Nineteen percent of the country's annual budget is now being used to pay the interest on our national debt and much of this interest is being paid to foreign bond holders. Every year we ship boat loads of our wealth to countries all over the world to pay the foreign bond holders their interest! (Actually it is posted to their accounts electronically but it amounts to the same thing) We ship billions of our dollars (interest payments) annually, to Japan, China & Korea alone! This will continue forever and increase over time as our trade deficit continues to expand.

The foreign companies love to sell us their junk (anything that depreciates or is consumable - oil, automobiles, television sets, etc.) for our dollars - non-interest bearing U.S. Government backed IOUs. These non-interest bearing dollars are quickly traded for interest bearing bonds to the delight of our economists who think that this is helping to finance our national deficit. (It would cost us less if they just kept the non-interest bearing dollars.) Or they buy our assets (real estate, companies, stocks, art, raw material, etc.). They prefer to buy the store rather then the merchandise within it. - An ever larger percentage of our wealth is now being paid to these foreign bond holders. It will continue to grow until we adopt a strong trade policy.

The fastest growing percentage of our trade deficit with these countries is the interest we are paying to them as owners of US treasury bonds. Due to this chronic foreign trade deficit imbalance - every year more then one hundred billion dollars of our nation's wealth is transferred to foreign countries. In one hundred years at least ten trillion dollars of our nation's wealth will be held by foreigners.

When the strength of the yen increased relative to the dollar, the Japanese manufacturing companies found it harder and harder to export their products. Their government solved this problem by creating a mild recession. The current recession in Japan is a deliberate policy to restrict their citizens purchasing power and created a recession. To do this they passed a value added tax. They also lowered their interest rates. This action brought down the value of the yen against the U.S. dollar and prevented the ordinary citizen from buying too much imported merchandise. These policies along with their restrictive trade barriers increased Japanese trade surpluses tremendously.

The Japanese right now, are just where they want to be (no matter what they say publicly). Money is pouring into their country from all over the world from foreign investments and foreign government bonds, their trade surplus is constantly increasing, their factories - all over the world - are humming and they are in total economic control. Who needs an army and navy in this economic power world! And to top this all off they have the world economists feeling sorry for them, giving them advice on how they can solve their banking and recession "problems"!

We now have a new trade adversary coming into the picture to further exacerbate our trade balance problem. China's trade surplus has now surpassed Japan's and the southeastern Asian countries are now also beginning to adopt more restrictive trade policies. The future of America's trade balance does not look good.

Can we continue this trend for another hundred years? "Free Trade” and "Favored Nation Status” are a nice catchy phrases but they must be kept in perspective so that, in the long run, they do not lower the standard of living of our citizens in the future. How about “Fair Trade” instead of “Free Trade”.

Fortunately, the imagination, technological advances and entrepreneurial spirit of our country remains strong. So far, new creative entrepreneur capitalists have been able to create many new wealth generating industries. Our companies are producing amazing new products and services that are at the leading edge of world technology. The government is now benefitting greatly from the tremendous increase in taxes it receives from all this new wealth and is starting to pay off some of our national debt - thus lowering the interest rate it has to pay to the bond holders.

This all changed when the "Right Wing" Republicans took over the government. (They now control Congress and the Presidency). The surplus of the Clinton Administration soon vanished when GW Bush and the Republican Congress voted a for very large income and estate tax cuts and declared an ill conceived war with Iraq. This may have sent the Federal deficit a fatal nosedive that the country may not recover from - only time will tell.

Donald L. Hamilton is the author of “The MIND of MANKIND - Human Imagination, the source of Mankind’s tremendous power!” (novan.com)

The Mind of Mankind