| mar 12 2007 | | New York, New York. | Is it just me, or does no one remember history? The country that is America is following the identical path followed by New York in the seventies. Wow! Just over thirty years ago, who could possibly be expected to remember what happened to that great city. Come on people I am not talking about the Romans, this is a recent event.
O.K. for you folks who like Rip van Winkle have just woke up from a nice nap and ventured forth from your cave, this is how it went down. New York was a vibrant city with lots of social programmes which guaranteed a high level of payments to cops, teachers, fireman and a whole host of other city workers. It was a city that also had a huge capital expenditure requirement to keep the roads paved, sewers working, bridges safe (well one did fall down eventually), you get the idea. It could pay for these things from taxes it collected from businesses and individuals, except that more and more businesses and individuals were moving from the city to the suburbs.
So think of America now. Feakin’ ginormous expenditure in the trillions (anyone who can count to a trillion needs to get a life) and a dwindling tax base as companies go off-shore and individuals lose their well paid jobs to go toss burgers as wage slaves while the government asks the rich for less tax money.
Back in the seventies the Mayor and cronies of New York thought a great way to get the additional funds they were short was to sell bonds. So they sold bonds and the banks lined up to buy them because this was New York and it was guaranteed, right? So this Ponzi scheme (go Google Ponzi, I don’t have time to baby you), like any good Ponzi scheme worked until the banks got bloated on the bonds and started to worry if they would get paid. In fact they didn’t at the end when for a moment in time the city of New York was bankrupt. The city went to the Feds whom they thought would have to bail them out but Ford said ‘**** off’. He did eventually change his mind and that and the election of Ed Koch turned history around, and heralded in an austerity period that was copied by countries around the world, the text book example would be Thatcher in the United Kingdom.
America today is technically bankrupt and even banned the use of M3 so no one would know how fast the printing presses are running. You see there is never any shortage of funds to pay debts when they come due because the Feds can nip down the cellar and print off a few billion more dollars to cover the interest due, or even today just add a few more noughts in a computer (noughts are so much cheaper than paper). The problem with this is that the more dollars you print, the less they are worth, as they have no asset backing them. Just as the bankers grew tired of New York debt, the mostly foreigners, like Japan and China, who purchase Americas debt have grown tired of seeing their holdings being worth less and less each year. So they have stopped buying as much debt as they did.
Who will the Americans go to when their notes come due? Who will bail them out? What effect will their crash have on the rest of the world? And for those of you who think the New York failure was back in the Roman times, I have this to say. When the Roman Empire failed it was followed by the Dark Ages (go Google Dark Ages).
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