For as long as I can remember, in every economics class of the latter 20th century and early 21st, we have been taught that the United States is the industrial leading behemoth that cannot be surpassed because of its sheer fiscal might. Every currency exchange in the world still compares its local currency to the US Dollar and the United States is still the target for every worldwide consumer innovation, as it is the largest most lucrative market in the world today.
But times are changing. Let's step back and understand the passing of the torch that saw the United States rise as the worldwide economic leader. People who don't study or pay attention to history, may not realize that by the turn of the end of the 19th century and the beginning of the 20th, Great Britain was the world leader in most major industrial and financial measurements. However, by this time the British Empire grew beyond its means. With its empire stretching across the globe and the financial stresses inflicted by various conflicts, that standing became very tenuous. The beginning of the end was the beginning of World War I, where Britain extended itself further fiscally, and just could not keep up with the rising growing economy of the United States.
Despite going through the Great Depression, the United States kept growing in every phase of its economy. The final straw that unseeded Britain from the top spot was the havoc World War II inflicted upon its people, infrastructure, and finances. Soon their colonies, once the cornerstones of their financial income, began to break away as independent sovereign nations. Then their industries began to be nationalized. Finally, their national budget proportionally became a shadow of its former self. This made the economy grow at a snail's pace and even contract at times.
The United States had none of these problems. The younger nation was buoyed by the end of the Civil War. The United States saw its greatest leaps in industrialization and natural resource discoveries push the growth margin higher than ever during the "gilded age", leading up to the start of the 20th century. By the time of the roaring 20s, the country was now an economic contender on the world stage. But because neither of the world wars saw any extensive damage to the United States infrastructure, there was no pause and no rebuilding cost. This freed up the United States to invest in its growth further and leap past its European competitors with a seemingly insurmountable advantage into first place.
It is a spot which we, as a nation, have not relinquished since. However, our supremacy on the world stage has diminished over time. Since the late 20th century, the United States government has continuously mismanaged its budget to the tune of a financially devastating fiscal deficit. As the GDP and per capita income increased, so did the manufacturing costs. As a result, we have transformed our economy into a service, credit, and consumer economy. All the while shipping our blue collar manufacturing jobs overseas. With that transition we have also given the technical expertise and the income, which was previously kept in house, to nations we never saw as our competitors, let alone our equals.
But this is exactly where China finds itself today. Having absorbed decades of manufacturing and assembly handover from Western nations, China has acquired both the infrastructure and the technical knowledge base necessary to compete on the world stage as equals. Furthermore, Chinese government has acquired sufficient sovereign debt of every Western nation, including the United States, to be able to have political and economic leverage it previously dreamed of.
But now, having accumulated sufficient wealth, China is transitioning. It finds itself at the exact same inflection point that the United States found itself in the late 19th and early 20th century, when it was breathing down Great Britain's neck. Except now it is China ready to overtake the United States as the leading economy in the world. Chinese government is well poised for the role, with a bank roll of foreign debt and a national cash surplus that now seems more attractive to global investors than ever before.
As the conflicts of the world swirl around, the safest place for foreign cash is still the United States, as it is being recognized for its past fiscal dependability. But the winds are changing, and the Asian powerhouse that is China sees opportunity in this crisis. Up until now, they have been able to manipulate its currency and keep the value of the Yuan down to keep its manufacturing infrastructure viable on the world stage, and its Yuan-denominated sovereign debt purchases high in value. But their per capita incomes and currency value is growing beyond these controls. Soon enough, China will find itself in transition to a consumer economy. And that's exactly when the United States will be faced with a similar fate that Great Britain faced in the 20th century.
What do you think? Will China become a major consumer economy within the next decade? Will foreign investors see it as the new capital safety market? Will the US Dollar Standard crumble within the next decade? Please Leave your thoughts below in the comments section.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Monday, October 23, 2017
Wednesday, September 27, 2017
Cracks in Japan
If you're like most Americans, you have probably missed the news this past Monday morning that the Japanese prime minister Shinzo Abe has called for snap elections and a dissolution of the current government body that has previously given him stern opposition.
In effect, he is seizing the moment of higher approval ratings that are currently hovering above the fifty percent mark and put him in a much better position to make this move than his thirty percent approval ratings just months ago. So what has changed? He is finding the opportunity in the North Korean threat, which has propped up his approval despite an economy that is in deep trouble.
