Masthead graphic based on a painting by Gudrun Thriemer.

Friday, January 23, 2009

Peter Schiff, "The world won't buy unlimited US debt," Wall Street Journal, January 22, 2009.

[Canadians eagerly awaiting Flaherty's new budget guff might want to consider this. A few economists actually predicted the economic crisis. Peter Schiff (Aug 28 06) is one of them.

Most of us know that Canada is high on the list of "nations funding America's public debt." Schiff says that means we are among the few capable of underwriting Obama's stimulus package for the US. We can do that by never using that money to buy other assets or fund our own domestic spending initiatives, i.e., "your deficit is my deficit." (Our old pals wouldn't screw us--again--would they?) Here, let you sacrifice me for that... -jlt]

Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come."

  We are planning to spend as much as we like, for as long as we like, and we will let the rest of the world pick up the tab.

But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers. Could this be described as sacrificial?

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

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