surely you meant to say Europe and Japan will eventually cease subsidizing the US? Or do you not consider yourself to be a debtor? Hawkmoon Ron the Debtor:0)
Who's economic growth has been dependent upon selling things to the US??
Being a debtor isn't so bad when the bank has little ability to enforce the payment of the debt on it's own terms and the debtor runs the printing press.
But it's bad when economies already suffering from double digit unemployment suddenly see their ability to rely upon exports to the US decrease by 40% (appreciation of the Euro from its lows against the USD).
... yes, yes, but, J6P's pension savings, constituting a greater part of US debt instruments outstanding, is suffering the same dilution, and do not forget, the foreigners do not just buy US debts, but also US assets, which will either be saved or doomed alongside that of J6P assets.
And where else are they going to invest those dollars they receive for their goods? What currency are they going to convert into? Their own? That would be counter-productive to maintaining their ability to manipulate currencies to promote their exports at the expense of the US.
And the Japanese government can't tolerate the yen climbing much higher because that will result in non-maskable profitability issues that will require worker layoffs. And as I've stated before, 25% of the Japanese population will be retiring within the next 5-10 years, with little belief that the tax base will be replaced, and heavy politcal consequences should they default on their domestically owned JGBs held by those pensioners (who be withdrawing their money in ever increasing quantities over the coming decades).
But the US, being the debtor, and the market of last resort for the rest of the world who have yet to get their economic acts together sufficiently to rival our GDP, and has the ability (for now) to require our debt holders to accept our currency, has considerable power in itself.
And the demographic picture favors the US since even with own aging population, we are socially able to integrate new immigrants to sustain the tax base. If anything, it's expected the US population will grow to 500 million within the next 20 years (primarily hispanic) which will be much less difficult to integrate than muslims are in a secularized and/or christian Europe.
Thus, while I concur that the US is going through some tough economic times, I still don't see any better place to put cash to work that has the transparency of US markets (even with the recent scandals), or the productivity improvements.
When I see Europe or Asia showing that, then I'll be forced to reassess my views on US competitiveness.
Hawk |
