The Binary Circumstance

On March 20, 2003, President George W. Bush invaded Iraq. On May 1, 2003, not even three months later, Bush declared that the job was done and the war had been won in his “mission accomplished” speech. As of today, December 2, 2009, we are still fighting the war in Iraq. As Wikipedia points out:

The vast majority of casualties, among both coalition (approximately 98% as of October 2008) and Iraqi combatants, and among Iraqi civilians, has occurred since the speech.

Last night President Barack Obama announced his plan to send more than 30,000 new troops to Afghanistan. He also said that he would begin withdrawing those troops in July, 2011, after only eighteen months. He has gone one step further than George W. Bush. He’s announced when the mission will be accomplished before it has even started.

That’s no way to fight and win a war. But it is the way to sell another open-ended conflict to the American people.

An episode of South Park from 2001 called “The Entity” will remind you what short-term memories people have when it comes to government bailouts. That’s just in the first three minutes.

The rest is typically brilliant, outrageous, raunchy, laugh-out-loud South Park humor.

South Park Zone has all South Park episodes online in streaming video with HD.

You can also see Trey Parker and Matt Stone’s commentary on “The Entity” on YouTube.

The foreign debt of the United States doesn’t look so bad when compared to many other nations in the world.

This CNBC Slideshow illustrates the point very well.

How do countries with foreign debt of several times GDP ever hope to repay it?

Some examples: The United States: 94.3% of GDP or $43,793 per capita, Sweden: 194.3% of GDP or or $73,854 per capita, Hong Kong: 205.8% of GDP or $89.457 per capita, Netherlands: 365% of GDP or $146,703 per capita, and at the top of the list is Ireland: 1,267% or $567,805 per capita.

While it might be tempting to feel happy that others are worse off than we are, what happens if several large countries cannot repay their debt at the same time or they start printing money like crazy to pay it off?

Charles Goyette, author of the upcoming book, The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, wrote an article for CNBC about what the government and the Federal Reserve have done to the dollar and it’s impact on the price of gold.

He explains how our once-strong dollar is losing its status as the world’s reserve currency due to relentless borrowing and printing:

As long as the rest of the world was willing to continue holding dollar reserves, their demand for the dollar would bid its price higher than it would otherwise be.

As long as oil producers were willing to sell their depleting commodity for a depreciating, irredeemable currency, Americans were the beneficiaries of this added dollar demand.

If the world would just continue to go along, the Federal Reserve could accommodate spend-thrift US politicians and create new dollars at virtually no cost.

But to mix our ornithological metaphors, the chickens have begun coming home to roost. There is no reasonable prospect of the federal debt being paid down, at least if both the visible ($12 trillion) and the hidden ($100 trillion?) debt are taken into account. Nor can anyone possibly believe that today’s government bonds can be paid except by issuing new bonds tomorrow.

It is this reckoning that had gold pierce the $1,000 mark in 2008 (while oil soon surged ahead for the same reasons to $147). And despite the scramble for liquidity with the mortgage meltdown last year that drove gold briefly down to almost $700, it didn’t take long for gold to work its way back up and to new highs.

The dollar bubble may not pop suddenly like the dot com bubble or the housing bubble. But like the miner’s canary, the gold price is warning that our monetary system is toxic…

It’s an excellent, short article that does a good job of explaining what has happened to the value of the dollar since Nixon took us completely off the gold standard in 1971.

The World Gold Council has a graph of monthly gold prices since 1971. It shows what happened to the value of the dollar relative to gold once the government and banks had no limit on how much money they could print. The same page shows that this is a global phenomenon, often because other countries used the dollar as their reserve currency. Paper currency around the globe is becoming increasingly worthless.

As I noted in my previous post, the Federal Reserve has debased the dollar so that what cost $.08 in 1913, now costs $1.00.

It’s no wonder that Ron Paul wants to put an end to the Federal Reserve.

I’ve noted in previous articles that no person who works for a living can compete with someone who has a printing press that is counterfeiting money. Government and bank printing presses have enslaved all Americans for generations to come to a massive debt that can never be paid off without enormous pain. And most Americans have gone along willingly.