Been Wondering...Follow

I've read about how the United States in supposedly 4 trillion dollars (at least) in debt to various other countries. I've read on this very forum that we are at the mercy of China and other Asian countries because of this. Apparantly one thier leaders (I forget who) had been bragging about it, and how they could make our money worthless. My question is, why havn't they? Should we be concerned that our money technically IS worthless? Is there any escape from whatever inevitable economic doom that awaits us all?

Mind you, once they realise that the Asian market has more potential than the West, that might change.

Granted, won't be happening for quite some time.

Even so, China is switching from USD as main currency to others.

What bank is that? Sign me up!

If China, India and Europe kicked in a trade agreement, USA would be toast, fiscally speaking.

Unlikely for another 10-15 years, but if Europe does become a federal union (likely IMHO) and India and China continue to capitalise and commercialise, USA needs to have fixed that deficit in time.

Greenspan wasn't right about everything, but I suspect he had that one to a tee.

It's not liekly that the US will have its debt fixed, or even under control in a decade, or even two decades. This is a debt society. Most major advantages can only be gained through the vehicle of debt.

A home: how do you get it? By borrowing money. Real estate prices are based not on the actual worth of the property, but what someone who might want to purchase that property will be able to pay back over a long period of time.

Cars: how do you get one? By borrowing money. Car prices are established at what an individual should be able to pay back over the period f time for a car loan. As the dependability of vehicles has improved (believe it or not, it has) the relative price of a car has increased such that the loans can be extended for longer periods of time.

The concept of debt management and manipulation, as opposed to operating without debt is all pervasive. Those who avoid debt are punished by the debt society. Don't have a credit card? Never paid off a loan for a vehicle? Trying to get credit when you don't have credit is laughably difficult unless you're willing to pay the penalties of high interest and loan fees. I'm sure there are those among you who have credit cards, not for convenience or because you need them to get by occasionally, but because it's good for your credit to have, use, and pay your credit cards. Retailers have, in recent years, latched unto the wonderful concept of borrowing from their customers in the guise of "gift cards." Don't know what Johhny wants for Xmas? Give him a Walmart gift card for $100. Because a $100 bill is so tacky, right? That, and Walmart doesn't sell crack (any more).

In warehousing, it's highly conspicuous. For example: an item is ordered at a quantity of 150 cases every 3rd week. As each order arrives, the on hand supply has been depelted by orders that the warehosue has shipped out. Why, I am asked quite often by the people who handle this product, doesn't the business order 300, or 1500 cases of this product at once? This one has a shelf life of 5 years! Better yet, order an entire truckload! That would be much easier to properly ID and label as it arrives. I answer them with several reasons, such as the limited space available to be consumed by a given item, the amount available to order, and the price breaks on the order sizes. But what it all gets down to is the inventory turns vs. the payoff time on the invoice for a particular order. In a perfect world, I buy 150 cases, have an invoice that's due within 30 days, and get a 2% discount if it's paid off in 20 days. After I deliver to a customer, they're electronically debited within 5 days. So I get the product, ship it to my customer, and get paid for most of the product I bought before I have paid for it myself. After 19 days have passed, it's very easy to evaluate whether the amount of value collected from my customers exceeds the invoice amount (with 2% discount) and whether the invoice should be paid at the discount rate or taken out for the additional 10 days before being payed. (Also to be considered is the amount of cash I have on hand and the other uses it would be put to if not used to pay this invoice at this time, and what my cash in/out will look like int eh additional time period being considered.) The vendor is my creditor; I'm operating my business with the vendor's money. My own customers are also looking to turn the inventory they purchase from me in a similar manner.

I'm sure you've all heard how if trucks stop running, America would shut down in a week. It wouldn't really shut down, but it'd sure feel like it. Restaurants, grocery stores, etc. all have very fast inventory turns. Most of them replace the volume equivalent of their entire inventory every 5-8 days. Some items that are consumed more slowly may only get ordered very occasionally, but many things are ordered 2-3 times per week. The end result is a much fresher product offered to the consumer and a house of cards that can come tumbling down if the debt society which is the base for the house begins to wobble.

All in all, I think the US is undeservedly "overvalued" but rather than seeing the US society view on debt change in the next decade or two, I expect that the world will conform to what we're doing. It does have its own convoluted wisdom to it, as it builds individuals who can conform while innovating. We learn which rules can be broken and which must be followed. And at the end of the day, when all is settled and done, it's just a game. Sure, people live and die in the game, but it's still just a game. Juggle this resource, squeeze that one, take this from your enemy, let him have that because it's no good anyway and you need to let him have something with which to keep building just a little so when you eventually take over his territory you only have to convert it, not build it up from scratch.