deficit spending

[nibot]

It's not particularly sophisticated, but I agree with the sentiments of the Time Magazine op-ed titled, "Hair of the Dog":

Are you at all suspicious? Does it sound too good to be true? Here we are, plunging into a recession. The proximate cause is irresponsible mortgage loans made to people who can't pay the money back. The deeper cause is, at least in part, years of too much borrowing and spending by Americans, both as individuals and collectively through the government. But behold: there is—oh, joy!—bipartisan agreement on a solution. Although quibbling over the details, everyone—Republicans and Democrats, the White House and Congress, all the presidential candidates—agrees that what we need is a "fiscal stimulus."

In other words, the government should go out and borrow even more money and pass it around for us to spend. The experts caution that for maximum stimulus effect, we must be sure to spend it immediately. No squirreling it away for a rainy day. In drinking circles, they call this hair of the dog: to cure a hangover, you have another drink.

On NPR the other day they interviewed James Fallows on the American-Chinese economic relationship, the peculiar scheme by which China produces stuff and gives it to us in exchange for American dollars.... which they then loan back to us by buying American debt. It's as if China is working so feverishly for the U.S. and getting only I-O-U's in return. Why? I wish I understood it better.

Comments

[evan.livejournal.com]

My understanding is that by holding a ton of US debt, they can choose to effectively destroy the US economy when they want to. If it* ever comes to war they could even just rattle their sabers about maybe ruining the economy and the effect on the US will be enough to let everyone know how serious it is.

* it = our nation's general propensity to use the military to "solve" things

[nibot.livejournal.com]

I think that's true, but I don't think it's why.

On the radio they talked about some scheme where Chinese businesses must exchange dollars for yuan via the government instead of on a free market. Somehow the Chinese government exerts control on the economy my manipulating the exchange rate. After all, the Chinese people must have some direct incentive to produce so much.

Rambling post.

[caerglas.livejournal.com]

Ya know, despite being in the last stretch of my 3L in lawschool, having taken Partnership tax, income tax, corporate tax, tax clinic, tax moot court, Seminar on Valuation in tax, and international tax... being currently enrolled in estate and gift tax, advanced Corporate tax re-orgs, tax procedure and secured transactions, all I can say is this:

Man, is the economy really complicated, and there are some seriously smart people with heavy math skills doing their best to prop us up.

It's possible that China's buying U.S. debt because it's seen as stable--despite the uncertainty in public discourse. Maybe there is a 'we'll bankrupt them like they bankrupted Russia' thing going on... But personally I don't see it. You don't loan someone all your money just so you can be happy when they don't pay you back and call them a dead beat. Well, if you DO, I'll give you my bank account number.

I'm also kinda amazed at the talk that China's prosperity is America's detriment. What trash. How paranoid and xenophobic. Someone doing well isn't a threat; someone attacking or destroying us is a threat. Anyway, good job China.