Fargoizing the National Debt

This was perhaps a little predictable:

"The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible."

"The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world," he added. "The world does not have so much money to buy more US Treasuries."

Thus spake an official of the Bank of China. This is indeed unfortunate, since our budgetary Ponzi scheme depends on a continuing supply of marks to keep the game going. The corporate/government merger known as Washington, D.C. must have overlooked one or two salient points in its drive to create a capitalist paradise:

First, while one can understand that Washington insiders would become careless about the 300 million citizens who make up the actual American populace, you can only indulge this attitude so far. If you create a country where tax incentives and free trade regimes result in the destruction of the labor market, at some point (such as right now) you will reach a juncture where the American masses who are not organically connected to the federal government cannot earn enough money to pay any taxes. When this happens, somewhere north of 50% of government revenues disappear (the elite One Percenters who get their money interest free from the Federal Reserve pay about 46% of all income taxes). We are currently on such a trajectory, since total tax revenues this year will probably just surpass $2 trillion, against expenditures of around $3.5 trillion or so (probably more, because there is still the Epic War to Eradicate Afghan Jungle Gyms to be funded). Adding to this slight noncongruence is the loathsome reality that over $3 trillion in Treasury debt will "mature" this year and will need to be rolled over.

The second problem is that the lumpen proletariat not only don't pay taxes, they don't have the money to buy Chinese cell phones, flat screen TVs and melamine-laced dog chow. Since the Wal-Martcentric "economy" was based on this dubious activity, the "current account deficit," which the Chinese (and their Amen Corner in the U.S. Congress) used to be so happy about is now disappearing. Memo to Mr. Zhu: the American worker is not "saving," per se. He's trying to stay indoors and consume food.

The question then becomes how to finesse your way past the need to auction off something on the order of $4.5 trillion in U.S. debt without having even a single failed auction. If an auction is held and nobody shows up, then for the first time in living memory a holder of U.S. Treasury securities will have to be informed that we don't have the money right now. Personally, I would recommend simply not returning phone calls from foreign central banks. A model for this kind of dodge was probably best demonstrated by William Macy in "Fargo," where he strings out the financing company for as long as possible by (a) not returning calls, (b) promising but not delivering and (c) sending unreadable fax messages. I don't see why Timothy Geithner couldn't use all of these techniques.

Scene: Office of the Secretary of the Treasurer, Washington. A secretary answers the phone.

Secretary: Mr. Secretary, Mr. Zhu is on line one. Again. He says you still haven't credited his account with that $50 billion on the maturing T-bond.

Geithner: Can you tell him I'm in the bathroom right now and I'll call him right back?

Secretary: Okay. (Murmuring into phone.) He's wondering if you're eating too much Mexican food. That's the fourth time in two days you've been...indisposed.

Geithner: Tell him I promise I'll get back to him. Get a number.

Secretary: (Murmuring.) He says he'll hold.

Geithner: Tell him the computer's been down all day and we'll probably get that transfer made by tomorrow morning.

Secretary: Okay. (murmuring). He says he still wants to talk to you because that's what you said yesterday.

Geithner: Tell him I died.

Anyway, Geithner and Bernanke (if he gets confirmed) will think of something. They're very resourceful, and they own a printing press. Money, schmoney. Let's build the B-22 after all. Our best days lie straight ahead.