 18, 2011 at 1:46 pm, Herschel Smith said:

Burk, your tone is condescending, and for no good reason. You don’t know as much as you think you do, and I have taken some time to understand economics.

My views are too involved to attempt to outline in a comment, but I didn’t say that Keynesian economics couldn’t work FOR A TIME. It certainly can. It’s fun for me to spend more money than I have, too, for a while.

The alternative to Keynesian economics is not living in caves. You’ve given us a Hobson’s choice, which is what people do when they really don’t want their own views to be opened up to scrutiny.

I’m saying that you are closed-minded person.
On February 18, 2011 at 3:55 pm, Warbucks said:

Dr. Milton Friedman had a way of simplifying the complex and bringing economics down to my level: http://www.youtube.com/watch?v=p88XH11R7J0&feature=player_embedded
On February 18, 2011 at 5:28 pm, Burk said:

Here is recent coverage of Bernanke’s thinking. Now he ain’t perfect, but he does understand what I am talking about above. Read his actual remarks as well, where he excoriates China for saving too much, for sterilizing its trade surpluses, and putting deflationary pressure on the rest of us (i.e. the US). He isn’t thanking them for buying bonds.. quite the opposite.

http://www.marketwatch.com/story/bernanke-defends-qe2-on-global-stage-2011-02-18?dist=countdown

http://www.federalreserve.gov/newsevents/speech/bernanke20110218a.htm

Note as well how Bernanke comments on the structural problems of the gold standard.. a relic we are well rid of, which led to a century of booms and busts prior to the great depression. Sure, fiat money puts marginally more responsibility on the federal government. But unless we lose our minds to crackpot economic theories, we have the expertise to deal with it, and benefit greatly from it.
On February 18, 2011 at 6:01 pm, Herschel Smith said:

Oh goodness. Please drop it. You are under the mistaken impression that I (or we) simply don’t understand this stuff. I do. I understand their concern for macroeconomic inefficiencies, under-consumption, under-growth, and so on and so forth. It’s why you (and they) supported the stimulus.

It all goes hand in hand with your overall world view. You are a statist. You believe in the power of the state to do anything and everything, from liberating people, to changing hearts and rehabilitating criminals, to controlling crime by gun legislation, to redistributing wealth, to handling the economy by managing monetary policy, interest rates, cash influx to the system, national banking, and everything else. In short, there is no limit to the expanse of government control for you, because the state is god.

It will all fail. The economy cannot be handled so efficiently and correctly as it can of its own accord. The state cannot create wealth, and the state cannot do anything other than screw something up (other than simple matters of administering justice and providing for the common defense). It’s a matter of world views, Burk. You are thinking myopically by thinking that you can re-educate people into seeing things your way. It’s not a matter of education. I know economic theory and I can solve second order differential equations as well as discuss Hegelian dialecticism and how it influenced Marx and Darwin. Education has nothing to do with it.

Your god will fail you, always and forever. It will always disappoint you since it is merely an idol made in your image.
On February 18, 2011 at 8:14 pm, Burk said:

Hi, Herschel-

It is curious that someone with such anarchic views would get involved in the military, our most socialistic and statist institution bar none.

Our founding fathers were sick of the weakness of the articles of confederation and founded a strong state. The state undergirds everything we do- the legal system that “private” property relies on, the money, the corporate charter, the monopoly on violence. There is no way to get around it and wish it away. The absence of a state (i.e. rules) sends us into the Darwinian situation you saw in Iraq.

It is the old Rosseau/Hobbes debate, (taken in naive form), and I think Hobbes wins hands-down. Not only is the state fundamental to our civilized condition, but our communal decisions, expressed through the state, are always sovereign over individual concerns. Thus the draft, the death penalty, and other state powers.

We may, in our wisdom, communally agree on formal bounds to state powers, and individual rights & freedoms to further our happiness and comity, but these also are creatures of the state, not written down in any celestial or DNA code. They are definitely not inalienable. Without the state, we are left naked, without any rights against the next robber who comes down the road.