Japan's annual debt is currently over twice its own annual gross domestic product. This means that Japan has to continue borrowing and use its own quantitative easing variation of the program in order to keep up the illusion of a functional economic health.
Essentially, the world's governments are all doing this. They are borrowing from each other with money they do not have, treating each others' debt as assets. So we are all essentially stuck holding each others' IOU notes that on which we can barely pay the interest. The problem with playing this global game of musical chairs is that sooner or later the music will stop... and there will be no chairs.
Every time the governments borrow, print, and dilute money; they are in fact devaluing the currency each country uses and its people earn. Therefore, these measures are going along a curve of continuously diminishing returns. As a result, there will come a time when these measures will become completely ineffective. And that's when the music will stop.
Japan, with the highest ratio of debt to GDP, will be one of the first, if not the first country to fall in this setting. Shinzo Abe, being the proponent of monetary easing measures, is seeking to consolidate power and reduce opposition, as his Monday power move has proven.
In America, we will likely be the last nation to feel the impact of this global wave of deflation. The reason is once the dominoes begin to fall, all foreign countries' biggest capital holders will transfer their wealth to the United States market, as it is seen as the most stable. But this will ultimately prop up our assets only to fall the farthest and in the most painful devastating fashion.
That is why Japan matters, why foreign economies we have ties with matter - our economic well being is intertwined with the countries whose debt United States lists as assets. We must recognize that the troubles we are seeing in armed conflicts across the world and natural disasters that devastate other countries are not just "their problem", it is in fact our collective problem.
So do not be deceived by the skyrocketing Dow Jones and S&P 500 in the next few years. These events occur because of the money coming in from foreigners to temporarily avoid the calamity that their nations are enduring, one that will ultimately come our way in the end.
For now, the market will be a good place to keep your savings and retirement. But once the music stops, the only assets that will be safe are defensive ones, whose value doesn't fluctuate based on paper currency.
In effect, he is seizing the moment of higher approval ratings that are currently hovering above the fifty percent mark and put him in a much better position to make this move than his thirty percent approval ratings just months ago. So what has changed? He is finding the opportunity in the North Korean threat, which has propped up his approval despite an economy that is in deep trouble.
Japan's annual debt is currently over twice its own annual gross domestic product. This means that Japan has to continue borrowing and use its own quantitative easing variation of the program in order to keep up the illusion of a functional economic health.
Essentially, the world's governments are all doing this. They are borrowing from each other with money they do not have, treating each others' debt as assets. So we are all essentially stuck holding each others' IOU notes that on which we can barely pay the interest. The problem with playing this global game of musical chairs is that sooner or later the music will stop... and there will be no chairs.
Every time the governments borrow, print, and dilute money; they are in fact devaluing the currency each country uses and its people earn. Therefore, these measures are going along a curve of continuously diminishing returns. As a result, there will come a time when these measures will become completely ineffective. And that's when the music will stop.
Japan, with the highest ratio of debt to GDP, will be one of the first, if not the first country to fall in this setting. Shinzo Abe, being the proponent of monetary easing measures, is seeking to consolidate power and reduce opposition, as his Monday power move has proven.
In America, we will likely be the last nation to feel the impact of this global wave of deflation. The reason is once the dominoes begin to fall, all foreign countries' biggest capital holders will transfer their wealth to the United States market, as it is seen as the most stable. But this will ultimately prop up our assets only to fall the farthest and in the most painful devastating fashion.
That is why Japan matters, why foreign economies we have ties with matter - our economic well being is intertwined with the countries whose debt United States lists as assets. We must recognize that the troubles we are seeing in armed conflicts across the world and natural disasters that devastate other countries are not just "their problem", it is in fact our collective problem.
So do not be deceived by the skyrocketing Dow Jones and S&P 500 in the next few years. These events occur because of the money coming in from foreigners to temporarily avoid the calamity that their nations are enduring, one that will ultimately come our way in the end.
For now, the market will be a good place to keep your savings and retirement. But once the music stops, the only assets that will be safe are defensive ones, whose value doesn't fluctuate based on paper currency.
Saturday, February 18, 2017
Opportunity Blueprint
In modern times, we find ourselves a highly divided country with an alarming (and continuously growing) disparity in terms of income between the classes of our society. Incomes diverge, as expenses grow. It hasn't always been that way, but this is where we are and we have to resolve these issues before our nation collapses along the fault-lines of growing division.
