Vi,
If the FED cuts, I hate to say it but it's true, the countries who hold most of our debt must continue to do so, as if they permit the dollar to fail there own economies collapse. Sure, the Chinese and Japanese may be able to increase market share elsewhere in the world, but not nearly as much as the U.S. consumes. They may threaten, but if they permit our economy to falter they'll be worse off then we are in the end.
Please don't get me wrong, I've never liked the way we import far more than we're exporting. Or how we've encouraged mainstay American companies to move almost all manufacturing offshore. It's pained me that people say how much cheaper it is to make things in the Orient, then have Honda, Toyota, etc invest in giving American workers modern technology and proving we can build cars as well and as cheaply as anywhere in the Orient. Imagine what would have happened if American companies had invested their profits here in automated equipment to make clothes, furniture, etc. etc. etc. It's almost impossible to buy American products anymore, yet what we buy still have labels that once represented American companies. We're probably still the most inventive country in the world, we need leadership that's pushing the direction we go. If it were up to me, we'd be the leader at reducing pollution, developing alternative power sources including massive research into fusion. We'd develop these things and sell them to the rest of the world, instead we put the kabbosh on treaties, like Kyoto, that would make us cut emissions, etc.
I believe the world will live with whatever cuts we do, they may not like it, but similar cuts will spread to maintain some degree of equilibrium, and we'll get the mortgage situation straightened out. The FED certainly has some blame in what's happened, they should have not taken rates as high as they did, and should have lowered sooner, but the banking industry brought this on as well. You can say it was brought about by people taking loans they couldn't handle, but the truth is it was the banks who convinced them that they could, "When the interest rate adjusts we'll have a new loan that will fit your needs." This was never in writing, but I'll bet 90% of those who've been foreclosed on heard it from whoever was handling their mortgage. JMHO.
Gary |
