MSNBC: Japan and China "own more of America than Rhode Island does"

[Bush_Eats_Beef]

http://www.msnbc.msn.com/id/6884661/site/newsweek/

Feb. 7 issue - You didn't need to be a political consultant to predict the likely linchpins of the president's State of the Union address. Safeguarding Social Security, the entitlement program whose cost accounts for a fifth of the entire federal budget. Continuing the tax cuts that George W. Bush embraced during his first term and defended during the election. And bankrolling the war in Iraq, for which the administration is seeking $80 billion in its current budget.

Home foreclosures have become commonplace in recent years as consumers bought houses they could scarcely afford, then took second mortgages on them to pay other bills. Bankruptcy filings were widespread as well. While the very word was once synonymous with disgrace, now it constitutes a kind of automatic absolution: fess up, and the blot is gone. By contrast, the savings rate has plummeted during the last 20 years. One study showed the average American household with nearly triple the amount of credit-card debt it had a decade ago, scarcely surprising when unsolicited offers are sometimes sent to infants, the dead, even the occasional family pet. (If Woofie had opposable thumbs, he'd sign up.) When a family friend told Benjamin Braddock in "The Graduate" that the future was plastics, he was off by only that last letter.

In a case of civic synergy, the current administration seems as dazzled by the possibilities of big debt as any guy in a car showroom. Last year government revenues were the same as in 1999, but spending was up by 34 percent. While there was a surplus when Bush arrived in Washington, the budget deficits are now the largest in history. And Congress had to bump up the debt ceiling yet again so that the Treasury could raise $8 trillion to meet its obligations. But there's no public shock and awe. The numbers are so large, the zeros so endless, the legerdemain so little discussed that the national debt seems disconnected from reality, floating over Washington like a blimp at a sports event.

Actually, a good bit of the shortfall has floated across the ocean. Although this administration was not shy about expressing its contempt for the need for foreign help with Iraq, it dare not say the same about its budget. More than 40 percent of our national debt is held by other countries, and that number has increased incrementally since George W. Bush first became president. China holds $500 billion in Treasury bonds, Japan $720 billion. Probably that means they own more of America than Rhode Island does. Probably it means we will have to be very very nice to them no matter what they do.

[slipslidingaway]

1. Chart at the bottom of the link from 1970 forward

http://contraryinvestor.com/mo.htm

"The Most Important Transfer Of Them All?...As a very last, and what we believe extremely important, point of information that is tangentially being driven by the US trade deficit is an update of a chart we have shown you before. If you remember the chart, you'll remember our comment that, in all sincerity, it's one of the most important pictures we can possibly think of at the moment. The data is taken from the 3Q Fed Flow of Funds statement. It's a look at US assets owned by the foreign community relative to foreign assets held by the US community. And we've put the net number on top of US GDP for some perspective as to magnitude relative to the total size of the US economy."