.. The question is not whether the U.S. deficit will be
sustained at present levels forever - it will not - but more when and
how the eventual adjustment takes place ... While this would likely be
manageable in the short term it could adversely affect the
sustainability of recovery later on."
Another embarrassing truth is that a strong recovery in Europe or Japan
may deplete the pool of foreign capital available to the USA. German
and Japanese Investors may prefer to plough their money into a
re-emergent Germany, or a re-awakening Japan - especially if the dollar
were to plunge. America requires more than $1 billion a day to maintain
its current levels of government spending, consumption, and investment.
There is another - much hushed - aspect of American indebtedness. It
provides other trading blocks and countries - for example, Japan and
the oil producing countries - with geopolitical leverage over the
United States and its policies. America - forced to dedicate a growing
share of its national income to debt repayment - is "in growing hock"
to its large creditors.
Last month, Arab intellectuals and leaders called upon their
governments to withdraw their investments in the USA.
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