Posted on 03/04/2006 3:13:51 AM PST by hawkiye
Total foreign ownership of US Federal deficit currently stands at 45% as of end of first half of 2005 COUNTRY OWNERSHIP OF U.S. GOVERNMENT DEBT
Japan $687.3Billion
China $252.2 Billion
United Kingdom $182.4 Billion
Caribbean Banking Centers $102.9 Billion
Taiwan $71.8 Billion
Germany $63.5 Billion
Korea $61.7 Billion
OPEC $54.6 Billion
Hong Kong $48.1 Billion
Canada $47.8 Billion
Grand Total $2,065.5 Billion
Conclusions:
* Foreign sources financed 54% of US Federal deficit in 2002, 73% in 2003, and 99% in 2004
* Total foreign ownership of US Federal deficit currently stands at 45% as of end of 1st half of 2005
* The US Government currently owes Japan $687 Billion, China $252 Billion, and Korea $62 Billion - together $1.0 Trillion
* The US Government currently owes $2.0 Trillion to foreign lenders
I'm not an economist, but I'll give it a shot.
There's a bunch of reasons:
A)Money is very much a commodity or like a stock. It's traded like stocks. You or I could go out tomorrow and essentially buy a bunch of Euros or Yen, using dollars to pay for them. If the price of the Euro/Yen goes up, then we've made money. If it goes down, we've lost money. The same types of factors influence the rise and decline of currency as influence the rise and decline of stocks. If a country, as a company, doesn't make good on its debts then the currency declines and everything imported become more expensive, including oil etc.
B)All countries have to borrow money. If a country is seen as a bad risk, then they have to pay more interest on the money they've borrowed. That money is generated -- one way or another -- from the population.
Interesting. Right now the dollar overseas is really low. When I first arrived in Korea in 2002, I could switch a dollar bill with 1320 won, now in 2006 (although I am no longer in Korea) it is one dollar for 993 won. Now in Italy I give 30 dollars and you get like 21 euro. Hopefully our dollar will go up soon. Thanks for your explanation.
Like I said, I'm no economist -- there are others on this site who can provide a more detailed explanation.
Add to that the fact that the fedgov has over 50 Trillion in "unfunded liabilities" that will come due at some point should also cause concern. Also, I tend to believe that these other nations buying up so much of the debt aren't just looking for an extra % point on a T-bill, there's most likely other strings attached that we're not privy to. A lot of these folks who are so unconcerned about the levels of debt accruing are somewhat reminiscient of the yuppies of yesteryear who NEVER thought the good times would end.
I'm afraid these good times, such as they are, will end with some serious belt tightening and hefty tax increases. That means the Fed shifts tax burden to the states, which comes down hard on the middleclass. So, you'll get two tax bites -- state and fed. And don't be surprised if the mortgage deducation goes out the window.
Gold took a big jump last week and some attribute it to a coming devaluation of the dollar.......there's a site called www.kitco.com.......check out their forum......there was some discussion there.
I really believe these "good times" have come with a heavy price to be paid for down the road. Already there's rumblings that these foreign creditors will someday own more of our basic infrastructure such as water systems, highways to be turned into toll roads, etc. If the "unfunded liabilities" figures are to be believed (I've estimates of over 80T) then
it's just a matter of time before TSHTF.
My first hint was this past Christmas when even the young kids pulled down seven figures. In days gone by there would be a large flurry of extravagant spending. Not this past year. Even the young kids stashed their money.
Thank you much. I am going to take a look and learn something. Have a good one.
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