The Naked Hegemon

[Jemmons]

"Uncle Sam has reneged and defaulted on up to 40% of its trillion-dollar foreign debt, and nobody has said a word except for a line in The Economist. In plain English that means Uncle Sam runs a worldwide confidence racket with his self-made dollar based on the confidence that he has elicited and received from others around the world, and he is a also a deadbeat in that he does not honor and return the money he has received...



...China and other East Asian nations do earn in dollars, to which they have pegged their currencies, so they have already lost a substantial portion of their dollar stake, by far the world's largest.

And they, like all others, will also lose the rest. For Uncle Sam's debt to the rest of the world already amounts to more than a third of his annual domestic production and is still growing. That alone already makes his debt economically and politically never repayable, even if he wanted to, which he does not. Uncle Sam's domestic, eg credit-card, debt is almost 100% of gross domestic product (GDP) and consumption, including that from China. Uncle Sam's federal debt is now US$7.5 trillion, of which all but $1 trillion was built up in the past three decades, the last $2 trillion in the past eight years, and the last $1 trillion in the past two years. Alas, that costs more than $300 billion a year in interest, compared with, for example, the $15 billion spent annually on the National Aeronautics and Space Administration (NASA). But no worries: Congress just raised the debt ceiling to $8.2 trillion. To help us visualize, $1 trillion tightly packed up in $1,000 bills would create a pile 100km high. "

Source and more:
http://www.atimes.com/atimes/Global_Economy/GA06Dj01.html

[HysteryDiagnosis]

1. I hope Iraq can follow our example of fiscal responsibility, duty

to its citizens and shining democracy (diebold)

[On the Road]

2. While I Understand the Point of the Article,

this diatribe is not written particularly well.

A lower dollar does NOT equal defaulting on the national debt. The US and China have both tried to lower their currencies to strengthen their balance of trade. If you're going to have unregulated trade, this is one of the few tools a country has to prevent trade deficits. It happens to be working out better for China than for the US.

I appreciate the history of Britain's "imperialism of free trade" (which I'm nbot familiar with), including the role of military force. Hong Kong must be quite familiar with those British policies. But the situation is reversed here: the US owes China money, not the other way around.

It's true the US dollar has been used as the de facto world currency, and that this is an enormous advantage for America. It's partly because other major currencies have been less stable and less well managed than the US dollar. Bush's deficits are in the process of changing that, which seems to be what the editorialist wants, except that the result is likely to be a further erosion of the dollar, which is what the editorial is complaining about.

The Asia Times is a great newspaper. This isn't up to their usual standards. Maybe a bit of pro-Beijing influence in the Hong Kong news room.