Thanks to the enormous trade and budget deficits run up by the Bush administration, the U.S. economy is dangerously dependent on foreign investors, especially China. Ian Williams provides some sobering information in a recent article for Alternet:!
Indeed, the United States' position is worse than it looks since it's problems run deeper than the national level. Thanks to a federal system of government, much of the money that central governments control in other countries is spent in this country by state, county and city governments. And they are all facing growing deficits. It all adds up to a fiscal nightmare.
There are few reasons in the long run for foreigners to want to put their money in a rapidly depreciating currency that pays lousy interest rates. What's more, the Bush foreign policy doesn't exactly inspire confidence. The more the U.S. government acts as a solo rogue elephant in world affairs and disregards international law, the less secure foreign investors will be that they can get their money back on demand. There has already been an outflow of Arab money as the Sheikhs worry that between John Ashcroft and ambulance-chasing lawyers, their holdings can be easily frozen or confiscated.
And if the investors all get the jitters together, the U.S. will experience a snowball effect, similar to the meltdown in South East Asia and Argentina.
A run on the bank is a real possibility, and, as we know, these get out of control. It led to breadlines in Buenos Aires recently, and our very own Great Crash of 1929.
Read the full story at Alternet:
http://www.alternet.org/story.html?StoryID=17547