First of all, let me say this clearly - it is all about money. There literally is nothing else that divides us at the core except for money. Racism, anti-antisemitism, xenophobia, islamophobia, etc. are all just the byproducts of the basic problem where people fear for their financial well being due to a perceived threat or a poverty-stricken reality makes people desperate enough to believe.
While these threats are just untrue and ridiculous at the core, the division we see across our nation are real. Furthermore, the proposed solutions to the economic divergence/disparity among the classes couldn't be more different and polarizing from both Democrats and Republicans. But without a meaningful admission of the core problem, neither of these one-sided proposals have any viable way of solving the root of the problem.
The government earns money from taxing the citizens' incomes, purchases, sales, gifts, etc. The majority of the revenue comes from income tax. The economy strives when the citizens are capable and motivated to spend their disposable incomes. As a result, it drives corporate profits and government revenues up. Finally, businesses see a reason to keep people employed and hire more staff to expand in order to meet the demand.
It has long been a predominant Republican belief that applying a flat tax across all tax brackets will raise enough revenue to balance the budget. However, taxing the lower classes and those below the poverty line would not only drive people into a further financial despair, it would also require additional Federal spending to accommodate those suffering from such a tax program. The general population will have less disposable income, the businesses will lay off staff due to waning demand and the government will be left with an ever-declining revenue. It is a losing scenario.
It has long been a predominant Democrat belief that spending government funds to hire people and create government sponsored projects are ways to increase employment and, subsequently, increase the government's revenue stream. While this appears to be a good plan in theory, it is a totally different result in practice. When you are spending tax revenue on hiring public and creating projects that do not have a corresponding demand, you are in fact cannibalizing the government funds. Yes, the unemployment decreases and the government revenues increase. However, your spending outpaces the revenue received. It is a net negative effect and a losing scenario as well.
What I propose is a return to near-parity in terms of net income. What does that mean? Net income is the total amount of money a person takes home from their wages after all taxes (including income tax) are paid. How would someone increase the incomes of the poverty line and lower classes? Simple, it would involve a two-fold plan of income re-balancing in an employer-employee environment.
First, the government would need to institute an enforceable guideline for compensation of companies' lowest paid employees to be no less than a certain reasonable percentage of the highest earning employee (usually the CEO). This way, each company is required to distribute its profits more fairly and each employee earns enough to where the taxes no longer cripple them below a living wage (that would otherwise require them to borrow in order to survive).
Second, the government would need to protect American companies and workers from outsourcing and in-sourcing scenarios. A lot of companies began to chase profits in the 1990s with cheap overseas labor that resulted in higher profit margins. However, this all came at taxpayer expense as hundreds of thousands of Americans lost their source of a living wage. The government loses revenue from taxes on those incomes and is now forced to spend their depleting revenue to support the newly unemployed. It is time to stop the bleeding. United States is still the leading consumer economy in the world. As such, it can dictate what US companies' foreign manufactured goods can pay in taxes - recognizing that one such product or service bought, is one American product or service left with declining demand. To solve this problematic economic minefield, the government needs to gradually phase in a tax of (5%, 10%, 15%... n%), where n% equals the difference in cost between a comparable American product (or service) + 2%. This will level the playing field for US produced goods and services, while providing American companies operating overseas with enough time to move back their operations, avoid losing government incentives and hire American workers.
The end result will be a greater level of net income for majority of Americans, a new degree of income parity between the highest and lowest earners, protection for American workers' incomes, increased disposable income spending, increased government revenue, reduced unemployment benefits spending and a more stable economy.
And maybe, just maybe, when we are in a new era of wholesale economic revival, our divisions will greatly diminish as our incomes and interests converge.
First of all, let me say this clearly - it is all about money. There literally is nothing else that divides us at the core except for money. Racism, anti-antisemitism, xenophobia, islamophobia, etc. are all just the byproducts of the basic problem where people fear for their financial well being due to a perceived threat or a poverty-stricken reality makes people desperate enough to believe.
While these threats are just untrue and ridiculous at the core, the division we see across our nation are real. Furthermore, the proposed solutions to the economic divergence/disparity among the classes couldn't be more different and polarizing from both Democrats and Republicans. But without a meaningful admission of the core problem, neither of these one-sided proposals have any viable way of solving the root of the problem.
