To be or not to be...

"Man by nature is a political animal" - Aristotle

The second century B.C Greek philosopher, believed that a concept of city/ state is organic with each individual at the top and the collective entity at the bottom. Freedom is achieved when each individual is allowed to pursue his/ her self interest as long as it doesn't interfere with some one else pursuing the same goal. I look to understand if these principles might hold in the US going forward. I begin with analyzing the state of the economy.

The total national debt in US (excluding future social security and medicare obligations and those of Freddie and Fannie) stands at $11 trillion or 80% of GDP. The outstanding MBS and the public mortgage backed securities guaranteed by Freddie and Fannie amounts to $8 trillion. The private sector debt has ballooned to nightmarish levels. The ratio of total credit to GDP in US exceeds $50 trillion or 350% of GDP. This is the largest ratio for any society in the history of mankind. By guaranteeing the majority of debt, the US society (government + citizens + corporations) is bankrupt.

Inflation, a noun form of the verb to inflate, which derives from the Latin word inflatus, i.e to swell or to blow up. In modern day, courtesy Arthur Burns's tweaks in 1972, inflation is measured as rise in prices of goods and services excluding food and energy. Since the prices have been steadily decreasing, most economists and policymakers are worried about deflation. But with the FED increasing (via printing) money supply something has to be inflated as money always chases goods. Hence the inevitable question is what is inflated? The answer is US treasuries, US dollar and stock markets. The world has finally learnt not to lend anymore to US (buy their debt). With the treasury issuing $100 bln of debt every alternate week its inevitable that treasury and the dollar collapses.

When the bubble blows the dollar could depreciate by at least 20 times. This is an automatic "transfer of wealth" to other economies that are fiscally sound, like China. It will not only address the size of outstanding debt in the US but also adjust the large global fiscal imbalances. Such substantial shifts causes hyperinflation and social unrests and ill-will as witnessed by banana republics in the past.

Socialism seems to be more welcomed in US and its understandable. Majority of the population is in grim situation; loosing jobs, mounting debt payments; threat foreclosing their house with little or no savings! They are looking for the government to "bail" them out; increase jobless benefits and back their debts. And the government, in its extreme sense of wisdom, chooses to tax the remaining yet the productive part of the economy.

Great inventions and discoveries have never come through orders from government. Thomas Edison or Albert Einstein came up with inventions and ideas driven by a self-motivated passion. Silicon valley came was developed as result of actions by a collection of bright individuals than from creation of state or federal government. The current administration is sowing the seeds of socialism with increased regulation, higher taxes and greater barriers to entry of new businesses.

In sum, I question the rational to be in America or have assets in US dollars. The principles that built this country have been torn apart the last few decades; with ever deteriorating fiscal condition, potential currency crisis, increased socialist principles I reflect if the concepts of freedom and state hold good in future. The early fathers and more recently the "brain drain" from Asia came to America in search of these ideals. Perhaps its time for every American who values freedom and liberty or everyone who is in America to look for outside pastures.

"May you live in interesting times." - An old Chinese curse