February 2, 2010
Photo: The Bush Whitehouse
There has been a great deal of controversy over the fact that the United States owes China $789.6 billion in Treasury Securities.
Then again, we owe Japan $757.3 billion and the United Kingdom $277.5 billion.
reported under the Treasury International Capital (TIC) reporting system are based on annual Surveys of Foreign Holdings of U.S. Securities and on monthly data. Department of the Treasury/Federal Reserve Board January 19, 2010 SOURCE: http://www.ustreas.gov/tic/mfh.txt
The American government may owe China $789 billion, but when it comes to foreign debt PER CAPITA (per person), economic debt in the U.S. could be worse.
This reminds me of facing my parents after receiving a bad grade in school (okay, that almost never happened!) and using the excuse, “But the other kids failed too!”
The response: “But we’re not the other kid’s parents!”
Yet, it’s comforting to know the debt per capita is worse in other countries:
· Greeks: $27,746
· Belgians: $27,023
· Austrians: $26,502
· Irish: $24,247
· Norwegians: $21,402
· Italians: $24,247
· Dutch: $20,412
· French: $18,946
· Germans: $15,574
· Finns: $13,617
· Americans: $11.094
· Danes: $9,410
America's dependence on foreign capital to fund its fiscal and external deficits is anything but a joke. And as the dollar has declined steadily -- not just in the past eight months but over the past eight-plus years -- global investors' willingness to continue to acquire and hold dollar assets has been open to question.
The latest Treasury International Capital data show that, notwithstanding growing criticism of American fiscal and monetary policies from abroad, foreign demand for long-term U.S. financial assets remains robust. And that's after deducting a steady exodus of American investors' money for foreign securities. http://www.ustreas.gov/tic/
Have you ever wondered who really reads that boring crap from the U.S. Department of Treasury? Well, now you know.
As the dollar weakens, America's purchasing power shrinks and the U.S. share of global GDP declines. Everything the United States imports, from petroleum to electronics, becomes more expensive. Because Americans import the vast majority of things they need, this could result in higher inflation and interest rates in the future. Ultimately, a weak dollar could cause living standards in America to decline.
The dollar's status as world reserve currency could also be in jeopardy. Recently, the United Nations, China, Russia and other nations have questioned that status, advocating replacing the dollar with another currency or a basket of strong regional currencies. GOLD isn’t looking so bad now. You may want to re-read that article.
If and when the dollar will be ousted as world reserve currency is the subject of much speculation. Right now, the greenback is still the most used for international transactions and constitutes more than 60 percent of other countries' official foreign-exchange reserves.
However, that percentage is steadily slipping. Several ideas are being bantered about regarding what currency could replace the dollar. The euro, Chinese yuan and a completely new international reserve currency appear to be top contenders. And while Europe or China may not be quite ready to take the lead as economic superpower right now, they are definitely moving in that direction.
A weak dollar makes imported products much pricier to buy here like Italian olive oil, imported wines, and Japanese products. A weak dollar does help many U.S. companies boost their overseas sales and makes domestic goods cheaper than imports at home.
For HOUSTON: A weak dollar increases tourism as more foreigners can afford to visit and spend money in the U.S.
So maybe we should stop fighting that new Dynamo’s stadium and get focused on all of the great events and places to see in HOUSTON!
Contact James Hamilton: firstname.lastname@example.org Or find me at: Twitter Houston’s Workplace Examiner LinkedIN MySpace
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