Friday, March 17, 2006

Global Credibility Problem? 

In the matters of debt, countries have lost credibility with the world community for many decades. Think of South America -- Argentina, Brazil, Bolivia. Think of Germany after World War I. Think of any number of African countries. Think now of the United States, and its decision to raise its debt limit to $9 trillion.

No one is calling in the US debt yet. There doesn't seem to be avoidance of US treasury bonds - yet. The world is loaning the money to the US, but we haven't been put on notice -- yet.

Somehow this country maintains credibility based on its earning power and consumption of world's goods. But when does debt become an international credibility problem? There are global relationships among international bankers that I don't understand. I suppose one could call it the highest form of public relations in that bankers handle among themselves the details of country debt and communicate warnings where needed.

Still, $9 trillion is a huge number and one wonders if we aren't pledging the future of our children to repay, say, down to $1 trillion -- a still incomprehensible sum.


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