Yesterday, Today, Tomorrow By Mr. Caudill ; LCMHS

March 11, 2025

One of the driving factors a study of history reveals is the reality money makes the world go round. Looking at the 1300s, where the Silk Road, Indian Ocean Trade Routes, West African Trade Routes, Trans-Atlantic Trade Routes, or even the Native American

Trade Routes, we see the rise and fall of empires were based on how they benefitted from trade on those routes. The rise of America's industrial might during the Civil War translated into incredible national wealth during the years leading up to World War I.

American factories untouched by the War to End All Wars helped drag the world out of a depression by supplying Europe and building a military arsenal second to none during World War II. As the only western nation with an industrial base untouched by World War II, the United States remained the manufacturing leader for decades after hostilities. Effective management of international trade, and the wealth and power it generates, has always been the key to the rise and fall of empires.

Several factors are used by the leadership of each nation and the International

Monetary Fund to determine the financial health of a nation. These include Assets of the Nation, which include things like: workers who can produce; natural resources like iron, oil, natural gas, coal, wood, rare earth metals, etc.…; infrastructure like ports,

bridges, roads, rail lines, airports; and technology. National Debt is a factor, how much the national government owes others. This isn’t necessarily other countries, in the United States, many individuals, retirement plans, and companies invest in the nation by buying Treasury Bonds, retirement funds buy bonds from the national government planning on an increased return on the investment, as does the Federal Reserve and other federal agencies like Social Security. Finally, there is Gross Domestic Product

(GDP), which can be calculated in a couple of ways, but this is the Consumption formula. The wealth of the nation is based on Consumption by you and me in the country, Investment by people and companies in the country, Government Spending, and the amount of difference in export and import fees, or more simply, Net Exports. A key thing to remember is that GDP is determined over a specific period. It could be determined monthly, usually quarterly, but sometimes annually. It is important when looking at national wealth that Assets, Debt, and GDP are examined overall.

I think an examination of three of the world’s most economically powerful nations and their different approaches might give us a better understanding of how healthy they are as nations and how international trade works. Numbers one and two have been set for a few years. The United States is the world leader followed by China. There has been some sliding up and down recently between Germany and Japan, but let’s go with Japan. These three economies have achieved economic dominance following very different paths.

Let’s start with Assets. The United States Federal Government is estimated to have about $5.6 trillion in assets, but including states, businesses, and individuals in the equation, that number grows to about $168 trillion. China has roughly $12 trillion in assets, almost a trillion is in US Treasury Bonds. Japan has about $9 trillion in assets

with over a trillion secured with US Treasury Bonds. The US holds the monetary edge in assets.

Now an examination of Debt is in order. The United States has roughly $36 trillion of debt. China has about $10 trillion of debt. Japan has about $9 trillion of debt. Again, the United States is the leader.

Finally, Gross Domestic Product (GDP) needs to be studied. The United States during 2024 produced about $26 trillion in goods and services, China about $19 trillion, and Japan about $4 trillion. The United States leads again.

All three countries are economic powers. China has kept their debt to GDP ratio low through strict government controls and significant investments in foreign reserves, like US Treasuries. Japan on the other hand has a debt to GDP ratio that is higher than the United States, at about 250%, while the United States is about 120%. Neither Japan nor the United States could pay off their debt with the annual Gross Domestic Product.

Of the three; however, the United States holds a remarkable edge in Assets over both nations. The US assets are six times our debt, while China assets are only about 1.2 times their debt, and Japan’s asset to debt ratio is at the break-even point. Of the three, the United States has the most reserves to survive economic crisis despite wild spending by the federal government. If there is a single indicator on how stable our economy is, I think two of the most powerful economies in the world having about $2 trillion invested in America says it all.

Some things haven’t changed since the 1300s. International trade and fiscal management of resources still drive the rise and fall of empires. Only instead of goods and services taking weeks to travel between markets, today billions of dollars’ worth of

goods and services fly between countries every second of every day. The world is truly smaller.

Chuck Caudill is a recovering politician and military retiree. He has dabbled in the performing arts, journalism, and service industry. Currently a Social Studies and History teacher at Lee County Middle High School, he is writing this column to keep students and parents engaged in discussions that will prepare students to be the Shepards of the future.