[DcifrThs]

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LOL, maybe you should learn macroeconomics (and not from a community college).

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why are people ragging on kimchi like this?? he's a really smart guy, far smarter in trading than almost anybody on this forum.

he's asking about an area in which he doesn't have as solid an understanding.

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In all seriousness, the Gov't debt is indirectly financing our consumption. The biggest owners of our debt are our trade partners. They are giving us their goods for a promise that we will have something worth giving to them in the future.

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gov't debt grows now from 2 sources.

1) in response to federal spending deficits/promises/commitments etc.

2) holding the deficit growth constant, govt debt grows on itself to finance previous borrowing

the consumption being financed is a result of the US consumption of foreign goods. the rate at which the government can borrow was artificially pushed down by the chinese pegging their currency to ours. we'd have been paying a higher rate for our govt debt if china didn't buy some $1trillion of that debt.

i don't know to what extent our trading partners are financing our consumption (i.e. comparing % exports for us vs. trading partner vs. % of debt held by that trading partner) but i'm sure it is a lot.

the main point here is that i don't think phrasing it like "they are giving us goods for a promise of something greater in the future" is the best way to say it or how it plays out.

they get something NOW from this. they (the countries from which we net import) get higher growth now than they would not have gotten otherwise (if we didn't net consume so much). and the financing doesn't have to come from those countries as a proportion of the net amount we import. it just has to come from somewhere. foreign central banks are the main holders with china being FAR out in the lead.

Barron