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Subject: World Economy

Asia News ASIA - UNITED STATES U.S. debt approaches insolvency; Chinese
currency reserves at risk asia united states asset depreciation dollar
devaluation treasury bubble bond rates american public debt trillions
bailout aig fannie mae freddie mac housing bubble subprime mortgage meltdown
currency crisis gdp federal balance sheet bernanke paulson china chinese
economy foreign currency reserves yuan manipulation credit recession
depression In a few months, America's public debt has grown to more than
100% of GDP. Fear of a valuation crisis for the dollar, with tremendous
consequences for Asian countries, major exporters to the United States.

 <http://www.asianews.it/index.php?l=en&page=9>

» 12/19/2008 16:54
ASIA - UNITED STATES
U.S. debt approaches insolvency; Chinese currency reserves at risk
by Maurizio d'Orlando

In a few months, America's public debt has grown to more than 100% of GDP.
Fear of a valuation crisis for the dollar, with tremendous consequences for
Asian countries, major exporters to the United States.

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Milan (AsiaNews) - In the United States, the danger of debt insolvency is
growing, putting at risk the currency reserves of foreign countries, China
chief among them. According to new figures published by Bloomberg in recent
days (Nov. 25, 2008 [1] <http://www.asianews.it/index.php?l=en&art=14054#1>
), the American government has employed a total of 8.549 trillion dollars to
stop the financial crisis. This means a total of about 24-25.4 trillion
dollars of direct or indirect public debt weighing on American taxpayers.
The complete tally must also include the debt - about 5-6 trillion dollars -
of Fannie Mae and Freddie Mac, which are now quasi-public companies, because
79.9% of their capital is controlled by a public entity, the Federal Housing
Finance Agency, which manages them as a public conservatorship.

In 2007, public debt in the United States was 10.6 trillion dollars,
compared to a GDP (gross domestic product) of 13.811 trillion dollars.
Public debt in 2007 was therefore 76.75% of GDP. In just one year, direct
and indirect public debt have grown to more than 100% of GDP, reaching
176.9% to 184.2%. These percentages exclude the debt guaranteed by policies
underwritten by AIG, also nationalized, and liabilities for health spending
(Medicaid and Medicare) and pensions (Social Security)[2]
<http://www.asianews.it/index.php?l=en&art=14054#2> . By way of comparison,
the Maastricht accords require member states of the European Union (EU) to
reduce their public debt to no more than 60% of GDP. Again by way of
comparison, in one of the EU countries with the largest public debt, Italy,
public debt in 2007 was equal to 104% of GDP.

In 2007, 61.82% [3] <http://www.asianews.it/index.php?l=en&art=14054#3>  of
America's public debt was held by foreign investors, most of them Asian. So
the U.S. public debt held by nonresident foreigners is equal to about
109.39% (113.86%) of GDP. According to a study by the International Monetary
Fund, countries with more than 60% of their public debt held by nonresident
foreigners run a high risk of currency crisis and insolvency, or debt
default. On the historical level, there are no recent examples of countries
with currencies valued at reserve status that have lapsed into public debt
insolvency. There are also few or no precedents of such a vast and rapid
expansion of public debt.

The United States also runs large deficits in its public balance sheet and
balance of trade. Families and businesses are also deeply in debt: in 2007,
American private debt was equal to a little more than 100% of GDP. At the
moment, it is not clear how much of America's private debt has been
"nationalized" with the recent bailouts.

In the early months of next year, when the official data are published, the
United States will run a serious risk of insolvency. This would involve, in
the first place, a valuation crisis for the dollar. After this, the United
States could face a social crisis like that in Argentina in 2001. A crisis
in U.S. public debt would likely have a severe impact on the Asian countries
that are the main exporters to the United States, China first among them.
Chinese monetary authorities, thanks to a steeply undervalued artificial
exchange rate, by about 55%, have limited imports (including food) and have
achieved an export surplus. This has allowed them to accumulate a large
stockpile of dollar reserves. In a currency crisis, China risks losing much
of the value of its accumulated currency reserves. At the same time,
pressure on imports (wheat, other grains, and meat) have led to inflation in
the prices of food, the most important expenditure for more than 900 million
Chinese. This is nothing more than a small confirmation of the recent
statements of the pope, in his message for the World Day for Peace, where
the pontiff calls the current financial system and its methods "based upon
very short-term thinking," without depth and breadth (nos. 10-12),
preoccupied with creating wealth from nothing and leading the planet to its
current disaster. [4] <http://www.asianews.it/index.php?l=en&art=14054#4>

[1] See Bloomberg, 2008, 11-25 16:35:48.130 GMT “U.S. Pledges Top $8.5
Trillion to Ease Frozen Credit (Table)”

[2] In this case, exluding AIG policies, one arrives at a total equal to
429.37 of GDP.

