Risk of rebuilding New Orleans in deluge of debt
By Clyde Prestowitz in the FT September 28 2005 19:41
""In the wake of President George W. Bush’s recent speech in New Orleans, I have been wondering if anyone has asked the Chinese how they feel about his decision to spend “whatever it costs” to rebuild the city. After all, they are the ones who will have to pay for it."
"The cost of rebuilding is estimated at more than $200bn (€167bn) but the White House insists it will not increase taxes. That means the entire cost will be added to the $350bn federal budget deficit, driving it close to $600bn. This deficit is financed by selling US Treasury bonds to investors looking for a fair and safe return on their savings.""
"The nation’s overall savings rate is negative and the deficit is funded by foreigners. In fact, more than 75 per cent is financed by foreign central banks, among which the People’s Bank of China will soon pass the Bank of Japan as the biggest lender."
"In 2004, according to the Bank for International Settlements, central banks funded 75 per cent of the US current account deficit. This year, the PBoC alone is likely to cover nearly 40 per cent of it."
"These banks now hold so many dollars ($800bn for the PBoC and close to $850bn for the BoJ), that any fall in its value would cause large capital losses on their own balance sheets."
"Paul Volcker, the former Federal Reserve chief, has predicted a 75 per cent chance of a global financial crisis within five years."
During Wolfowitches' evidence to the Senate committee on foreign affairs, he said that "we will conquer the world either by consent or conquest".
Was currency [Euro vs US$] one of the reasons for the war? There definitely seems to be some kind of cold war going on, which I don't pretend to understand, with oil, China, Iran and the euro/dollar choice... If China and some axis of oilville countries switch to euros will that have disasterous consequences for the US? Does their massive debt make them or China more vulnerable to economic meltdown?
The US are also apparently furious that Malaysia and China have 'de-pegged'. The US economy is basically bankrupt, it is being propped up by a daily overdraft from the rest of the world, especially China, and Bush now dares not criticise them for human rights violations.
Will the US ever be able to service these huge ammounts? let alone pay off the capital. Everything and everyone in the US is owned by private banks.
They'll have to have a WWIII for the private banks to create more money and profit.
(this last bit is based on posting by 'Ekk' on the medialens message board which is a constant source of interesting stories