PHANTOM GDP

All eyes were on the U.S. , while the U.S. House, Senate and President Obama
jockeyed for position on raising the U.S. Debt Ceiling. The Dollars position, as the principal world trading currency, was at stake while those in Washington [D.C.], and in academic circles, squabbled over they way, means and impact of raising he debt ceiling. Drama aside, it was a forgone conclusion that a "deal" would be done and the
debt ceiling would be increased to accommodate U.S. deficit spending.

The side-bar to Washington's theatrics, economic growth [ measured in GDP ], was hinted at in the House passed [H.B. #2560] Cut, Cap and Balance bill, but never brought to the floor by Senator Harry Reid, for Senate vote. Gross Domestic Product, GDP,is the benchmark measure used internationally to snapshot a nations economic growth. The U.S. snapshots GDP on a quarterly, basis; and, during the quarter, when the debt ceiling drama was playing in Washington, the U.S. GDP had stalled at around 1%. Without growth, government revenue, remains stagnant, absent an increase in taxes, often masked as fees, to offset government spending.

The way GDP has traditionally been calculated [ all goods and services ] essentially is a miss-measure that overstates real economic growth by a factor equal to the amount of government costs and services included in the GDP computation. Since the miss-measure GDP computation has universal appeal, true economic growth remains phantom to the delight of Wall Street, London and world financial markets. The GDP miss-measure is a harbinger for future financial melt-downs.

Among the minority of others, China, appears recognize the GDP anomaly, by its recent downgrade of U.S. debt obligations. Others will likely realize the U.S. has been and will continue, for the foreseeable future, to experience negative GDP. This has ominous consequences for todays inter-connected world, and is one factor in the flight to gold and other precious metals. Absent an accurate measure of a nations economic growth, and a stable benchmark currency, the surplus capital necessary for economic growth, will be locked in gold and precious metals, and world economies will unravel.

This U.S. and U.S. dollar, can no longer serve as a benchmark currency. The failure of the U.S. to balance its budget, per the U.S. Balanced Budget Act of 1985, yes 1985, was the first signal to the world that new measures and new benchmarks would be necessary if sustainable, shared, economic growth were to be achieved on a world basis. The latest U.S. budget antics [yr. 2011, 26 years later ] are a signal that the U.S. is in a downward economic spiral and can no longer be viewed as a stabilizing force, and the U.S. dollar, a reliable currency.

The U.S., as a system of governance, has displayed it's inherent flaws; arrogance, fashion, feelings, and ego, trump reason. New measures and a new type of benchmark currency will be needed before financial stability can be achieved on a world basis; otherwise,one country will fail, followed by the next, and by the next; signs of which are appearing in Europe and with the Euro.

“Israel to Bomb Iran - A story of the trail that wags the dog”

The Obama administration is learning that it is the tail ( Israel ) that wags the dog ( U.S.A. ) when it comes to the middle-east, flow of oil, and world finances.
Israel, since it's recognition in 1947, by then U.S. President Harry Truman, as a de-facto State of the U.S., has received more U.S. aid and subsidies than any other U.S. State and virtually every other Nation. In direct U.S. aid, Israel has received well over $400 billion U.S. taxpayer dollars; in addition, the U.S. has provided Israel with nuclear technology and military ordinance worth the billions of dollars. Bottom line, Israel is the most powerful U.S. State and is U.S. proxy abroad.

As the recent visit of U.S. Secretary of Defense Gates indicates, the Israeli government of Benjamin Netanyahu, and his Defense Chief Ehud Barak, intend to bomb Iran, resulting in the interruption of the flow of Iranian oil to China and other Asian customers. Israel is U.S. foreign policy. The bombing of Iran will interrupt oil flow and markets, permanently de-stabilize the middle-east with U.S. troop occupation for the foreseeable future. The world will be plunged into a full blown financial depression.

What is amazing is the silence of China. China stands to lose the most, politically and financially, from this planned chaos. One would think that China would assert itself as a world power, enter into defense/security agreements with Iran, Iraq, Syria, etc. ( fashioned after U.S. /NATO agreements ) and deploy troops and equipment accordingly, in order to check Israel, prevent the further de-stabilization of the middle-east, and to avert civilian catastrophe in the making. The Israeli bombing of Iran will trigger the collapse of world financial regimes, rendering the dollar of little value, and substantially diminishing the value of dollar assets held by China.

China has been reluctant to assume the roll of "peace maker" in a world tumbling into disorder under the leadership of the U.S. The U.S. thrives on and cultivates chaos and disorder. There is no single nation, with the exception of China, that has the capability of bringing order and common sense to the bargaining table. Hopefully, China will recognize it's roll and responsibility as "peace maker" before it is to late; now, appears appropriate.

CHINA SYNDROME

Corporate greed and undue Washington influence jump started the parade, shipping U.S. jobs and technology offshore. The Nixon administration opened the doors for corporations in China; following administrations, and Congress, long noted for it's myopia, passed NAFTA and other "Free Trade " agreements emasculating U.S. manufacturing and production capabilities, and U.S. employment. Now the nascent Obama administration, through Timmy Geithner the new Secretary of Treasury, is blaming U.S. economic woes on China's failure to re-value the yuan per U.S. "demands".

China and the value of the yuan are not the problem, U.S. corporate and financial interests influence on Congress, coupled with the inherent shortsightedness of our 535 federal legislators is where the root of the financial crisis rests. The Obama stimulus plan, illustrates that the U.S. government has no real clue how to fix the cascade into depression, 15% unemployment, and the hardships U.S. main-street is facing over the next 4 + years.

There is nothing to be gained by bad mouthing China. The U.S. made China, at first reluctant, a partner in the plunder of cheap labor to fatten the gluttony and greed of U.S. corporate titans. Now China is not just a partner for the production of goods, but the banker of the U.S.. Now is not the time to get on a high-horse and criticize China. From a political and structural standpoint, China is better suited to effectively respond to "crises " then the cumbersome system the U.S. has to wade through. The U.S. is poised to float the most massive debt in the modern world. Who is going to "buy" the debt of a country that produces arms, munitions, the instruments of war, and that invades others at will; but has little else to offer ? The only hope the U.S. has is that China, and other Asian nations will continue to buy U.S. debt obligations.

It would be much wiser, to work with our partner, China, and develop practical plans that would be beneficial to both countries, and forget currency valuations. Example, assign U.S. creditor interests in G.M. and Chrysler to China - when G.M and Chrysler, or Ford, ask for more bail-out funds, refer them to China. It would be in the mutual interests of both the U.S. and China, for China to produce parts for cars assembled in the U.S. for U.S and China markets. The U.S. can't take back all the jobs that Congress has allowed to be exported, but we can work with our partners abroad, to have a two-way, as opposed to a one-way, street.

The Obama administration has had one hell of a load of crap dumped upon it. It will take more then hope and a prayer to make any headway and start to dig out from under this pile. Now is not the time to start poking at China.