Liquidation of America, Inc.

The fire sale continues:

On Monday we learned that Merrill Lynch, having just sold a $4.5 billion stake to the Singapore government, is again passing around the hat, this time wooing the Chinese and Saudi governments for badly needed funds. This of course follows similar moves by U.S. investment houses Citigroup, Morgan Stanley and Bear Stearns. These developments should be disconcerting on many levels, yet most seem unperturbed.

In the first place, the fact that troubled firms need to look abroad for cash provides startling evidence of the extent of the deterioration of America's economic might. The reason we need to seek capital from abroad is that we squander our own on consumption.

However, these foreign investments come at great cost; specifically preferred shares that place new foreign shareholders in senior positions to existing American shareholders and burden the latter with substantial dividend payments (11% for Citigroup and 9% for Morgan Stanley). Of course, large dividend payments to foreign shareholders will only worsen our nation's current account deficit, putting more downward pressure on the dollar and the American standard of living. Contrary to Wall Street's positive spin of foreigners "investing in America," such acquisitions really amount to foreigners buying up America, as our creditors take our assets in exchange for our debts.

There won't be any formal announcement of America's bankruptcy; just the quiet shuffling of the creditors taking charge as our quality of life slowly (or not so slowly) slides relative to everyone else..