Obtuse Observer

January 31, 2012

Why (knowing) History Matters

In the busy year of 1956 Gen Gamal Abdel Nasser of Egypt seized the Suez Canal.  The French and British, who relied on the canal as a link between vital economic and geopolitical interests, were not pleased.  There was much political intrigue regarding regional events following WWII that lead to the seizure.  They are too numerous for the purposes of this blog but a short regional list includes:  the Algerian War, Soviet support for the FLN and Soviet Foreign Minister Vyacheslav Molotov‘s offer to French Foreign Minister Guy Mollet to withdraw same in exchange for French withdrawal from NATO, Soviet offers to finance the Aswan Dam, American opposition to the Anglo-French redrawing of the middle-eastern map after WWI which established two Hashemite Kingdoms, how to deal with the new State of Israel, and the Hungarian revolution.

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Diplomacy failed.  The British and French allied with the Israelis, attacked Egypt and seized the Suez Canal.  The well planned and executed military operation was accompanied by a poorly planned and failed political operation.  The seizure was broadly condemned. 

The simplified and condensed factor resolving the conflict:  The Anglo-Franco Israeli coalition was made to collapse by a threat from President Eisenhower to sell the American holdings of UK Pound Sterling Bonds.  The threat if carried out would quickly and catastrophically collapse the British economy.  The threat was believed, the Canal returned and forces withdrawn.

Why is this important?  The United States used their economic leverage, massive amounts of UK war debt not fully paid off until 2006, to force to reverse a British policy the Eden government believed to be in their geopolitical best interests.

Why does this matter to the US today? 

Our 2010 estimated GDP was $14,660,000,000,000.00 ($14T)

As of today our outstanding debt is $15,236,231,788,440.22.   ($15.2T)

Debt held by China is $1,132,600,000,000.00 ($1.1T) or roughly 25% of our sovereign debt as of November 2011.  With a couple subsequent debt ceiling raises of $1,200,000,000,000.00 and Europe in economic crisis the cash total and debt ratio held by China is most wisely assumed to have increased.

Holding 25% of our debt which is the equivalent of 25+% of our GDP gives China a veto on American policy.  That is not a good thing.

 See also, Why Our Debt Crisis Matters

December 7, 2011

Why Our Debt Crisis Matters

Filed under: 2011 Budget,Debt,Deficit — Tags: — Obtuse Observer @ 2:53 am

Exorbitant national debt is a more immediate, real and serious issue than any other facing us today.

Massive levels of debt moves us closer to collapsing governments across the planet. Massive instability in that sense is something to be very frightened of. Think global Somalia.

Globally the love of bashing America as a colonialist is useful for dictators needing to redirect their people’s anger at their situation and others who either deny or are unaware of the stability America brings to the world.

Our current national debt is $15,073,380,701,589.57.  The estimated GDP for 2010 was $14.66T.  “T” means trillion.  I’m not sure I really understand what that number means.  It is awfully big though.  The interest on our debt in 2011 cost us $454,000,000,000.00 (double the 1988 price tag).  Let’s put that into perspective:

198 countries have a GDP smaller than our interest payments.  That leaves 28 countries worth more than our debt service.

In 2010 France, Russia and the UK spent less on their COMBINED military budgets.

In 2011 China spent $380,000,000 on its military.

 

It could be said that our debt helps fund the militaries of our enemies around the globe.  Here’s a list of foreign holders of our debt.  China tops it off with $1.14T of the $4.6T held by foreign governments; that’s 25% of it folks. 

Our debt levels are unsustainable and must end; the only remaining issues are when how much will it hurt.  Resolving the crisis will likely further weaken our economy and negatively impact our military strength.  A weakened economy and weakened military reduces our ability to influence global politics. If potential aggressors stop fearing reprisal from America through economic or military means restraints on their behavior will weaken and possibly collapse.

A weak America creates global instability.

Why?  Does North Korea stays on their side of the DMZ because of respect for the cease-fire that it repudiated on May 27th?   Has Iran not (openly) interfered with Iraq out of courtesy?  How long would Taiwan remain an independent nation without American support?

If those restraints break down the possibility massive and global warfare will become more likely.  That is not a good thing.

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