The government earns money from taxing the citizens' incomes, purchases, sales, gifts, etc. The majority of the revenue comes from income tax. The economy strives when the citizens are capable and motivated to spend their disposable incomes. As a result, it drives corporate profits and government revenues up. Finally, businesses see a reason to keep people employed and hire more staff to expand in order to meet the demand.
It has long been a predominant Republican belief that applying a flat tax across all tax brackets will raise enough revenue to balance the budget. However, taxing the lower classes and those below the poverty line would not only drive people into a further financial despair, it would also require additional Federal spending to accommodate those suffering from such a tax program. The general population will have less disposable income, the businesses will lay off staff due to waning demand and the government will be left with an ever-declining revenue. It is a losing scenario.
It has long been a predominant Democrat belief that spending government funds to hire people and create government sponsored projects are ways to increase employment and, subsequently, increase the government's revenue stream. While this appears to be a good plan in theory, it is a totally different result in practice. When you are spending tax revenue on hiring public and creating projects that do not have a corresponding demand, you are in fact cannibalizing the government funds. Yes, the unemployment decreases and the government revenues increase. However, your spending outpaces the revenue received. It is a net negative effect and a losing scenario as well.
What I propose is a return to near-parity in terms of net income. What does that mean? Net income is the total amount of money a person takes home from their wages after all taxes (including income tax) are paid. How would someone increase the incomes of the poverty line and lower classes? Simple, it would involve a two-fold plan of income re-balancing in an employer-employee environment.
First, the government would need to institute an enforceable guideline for compensation of companies' lowest paid employees to be no less than a certain reasonable percentage of the highest earning employee (usually the CEO). This way, each company is required to distribute its profits more fairly and each employee earns enough to where the taxes no longer cripple them below a living wage (that would otherwise require them to borrow in order to survive).
Second, the government would need to protect American companies and workers from outsourcing and in-sourcing scenarios. A lot of companies began to chase profits in the 1990s with cheap overseas labor that resulted in higher profit margins. However, this all came at taxpayer expense as hundreds of thousands of Americans lost their source of a living wage. The government loses revenue from taxes on those incomes and is now forced to spend their depleting revenue to support the newly unemployed. It is time to stop the bleeding. United States is still the leading consumer economy in the world. As such, it can dictate what US companies' foreign manufactured goods can pay in taxes - recognizing that one such product or service bought, is one American product or service left with declining demand. To solve this problematic economic minefield, the government needs to gradually phase in a tax of (5%, 10%, 15%... n%), where n% equals the difference in cost between a comparable American product (or service) + 2%. This will level the playing field for US produced goods and services, while providing American companies operating overseas with enough time to move back their operations, avoid losing government incentives and hire American workers.
The end result will be a greater level of net income for majority of Americans, a new degree of income parity between the highest and lowest earners, protection for American workers' incomes, increased disposable income spending, increased government revenue, reduced unemployment benefits spending and a more stable economy.
And maybe, just maybe, when we are in a new era of wholesale economic revival, our divisions will greatly diminish as our incomes and interests converge.
Wednesday, September 17, 2014
How The Rich Campaigned for, Lobbied and Stole Economic Recovery
It is no secret that today on the Internet, Television and Radio you will hear news of the Great Economic Recovery! While it is certainly true that the traditional indicators of economic health have shown positive signs of life, it is also true that the American Elite (the American equivalent of Russian Oligarchs) have gamed the system to make the economy look healthy, while screwing the average American in the rectal cavity.
The average middle class American today (wage per capita less than $60,000) will find their adjusted-for-inflation annual wages down by 5%, as opposed to six years ago. Compare that with the upper class (wage per capita more than $150,000) and the upper crust (wage per capita more than $500,000), whose adjusted-for-inflation annual wages are up by 10% and 25%, respectively. You can see the unfair disparity in these figures.
You may ask yourself - how come the economy seems like it is healthy?
The answer is simple - it is a combination of the Federal Reserve pouring in money into the markets without any rational limits, the Unemployment Index not showing the full picture and the Corporate landscape using creative means to make a profit while preventing the benefits of those profits to reach common Americans.