With appreciation…
On February 18, 2011 at 11:55 pm, Herschel Smith said:

I’m going to go yet another round with this, and then we’re going to let it go. To be honest, you have a blog (a well-designed blog) and you should advocate your views there.

But I feel that I haven’t been clear enough with you. Obviously I need to be less nuanced, or make fewer assumptions about you and what you know.

(1) My views are not anarchic. You would be surprised how many conservatives there are out there. You need to expand the circle that you “run” in.

(2) It’s interesting that you would refer to the military as a “socialistic” institution. Depending upon what you mean, you clearly have no idea what you’re talking about. The military has the reputation of being the most merit-based organization on earth. As far as being a statist institution, I’m not sure what you mean, but let me clarify your understanding. A Christian like me can easily advocate a less intrusive state on Biblical grounds, but also advocate a strong military and a state that administers justice because Paul granted the power of the sword to the state in Romans 13.

(3) Our founding fathers founded a country that focused power down, not up. You need to read more thoroughly than you have. This is a horrible, horrible misconception, and I’m not sure where you would have gotten such an idea. To cite just one example, each of the states had a formally recognized Christian denomination at the time of the signing of the constitution.

You use the phrase of the state being sovereign over individuals. Right you are in your views. You are a statist. The state confers happiness, and our rights are not inalienable. Thus the state confers, legitimates and protects us. Cradle to grave security. We’re “naked” without the state.

Thus, the state is your god. Your own words damn you. I have been right about everything I said about you.

On the other hand, the debate isn’t really about Rosseau/Hobbes. Study R. J. Rushdoony, “The One and the Many: Studies in the Philosophy of Order and Ultimacy.” Rushdoony explains well why you see things the way you do. The great ontological questions raised by Parmenides and Plato are always resolved into anarchy or totalitarianism. You have resolved the question in the state, or as a totalitarian.

I, on the other hand, need no such resolution because of the ontological trinity. Rights are conferred by God, not the state. The founders saw it the same way, which is why they saw rights as inalienable. You shouldn’t try to amend history. Learn it rather than engage in revisionism. You may not like what they had to say, but don’t bastardize their views.

The state, along with the institutions of the church, family and economics, are all accountable to God. The state isn’t over the family, and the church isn’t over the state. Most of history’s problems have come from domination of one of God’s institutions by another.

This will be difficult for you. But it reminds me of a story. A man walks into an emergency room and claims that he is dead. The doctors argue with him until they come up with a brilliant idea. They ask the man, “Do dead men bleed?” He responds, “Why no, dead men do not bleed.” So they prick his finger and show him that he bleeds. He exclaims, “Why, I guess I was wrong. Dead men do bleed!”

Axioms, Burk. Presuppositions. Pre-theoretical commitments. It all starts there, and your system is built from them. I have them … and here is what will be hard for you to get … you do too. We all have axiomatic irreducibles, upon which syllogistic reasoning is based. If we have no starting point in our philosophy, then we cannot get started. If we can prove our starting point, then it isn’t really our starting point. Something else is.

You must think epistemologically. Think all the way back to what your criteria is for asserting that something has positive truth value. How do you know what you know? What is your source of truth?

You are such a prime example of a statist that it is frankly difficult to imagine that you’re being truthful in the things you say. You must be joking about some of these things, just toying with us. But something tells me that you are being truthful.

But you need to escape from your pedestrian reasoning for just a moment. Stop typing and telling me what you believe. I know what you believe. I knew from the very first comment you ever made here. Slow down. Think clearly and be circumspect.

You have many great question that you need to ask yourself. Do bodies really just cool to ambient temperature when we die, or is there more? If there isn’t more, then what’s the point of life? How would you as an atheist and statist possibly come up with an an ethic that cannot change? After all, Hitler was also a statist.

How does an atheist ever answer for the existence of universal, invariant, abstract entities such as the laws of logic and math? If they aren’t based on the unchangeable nature of God, then why will the first and second law of thermodynamics be the same tomorrow as it is today? If I solve a differential equation today, why will the solution be the same tomorrow?

