Remember MAD, mutually assured destruction of cold war? Well our MAD world economy says we can borrow money endlessly and use it to buy foriegn procts and expand government and there is nothing foriegners can do about it.
The longer BoB keeps the economy in a recession the more of a mandate he has to do anything he wants and the more foreigners avoid investing in US private industry/stock market (your retirement funds) and instead buy T-bills for him to spend. What about 2010 election? Maybe his goal is to get enough government employees, and voters on federal contracts, like public school teachers, nurses, UAW, Mexican immigrants to win the elections so that it doesn’t matter how the economy looks for everyone else. Of course he can never reduce the deficit with this strategy no matter how high he raises taxes.
Not only foreigners not investing in US stocks, but what person in his right mind would invest with the threat of nationalization hanging over so many industries and the complete lack of clarity regarding constantly changing government rules and regs. How does the auto industry conduct R&D if they are forced to make 20 different flavors of a single model car to satisfy the states’ whims?