U.S. Relying More on Foreign Investors to Finance Deficit

Concern Rises Over Foreign Investors' Appetite for Dollar Amid $665.9 Billion Trade Shortfall

http://abcnews.go.com/Business/wireStory?id=598298

WASHINGTON Mar 20, 2005 — America buys more than it sells and spends more than it earns. So who bankrolls the shortfalls? Foreign investors. The shortfall on all trade and investment income with the rest of the world swelled to an all-time high of $665.9 billion in 2004, according to the Commerce Department.

>>>>Foreign investors finance the deficit in a number of ways. When foreign companies sell Americans cars, clothes and other goods, those businesses are willing to be paid in dollars. That money is then invested in U.S. stocks, corporate bonds and Treasury securities.

Foreign governments mainly central banks help to finance the deficits by investing in U.S. securities, including the Treasury's. Foreigners' appetite for U.S. investments also helps to finance the government's record budget deficits.

>>>>Net purchases by foreigners of U.S. stocks, corporate bonds, Treasury securities and other investments totaled $92.5 billion in January, a sharp increase from December, the Treasury Department reported. Of that total, $78.2 billion came from private foreign investors, while foreign governments snapped up $14.3 billion worth of securities, the department's data show.

I like everyone else have been distracted with the Teri Schiavo case, but am finally coming out of the trance to really listen today to the other things happening in the world.

READ THIS ARTICLE, it is the most "news" item today.

I think that so much of what is happening to our economy is so overwhelming that folks just can't absorb it. Then there is that feeling of powerlessness with regard to actions and complicity of the republican Congress and chimp boy in the White House in the dismantling of our safety nets and the deepening of the plights of the poor and working-class. Unfortunately, it may take a further deepening of our collective plights to actually get the attention of the majority of Americans who still feel like they can rise to the top of the economic pyramid that has been promoted and furthered by the industry charlatans in Congress and the White House.

bushco's little empire will end when these people decide to stop financing us.

If China or Japan has an economic crisis and starts selling off U.S. securities . . .

What would happen if they just stop financing us. I'm not talking about a sell off of our securities just a lack of interest to continue to carry our debt. My understanding is that it's in their current better interest to keep us afloat, but for how long? The Asian central banks are currently boosting holdings of euros versus dollars. To me it would appear they are trying to wean themselves off the dollar in an attempt to prepare for our impending economic demise.

is the prospect that we would not have enough capital to continue purchasing their imported goods at a rate which sustains their own growth.

Here's a good article outlining how Bush uses the foreign investment to fuel the war, tax cuts, etc.:

U.S. Debt to Asia Swelling
Japan, China Lead Buyers of Treasurys

By Peter S. Goodman
Washington Post Foreign Service
Saturday, September 13, 2003
http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A3188-2003Sep12¬Found=true

{snip}

-Should the day arrive when overseas holders of U.S. dollars, whether in Asia or elsewhere, decide not to buy so many U.S. assets or begin selling their holdings, that would reduce the overall demand for U.S. dollars, driving the value of the currency lower. That would raise the cost of imported goods in the United States, possibly fueling higher inflation and interest rates and slowing overall economic growth.

Economists have warned for years about the potentially painful consequences of such a shift in global investment patterns.

This has caused some analysts to even envision the day when China could use threats of selling Treasurys to try to influence U.S. economic or foreign policy -- for example to quash efforts by U.S. lawmakers to keep out Chinese exports or to pressure Washington to withhold support for Taiwan, the self-governing island that Beijing considers part of its territory.

"The U.S. dollar is now at the mercy of Asian governments," said Joan Zheng, a former official at the People's Bank of China, the country's central bank, and now an economist at J.P. Morgan Chase & Co. in Hong Kong. "If China wants to influence the market, it can. Its financial power is just so strong."

:nuke: :nuke: :nuke: :nuke: :nuke: :nuke: