Editorial Note: This article was written in late 2008 by the author while President Bush was still in office. It helps us to track back the development of this financial crisis since its beginning.
Since the U.S. subprime mortgage crisis (abbreviated as subprime crisis) erupted on August 20, 2007, it has spread far and wide for over a year. By September 19, 2008, it turned into a full-blown financial crisis. On October 3, the biggest-ever financial bailout bill in global history, worth 700 billion U.S. dollars, was voted by the U.S. Congress (later both the U.S. House and Senate amended the amount to $850 billion), an unprecedented event in history. On October 21, the Fed (U.S. Federal Reserve) divulged Ben S. Bernanke’s second-round huge rescue plan that will use $540 billion to buy short-term debt from U.S. mutual funds. Will America continue with a third, fourth and more rescue plans like this?
On May 30, 2006, Bush nominated Henry Merritt “Hank” Paulson, Jr. who had worked for 32 years at Goldman Sachs & Co, to head the Department of Treasury, on the same day that John Snow announced his resignation as Treasury Secretary. By October 2, 2008, Paulson had been in charge of the U.S. Department of Treasury for more than 2 years. After he repeatedly explained his rescue plan to the U.S. Congressional Leaders, he appeared on four American television talk shows to explain to the American people that he would complete the “market rescue mission” based on his professional ethics, but he said that he would not want to continue his post in the next administration, no matter who got elected. Now Paulson wants to prevent the financial crisis from spreading like a flood. Here are our questions: 1) how will the U.S. government value these non-performing assets? 2) When will the U.S. government start buying these assets? Paulson portrayed this intervention as harmful but necessary. Paulson said during the NBC television “Meet the Press” program that property taking is not something the government wants to do, but that it is very necessary, and the reason for doing so is to protect the taxpayers.
But, can $700 billion really rescue this unprecedented American financial crisis—the subprime black hole? According to Fannie Mae and Freddie Mac, “the first crater” of the U.S. subprime crisis, their black-hole non-performing loans, which is about 40% of the total U.S. real estate market value, amounts to $5.4 trillion ($5,400 billion). That is to say that the U.S. real estate loan market will have more than 10 trillions’ worth of non-performing loans. Is injecting $850 billion to fill a 10 trillion dollar “black hole” not a drop in the ocean and too little to be of any help? The Bush administration has since August 2007 started multiple efforts to strangle the subprime crisis. But after a year, nothing has succeeded, nor can the subprime crisis be nipped inside the bud. Now that the two U.S. federal legislative houses passed the $850 billion bailout plan, its only effect is to soften the impact of the year-long subprime crisis for another six months and allow the Bush administration a decent departure before January 20, 2009. Then the U.S. subprime crisis will explode again between February and March 2009 with no one being able to prevent it …
0. America’s Failure Is Paulson’s Failure
During the three days of September 15 to 17, 2008, the U.S. subprime crisis erupted on a large scale. On September 20, high-ranking U.S. financial and monetary officials, led by Paulson, in no time introduced a $750 billion rescue package. But no one from top to bottom in the U.S. federal government knows clearly how big the financial black hole is and how much capital is needed to fill it. Can $700 billion really fill this black hole, the black hole of Wall Street that flies in from the sky beyond? After all, the subprime crisis has already run amuck for over a year in the U.S. and there had already been more than 5 capital injections totaling over $500 billion. In chronological order, since August 2007 the U.S. and the European Union (E.U.) have injected a few hundred billion U.S. dollars to block the subprime crisis; subsequently Bear Sterns went bankrupt; then Fannie Mae and Freddie Mac were rescued by the U.S. government; Lehman Brothers filed bankruptcy, Merrill Lynch was sold, American International Group (AIG) was taken over by the government; on September 26, 2008, Washington Mutual, the largest U.S. savings and loan bank, whose total asset value amounted to $307 billion, of which only 188 billion was deposits, announced its bankruptcy and was bought up… Since the U.S. subprime crisis outbreak on August 20, 2007, has the strategy of the Bush administration in dealing with the subprime crisis worked, been effective or made the slightest progress? If not, the $850 billion will also be wasted and all in vain. Have Paulson and Bernanke not spent money like water and helplessly injected capital over and over again? The basic fact is: over one year, apart from repeated enormous injections of capital to deal with the subprime crisis and repeatedly letting a few hundred billion U.S. dollars drift away, what can be done to see light at the end of the tunnel in curbing this subprime crisis? How can the 300 million American citizens believe that the administration could bring Wall Street out of its financial predicament, exterminate the subprime crisis and let Americans enjoy a good time after the unprecedented 9/11 event and the war in Iraq?
