The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. “It’s a distinction without a difference whether it’s a foreign or a U.S. one,” he said in an interview with Fox News.
Apparently the American bailout of AIG was undertaken at the behest of several foreign Finance Ministers and Central Banks, since AIG is a major player in the economies of many nations. That is all well and good, and may well be necessary, but apparently none of these central banks are contributing financially. This I find very disturbing. We Americans should not have to foot the bill by ourselves.
Let Europe take care of its own stupidity. We have enough of our own here in the US. Nuff said!!!
#1,
Since we don’t make anything anymore, there is a trade deficit that has to be financed by foreigners buying US dollar-denominated assets. If they have to pay to keep those assets afloat, we are effectively telling them to foot the bill for our own consumption. Should that happen, foreigners will start dumping their dollars in favor of other denominations and the world will be awash in rapidly depreciating dollars.
When you’re in debt to the rest of the world, you’re options are limited.
“your” urgh.
“When you’re in debt to the rest of the world, you’re options are limited.”
Umm. As the banks and CDOs have recently found out, the options of debtors versus those who assisted them in burying themselves are not quite as limited as creditors might hope. In the absence of debtors prisons or slavery, there is the option of walking away. Similarly, in the absense of China’s military arm directly forcing our government to sell us into slavery (something our politicians seem willing to do anyway) the option of default does exist for a superpower.
Similarly, our balance of payments would not be nearly so bad, had not Europe forced us to be fund their entire defense system under the guise of an “alliance”, while they concentrated on building infrastructure and social services, and had not Asia stolen our industry by linking their currencies to ours to forcibly undercut us.
It is not only individual debtors who can walk away, y’know. A president who was not beholden to Europe could (like Russia) simply default and accept the consequences.
So I think it is not unreasonable for Europe to bail out her own idiots while we do the same for ours. I think it would also be very reasonable for Europe to pick up her own defense vis a vis Iran and Russia, and for us to erect trade barriers against China until she permits the yen to float freely against the dollar. When she does, our industry will come home. (And without defaulting either).