Kindness of Strangers

The current US economy is highly dependent on the willingness of the big international dollar holders - China, the Gulf States, Russia, Japan, and others - to lend us money at cheap rates. So far, this has been a dubious financial decision for them, since the decline of the dollar means that they keep losing money.

Brad Setser takes a look at some historic parallels. They aren't entirely encouraging. Surprising enough, owing a lot of money has a way of weakening your status and bargaining position. For the present, and for the foreseeable future, we are addicted to that cheap Chinese and oil exporter crack. The only things likely to improve our international standing are cutting back on our oil use and balancing the budget.

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