Back to the Future!

What’s all this fuss with the Credit Rating of Standards and Poor’s? (Apart from stoking a funny debate on what kind of a name this could be to a rating agency!). Well, it is all about, let us bite the bullet and spell out the tragic line – The Bankruptcy of the great nation – USA.

Many thoughts and theories abound on why this great country is becoming the cynosure of all eyes very frequently for the wrong financial reasons. Questions are being raised on the audacity of the USA to be playing the “Big Daddy” for the developing nations, while its own backyard is being ravaged by debt. Debates are woven around the credibility of the financial culture of the once great nation, which was built around a simple principle - Live for Today.

This particular aspect does require a deeper look, for in my personal view, does bear logic. Look at the needs of a common American citizen. The equivalent of our own Roti Kapada or Makan. This used to be an almost assured commodity, thanks to the Social Security System of Doles and Credits (Benefits, in the words of the US Senate). Federal Benefits, Unemployment benefits, Temporary assistance, Health Insurance, Supplemental Security program and a horde of other innovative jargons, which all translated into; let us face it – Alms.

To quote from the official document “The main part of the program is abbreviated OASDI (Old Age, Survivors, and Disability Insurance) or RSDI (Retirement, Survivors, and Disability Insurance). When initially signed into law by President Franklin D. Roosevelt in 1935 as part of his New Deal, the term Social Security covered unemployment insurance as well.”

In 2004 the U.S. Social Security system paid out almost $500 billion in benefits. I shudder to think what it would have been in 2010. Now, where did all that money come from? Certainly not from the surpluses of the economy which was already in shambles. It had to come from borrowing and I suspect, China was playing the seeding game, lending away to glory, while the wars in the middle east and the crack down on terror was literally turning the USA into a financial black hole, sucking in borrowings into it, with no sign of what happened, once inside. A classic example of how the legendary British Empire was brought to its knees, by the endless wars keeping it occupied – not knowing a way to shake off the wars.

Well, what does the future hold for America – it’s hard to tell, but I suspect that the days of the dole are now drawing to a close. Reality will dawn and the Indian value system (Live for today, Save for tomorrow), imbibed into our DNA by or forefathers will possibly be the next ‘in thing’ and suddenly, the value of gold as an investment commodity, will come as a rude shock to the average American.

As for China, I would be surprised if it did not crack the whip, sooner or later, but would be interesting to see how the world rallies around their ‘Once Big Brother’. China holds US Treasury securities approximately aggregating to $1.2 trillion. Similarly, the Japanese are the second largest lender to the US and hold about $900 billion.

The yanks will now have to learn to live in a competitive world. A world where every penny – nope paisa will have to earned, where security will pat you down, where secondary will check you for Malaria shots, where you will need to save for your future, where when you buy a product, it is Sold, and cannot be returned after use, where Corvettes and Lamborghinis are a distant dream on hard earned cash or in other words, there is nothing called Today, without tomorrow.

Until then, Uncle Sam – Back to the Future!