“If the United States was a small or less-developed country, financial alarm bells would already be ringing. The U.S. current account deficit is well above the 5%-of-GDP standard the IMF and others use to pronounce economies in the developing world vulnerable to financial crisis” (John Miller, Dollars and Sense, January/February 2005). For the first three quarters of 2006, the current account deficit totaled $655.9 billion, putting it on track to reach $874.5 billion for the entire year. The current account deficit “essentially measures the nation’s debt with the rest of the world, which must be financed by loans from abroad or asset sales to foreigners. “Some economists are worried that foreign investors will lose their appetite for US assets, causing the dollar to fall sharply and forcing interest rates higher to attract the needed investment” (“US Q3 Current Account Deficit Grows to 225.6 bln usd, Equals 6.8 pct of GDP,” Forbes.com, Dec. 18, 2006). Not only is the United States the biggest debtor nation in the world, now “foreigners hold more than 50% of our debt, which makes them majority owners,” says Todd Harrison (MarketWatch.com, Dec. 20, 2006). The United States has been the largest economy in the world, and the U.S. dollar has served as the world’s reserve currency for decades, since the British currency lost that advantage after World War II. Britain had gone from the world’s biggest creditor in 1913 to become a net debtor after two costly world wars. With the United States now as the biggest debtor, can its dollar still continue to be in demand? Will other nations keep accepting the flood of dollars and buying the billions in American treasury bonds necessary to keep it afloat? The Bible warns, “The borrower is servant to the lender” (Proverbs 22:7). And in a prophecy of the results of not obeying God, the Bible says that the foreigner “shall lend to you, but you shall not lend to him” (Deuteronomy 28:44). The handwriting is on the wall.
Tuesday's HOT MIC - Join us all day, every day.
2 minutes ago