Indentured Nation

It's a beautiful Indian Summer day here in Washington, and I really wanted to write something positive and spiritually uplifting, but I'm just not feeling the love. I'm thinking about some Pumpkin Chiffon Cheesecake that might just make me feel all autumny and warm inside.

I guess everyone saw President Bush boasting about our reduced trade deficit for August last week. And while it is good news that we are producing more goods in this country, I think regular Americans don't really distinguish between the term deficit, and debt. A trade deficit is the difference between what the US imports, and what it exports. In the month of August, we imported 57 billion dollars worth of goods, down from the 59 billion dollars in July. No one really knows if Americans are buying less imports because we are completely broke, or if we are buying less imports because we are afraid that the party hats might have been manufactured in Beijing and contain a birthday surprise of a hefty dose of lead for our two-year-old's party. I used to think that the deficit was the amount of money that the US government borrowed to stay afloat. That was before I worried about things like retirement and Social Security.

I was wrong. Big time.

If we're talking national debt, rather than deficit, the number has a lot more zeros. What President Bush did not talk about, and what no politician ever talks about, is the amount of money that we borrow every day to sustain our way of life. We have expenses, and unfortunately, our expenses total up to a lot more than the taxes we take in. If we're talking just straight debt, what the US owes to other lending institutions, namely China and Japan, the number totals 5.04 trillion. But we don't just borrow from foreign countries, we also borrow from ourselves. If you add money borrowed from Social Security, the number rises to 59 trillion.

That's a crap-load of money. And it doesn't include what you and I owe privately, and I can tell you, I'm going to be paying for my house and my home equity loan for the next ten years before I'm in the clear. Multiply my situation by 300 million, and you've got a number that is boggling even to mathematicians.

There's not a politican running for office today who is willing to tell the American people just how much we have F-ed Up the national checkbook. The financial news pages are full of stories about how the sub-prime crisis is over, and the economy looks solid. But a disturbing story in the New York Times today tells me that our sub-prime woes are far from over.

Concern that the financial system had not yet put the crisis behind it led Citigroup and two other big banks, Bank of America and JPMorgan Chase, to announce an initiative today to insure liquidity in the credit markets. The plan, fostered by the Treasury Department, calls for the banks to finance a pool of short-term debt and to draw from it.

The banks behind the scheme – Citigroup, JPMorgan and Bank of America – on Monday said they were still thrashing out key details about how the new “super-conduit” will purchase assets and at what price. They have estimated that the scheme will need $75bn to $100bn of back-up liquidity lines, and will only buy high-quality assets.

If the sub-prime woes are behind us, why did the Fed ask the large banks to create this super-fund? And why can't the Fed just supply the money for this fund?

Are we already just so in debt that we have to ask corporate America to bail us out? If the Treasury is completely solvent, why ask Bank of America for a loan?

I was going to buy a Pumpkin Chiffon Cheesecake for dessert, but now I think I'll just settle for a Snicker's bar.

You might also want to watch your spending in the next few weeks.

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