What really deserves all mankind's thorough study, understanding and recognition over the last 100 years of history is: if this $850 billion rescue plan were introduced in China, it would, as a document “X” of the Central Government, be implemented with lightning speed, without going through any national legal procedure, just like China’s “Great Leap Forward”, “Three-anti/Five-anti Campaigns”, “Cultural Revolution,” and the 29th Olympic Games in 2008. It is exactly this kind of American-style and Chinese-style nation, law and so-called characteristics that have caused historically unprecedented natural disasters and man-made tragedies that no one could stop. But if the $700 billion bailout package had first been rejected, then it might be possible to impede the repeated unlimited capital injections of the administration and the subprime crisis might be effectively blocked by law and put to an end. However, just as “The Great Leap Forward” and “The Cultural Revolution” erupted then in China, who could block or check and balance the monopoly of absolute high concentration of decision-making power? As to the $700 billion plan designed to contain the financial crisis, it is 100 times better than China's disasters like the “Three-anti/Five-anti Campaigns,” “The Great Leap Forward” and “The Cultural Revolution”. "A rule-of-law nation” is what is most recently lacking in America's 232-year history and it is also what China aspires to establish in her recent 60 years. Effective containment of man-made disasters and prevention of their recurrence is a “must” for all mankind, today and tomorrow.
In this U.S. financial tsunami, Paulson is the global number-one director. The U.S. media generally call him “Hurricane Hank” since he “likes to engross himself in hard data and details,” was always quick to act, bold and decisive, and effective. The outbreak of the U.S. subprime crisis of more than a year has given Paulson an opportunity to demonstrate his courage and unleash his deep-rooted Goldman Sachs macroscopic grand approach. He helplessly watched the American subprime crisis turn into a global financial tsunami. He could only constantly patch the hole on the run and then continued the flight inside the gigantic bloodbath, repeated the fight and continued the financial management solutions that he has developed through his career. Paulson’s failure is due to, first, the loss of loophole control of major American banks, consortiums and corporations; and his reluctance to undertake their nationalization. But what else could have been done? Because even the ordinary person knows that no one is wealthier than a nation. Paulson, the “brilliant Wall Street genius in a generation” will soon disappear from the scene——today’s Wall Street will forever have more people playing games and digging gold than what the U.S. government can do in sealing the leak by rules. Paulson’s most famous work was his quick act in launching the $700 billion rescue package——but had this plan come out at the beginning of 2008, it might have saved America. Now the general trend of the U.S. financial crisis is beyond cure and the game is over, no one will be able to save Wall Street. It only fulfills a Chinese old saying of “making every effort to save an impossible situation”…
The failure of the U.S. financial crisis is the failure of the 8-year governance of the Bush administration and even more a broken dream for Paulson, the genius and financial giant. Having served as a fledgling under President Nixon in the 1980s and under the historically most authoritative President Bush, and as chairman of Goldman Sachs, Paulson has become the most powerful Treasury Secretary in American history, but also this generation’s financial giant who has suffered the worst defeat. Paulson’s failure is due to the overly rapid development in American finance that is unmatched by Goldman Sachs management and the previous game rules of Wall Street. After these rules were swallowed by the bubble burst of the “new economy,” no new regulations could be enacted to catch up with the wild whirlpool of the financial crisis. For more than a year, Paulson repeatedly failed to stop the proliferation of the Wall Street financial crisis. The reason was that his management skills could no longer keep pace with Wall Street. For 232 years America has always been known for establishing “rules of the game.” But this time, the rules have lagged seriously. When the Wall Street gamblers had finished off a great game and left, America’s new “rules of the game” had yet to emerge.
