Friday, March 07, 2008

Just a Thought (Commentary)

Source: Unknown...

After The Asians Call In Their Loans, We'll All Get To Wear These Nifty Kimonos ...

Since the beginning of the Bush administration, the government has been selling U.S. currency to finance the trade deficit. In the last six years the Japanese have bought up $700 billion in U.S. currency and the Chinese §200 billion dollars. The most pressing danger this presents is that if they stop buying dollars, we will effectively lose the low interest loans we are using to finance our debt. Many economists worry that they will dump their holdings, sending the dollar into a free fall.

As James Surowiecki wrote in The New Yorker, "The Chinese and the Japanese could decide that the costs of the falling dollar are too great, and suddenly stop (or, at least, cut back sharply) their lending to the United States. This would lead to a so-called 'hard landing' for the U.S. economy: high inflation, punitive interest rates, collapsing stock prices and housing prices."

No comments: