Dear Editor,
In 2004, the United States imported a record $617.7 billion more
than it exported, a 24.4 percent increase over 2003. The annual
deficit with China was $162 billion, the largest trade imbalance
ever recorded by the United States with a single country.
Dear Editor,
In 2004, the United States imported a record $617.7 billion more than it exported, a 24.4 percent increase over 2003. The annual deficit with China was $162 billion, the largest trade imbalance ever recorded by the United States with a single country. Equally important, as of March 9, the public debt of the United States was just over $7.7 trillion and climbing, making us easily the world’s largest net debtor nation.
Refusing to pay for its profligate consumption patterns and military expenditures through taxes on its own citizens, the U.S. is financing these outlays by going into debt to Japan, China, Taiwan, South Korea, Hong Kong and India. This situation has become increasingly unstable, as the U.S. requires capital imports of at least $2 billion per day to pay for its governmental expenditures.
Any decision by Asian central banks to move significant parts of their foreign exchange reserves out of the dollar and into the euro or other currencies in order to protect themselves from dollar depreciation will likely produce a meltdown of the American economy. On Feb. 21, the Korean central bank, which has some $200 billion in reserves, quietly announced that it intended to “diversify the currencies in which it invests.” The dollar fell sharply and the U.S. stock market (although subsequently recovering) recorded its largest one-day fall in almost two years. This small incident is evidence of the knife-edge on which we are poised.
Japan possesses the world’s largest foreign exchange reserves, which at the end of January 2005 stood at around $841 billion. But China also sits on a $609.9 billion pile of U.S. cash, earned from its trade surpluses with us. Meanwhile, the American government insults China in every way it can, particularly over the status of China’s breakaway province, the island of Taiwan. The distinguished economic analyst William Greider recently noted, “Any profligate debtor who insults his banker is unwise, to put it mildly. … American leadership has … become increasingly delusional – I mean that literally – and blind to the adverse balance of power accumulating against it.”
In order to regain any foreign confidence in the sanity of our government, we need, at once, to reverse President George W. Bush’s tax cuts, including those on capital gains and estates (the rich are so well off they’ll hardly notice it), radically reduce our military expenditures, and stop subsidizing agribusinesses and the military-industrial complex.
If we do not, we risk a fear-driven flight from the dollar by all our financiers, collapse of our stock exchange and global recession.
Dan Alexander, Morgan Hill