The U.S. government has attempted to rescue Fannie Mae and Freddie Mac from their burning disasters, but without examining the real sources of these problems. This shows that even if America, the world’s number-one superpower, has a bucket filled with gold, it will eventually be exhausted as long as there is an endless leak. It is obvious that Wall Street has black holes all over. Even if Paulson were a superman, how many black holes could he block? If America can really ride out this unprecedented financial crisis, Paulson will no doubt become the hero in American history. But if the financial crisis continues its rampant pace and begets unmanageable disasters, Paulson will acquire a lasting notoriety in American history.
A. How Big Is the U.S. Black Hole?
At the end of September 2008, there were 117 small- and medium-sized banks facing closure. An even bigger subprime crisis is surging like a storm——when Chinese Premier Wen Jiabao reported on the current critical situation of the U.S. financial crisis and he remarked that the bad news for this financial crisis had just begun (see the Introduction of the article “The Fifth Wave of the Wall Street: 117 U.S. Bank Failures?” Southern City Daily newspaper, page C02). Can the additional injection of $700 billion in the U.S. really block the subprime crisis? How big is the black hole in the U.S. subprime crisis? Exactly how much capital is needed for the U.S. government to plug this black hole? Let us make an open-book accounting.:
If the data from the U.S. take-over of Fannie Mae and Freddie Mac are true and reliable, and if the non-performing loans of Fannie Mae and Freddie Mac are indeed $5.4 trillion as announced by the U.S. government, which is 45% of the U.S. total mortgage market, then, this time, the bad loan-debt of the U.S. at least exceeds $10 trillion U.S.
If it is possible to exterminate the U.S. subprime crisis with $700 billion, if it is possible to strangle the $10 trillion bad debt in the cradle, it means that the U.S. can use $700 billion to leverage $10 trillion——is this not an interpretation of Chinese old saying of “hanging by a thread”? Then, why can’t the U.S. with its $14 trillion gross domestic product (GDP) deal with this $10 trillion subprime crisis? (Usually the capital market of a normal developed country can be more than three or four times its GDP). How come the 232-year-strong America, which has accumulated a huge national wealth of $100 trillion, be dragged painfully by the $10 trillion subprime crisis, be routed, and even be unable to withstand a single blow? The vast majority of kind-hearted people would rather believe that Wall Street has got a cancer, but not incurable; and even if it is an incurable disease, people would not want to believe that Wall Street will die. But no living beings can be free from cancer.
Bush’s $850 billion rescue plan is a life-saving drug, but also a deadly drug. First, since the subprime crisis erupted over a year ago, the Bush administration had already been utterly routed. They did not have a viable solution for the subprime crisis. What will happen if the Bush administration acts like the 1929 Hoover government treating a serious illness with the wrong medicine? Even after this administration is replaced, how will the U.S. and Wall Street continue to function? Faced with this dilemma, the U.S. passed the bailout plan to regulate and further curb the power of the Bush administration. This is in any case the only way out for the current U.S. government.
B. Path for Rescuing the U.S. from the Subprime Crisis
More importantly, the U.S. financial system is completely broken and cannot at all support the normal operation of Wall Street and the U.S. national system. It is well known that the U.S. central bank is under the management of the Federal Reserve. The U.S. financial system operates the nation’s domestic major business of the U.S. dollar in three ways: commercial banking (business in direct U.S. dollar currency), investment banking (business in real-estate mortgage specialty) and investment banking in securities (business in currency investment of securities). However, after September 20, 2008, all the U.S. investment banks became commercial banks or bankrupt, or were bought up. And U.S. investment banks possess the entire U.S. direct currency or half of the transaction amount——the business total exceeds $10 trillion (just the business total of Fannie Mae and Freddie Mac already amounts to $5.4 trillion). This means that today the U.S. has at least $10 trillion rotting inside the basket of the investment banks. So the $700 billion from the U.S. government is too little to be of any help and even unlikely to make a ripple inside the pool of the $10 trillion bad debt. No one can rescue Wall Street’s busted dam this time. The only road to relief would be for major countries to combat the disaster jointly and with determination.