It is clear as day that since the financial crash of 2008, the Federal Reserve has been printing money to mask the deflation that should have taken place in order to stabilize the unhealthy explosion in asset values which occurred due to Bank Deregulation and the Housing Asset Bubble. And, to a certain extent, the Federal Reserve has been successful in psychologically bypassing the panic and collapse associated with the deflation of the Great Depression of 1929.
However, just like Herbert Hoover's administration in the post-crash years, Barak Obama's administration has stepped into the same trap of trying to stimulate the economy from the top down. In Hoover's time it was called "Trickle-Down Economics", in Obama's time it is called "Bailout" and "Stimulus Package". History teaches us that it doesn't teach us anything. Just like in the 20th century, in the 21st century the Corporations kept the money made as a result of Government assistance, while the average American has seen their savings shrivel and their paycheck devalue with time.
With respect to the Unemployment Index, all it shows is how many Americans are getting a paycheck. While it is true that there are many more people employed today as opposed to four years ago, it is also true that the vast majority of recent employment opportunities are either part-time, contract, full-time positions with lower salaries, or full-time positions with multiple role responsibilities. As such, a large majority of American population that is a part of the "employed" figures according to the index is in fact "underemployed", if not completely overworked.
Corporate profits are up! The American stocks are soaring in value. But the vast majority of this growth is due to creative tactics, not an increase in productivity. The Corporations are using the free liquidity pouring in from the Federal Reserve to restructure their debt (refinance) and make their balance sheets look healthier. They are also cutting their biggest expense - the employees. Whether it is through laying off older more expensive employees in favor of fresh from college graduates, reducing employee benefits, or "consolidating" their workforce by having fewer employees do more - it leads to the appearance of profits. If that wasn't enough, the profits the companies are getting, they're not using to grow the business and hire more people - the corporations know there isn't a growth in the actual demand. Instead, they increase the value of their stock by putting all of those profits to buy back their own stock, which leaves the remaining shares more valuable - making it look like the company is growing, when in fact it is not.
So the Corporate Landscape, which was too big to fail, is thriving! However, the ordinary people who make these corporations work are losing. They are losing in wages, benefits, personal time, rising cost of goods, and oh by the way having their tax dollars sponsor the bailouts of the very companies that are now fleecing them.
The true problem is that we, as a people, have lost faith in our Democracy. Through our apathy, we have turned it into a De Facto Polyarchy! Get off your lazy ass and write a page, just a page, to your local representatives and senators. Make sure that your voice is heard! Make phone calls to those same representatives and senators. Get your community to know the facts and get them voting. This should be our Outbreak - an Outbreak of Consciousness.
So the Corporate Landscape, which was too big to fail, is thriving! However, the ordinary people who make these corporations work are losing. They are losing in wages, benefits, personal time, rising cost of goods, and oh by the way having their tax dollars sponsor the bailouts of the very companies that are now fleecing them.
The true problem is that we, as a people, have lost faith in our Democracy. Through our apathy, we have turned it into a De Facto Polyarchy! Get off your lazy ass and write a page, just a page, to your local representatives and senators. Make sure that your voice is heard! Make phone calls to those same representatives and senators. Get your community to know the facts and get them voting. This should be our Outbreak - an Outbreak of Consciousness.
Saturday, January 28, 2012
The Fall (Part II) - Military Race against whom???
In last week's post we began looking at the fall of the Socialist empire and the major factors that forced its demise. In Part I, we covered the Patriot Act, SOPA and NDAA, as well as how each parallels the government control principles of a Police state. While today's news were all about the Internet blackout and the SOPA/PIPA backlash from the public, today's post will focus on The Fall Part II that will cover our country's out of control military spending.
When the economy imploded in the Soviet Union, one of the major factors which led the demise was the consistent foolish desire by the Socialist world leader to "Keep Up with Uncle Sam" in terms of military might. The CIA saw an opportunity in this desire and consistently fed it, in order to drive their ideological opponent out of business. To compound the problem, Soviet Union's incursion into Afghanistan lasted for over nine years and bled the once formidable Socialist adversary completely dry. What the Politburo discovered, when it was way too late to stop the collapse, is that you cannot expect to cover the increasing costs of military spending without growing the country's gross domestic product. But the money to pay for all of this had to come from somewhere... and it did. It came at the cost of a declining living standards of Soviet citizens, as the government fleeced its population of their earnings in order to pay for the military indulgences.
