While the news media concentrates on Japan's nuclear problems, we in the United States face a devastating financial "tsunami" of our own. We are currently looking at unbridled government deficits of at least $1 trillion per year as Congress haggles over extending the debt limit — now at about $14 trillion — and offers minuscule cost reductions. As we engage in military action in Libya, we cannot continue to add hundreds of billions of dollars per year to the deficit in unending Middle East wars.
Japan is second only to China as a purchaser of our debt. They can no longer buy our debt and will by necessity begin to sell the U.S. paper they hold to get funds to rebuild from their worst disaster since World War II. With the loss of Japan, the only option the Federal Reserve Bank has is to simply create more dollars that are only backed by the strength of the government, which they then exchange for U.S. Treasury notes, effectively monetizing the debt by debasing the dollar.
The Japanese are handling the nuclear crisis well, and when it is all over there will be very few deaths from radiation. The French will continue their pro-nuclear strategy. The Chinese, following the French model, will continue to build nuclear plants and high-speed electric rail systems. For security against loss of Middle East oil, they will continue to build coal-fired power plants to complement the nuclear strategy.
We, on the other hand, will not drill on the shallow continental East and West Coast shelves or in the Arctic National Wildlife Reserve because of the BP accident; increased nuclear power is dead after Japan; coal production has been restricted after the West Virginia mine disaster; and the environmentalists will frustrate natural gas production from shale.
That leaves green wind and solar energy solutions, which are erratic and inefficient and will take decades to replace any appreciable amount of fossil fuels. Diverting corn from food to ethanol fuel does nothing for reducing carbon dioxide and is one of the principle causes of current record-high food prices.
Meanwhile, about 60 percent of our crude and oil products are being imported, at the cost of $400 billion per year, at a time when a number of Muslim nations with 75 percent of the world's oil reserves could well end up in the hands of Islamists. Saudi Arabia, with 25 percent of the oil reserves, has aging and infirm rulers and is surrounded by revolts in Egypt, Yemen, Oman, Bahrain, Syria, Kuwait and Jordan. If Saudi Arabia falls to Wahhabist radicals, and we are embargoed as we were in 1974, the American lifestyle is finished.
To add to the mix of problems, we have exported significant portions of our wealth-producing manufacturing industries, resulting in an unsustainable foreign trade deficit, purchasing goods and services from Asian countries with less than 10 percent of U.S. domestic labor costs.
Our position is eerily similar to that of the Weimar Republic in Germany in 1920. After losing World War I, Germany was required to pay oppressive reparations and financed its internal recovery by creating money that the government did not have. The leaders believed that debasing the mark would make German goods cheap and easy to export, and they needed the export earnings to buy raw materials abroad. More than inflation, the Germans feared unemployment. The leaders did not see anything wrong with massive increases in the money supply.
By 1923, the exchange rate was 4 billion marks per dollar. The country collapsed economically and politically with internal chaos, resulting in Hitler's election as chancellor.
In 2003, Warren Buffett proposed a method to eliminate the U.S. trade deficit. Sen. Russ Feingold converted Mr. Buffett's proposal to a bill named the Balanced Trade Restoration Act. It was not enacted.
Passing the Feingold bill would increase U.S. employment, stabilize the dollar and be the first step toward solving our financial problems. Other steps toward reducing our debt and solving our trade deficit include: ending our Middle East wars; drilling for oil and gas; constructing nuclear plants with spent rod reprocessing; and replacing liquid fuel use for auto and air travel with high-speed rail systems and electric cars.
We cannot prevent the Middle East implosion, but we can become indifferent to oil supplies from that volatile part of the world. The alternative is disastrous.
Charles Campbell, a resident of Woodstock, is a retired senior vice president of Gulf Oil Corp. His e-mail is email@example.com.