As America's debt continues to grow, is it causing foreigners to think twice about investing in America? The U.S. has been one of the most stable countries over the past century. It has remained stable through two world wars, numerous administration changes and economic and political crisis around the world. But America has been borrowing more and more money and has a debt that is approaching $12.1 trillion. Countries do fail because they spend too much and ultimately try to print their way to success.
Historically, when other countries have spent to much money they have looked to the printing presses to solve the problem. Germany, Argentina and Zimbabwe are examples of countries that have done this recently.
With President Obama visiting Chinese President Hu, he is going to hear a little different perspective about debt than he does at home. The rest of the world is going to look at America's debt differently than we do. A person who borrows money has a distinctly different approach from the person who lends the money. With America's debt growing and the U.S. dollar falling, foreign investors are seeing American investments in U.S. debt fall in value. This can cause them to dump the investments, which in turn continues to push the U.S. dollar lower.
Ultimately, the debt alone may not be so scary, but out of control government spending can be.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
11-17-2009 @ 11:37AM
Sheldon L said...
You have it backwards. Foreigners are on a buying spree now and it will accelerate as the dollar drops. They may not buy as many treasuries but our real estate assets and major companies have been and will continue to be acquired.
11-18-2009 @ 12:51AM
Racinjaxon said...
By keeping rates artificially low not even foreigners are dumb enough to buy treasuries these days…..Eventually they’ll realize that real estate too is less compelling when the green in front of the buildings isn’t grass but rather shredded currency that’s only value left is to cover unsightly dirt. By trying to devalue our way to greatness, America’s policymakers are playing with fire and using a strategy that I could only describe as morally dubious.