Which all brings us to today, where the United States has no formidable military rival in the world and still outspends the closest military power eleven times over. Let me repeat that, the United States of America spends eleven times more than the second highest military spender in the world. Last year, our country spent over seven hundred billion ($700B) on military during one of the worst ongoing recessions in the country's history. Incidentally, we also had the largest increase in military spending than anyone else in the world. And while our national economy isn't growing, our military spending continues to increase.
To be fair, some of the spending increases are attributed to ongoing operations in the Middle East and Afghanistan. Nobody will contest that the incursion into Afghanistan after 9/11/2001 was justified as retribution against terrorist-sponsoring Taliban nation. Neither will there be issues justifying the incursion into Iraq in March of 2003 to destroy a terrorist-harboring regime. However, the length of stay in these regions has been extensive. Nevertheless, the public has yet to question our government's intentions when it came to military spending correlation to our economy.
The public may already know that active military operations cost money. The Army employs over 1,100,000 Americans in active and reserve military personnel directly within the branch. You need to pay for arming, clothing, feeding and transporting military personnel. Intelligence, logistics, armored vehicles and other related equipment costs a lot of money - and you can't get it on sale at Walmart. The taxpayers pay the full price and sometimes an inflated price due to the existence of only one supplier in many cases. What most people do not realize is how far-reaching the war machine is into our economy. Manufacture of small arms, tanks, fighter jets, reconnaissance planes, helicopters, drones, refueling vehicles, artillery, optics, satellites and more are all taken care of by private companies. The engineering and medical staff required in the field are a part of the military, but the equipment they require are also supplied and maintained by privately held companies.
Part of the arsenal in our military is the highly mobile Navy that can deliver a military presence anywhere in the world. All of its vessels are enormously expensive to build and maintain, as well as instruct personnel on how to operate them. In the disclosed vast arsenal of our Navy there are 12 Aircraft Carriers, 29 Amphibious Vessels, 109 Surface Vessels and 71 Submarines. To keep this fleet afloat year in and year out costs the American Taxpayer a fortune.
The United States also maintains an incredibly large military presence at home and overseas. We have Army, Navy and Air Force bases all over the world in every continent except for Antarctica. We have bases in Afghanistan, Australia, Brazil, Bulgaria, Cuba, Germany, Great Britain, Greece, Greenland, Guam, Iraq, Israel, Italy, Japan, Kuwait, Kosovo, Kyrgyzstan, Netherlands, Portugal, Qatar, Singapore, South Korea, Spain and Turkey. And these are the installations that the United States has made public - it doesn't account for others that are utilized by various intelligence services. While not as expensive as an active military operation, the same exact costs apply to personnel and equipment. Furthermore, the majority of installations in Europe serve no real purpose, as they are Cold War relics that survived our transition from the days of the arms race, where we successfully pushed the Soviet Union to expend its military to the breaking point.
In the end, the United States military machine is very costly to the American taxpayer. In addition, the war machines and bases the United States maintains around the world are a bleeding wound to the American taxpayer. Furthermore, taxpayer funds are also spent heavily on the wide array of private companies that supply the United States military. As a result, the indirect and direct military expenses are beyond reason. Furthermore, they provide a reduction in unemployment figures as more people are employed directly and indirectly through the military each year - this allows the government to mask true unemployment figures. Moreover, they provide related private sector economic growth which is fueled by government spending and represents false growth and false hope in our economy.
Lastly, and to my initial point, against whom are we conducting this arms race? We no longer have a Soviet Union to strangle with our spending. On the contrary, we are suffocating ourselves with every additional budget increase that is earmarked for the military. Our Cold War rival was pushed to the brink with the arms race we engineered. Let's not fall victim to our own strategy.
When the economy imploded in the Soviet Union, one of the major factors which led the demise was the consistent foolish desire by the Socialist world leader to "Keep Up with Uncle Sam" in terms of military might. The CIA saw an opportunity in this desire and consistently fed it, in order to drive their ideological opponent out of business. To compound the problem, Soviet Union's incursion into Afghanistan lasted for over nine years and bled the once formidable Socialist adversary completely dry. What the Politburo discovered, when it was way too late to stop the collapse, is that you cannot expect to cover the increasing costs of military spending without growing the country's gross domestic product. But the money to pay for all of this had to come from somewhere... and it did. It came at the cost of a declining living standards of Soviet citizens, as the government fleeced its population of their earnings in order to pay for the military indulgences.
