PrintFebruary 17, 2010
USS Obama is sinking
The Obama Administration continues to proclaim the strength of the nation's economy, and foreign governments are responding with a collective "yeah, right".
ABC News reports:
Foreign owners of US government debt reduced their holdings by the largest monthly amount ever in December, with China offloading so many Treasury securities that it is no longer the largest foreign holder.
According to new data released Tuesday morning by the Treasury Department, foreign holdings of Treasury securities plunged by $53 billion in December, a record drop. China led the sell-off, reducing its holdings by $34 billion.
The administration has continued to increase the government's expenditures even while it takes in less revenue--one consequence of the Great Recession. To shore up the hole between the revenue and expenditures, the government has to borrow money, and foreign nations serve as its lenders through purchases of U.S. Treasuries. The administration has defended the nation's ability to service these debts, but it's becoming ever more difficult to believe its claims. The fact that foreign governments are reducing their holdings of U.S. debt is a sign that they are paying more attention to the administration's actions than its words.
Barack Obama's inability to do anything to stem the tide of the nation's unemployment problem has forestalled any potential recovery from the recession, and the government will continue to collect less revenue. Additionally, his $3.8 trillion budget for fiscal year 2011 has provided the latest indication that the administration has no plans to curtail spending on any meaningful level.
Thus, it should come as no surprise that the president is losing the confidence of other nations who justifiably don't believe that the nation's financial house of cards will be in order anytime soon. China is leading the way. Premier Wen Jiabao first voiced his concerns over the U.S.'s debt last March, and the Chinese have been dumping their Treasury securities for the last five months.
If foreign nations continue to decrease the amount of money they loan to the government, it will find itself between a rock and a hard place. It will either be forced to pay a higher interest rate to borrow money from other nations or it will have to print the money it needs. If printing money becomes the only course of action, inflation will ensue, and foreign governments will find the investments they have made into the U.S. devalued.
It's difficult to see how the administration continues to tout what a great job it's doing while it watches Democratic colleagues in the legislative branch and foreign governments invested heavily in the U.S. economy, both jump from the president's sinking ship.
J.C. Arenas is a frequent contributor to American Thinker and welcomes your comments at jcarenas.com