[3] Cf. Economic crisis: <http://www.asianews.it/index.php?l=en&art=13959>
US, China and the coming monetary storm

[4] Cf. AsiaNews.it 11/2/2008 Message for
<http://www.asianews.it/index.php?l=en&art=13984>  Peace 2009: the poor,
wealth of the world; Global
<http://www.asianews.it/index.php?l=en&art=13983>  solidarity to fight
poverty and build peace, says Pope

e-mail this to <http://www.asianews.it/index.php?l=en&art=14054>  a friend

printable <http://www.asianews.it/index.php?l=en&art=14054>  version

See also  

09/30/2008 ASIA - U.S.
Depth of the <http://www.asianews.it/index.php?l=en&art=13348>  abyss of
economic, social, political chaos
by Maurizio d'Orlando

03/19/2008 ASIA
Economic <http://www.asianews.it/index.php?l=en&art=11815>  crisis renews
prospects for world currency
by Maurizio d’Orlando

12/22/2008 JAPAN
Japanese <http://www.asianews.it/index.php?l=en&art=14066>  exports tumble,
trade deficit grows

09/19/2007 ASIA
Subprime <http://www.asianews.it/index.php?l=en&art=10347>  lending to
trigger world’s worst financial crisis since 1929
by Maurizio d'Orlando

12/09/2008 ASIA
Economic <http://www.asianews.it/index.php?l=en&art=13959>  crisis: US,
China and the coming monetary storm
by Maurizio d'Orlando

Dossier  

World <http://www.asianews.it/index.php?l=en&dos=125&size=A>  Day of Peace
2009

 <http://www.asianews.it/index.php?l=en&dos=125>

Orissa: <http://www.asianews.it/index.php?l=en&dos=124&size=A>  the Hindu
pogrom against Christians

 <http://www.asianews.it/index.php?l=en&dos=124>

[Show all dossier] <http://www.asianews.it/index.php?l=en&dos=all&size=>

Editor's choices  

ASIA
Economic
<http://www.asianews.it/index.php?l=en&art=13959&geo=&theme=&size=A>
crisis: US, China and the coming monetary storm
by Maurizio d'Orlando
<http://www.asianews.it/inc/templates/files/spacer.gif>
<http://www.asianews.it/index.php?l=en&art=13959&size=A>
<http://www.asianews.it/index.php?l=en&art=13959&size=A>
<http://www.asianews.it/index.php?l=en&art=13959&size=A>
The massive levels reached by the foreign debt of the United States and the
excessive and unjustified devaluation of China’s yuan are two high risk
factors for the world economy and stability. Solutions found so far may be
useful for financial institutions but not for the population. A
“transnational” oligarchy is emerging that includes central banks, the
Chinese Communist Party, Russia’s oligarchies and oil sheiks.

ASIA
Speaking
<http://www.asianews.it/index.php?l=en&art=13914&geo=&theme=&size=A>  of
Asia, speaking of Christ: AsiaNews is 5 years old
by Bernardo Cervellera
<http://www.asianews.it/inc/templates/files/spacer.gif>
<http://www.asianews.it/index.php?l=en&art=13914&size=A>
<http://www.asianews.it/index.php?l=en&art=13914&size=A>
<http://www.asianews.it/index.php?l=en&art=13914&size=A>
From a few thousand visitors, AsiaNews.it today has tens of thousands of
visitors, for a volume of 2-3 million pages each month. An instrument to
inform and share the life and hopes of the peoples and Church in Asia,
overcoming economic and catastrophic clichés.

UNITED STATES - ASIA
Obama: <http://www.asianews.it/index.php?l=en&art=13703&geo=&theme=&size=A>
pro-abortion president who will harm America's blacks
by Mark Tardiff  <http://www.asianews.it/inc/templates/files/spacer.gif>
<http://www.asianews.it/index.php?l=en&art=13703&size=A>
<http://www.asianews.it/index.php?l=en&art=13703&size=A>
<http://www.asianews.it/index.php?l=en&art=13703&size=A>
The joy over the first black head of state must not overshadow the fact that
Obama supports extremely permissive abortion laws, and is against the rights
of the unborn. Abortion is diminishing black American communities. The
design of Planned Parenthood has always been that of using black leaders to
promote the self-destruction of their own people. Mark Tardiff, an American,
is a member of the Pontifical Institute for Foreign Missions, and was a
missionary in Japan.

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