Standard & Poor's just devalued U.S. government debt, a devaluation long in coming and likely the 1st of many to come. S&P just acknowledged the obvious, the U.S. is sinking in its own debt, much as China has been saying the last 2-3 years.
Last weekend Xinhua, China's state-run news agency called the downgrade "an overdue bill that America has to pay for its own debt addiction and the short sighted political wrangling in Washington". Yet as the U.S. government's biggest creditor with $1.2 trillion in Treasurys, China is risking the savings earned from the "blood and sweat" of its citizens to feed this addiction.
China's purchase of U.S. Treasurys plays a crucial role in allowing the U.S. government to issue a ton of play money at near zero interest rates, to fund its wars and war machine, to allow its citizens to buy Chinese made goods largely on credit they can't afford, to keep bailing out Fannie and Freddie, and to avoid confronting its massive and rapidly mounting debt problems. In recent years, all this cheap money sent to America without restrictions also set-off the real estate bubble.
So China, you are the drug dealer and the enabler and the addict is paying you in ever cheaper dollars. You can condemn the U.S. for being an addict but as long as you provide the drugs, America won't soon be going to rehab.
Dick
To learn more, please see "China's Debt Addiction," The Wall Street Journal http://online.wsj.com/article/SB10001424053111904007304576495873109283858.html
"The U.S. Downgrade: China Takes Aim at U.S. 'Debt Addiction' " Verizon Small Business Center reprint of a Wall Street Journal piece http://business.verizon.net/SMBPortalWeb/appmanager/SMBPortal/smb?_nfpb=true&_pageLabel=SMBPortal_page_newsandresources_headlinedetail&newsId=325729&categoryname=Technology&portletTitle=Technology
The title for this piece came from my son Kyle.
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