Today the U.S. has more than $10 trillion in bad debt like that of Fannie Mae and Freddie Mac. The total U.S. national strength at the time of 1929 Great Depression was only slightly over $100 billion. At the end of 2008, the U.S. GDP is about $14 trillion, 150 times that of the 1929 Great Depression period. Now the bad debt of the U.S. subprime crisis is very likely comparable to the U.S. GDP (according to the World Bank “World Development Report 2007,” in the order of gross national income, the U.S. has $13.8865 trillion, ranking first, followed by Japan’s $4.8133 trillion, Germany’s $3.1970 trillion and China’s $3.1209 trillion, and so on. The report projects the 2008 U.S. gross national income to exceed $14 trillion). If the U.S. subprime bad debt is as big as that of Fannie Mae and Freddie Mac, then this subprime crisis can only be the size of the U.S. gross national income of that year. Will the U.S. be able to deal with such a huge financial disaster? $700 billion vs. more than $10 trillion, is this not the Chinese classical allusion of a drop in the ocean or throwing an egg against a stone?
C. Post Paulson Period
On September 20, 2008, U.S. Treasury Secretary Henry Paulson on behalf of the Bush administration presented to the U.S. the unprecedented $700 billion financial plan to rescue the U.S. economy. At the same time, the U.S. Congress and Treasury Department also started interpreting the bailout plan and receiving consultations. According to Paulson’s plan, the U.S. Treasury Department would buy mortgage-related assets, bad debts from financial institutions including subsidiaries of foreign-funded banks inside the U.S. to contain the most severe financial crisis since the Great Depression. The media had estimated that bad debts might be as high as $800 billion to $1 trillion. Paulson said that the final cost is very likely much lower than the initial estimate of $700 billion, because the government can hold these assets until market stability and prices return to normal levels. Paulson said in a U.S. CBS TV interview that “This is the way of minimum cost.” It is estimated that, if the U.S. Treasury Department spares no effort in promoting Paulson’s rescue plan, it will make every American citizen bear an average debt of more than $2,000. Therefore, the U.S. Treasury Department requested Congress to raise the upper limit of the government borrowing from $10.6 trillion to $11.3 trillion U.S. dollars to meet the financial needs of the U.S. federal government and issue sufficient treasury bonds to cope with the situation.
After Paulson repeatedly described his rescue plan to the Congressional leaders, he subsequently explained to the American people in four U.S. TV talk shows that he would complete the mission of rescuing the market, but would not serve under the next administration regardless of whom will be elected President. However, two key questions still need clear answers: 1) how will the U.S. government set prices for these non-performing assets; and 2) when will the U.S. government start buying these assets? Paulson portrayed this intervention as harmful but necessary. He said during NBC’s “Meet the Press” talk show that in spite of its harmfulness, it must be done to protect the American taxpayer.
D. Market Bailout Needs Close Scrutiny
U.S. Senator Charles Schumer said that the Democratic Party will not add a bunch of insignificant terms to the bailout plan and also that the Congress will be discussing another motion to boost the economy. Schumer and U.S. Senate Banking Committee Chairman Christopher Dodd attended the meeting on Capital Hill and expressed that the market bailout program needs more protection of the interests of taxpayers and more measures to help those homeowners in trouble. In addition, they also expressed that the plan needs more regulations and amendments. Dodd said that they were fully aware of the current situation of the crisis …but that you cannot hand over $700 billion of taxpayer money without protecting the taxpayers.
Congress and the House of Representatives also held a similar view towards Paulson’s bailout plan. The Democratic members of the House Financial Services Committee made a number of proposals to amend the market-rescue program of the government. These included: set salary restrictions for executives whose business has undergone asset-stripping; take more measures to reduce mortgage foreclosures and let the State Controller General monitor the implementation of the rescue package. The House Financial Services Committee Chairman Barney Frank said during a CBS television interview that the full-blown subprime crisis is the biggest failure of U.S. national policy, in particular the national financial policy and the financial policy of the U.S. dollar currency, etc., in the 21st century. Paulson, as the highest authority in charge of the American economy, is to be blamed for today’s full-brown U.S. subprime crisis and its continuing spread. The U.S. federal government deficit in 2008 will hit a record in 232 years of history by exceeding the $1 trillion mark.
