China is in the unenviable position a compulsive gambler finds...

China is in the unenviable position a compulsive gambler finds himself in at the Roulette wheel.

Once large losses have been accrued there is an overwhelming desire to win back the losses. To walk away is to admit defeat and few human egos are capable of this.

China has the option to walk away which would catalyse a massive drop in the US dollar rendering China's investments near worthless. Or like the compulsive gambler China can keep pouring money into US bonds and there is little irony in the eventual outcome of this.

I simply can't get my head around the rationale of all the economic leaders in this world. What am I missing here. The US can't pay back their debts, this fact keeps getting ignored. There are four cancers in the US economic system in terms of debt.

1. The historical debt prior to the George W Bush era and this financial crisis. This is the debt that has been accrued by the Clinton, Bush senior and Reagan administrations and the other administrations going all the way back to independence.

2. There's the George W Bush debt linked to the industrial military complex. It would be difficult to pick the most war mongering US president since the end of World War 2 but George W is right up there. The increase in spending to historical highs on the US war machine will be an incredibly difficult precedent to unwind. Think about this carefully. Lobbyists have significant control over the US congress. To cut war spending is to cut jobs in the electorates of the lobbyists, and to cut profit in the companies in which the lobbyists are shareholders. This is insidious stuff. Try and undo this.

3.There's the rapid and unprecedented growth in debt due to the global financial crisis. This is one side of a double edged sword. If all this money was accounted for to the last cent like it would have to be by law in any corporation or charity that would be one thing, but it's not. It's dished out by the Fed Reserve. What is going on here? Why isn't there widespread outrage? Why doesn't the US media demand answers. For the taxpayer to be called on to bail out private financial institutions is insult enough to a democracy and free market, but to be opaque as to how this money is allocated . . . . I'm at a loss for words suffice to say that the only way to rid the patient of the cancer now is to kill the patient, the cancer has spread too far. A clever parasite has evolved to keep the host alive, but in the case of the US the parasites have all but killed the host. It's now a death watch.

4. Little discussed is the US's future liabilities for pensions, Medicaid, injured and retired military personnel and so on. There's plenty of incredulity at the 9 trillion national debt (one of many figures I've seen quoted) but what about the 60 trillion in future liabilites. Just alone this would be enough to sink the US but it is the fourth factor highlighted by someone (me) who has absolutely no economic education, experience or credibility. What the heck is going on. This is primary school arithmetic.

To continue a theme I don't need to debate with a PhD in economics or the chairman of the Fed Reserve or one of the many economic optimists who see green shoots, about the above four points. There's nothing to debate about expect the US's ability to pay back this debt. Can they or can't they do it? Not a single commentator debating with Peter Schiff or Jim Rogers ever offers an explanation as to how the US will meet it's obligations. The very notion of, let's say, credit card debt is to buy something now and worry about paying it back later. This thinking has infused mainstream economics to the point now that people just don't understand the question: "How will the US meet it's obligations".

They can't. China will realise this sooner or later.