We've swapped our IOU's for real things from foreign countries like oil, cars, clothing, electronics. We've received real things which are useful and we can enjoy and they've received our IOU's ( dollars, treasury bonds ). Who has gotten the most utility from that trade ? We have, of course.
Dollars and treasury securities have little or no intrinsic value. Their value comes only from what real things they can ultimately be traded. When the US prints money or issues treasuries, the best thing we can hope for is to never have them redeemed giving us the proverbial something for nothing. When they are redeemed here jobs are created from the economic activity of spending the money. The overseas debt is going to be a huge blessing for the US when those dollars are repatriated. The consensus opinion now is that the debt is something to worry about but it is NOT. The ones who need to worry are the foreigners holding our IOU's.
Think about it this way. Would it be a good deal if you never had to work again and could buy anything you wanted by simply writing an IOU ? And if some of your IOU's were interest bearing you could pay that interest by writing more IOU's ? This is what we have done collectively as a country. The world will not let us get away with this indefinitely just as an individual could not get away with it indefinitely. Eventually the holders of IOU's will want something useful in return and we must either work or provide something of tangible value to retire those dollars and treasuries.
TO THAT i ADD I THINK A COUNTRIES MILITARY MIGHT IS RESPONSIBLE FOR 50% OF THEIR CURRENCY VALUE. IF HAITI OR ZIMBABWE SUDDENLY DEVELOPED A NUCLEAR BOMB....you'd see their currency rise very quicky. Oh Jesus, I better be quiet before someone figures that out. Anyway, great post! Anyone disagree????
And when they (those people who so magnanimously supply us with tangible assets for -ahem- IOUs) simply refuse to accept our treasuries and/or worthless scrip??? Whatever gave that poster the idea that we Yanks are so supremely intelligent as to fool the Japanese, Chinese, Russians, Arabs et al indefinitely?
Just look to Argentina for what happens when one defaults on their debt. They are shut out (in our case - forever) of the debt markets. KABOOM! Game over! Rest of World: 1 - USA: 0
petrovsky i disagree. Its not a matter of fooling anyone. Im sure weve all worked out the details in secret..."you buy our debt, and we will keep consuming your oil and chaep electronics. we will even let walmart keep buying from all your cheap child labor. you dont tell, we wont tell." dont you think its all arranged so we all benefit............except the poor souls that are exploited. slavery is still in. its just disguised as a low wage. It will always be in, in this crazy world.