It isn't that much like the RE loans, mostly because it doesn't represent a debt.
Err...what do you call all the T-bills they convert their $ into. If it were not for that debt, the party would have stopped long ago. However, even if they just hold the $, it still represents a "debt" in so much as when they redeem them, the value they get will depend on our ability to absorb them again, which is how we pay the imbalance back, and hence holds debt risk for them.
If California sells more to Oregon than Oregon sells to CA, does that mean that Oregon has a debt to CA?
Assuming no third party balances the trade out, it means that CA eventually owns more and more of Oregon, or, they instead hold some form of Oregon debt like T-bills. Of course if they keep current on buying up Oregon, there is no imbalance in the trade, it is simply CA exports goods to Oregon, and buys assets in Oregon. However, if there is a real trade imbalance, then yes, CA is accumulating OR debt in some manner. That debt might not be worth much in the future, just like the falling $ teaches foreign holders of the $ that trade imbalances have consequences. Ignoring that reality is not wise. Just like ignoring liar loans proved to be unwise. |
