Thread: Go Bush Go!
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Unread 21 Mar 2006, 11:45   #32
Vermillion
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Re: Go Bush Go!

Quote:
Originally Posted by Yahwe
without considering the economic context these sorts of figures are meaningless: a debt of 1$ is ludicrous if you can't afford the repayments, a debt of 10,000,000,000,000,000$ is not ludicrous provided you can make the interest repayments and whittle down the loan
Which is, of course, the big question. At what point does the US debt reach a point where it is no longer manegable, and starts to have a serious effect on the country? The US in in a unique position: due it its financial clout they can handle a debt higher than most other countries (per capita). They also have several huge advantages on the international scene, such as the fact that the standard international commodity currency is the US dollar. That fact alone gives the US economy incredible stability.

However, the crisis point, if not the breaking point, may be upon them soon. Both the departing chair of the federal reserve Greenspan and the incoming chair have stated that the US is approaching critical mass with its debts, and they need to be dealt with. The Economist has been tracking the effects of the debt, most visible in the consistent slive of the relative value of the US dollar. Thats bad, as the fact that the US dollar is standard international commodity currency, a fact that gives the dollar stability, ironically also depends on the stability of the dollar.

There has never been a real threat to this status, as there has never been an alternative. Some nations were tosing around the idea of the Yen in the mid 1980s, but that never went far. The Euro is another possibility, but it is still fairly 'new', and though its value has been rising steadily against the dollar, its long term stability is unknown. Still, it is a viable option, should the US slide continue.

Finally, there is the fact that much of this new debt is being 'bought up' by one or two countries, most notably China. That gives them an interesting bargening chip should future tensions arise...


The point is, Yahwe is correct that the numbers are meaningless without context, but IN context, the numbers are, and should be, worrying. The internal atate of the US economy is also being kept artificially high by the housing bubble, which again both fedral reserve chairs have stated is due for a nice big Pop...
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