Biggest Heist in History

With no bloodshed, with not one shot fired, America just completed the biggest heist in history.

For years, Americans did not save. We were busy consuming, buying homes, cars and electronic gadgets. The Chinese, Japanese, Indians and Koreans worked hard and saved their incomes. They funneled their savings into America, buying our government and corporate debt. We lured the Chinese, Japanese, Europeans and Arabs to take our currency and our financial instruments, money market funds, SIV's, CDS's and mortgage paper galore, in exchange for their products and their oil.

They worked and saved, we consumed; they got our paper, we got all kinds of real products. Singapore, Qatar, Sweden and all these other countries put their faith in us. In effect they transferred their very real wealth, in the form of products, to us, in exchange for our word. Now this paper we gave them is worth much less. Especially the assorted mortgage notes. And thus the robbery was completed.

Even the government bonds, which represent the most solid of credit and are in such high demand now, are a robbery. They are paying an interest rate much lower than LIBOR or the rate of inflation, so effectively people are paying to put their money with the US government. Consider: the same government that is spending hundreds of billions to bail out the financial sector, the same government that is running massive deficits, the same government that is inflating the currency and will pay back its mountain of obligations in underappreciated money, thus escaping its fiscal commitments, this is the same government that people believe is a safe haven for their hard earned life savings.

As Lincoln said, you can fool all of the people some of the time, but not all of the people all of the time. America reneged on its implied promise before; will they believe us the next time around?

Alan Schram is the Managing Partner of Wellcap Partners, a Los Angeles based investment partnership.

Comments

[iambusto]

When 20% of our GDP will go for debt service in the future years (as it surely will), chickens will come home to roost.

[KillTheMessenger]

I would put it slightly differently. They got what they paid for. It did not take a rocket scientist to know that they US would eventually go belly up. Plenty of people, moi included, have been warning for years. Incidentally I happen NOT to own any of these instruments and I am fine.

Now, I seriously doubt that the countries you mention are particularly unhappy bunnies. If you look at

http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance

you can identify winners and losers easily. The winners are at the top of the list, the losers, including the Megaloser USA (last with the least) are at the bottom.

Almost everyone you claim is a loser is actually a winner and we are holding the pan for the world.

[Tellurider]

I believe that your wiki numbers are prior to the crash when the numbers dramatically changed.
Our country bankrupted the world. We wiped out the savings accounts, retirement accounts and the pension funds of the entire world.
It is simple. It was pay-back time for the world not supporting our invasion of Iraq.
Bush and the Boys said that they would get even with the world for eating French Fries instead of Freedom Fries.
The CDO Bonds were rotten from the beginning and Wall Street and Washington new it.
It was a con.
Our country kept very little of the CDO's and sold 95% to the world.
The countries of the world want their money back.

[SteveMDFP]

Quite so. For generations to come, people around the world will put their investments into markets in London, Tokyo, Paris--anywhere but the US. Our government (taxpayers) will have to pay higher interest on government bonds. Economic growth will stagnate as capital flows to other areas of the world.

Very sad. All because an unholy alliance of anti-regulatory ideology, idiocy, and political corruption conspired to let the financial markets turn into casinos.

[Sundialsvc4]

Basically, Alan, they're being swindled.

And when "Lord Paulson" calmly redacts those sections of critical agreements which reveal just who might be doing the stealing ... let's just say that you'd have to be the village idiot not to know what's going on.

The natural and inevitable reaction -- the one-and-only sensible one for the businessmen of any other nation on earth to take -- is the punch-line of that old Lone Ranger saw: "whaddaya mean 'we', PALEFACE?"

Don't accept the American Dollar. Insist that it must be converted on-the-market to your own favorite currency. Repudiate the oldy-moldy agreement that said that oil must be denominated in Dollars. You only have to convince is the largest oil-producer on the planet: Russia. And the biggest holder of American debt: China.

"We just want you to remember that one of us has just as many nuclear weapons as you do, and the other can quickly field a 10-million man army. We are not threatening you; just reminding you. We're just requiring you ... not 'asking' you ... to play fair and stop stealing. To make very sure that you do, we'll insist that you must use our money. We'll trade with you at the same prices, but in our money. You have shown yourself to be imminently deceitful and untrustworthy, and we choose not to inflict the consequences of this onto our children's children's children ... nor yours. We do not choose to accept 'World War Three.' "

[beaupritchard]

I've thought something similar to this for a while. Like a bad creditor we owe everyone ... who's going to come get it.

It makes us as low as the lowest hoodrat ... untrustworthy ... thuggish ... but still ... who's going to come get their money.

Really it's the future now. Money is just paper ... worth no more than the two parties that hold it agree on. Who can trust someone once its proven they will renege on an agreement. The financial centers must move off shore. And when the Saudis and the Chinese revaluate their currency in other than american dollars ... the markets will react negatively.

Meanwhile in anticipation Bernanke and Paulson are going to try to get their funds in real assets ... gold ... land and pay for them with paper.

Then Jacob called for his sons and said: "Gather around so I can tell you what will happen to you in days to come.

[nomoredead]

Now we know what the real ' Weapons of Mass Destruction ' are and who had them !

[iambusto]

Thats all right. They will just demand higher interest rates when they realise who much the $ has devalued and their holdings have dwindled.

Also, as we get into more debt, our future budget would have higher and hiher debt servicing percentage. :)

[MarryAnn]

GREED on all sides!

[hopeless277]

God I hope not. The USA is a more dangerous and barbaric place than Afganistan was before 9/11. Someone definately needs to invade us and put every member of the Republican party in prison for life.