E. Subprime Crisis Will Not Walk Away
When Bernanke tried to explain the $700 billion bailout plan for purchasing non-performing assets, he told Congress that this could avoid the banks underselling these mortgages——it could regulate auctions and other mechanisms, and provide the market with good information on prices of mortgage-related assets from the holding period to maturity. Bernanke attempted to convince the doubting Congress that the bailout plan promoted by him and Paulson would make the taxpayers believe that the money is worth spending. But over the past year, has the U.S. government not spent money this way while the subprime crisis continues breaking out unabated?
The U.S. market rescue package was released on September 29, 2008: it will allow the federal government to use $700 billion in different phases for market bailout. The first $250 billion can be put to use as soon as the bill receives approval for implementation from Congress. Another $100 billion can be used when the President deems necessary. The remaining $350 billion can be used only after evaluations by Congress. According to this program, the government will purchase non-performing assets of U.S. financial institutions to repay its citizens. The federal government can get access to negotiable instruments from these financial institutions and provide taxpayers opportunities to share future profits——but this will result only if the bailout plan succeeds. What will happen if the $700 billion gamble fails? What will happen if $700 billion still cannot clear the $10 trillion dollar bad debts...?
Despite the fact that Paulson’s $700 billion large-scale financial bailout plan came out slowly at the end after facing difficulties from all sides in the U.S., Paulson is still very confident and firm about exterminating the subprime crisis and seems to hold the ”winning card” tightly. But Paulson after all has seen the U.S. subprime crisis outbreak on August 20, 2008, the bankruptcy of the fifth largest U.S. investment bank Lehman Brothers and its taking over by JP Morgan in March 2008, the taking over of Fannie Mae and Freddie Mac by the government in July 2008, and the full-blown U.S. subprime crisis in September 2008. The subprime crisis has continued to deepen, with no end in sight.
F. Eight-Year Nightmare by Bush
George Bush is in power for 8 years. He leaves the greatest and unique inheritance in today’s U.S. history: 1) the spending of the U.S. war in Iraq exceeded $3 trillion ; 2) the expenditure of the global anti-terrorist campaign exceeded $1 trillion ; 3) to deal with the subprime crisis and fill the black hole will cost a large sum of $2 to $6 trillion ; and 4) there is a huge national deficit; the 2009 new government will have to issue over 11 trillion dollars in treasury bonds. Bush’s eight-year term in office has given 300 million American citizens and the U.S. federal government, with a GDP of $14 trillion in 2008, a black hole over $6 trillion U.S. dollar and a national debt over $11 trillion.
Since the founding of the United States, the largest expenditure black hole has been the Iraq war. According to the argument of Joseph Stieglitz, Economics Professor at Columbia University, former World Bank chief economic advisor and 2001 Nobel Laureate in economics, the U.S. military expenditure of the four-year-long Iraq war has been as high as $3 trillion. He further detailed that the $3 trillion does not include the future long-term-care costs of wounded soldiers; just the military spending of the U.S. military actions in Iraq alone is equivalent to 10 times the cost of the first Gulf War in 1991, 3 times the cost of the 12-year Vietnam War, 2 times the cost of the 3-year Korean war, or even 2 times the cost of all charges of the First World War. Stieglitz asserted that up to now, among all wars fought in the world, only the Second World War had expenditures comparable to the U.S. war fought in Iraq.
However, to fill a black hole in American history of more than $6 trillion that includes the war in Iraq will take persistent hard work of at least 8 to 10 presidential terms, or about 30 years. In America’s 232-year history, the best presidential period, however, had only a national surplus of about $500 billion, and happened to only three presidents including Clinton, when the government had a larger national fiscal surplus.
The more severe historical fact is that the $11 trillion U.S. treasury bonds can be supported by future U.S. national finance and the 300 million taxpayers over time, but no one knows when the $6 trillion black hole left by the Iraq War and the subprime crisis will become a tsunami in the future. From early August 2008 to September 2008, the violent outbreak is the proof of history. When, where, from which direction and for what incentive will the $6 trillion black hole stage a comeback? $6 trillion is almost half of the 2007 U.S. GDP and twice as much as 1.3 billion-strong China’s GDP. $6 trillion is about the annual profit of the world’s entire population of more than six billion: how to release it? How can this gigantic hole be filled? Who is going to fill it?
