Friday, July 29, 2011

Our Debt owed to (and dependency upon) Foreign lenders summed up in one paragraph

We buy $4 worth of stuff from China and they buy $2 worth of stuff from the US (does not matter what the "stuff" is and I just made up this 2 to 1 ratio).  After the transaction there is $2 left over and it is in Chinese hands. What to do with these $2? The Chinese are notorious savers. They save about 50% of their money and they like safe investments. They buy $1 worth of US Treasuries---sure, the interest rate is low but is a very safe place to put money relative to just about ANY other investment on earth.  Congress uses this money to fund programs, fight wars, etc. The program is fully funded (Some Taxpayer money PLUS lots of borrowed money) at the cost of paying only the interest. What a deal! We gets lots of benefits at the cost of a combination of some taxes and some interest...Rinse and repeat until we get 43% of our public debt owed to "Foreign Governments and/or Individuals"--

In a nutshell---The US has been asking others to fund programs our political leaders do not/did not have the courage to ask us to pay for ourselves. They do not even have to consider very closely the merits of those programs, finding funding sources has been relatively easy.  Whose fault is this? I think you already know the answer...   
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