Sunday, November 14, 2004

As the Dollar Declines

The dollar, which has declined nearly 30 percent against the euro since President Bush took office in 2001, fell to a record low this week. The decline has not been as marked against other currencies, largely because China and Japan prop up the dollar by investing heavily in United States Treasury securities - in effect, lending us money so we can buy their goods.

During the Bush years, 92 percent of the nearly $1 trillion increase in publicly held debt has been financed by foreign lenders.

Foreign ownership of Treasuries has tripled from the peak of the Reagan deficits in 1983. Because of this enormous dependency, anything that might affect foreign lenders' willingness to invest in Treasuries - including dismay over the United States' long-term fiscal disarray, better investment opportunities elsewhere, or geopolitical or economic strife - could cause the dollar to tank.
This is both amazing and underreported. All of our tax cuts are being financed by foreigners. This also means all of the Bush GDP "growth" has been put on credit cards owned by foreigners. I wish the article would have said which countries picked up this $920 billion tab. I would guess China and Japan own the majority of it, but I would like to see the actual numbers.

Clinton tried to warn us in his Democratic Convention speech, but Kerry never touched on it.

Argentinian style fiscal collapse, here we come!

via The New York Times

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