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Politics : Welcome to Slider's Dugout
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To: paul ross who wrote (4633)3/1/2007 4:46:49 AM
From: jim_p  Read Replies (3) of 50418
 
"I would say you would have to add the sub-prime problem to the inflationary side of the equation, for ultimately the US taxpayeor will foot the bill."

I agree with that, but the biggest risk to inflation that I didn't mention is the problem that is currently unfolding.

What happens when foreigner don't want any more USD? Who is left to fund our deficit spending?

We either have to raise interest rates going into a recession to attract more foreign capital, or print more money to fund it ourselves.

The big difference between the problems Japan had and the problems we face is that Japan had one of the largest trade surpluses and we have one of the largest trade deficits. Japan didn't have the need to print money to fund deficit spending. They also had one of the highest saving rates and we have negative savings.

Jim
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