I just read this:
http://www.atimes.com/atimes/Global_Economy/EK22Dj01.html

Economics is not my strong point but it appears to me that our government spending is out of control and we have no way to finance our debt.

Is this right? Are we in economic trouble on a larger scale?
What do you think about this article and what does this news mean for us?

Thanks.

The short answer is: Yes, in the long term, if we don't start paying off our debt, our economy is going to stumble badly and take most of the world economy with it.

What the article says is accurate.

A quick number: $6.8 trillion. That's our current federal DEBT (not deficit, but what our government has borrowed over the years to fund its programs and plans).

Another quick number: $318 billion. That's how much of our federal revenues went to paying the interest on the debt in FY 2003. That's tax money that didn't go to guns or butter, but to the people who own government securities which are issued to fund the government when revenues (taxes) don't match expenses.

And the dollar falling? We're the world's largest importer. If the dollar falls, everything we import -- from TVs to clothes to cars, etc. -- becomes more expensive. Good for local companies, bad for consumers who want the foreign-made products anyway.

Bad also for foreign countries who -- in a not-so-random twist -- are the primary holders of those same government securities that fund the debt. If those countries start to falter (and lower exports will likely weaken their economy), they will sell our securities to raise cash, thereby lowering the value of our securities (it's a supply/demand thing), requiring us to raise the interest on any new securities -- which we'll need to fund next year's defecits, because no one seems to have the guts to raise taxes OR reduce spending -- and raising the cost of interest.

It's a bad cycle we're in and Congress and the President seem unlikely to break the cycle without a major rethinking of their views. And without a major attitude adjustment toward taxes.

Ehh...I dunno that article is fairly slanted and that has a lot to do with where it was written ..from Asia.

Everyone one is the country was so up in arms about the war in Iraq and Bush's persistence that it was a necessary evil...but no one makes any kind of noise about his posturing for a trade war.

The amount that foreign investment has dropped in the US is terribly scarey..I knew we were bad off in that area...but that bad? ugh. And you would think with the dollar down investors would in fact be bargain hunting? I read in I think it was FT.com that over 50% of American investments are being held by investors in China...and Bush wants wage a trade war with them over brassieres?

I personally am not to worried about the dollar declining...as long as Bush knocks off this warrior rhetoric. I don't mind him being aggressive with China over her fixed currency...but combating anti-free trade tactics with anti-free trade tactics is ridiculous...what a hypocrite!

I have never understood why people get so freaked out about trade deficit...if your economy is growing shouldn't your imports be growing too? How are we suppose to cure our trade deficit...with a recession?

1.3 trillion of nearly 6.6 trillion of our federal debt was held by foreign and international agencies/companies/etc. That's only about 20%. As for other securities, it works both ways: we own a lot of their stocks as well.

But, yeah, we're fighting over bras?

Anyway, if the dollar keeps declining those bras will cost more (and sell less) even without Bush slapping an import limit on them.

And make the Chinese less of a profit because they insist on riding down with us.

We have a lot more pull with the falling dollar in Asia than we give ourselves credit for. Yet I just can not figure the need for the import limits except to be nasty.

I wanted to give the actual numbers of the fall of foreign investments in the US...



I honestly had no idea it had dropped so low.

Greenspan gave Bush a warning and I wonder if Bush will heed it? Greenspan claims the only danger to our rising deficit is our rise in protectionism.