I've taken some time off, so sue me.  hehe.  Sorry about the break.  I got a job that is taking up lots of my time right now and I am pretty tired afterwards.  This thought hit me this morning and I finally have some time to put my thoughts into words.

Obama has spent and spent and spent to try and not only help his cronies, but help the economy too.  He is taking this advantage of crisis to input as much socialism as he possibly can.  Fortunately, the people, and some democrats, are waking up and rejecting the healthcare bill so far.  Cap and Trade didn't fare well either previous to that.  So lets take a look at what has happened so far, with all the pet projects we have paid for.

Our economy is stable, for the time being (I will cover that later in this piece), and some have announced the recession is over.  The stock market has risen slightly in response to all the money pouring from our government into the economy.  Free cash is coming left, right and center.  Cash for clunkers is one example of this, though this will hurt us and drive the cost of vehicles up in the long run.  Much of the stimulus money was spent on Obama's cronies, so while it helps slightly, we do not even come close to getting the best bang for our buck.  It also increases corruption(if thats possible) and will again hurt us in the long run.  The take over of GM will kill the American auto industry by forcing GM to make decisions based on politics instead of economics.  The banks owing our government billions will also give our government power over them and will allow them to force their will upon the banks.  Say the government wants a certain minority group to get a special treatment, the banks will be forced to comply(more housing problems is foreseen here I believe). 

That is a quick summary of what is going on in the economy.  I know I didn't cover many things and some of them important, but that is not the focal point of this piece.  I want to know what is going to happen.  Where are we going from here?  Is the recession really over?  It seems so, unless we take into account the common sense of what other countries must be thinking right about now. 

According to:http://www.treas.gov/tic/mfh.txt

2.5 trillion dollars of our debt is owned by foreign countries, and that stat is from May 2008.  I would gander a guess that number is well over 3 trillion by now.  At that time China had over 500 billion of it and they are also the one most quickly buying from us, so I would venture to say that they are buying a majority of what we are putting up right now, leaving them approaching 1 trillion themselves.  China and Russia have been front runners in trying for a new world currency.  They believe we have not been responsible with our dollar and with that, they would like to remove the dollar as the world currency.  The government is already finding it tough to coax Americans into buying the Treasury bonds because we believe the same as China and Russia on this matter.  How does this work out if foreign countries refuse to buy our bonds from us, or worse if they sell their bonds back to us.  What do we do?

What is a motivator for people buying bonds from the government?  Safe investment + good interest return =  good investment right?  Up until now, they have been an extremely safe investment, but are they still?  Several economists believe not and Moody's has lowered all state bonds to a negative rating (I forget the exact rating, but you can search that yourself).  The Federal government rating is not as low, but is it far behind?  The spending habits of the feds have been worse, far worse, than the states, only there is one large difference.  The states cannot print their own money.  With the federal government printing its own money, they can fall back and in times of need, print enough to make it through and keep their investments safe(I say that, but it should never be used in this manner).  This is also the power they have abused and people no longer have faith that the dollar is rare enough to be worth something.  So with foreign governments refusing to buy bonds our government is forced to do one of two things.  1) Print the money or 2) Sell bonds.  Option one will inevitably lead to a crash in our economy not seen since hyperinflation of the Third Reich.  This cannot happen or our country will undergo a revolution, in my opinion.  Option two is what I have been talking about and have given reasons as to why this option will be tough.  How can they get people to buy their bonds?  They MUST raise the interest rate.  The security of the bonds are not what they once were and to make the risk worth it, the return must rise.  What happens here?  Inflation occurs.  All interest rates will rise and the dollar value will fall.  If foreign governments actually sell their bonds, it would increase this reaction by multiples.

Now, our government must make one of those choices, but the story does not end there.  Once they choose option 2(while secretly doing option 1 as well), if we continue spending, the interest rates will continue to rise as the security of the bonds decreases.  This inevitably leads to the same result as option 1. 

The only way out is for our government to spend a low enough amount to create a surplus, and fast, to bring our debt under control.  With that, our bonds can once again be worth something and foreign governments will feel safe investing in our country again.  It is a snowball effect each way.  Once the ball gets rolling in one direction, it continues to roll and gain momentum.  We just have to choose the right side of the hill to roll down.

"All that is necessary for evil to triumph is for good men to do nothing" Edmund Burke