On Feb 6, 2007, at 2:08 PM, Yoshie Furuhashi wrote:
In this case, the lenders don't appear to have the power over the debtor to restructure the debtor's economy to prevent their paper claims from becoming worth less and less. So, it looks to me that it should be more accurately called "consumption subsidy," subsidizing US consumption, some but not all of which consists of exports from the lenders.
They don't have the power to demand structural adjustment - yet - but if they stop, or even slow, their purchase of U.S. securities, the U.S. has a problem. Of course, the U.S. could just repudiate the debts, but that would throw the whole world into a major crisis (and crisis isn't too strong a word). We are paying them more & more interest, too, and the income lines on the current account have slipped into the red. Doug