Again, think presuppositions. You need to go all the way back to starting points. Returning to the point of the post, Glen agrees with me.

Debt is bad, and it is especially bad to be indebted to totalitarian governments.
On February 19, 2011 at 4:08 pm, Glen Tschirgi said:

You have far more patience than me, Herschel.

Burk, you make alot of statements that just do not accord with reality. As Herschel ably pointed out, you have adopted a worldview that sees the state as the ultimate arbiter of all of human life. I doubt there is anything that Herschel or I could say that would convince you otherwise. It is a work of God in the heart. And he is at work in all of us, all of the time. So I leave you to his tender mercies.

To return to this post, I welcome your comments (and anyone else for that matter), but I ask that you avoid exaggerations and name-calling in making a point. That does nothing to further the discussion.

I believe it to be beyond dispute that the continued, deficit spending of the federal government is anything other than ruinous. If you can point to any evidence to the contrary, let’s hear it. The point of the post is that the federal spending is putting us increasingly under the thumb of our largest creditor, China. It is further corrupting our system of government by giving preferential treatment to the Chinese, as shown by the end-run around U.S. laws regarding large stock purchases.

Far from benefiting from the deficits, we are losing our valuable position as the world’s currency.

Bottom line, it is a very simple matter, no matter how you may try to obfuscate: the U.S. is quickly reaching the point where it will lose its ability to borrow or even re-finance at the unbelievably low rates of interest that have, heretofore, allowed us to spend so copiously.

China can have a direct effect upon those rates if it so chooses.

The U.S. cannot afford to have a president who is proposing to spend us even deeper into debt and expose us to ruin if those interest rates ever increase in any significant amount.

I totally disagree with your position on Keynesian policies. The fact of the matter is that the American economy in the 50’s and 60’s grew enormously in spite of such policies, not because of them. Those policies led us directly into the stagflation of the 1970’s from which we did not escape until Reagan broke from them in the 1980’s.

It is quite apparent that the Keynesian attempt to stimulate the economy by Obama and the Fed in 2009 and 2010 has been an utter failure. Mountains of debt and nothing to show for it. But of course, as Herschel points out, ideologues will never be convinced. You will find excuses. It wasn’t enough spending. It wasn’t the right kind of spending. It would have worse if we hadn’t spent. On and on. At some point, America has to make a choice and try something else. That was the November 2010 election and the “something else” won. Keynes is dead and good riddance.
On February 21, 2011 at 10:51 am, Warbucks said:

I love this discussion. It took me nearly 7-decades to land on an extraordinary answer to The Captain’s prime question: “How do you know what you know? What is your source of truth?” http://tinyurl.com/28l5qvq
On May 1, 2011 at 11:16 am, Shephard said:

Why does nobody in US see that there might be a war between USA and China over America’s national debt ‘execution’ in next 20-30 years?
On May 2, 2011 at 6:12 pm, TS Alfabet said:

Shephard:

That which is unthinkable or laughable today, is all too often the reality of tomorrow.

War between Red China and the U.S. ? Easily forseen. And actually, from what I have read, the Pentagon puts quite a bit of thought into China’s steadily rising military power.

It is not difficult to imagine that Creditor China, faced with a default in payments by the U.S. or a radical devaluation of the dollar by the Treasury, decides (as many creditors do when faced with the prospect of non-payment) to seize some “collateral” that has actual value. What collateral belonging to the U.S. might China want to grab? How about oil-rich Alaska? The U.S. sure isn’t using it, so why not? Ridiculous? Maybe. But try projecting 10 or 15 years into the future (maybe less) and see a U.S. military that has been hollowed out like that of the U.K. by years of Leftists in Congress demanding cuts to Defense spending rather than allow even a dime of cuts to entitlements.

The seizure of Alaska, one of the least populated States, would not be difficult if the Chinese military continues to grow and the U.S. military continues to shrink. It seems inconceivable now, but that is because the U.S. has never been in the position of being bullied by a militarily superior foe. And never underestimate what a nation that is ravenously hungry for raw materials and energy sources is willing to do.

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