We can’t rely on foreign capital to finance our annual deficit for the simple reason that it’s just not there. At $400 billion, there was enough surplus capital abroad to buy the treasuries and “externalize” our debt. At $1.6 Trillion, it exceeds the world’s capitalization capacity (the money ain’t there). So we have to internalize and monetize the debt. In three to five years we will see Weimar-style turbo inflation in the U.S. economy. The signs are already there. Unless the government MASSIVELY slashes spending and we endure a bad, but recoverable, depression, the outcome will be an unrecoverable tailspin.
The spending cuts you mention need to be done and done NOW. No more pussy footing around. It’s beyond me that our government believes that we can continue to spend more than it brings in and all the while, give our borrowed money back to the nations we borrowed if from and pay interest on it. It is said that we give our tax money to 150 countries around the world. We can no longer, nor should we, support the world when the majority of these countries hate us. Nor should we defend them with our military without them paying for that defense.
“We can’t rely on foreign capital to finance our annual deficit for the simple reason that it’s just not there.”
They aren’t financing that much of it anymore. Most of the deficit financing now is the Fed buying treasuries.