G. Domino Effect and the Rich Nations
Immediately after the U.S. passed the rescue plan on October 4, 2008, a financial crisis broke out on October 5 in Ireland, which has a population of 4 million, sits on top of Europe’s rich soil and has an annual per capita income of more than $45,000. The government used $585.24 billion (400 billion euros) to bail out the market, and provided debt guarantee and capital injection to support all the customer deposits of the six national banks and housing credit unions in Ireland. This rescue package will make the government bear as much as 400 billion euros of liabilities. However the Government of Ireland will never be the first domino after the U.S. financial crisis outbreak. What other countries will be the next ones to follow suit? Will the latter countries still have bail-out capitals to make disbursements?
Then on October 6, German Chancellor Angela Merkel and Finance Minister Peer Steinbrück jointly issued a statement to all the national depositors that their deposits will be guaranteed by the government. This guarantee would cover 500 to 700 billion euros (about $1 trillion) of deposit accounts. Jeanette Schwamberger, a spokeswoman for the German Minister of Finance, said that this 500 billion euro guarantee plan was only a gesture of the government: “A good possibility is that the government may not even have to spend a penny.” But the prerequisite was that the financial sector be problem-free. At the same time this decision was announced, Steinbrück also announced the latest rescue plan to save deep-troubled real-estate mortgage lender HRE. In this new program, the German financial industry agreed to first provide 15 billion euros in additional liquidity so that the amount of credit guaranteed by the government, individual banks and insurance companies to HRE increased to 50 billion euros.
The company that the German government tried to rescue is Hypo Real Estate (abbreviated as HRE), the second largest lending institution in Germany. Until June 30, 2008, this company’s investment portfolio provided total financing of up to 315.4 billion euros with a transaction risk position as high as 82.8 billion euros, while its core capital was only 7.4 billion euros, and the core capital adequacy ratio was 8.4%. The largest portion of the HRE’s investment was in public construction. In the 315.4 billion euro investment portfolio, 232.7 billion euros were used to finance the government. Earlier, the German government proposed that the Ministry of Finance take the lead to provide a line of credit of 26.5 billion euros, while a number of banks and insurance companies would provide an additional line of credit of 9 billion euros. But after the rescue plan was launched, banks and insurance companies have found that U.S. city Depfa financial bonds had problems. The originally planned amount of 35 billion euros that should remain in force until the end of 2009 was not sufficient. Out of helplessness, the government had to take action.
Why did the G7 group do nothing; why did it not attempt to save the United States? Can the G7 really save America?
Three days before this, the main national leaders of the E.U., French President Nicolas Sarkozy, Chancellor Angela Merkel, British Prime Minister Gordon Brown, as well as Italian Prime Minister Silvio Berlusconi, just had an emergency meeting to discuss systematic resolutions to deal with the subprime crisis and proclaimed to “work together.” On October 4, the four national leaders of France, Germany, Britain and Italy, the European Commission President Jose Manuel Barroso, and the European Central Bank President Jean-Claude Trichet gathered in Paris to discuss strategies to deal with the current crisis.
H. Rich European Nations Fearful of Chaos
“We want transparency, we have moral constraint, to create values and give people confidence,” Sarkozy said after the meeting. The heads of state agreed “in cooperative manner to solve their respective problems,” but did not issue any specific “pan-European program to save the market.” “Europe currently is hit by a crisis that is not totally identical to the U.S. subprime crisis,” said Jenny McKeown, who participated at the summit and expressed that the U.S. financial crisis was caused by the collapse of the real- estate market; on the whole, the European market was a lot better; from the write-down amount of the financial institutions, Europe is not as large as the U.S. From Summit participant Ayadi’s viewpoint, the purpose of this summit lay exactly in reaching the consensus of “solving their respective problems in a cooperative manner.” She pointed out that this agreement’s “first-level meaning is that each country solves its problems according to its situation, but all members need to inform each other of their individual solutions.”
