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How much more U.S. debt can the world swallow?

Some worry the U.S. will be forced to print more money, driving up inflation and interest rates.


 

As Americans ask whether President Obama’s US$819 billion stimulus package is enough, the rest of the world wants an answer to another niggling question: Where will all the money come from? The Congressional Budget Office recently forecast Washington will run up a US$1.2 trillion deficit next year, while independent forecasters peg the figure much higher. By some estimates America will need to borrow US$10 trillion over the next decade. Watching all of this warily are foreign central banks and investors who already own more than half of America’s debt, and will be asked to buy more. At the World Economic Forum in Davos, Switzerland, many are beginning to wonder how much more U.S. debt the world can swallow, according to the New York Times. One worry is that America’s hunger for cash will squeeze out other countries as they try to borrow to fund their own stimulus plans. Another is that the U.S. will be forced to print more money, thus driving up inflation and interest rates. One U.S. official tried to be reassuring. As soon as the economy bounces back, White House adviser Valerie Jarrett said, the country would “restore fiscal responsibility and return to a sustainable economic path.”

New York Times


 
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How much more U.S. debt can the world swallow?

  1. “How much more U.S. debt can the world swallow?”

    That is the 800 billion dollar question.

  2. ‘White House adviser Valerie Jarrett said, the country would “restore fiscal responsibility and return to a sustainable economic path”‘

    I didn’t know they hired comedians in the White House.

  3. As soon as the economy bounces back, White House adviser Valerie Jarrett said, the country would “restore fiscal responsibility and return to a sustainable economic path.”

    Riiiiiiiiiiiiight.

  4. Other than my usual technical quibble that printing money causes currency devaluation, not inflation (not that anyone getting paid in the currency in question would see a difference or anything), they’re going to have to decide between their military & fiscal responsibility.

    I’m not confident.

  5. “Another is that the U.S. will be forced to print more money, thus driving up inflation and interest rates.”

    They already are printing money as fast as the printers will work. Have you seen that chart released by the Fed Reserve Bank of St Louis? The amount of US $$$ in circulation has more than doubled in the past year or two.

    Has anyone seen photos from Weimar Republic where they needed a wheelbarrow to carry the money it took to buy a coffee? Or more recently, Zimbabwe abandoning its currency because of hyperinflation. That’s going to be the US if they are not careful.

    • Next stop the Trillion Dollar bill : redeemable at Starbuck’s (clever pun intended) for a non fat soya chai americano with cinammon on the side.

  6. If they cut the military to the bone a more than likely result will be the chinese will filling the role as the world policeman. Nice.
    But if they keep going as is they will wind up like the Pharaohs, Romans, Spain and England. Bankrupt and retreating inward.

    Not a pretty picture is it.

  7. When I chored through the hours of the documentary ZEITGEIST on the internet and saw how the U.S. printed money out of thin air, continuing doing business this way gets pretty scary.

  8. Just to add another perspective, if fuel for transportation was taxed like it is in Europe (about 0.8 Euro per liter versus 18 cents a gallon in the USA), the US would increase federal revenue by roughly 600 Billions a year…

  9. Would you keep fronting, (lending) to a user once his debt has got to a level that payment is impossable, The current situation reminds me of a guy I know who tries to borrow money all the time with the provision that when he wins the lottery all will be paid in full. Its just pie in the sky economics at best. Lets face it borrowing trillions more dollars can only mask the inevitable law of nature. Capitalism for the most part is based on ‘whats in it for me’, decandant lifestyle, and living beyond your means. The law will prevail and all the kings horses and all the kings men will not be able to put humpty together again !

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