In the coming weeks and months American taxpayers are going to face a number of bitter pills regardless of whether the financial bailout legislation is passed or not. The stark reality of the situation is that Americans are going to have to bail out not only Wall Street banks, but foreign investors AND governments like Saudi Arabia and China. The pitiful state of the American economy makes this a necessity.

Americans have little choice but to bail out everyone for the simple fact that it needs foreign investment to survive. The days when American production fueled its economy are long gone, whittled down to only a tenth of the total GDP. During the seven plus years of the Bush Administration the nation has become absolutely dependent on foreign capital for its very economic survival. The United States government will require half a trillion dollars in loaned money this year alone and this is not even counting what it will have to infuse into Wall Street. Even this astronomical figure is only a tiny fraction of the overall debt the American economy rings up each year. Credit card debt is in the trillions of dollars. Private and business debt adds trillions more. Overall U.S. debt is estimated to be over $50 Trillion (that's trillion, with a T). The obvious question is who is providing much of this capital to fund this debt?

It is an extremely complex set of lenders that are providing the capital for American debt. Oddly enough, the largest buyer of U.S. Treasury Bills is the U.S. government. Social Security funds are used to buy more than half the government debt. A large portion of the balance is funded through private investment and state owned investments known as Sovereign Wealth Funds. The SWF's acquire a good portion of their money from the American balance of trade deficit. This is why oil exporting nations have among the largest funds in the world. Here lies the crux of the problem.

If the United States government does not bail out everyone, including the foreign investors, the American economy will be viewed as a bad risk. When Treasury Secretary Paulson and Federal Reserve chief Bernanke talk about the credit market freezing up they are referring to the inflow of capital from foreign sources. It is this capital that has become the mother's milk of the American economy. If foreign investors get burned by their American investments they'll simply invest elsewhere. Within a year American could be bankrupt. It presently cannot pay its bills with its own production. If the tap is turned off credit card interest rates will skyrocket and normal loans will be next to impossible to get for individuals and businesses alike. Worse yet, treasury bills will become far less valuable and with them the value of the social security fund will drop dramatically. If the United States cannot borrow money it will have to sell assets. This will produce a dramatic decline in the American economy that is almost unimaginable.

In his testimony in front of Congress on September 23, 2008 Treasury Secretary Henry Paulson made a very telling comment about the state of American business. He said that if the bailout were not passed businesses could not acquire credit to pay their payrolls and operate their businesses. "Every business in America relies on money flowing through the financial system smoothly every day - not only to borrow, expand and create jobs, but to finance their normal business operations and preserve existing jobs." American business is so unstable that it cannot even pay to finance its normal business operations with standard business practices. Consequently, American taxpayers have little choice but to bail out all the investors, foreign and domestic alike. When asked about whether bailout funds would be used for foreign investors, Paulson tried to side step the issue because he knew the truth would be politically unpopular.

The bottom line is that the American taxpayer has no good alternative except to bail out everyone. If they do not the entire economy may very well collapse. It may be tough to swallow, but Americans have only themselves to blame. They supported politicians that fell in love with finance over production. In not protecting their productive base, they lost it. Now that America is dependent on finance it has to live with the consequences.