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How to make banks be at your mercy

June 25, 2009

Imagine this. You live in a nice big mansion, drive an expensive sports car, have many servants an butlers running around to serve you. You eat the best food, wear the best clothes and sport the latest coolest gadgets. You’re a famous well-respected socialite around the world and you are the life of any party. Your success is the envy of everyone.

What nobody knows is that you actually borrowed heavily to buy everything you’re flaunting. You are paying a monthly installment on this high life. In fact you’ve accumulated so much debt that if you stopped borrowing today, it will take your family 4 generations to pay off your debts.

A stupid way to run your life?

Well, thats exactly how the US federal government is living it up. It borrows money to run its agencies, pay its employee salaries, and run activities like medicare. It borrows from countries like China and Japan to the tune of hundreds of billions USD a year by selling them debt papers like US treasury bills and bonds. China alone has lent America US$1.95 trillion to date. AP reports that this year, the US will borrow nearly 50 cents for every dollar it spends.

And the total accumulated US debt? About US$12 trillion to date, or $37k for every man, woman and child in the US. That’s equivalent to the average yearly income of an employee working in the US. And just like a credit card, they will have to pay interest on these borrowings.

On this, the interest charges alone may top US$500 billion this year. That’s a cool $1 million burnt per second.

John Maynard Keynes once said, β€œIf you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.”

That’s why the world is at the mercy of the US and that’s how you too can have your neighborhood bank be at your mercy. πŸ˜€

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4 Comments leave one →
  1. June 25, 2009 11:55 am

    Everyone has been talking about the demise of the USD for some time now, but when will the tipping edge be reached? Hopefully, not in our life time. I’d hate to think about the aftershocks to the global economy and the havoc it will wreak.

    Still, things don’t seem to look good since the US is printing money like there’s no tomorrow. Unfortunately, Malaysia doesn’t seem to be doing well, either. Fortunes will be made or lost when the USD falls. Let’s hope that the majority can come out relatively unscathed.

    I think the “too big to fail” sentiment is propping up the US scenario because everyone’s gone in too deep with the USD. Its a huge bubble waiting to be pricked, with devastating consequences. Personally I hope we’ll see a gradual migration towards a basket of currencies. Euro + USD + Yen + Renminbi sounds like a good idea.

  2. June 26, 2009 1:51 am

    “Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.”

    the bible says , get in debt ! LOL .

    You’re kidding. πŸ˜€

    Buddhism has a slightly different approach. You focus on the present because you know that by doing good today, things will be alright tomorrow. Cause and effect.

  3. June 26, 2009 8:19 am

    er…u r corrupting people’s mind here…

    anyway, the world is at US’ mercy because we allow them to. but then again, China lending so much to the US, maybe it’s because they want to ‘acquire’ the businesses there? coz in the long run, US will not have anything to pay them back but to sell those businesses.

    Corrupting? Haha, I think John Keynes beat me to it. πŸ˜€

    The Chinese are already acquiring real estate and other assets in the US. Months go I predicted that GM would be bought over by Dongfeng Motor Corp. It came partially true. GM sold its Hummer division to Sichuan Tengzhong Heavy Industrial Machinery. Hahahaha πŸ™‚

    But those are sales of private business assets. I’m not sure what US govt assets China can take as collateral. Maybe a few missiles and an aircraft carrier?

  4. June 26, 2009 12:02 pm

    Get 50% of Pentagon perhaps? πŸ˜› Maybe China sending their spies over not just to monitor US…but to see which interesting stuff to acquire πŸ˜›

    For $2 trilion maybe they’ll let China absorb half of Florida or New Mexico…. and its not just the Chinese who’s coming to see what’s good to buy. The Saudis have been doing that for some time. πŸ™‚

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