Which all brings us to today, where the United States has no formidable military rival in the world and still outspends the closest military power eleven times over. Let me repeat that, the United States of America spends eleven times more than the second highest military spender in the world. Last year, our country spent over seven hundred billion ($700B) on military during one of the worst ongoing recessions in the country's history. Incidentally, we also had the largest increase in military spending than anyone else in the world. And while our national economy isn't growing, our military spending continues to increase.
To be fair, some of the spending increases are attributed to ongoing operations in the Middle East and Afghanistan. Nobody will contest that the incursion into Afghanistan after 9/11/2001 was justified as retribution against terrorist-sponsoring Taliban nation. Neither will there be issues justifying the incursion into Iraq in March of 2003 to destroy a terrorist-harboring regime. However, the length of stay in these regions has been extensive. Nevertheless, the public has yet to question our government's intentions when it came to military spending correlation to our economy.
The public may already know that active military operations cost money. The Army employs over 1,100,000 Americans in active and reserve military personnel directly within the branch. You need to pay for arming, clothing, feeding and transporting military personnel. Intelligence, logistics, armored vehicles and other related equipment costs a lot of money - and you can't get it on sale at Walmart. The taxpayers pay the full price and sometimes an inflated price due to the existence of only one supplier in many cases. What most people do not realize is how far-reaching the war machine is into our economy. Manufacture of small arms, tanks, fighter jets, reconnaissance planes, helicopters, drones, refueling vehicles, artillery, optics, satellites and more are all taken care of by private companies. The engineering and medical staff required in the field are a part of the military, but the equipment they require are also supplied and maintained by privately held companies.
Part of the arsenal in our military is the highly mobile Navy that can deliver a military presence anywhere in the world. All of its vessels are enormously expensive to build and maintain, as well as instruct personnel on how to operate them. In the disclosed vast arsenal of our Navy there are 12 Aircraft Carriers, 29 Amphibious Vessels, 109 Surface Vessels and 71 Submarines. To keep this fleet afloat year in and year out costs the American Taxpayer a fortune.
The United States Air Force provides incredible first strike capability in the American arsenal. In addition, it can prevent the need for ground operations and subsequently avoid American casualties. In its services are 5,573 aircraft, including 2,132 fighters. It employs more than 550,000 Americans directly, has 32 satellites and 450 Intercontinental Ballistic Missiles. However, the wealth of equipment we have is redundant with a significant part of existing projects for future aircraft unnecessary and wasteful. The Comanche helicopter and F-22 Raptor fighter were incredibly expensive and unnecessary projects that cost the taxpayers a lot of money, cancelled due to high cost of the programs and in the end were never needed on the field of battle.
The United States also maintains an incredibly large military presence at home and overseas. We have Army, Navy and Air Force bases all over the world in every continent except for Antarctica. We have bases in Afghanistan, Australia, Brazil, Bulgaria, Cuba, Germany, Great Britain, Greece, Greenland, Guam, Iraq, Israel, Italy, Japan, Kuwait, Kosovo, Kyrgyzstan, Netherlands, Portugal, Qatar, Singapore, South Korea, Spain and Turkey. And these are the installations that the United States has made public - it doesn't account for others that are utilized by various intelligence services. While not as expensive as an active military operation, the same exact costs apply to personnel and equipment. Furthermore, the majority of installations in Europe serve no real purpose, as they are Cold War relics that survived our transition from the days of the arms race, where we successfully pushed the Soviet Union to expend its military to the breaking point.
In the end, the United States military machine is very costly to the American taxpayer. In addition, the war machines and bases the United States maintains around the world are a bleeding wound to the American taxpayer. Furthermore, taxpayer funds are also spent heavily on the wide array of private companies that supply the United States military. As a result, the indirect and direct military expenses are beyond reason. Furthermore, they provide a reduction in unemployment figures as more people are employed directly and indirectly through the military each year - this allows the government to mask true unemployment figures. Moreover, they provide related private sector economic growth which is fueled by government spending and represents false growth and false hope in our economy.
Lastly, and to my initial point, against whom are we conducting this arms race? We no longer have a Soviet Union to strangle with our spending. On the contrary, we are suffocating ourselves with every additional budget increase that is earmarked for the military. Our Cold War rival was pushed to the brink with the arms race we engineered. Let's not fall victim to our own strategy.
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