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Join the Dots 314

1. The United States is living far beyond its means and its states and federal government are near bankruptcy, with around eleven trillion dollars of acknowledged debt.

2. The Chinese, Japanese, Koreans, and Sovereign funds are lending them most of the new money, and foreigners own around thirty per cent of the debt in total.

3. The United States is embarking on a huge spending programme, which will kick in after the worst of the deflation, which has not yet arrived. This spending programme will be inflationary.

4. China wants the lending tied to inflation in future, or it will push for a system based on a new global currency.

Comments

Anonymous said…
Anonymous coward here.

TIPS are the clear solution for any foreign lenders feeling skittish about US$ inflation. On the upside for Americans, China, South Korea, Japan and, while we're at it because they do sovereign wealth funds so intelligently, Singapore, are still betting on the US dollar.

On the downside, they're betting on the US dollar and I wholeheartedly agree with you that inflation is in the American near future. Sadly, this inflation will(is?) being caused by absurd federal spending. I don't believe in supply or demand side fiscal policy; on a long term basis, it is very difficult to spend yourself rich.

Inflation in Zimbabwe is ::grim chuckle:: worth paying attention to as a worst case scenario.
6:52 am
Martin Meenagh said…
Hallo there, AC.

We agree on the federal spending. However, I find myself wondering today if the debate isn't moving beyond Treasury Inflation-protected Securities to secessionist sympathies. The States, which are themselves in dire straits because of their own spending and borrowing, are threatening to go all Brazilian on the Union. Perhaps that's just a right-wing flirtation, but America is looking a little demented at the minute.

I wish that I could spend myself rich. I'm on an economy drive at the minute, though I remember Churchill once writing to his mother and saying much the same thing; 'I cannot afford the rent, so I am moving into the Ritz'.

It's a wonder we won, frankly. As for Zimbabwe, well, there's a country whose leadership just, simply, deliberately, destroyed their country. I work with a Zimbabwean who is a college accountant, and have worked with people who described themselves as Rhodesians in the past; the one thing that unites them is sorrow over what Zanu has done. It's lunacy.

Many thanks for your comment.
8:56 am
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