The E.U. members Ireland, Germany and Greece one after another proposed a similar “government guarantee” program. Since these decisions will have a profound influence on financial markets of other countries, each government has an obligation to let the governments of other countries sufficiently understand the full details of its decision-making to facilitate adjustment. Ayadi said that the crisis was far from over, but that there would still not be a pan-European bailout program; nevertheless, interactions would exist among national policies which will not be totally isolated; and subsequently more actions would appear.
On October 6, French President Sarkozy signed a government decree and announced that the French government would provide full guarantee to all deposits and French depositors would not suffer a loss of “even one euro.” Sarkozy said on the same day that Ireland was the first nation of the E.U. to implement “market bailout,” creating dissatisfaction among other members of the E.U., and they thought that the program would undermine fair competition between banks. On October 6, one of the richest nations, Iceland, which has a population of 300,000, sent a signal of potential national bankruptcy. On the 7th, Pakistan discovered that her foreign reserves could only last for one month and issued a distress call to the U.S.; on the 8th, South Korea announced an external debt of $140 billion and faced national bankruptcy…, it also sent a distress signal to the U.S. to save the U.S. dollar. Fearing that deposits of domestic banks might fly to the “first strike,” Ireland, Belgium, Germany, Greece and Italy and other E.U. members have adopted similar “market bailout” measures one after another.
According to science, sunspots will threaten the future survival of mankind. Mankind eventually will have to face the real drowning threat of sunspots. Similarly, the current enormous $6 trillion black hole will come right in front of us without any one being able to stop it. Over its past history, especially since the 20th century, America has continuously printed unlimited U.S. dollars using modern industry and printing technology, and released them to individual countries throughout the whole world. However, the $6 trillion black hole created during the Bush administration cannot be filled only by printing countless greenbacks. Indeed, since the end of the 20th century, there has been the birth of the euro and the growth of the Chinese yuan, both have gained strength. The sole dominance of the U.S. dollar for more than 200 years is gone forever. Now there are three pillars: the U.S. dollar and the euro have their own internal market of 300 million people, and the Chinese yuan has a market of over 1.3 billion people. The U.S. dollar, the euro and the Chinese yuan (combined) are used and circulated among more than half, or more than 3 billion, of the global population; in other words, today’s human world population use one of the three currencies.
The year 2008 faces an unprecedented controversy——the unique $850 billion bailout plan for the financial crisis was comprehensively challenged, criticized, but adopted helplessly at the end. Paulson said that he would not take a bet on the American people: he wanted to solve this problem. However Paulson, Bernanke and the Bush federal fiscal and monetary authorities after all have gambled for more than a year and yet have accomplished nothing. For more than a year, they have not solved any key issues that caused the frequent outbreaks of the subprime crisis nor provided substantively any fundamental prevention or solution. Paulson, in a speech on NBC, vowed solemnly to the American people and promised that he would not bet on the long-tern fundamentals of the American economy. The Bush administration had all along been unable to deal with the subprime crisis effectively, offered no tangible, practical and effective solutions and delayed over a year the opportunities for developing strategies and tactics. The Hoover government during the 1929 Great Depression outbreak also would never bet on the American people or their interests. Nonetheless, President Hoover did bet, lost completely and made himself America’s biggest loser in the world for the last 200 years. (The author is the chief researcher of Inside Information on National Condition).
 See article “Three Trillion U.S. Dollars Cannot Win the War in Iraq” by Cheng Youwei on Zaobao newspaper, Singapore, March 7, 2008.
 See article “Iraq War Costs ‘Not Cheap’?” on The Associated Press, March 17, 2007.
 On October 4, 2008, both the U.S. Senate and House passed the $850 billion rescue bill; on September 9, 2008, Paulson represented the federal government to sign the $200 billion bailout plan to save Fannie Mae and Freddie Mac; on February 13, 2008, Bush signed the $168 billion economic stimulus program; till the end of June, the U.S. federal government deficit reached $490 billion. Just the total of these 4 items within 2008 has exceeded the huge $1.5 trillion mark.
(Gong Shengli’s special declaration: the author carries inescapable and indisputable legal responsibilities to the content and facts of this article and declines reproduction of it in any form, excerpt, BBS and internet linkage. If there is any opinion, doubt and copy rights related issue, please contact the author through Gvv21@hotmail.com).