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America: A Nation Of Debt

Published 07/18/08 Jeff Bennett - Print Article
E-mail - editor@economyincisis.org

Foreign banks own almost $1.5 trillion in debt from mortgage giants Fannie Mae and Freddie Mac. Most of this debt is owned by China, Russia and the Middle East, leading purchasers of American Treasury and debt.

At current estimates, China possesses’ around $400 billion in debt, Middle Eastern nations $200 billion and Russia $150 billion, according to Telegraph.co.uk

While the financial institutions continue to implode in this credit crisis and the dollar continues decline, how long will these nations finance our extravagant spending? It is time for American politicians, businesses and citizens to begin living within the means of a responsible budget.

Source Telegraph.co.uk:

Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.

…

Roughly $1.5 trillion of Fannie and Freddie AAA-rated debt - as well as other US "government-sponsored enterprises" - is now in foreign hands. The great unknown is whether foreign patience will snap as losses mount and the dollar slides.

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But the lion's share is held by the central banks of China, Russia and petro-powers. These countries could all too easily precipitate a run on the dollar in the current climate and bring the United States to its knees, should they decide that it is in their strategic interest to do so.

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Merrill Lynch said foreign governments had added $241bn of US agency debt over the past year alone as their foreign reserves exploded, accounting for a third of total financing for the US current account deficit. (They now own $985bn in all.) By most estimates, China holds around $400bn, Russia $150bn and Saudi Arabia and other Gulf states at least $200bn.

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