It's no secret we're in the midst of some very serious economic difficulties and questions have arisen as to who is to blame. Over the course of the past weeks I've read some very valid posts pertaining to the fact that we are responsible and, while that fact has a certain ring of truth in that we in the western democracies, and the US in particular, do indeed buy the most stuff and waste irreplaceable resources to an extraordinary degree, we are victims of a system and sometimes enablers of a system whose roots are deep and dark. We are not to blame because we need money to live. There are many factors about why you might choose to buy a particular house in a particular neighborhood and if the house down the street from your parents now costs $250k rather than the $25k they paid for theirs, you aren't the one who made that happen. Not even George Bush, nasty as he is, is responsible for the monetary system that is grinding all of us in the direction of economic collapse - although he certainly has lots to answer for (details can be found on any of your March 19th Blogswarm posts).
Yesterday I read an article from the London Telegraph titled: Foreign Investors Veto Fed Rescue. Er.. how can they do that? Well, it turns out they can and I recommend you read the article yourselves if you can find any time but I'll try to explain what I'm coming to understand. The point being made by the business editor was essentially 'what if you hold a sale of 10 year US Treasury notes and nobody comes to buy?' Big problem. The thing hinges on the fact of the US dollar (petro-dollar) being the world's reserve currency and it's dropped a lot in value just recently which means that other countries are going to drop the value of their own currencies in order to keep down with us.
'Overall credit conditions could tighten into a world-wide slump (like 1930). It's the stuff of bad dreams.
As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to 66pc of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103).'
Okay, I read that list and then went back and looked at it again because something seemed weird about the first five countries. Japan, China, UK - okay no surprises there but how about numbers 4 and 5? Luxembourg? Aren't there about 57 people who live in Luxembourg? It's so small even I would have a hard time finding it on a map without a magnifying glass. Cayman Islands? Have you ever met anybody from the Cayman Islands? Do they arise each morning with hands over hearts and pledge allegiance to the sovereign Isles of Cayman? Do they go to work? or school? do they play ukuleles? do they eat bananas? Why is it that Saudi Arabia, Abu Dhabi and the UAE aren't even on the list? Could there be a connection?
Now I'm getting suspicious. Those two countries (?) seem to have more money than the next eleven and I've been wondering why. If you add them together it's almost as much as the first two countries on the list and double the UK at number three. This may be a bigger subject than one post will allow but I'll keep on investigating and will be back soon with my next report.