In his opinion piece today in the Wall Street Journal, Peter Schiff says that it won’t be the US that needs to sacrifice during the coming rounds of stimulus – it is going to be the Chinese, Japanese and Saudis who need to be prepared to sacrifice. Like Mr. Schiff, I’m not sure if we’re going to see these countries give up trillions of dollars just so we can boost jobs and consumer spending here in the USA.
“As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.”
“But just because the game has lasted thus far does not mean that they will continue playing it indefinitely.”
At some point, whether it be in 2009 or 10 years from now, these creditor nations are going to realize that the over-consuming US public is no longer “good for it”. What will happen then?
“Currently, U.S. citizens comprise less than 5% of world population, but account for more than 25% of global GDP. Given our debts and weakening economy, this disproportionate advantage should narrow. Yet the U.S. is asking much poorer foreign nations to maintain the status quo, and incredibly, they are complying. At least for now.”
If we continue to spend other peoples’ money to fund our projects, we are going to be in even more trouble than we are now. At some point, they (our creditors) will draw the line.
“one would hope that Mr. Obama can see that, just like all other bubbles in world history, the U.S. debt bubble will end badly. Taking on more debt to maintain spending is neither sacrificial nor beneficial.”