Current Events — HabitableZone

Current Events » in reply to They are getting close to holding enough of our debt that they can dictate terms.

Then why are interest rates low in the USA?
Scott Evil — (archived)

They cannot and will not dictate the terms.

Even Alan Greenspan can't dictate terms. (He can alter the supply, but not directly alter the real terms of aquiring or selling money).

Money is a commodity. Its value is in what it can purchase. The US $ is valuable because faith in the USA and her economy is by far the best investment of faith in the world.

The Chinese will continue to accumulate US $'s as will many other trading partners of the USA. The only way they can stop accumulating $'s, is if they stop selling products to the US. Why would they do that?

Also, as they accumulate more and more US$'s, it is in their best interests to have a stable US$.

In the meantime they are free to invest those $'s anywhere they please so long as there are takers both here and throughout the world.

Got to many US$'s? Want a better return than the fed offers? Maybe you should consider building a manufacturing plant in Davenport, Iowa USA.

The amazing thing is that the US economy grows despite the tax of a trade deficit that amounts to about 10% of US GDP. Follow me here...That's 10% additional economic growth that we siphon out of our economy each year!

Note: The US economy would overheat in the extreem if we were to suddely shift to a trade surplus and add that 10% to the annual GDP.

So the trade deficit can actually be viewed as a good thing! It keeps domestic inflation in check as those foreign goods flow in and US$'s flow out.

When the trade deficit does turn into a surplus, expect inflation to become more problematic. As I said in an earlier post, our biggest economic problem is the availability of workers...We've overcome that recently through immigration, both legal and illegal. Can that continue for ever? Of course not...Nothing lasts forever. But as long as GDP growth is kept to a steady, manageable, and predictable level of 2-4% or so, we are sitting pretty in the USA.

Anybody tells you differently and they are selling you pollitical bull-cacca.

Of course, anybody who doesn't believe me is free to invest their capital somewhere other than in the USA. That's the great thing about a global economy built on free trade.

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