Over the last couple of months, I’ve tried to make sense of the devaluing dollar, the fact that China a a few other nations buy so much of the bonds to cover our federal deficit and what it all means. I’m happy to report that my understanding was pretty much correct. This New Yorker article by James Surowiecki explains the situation pretty succinctly.
In short, Americans have been maintaining our standard of living on borrowed money, and the Chinese are our largest lender. Of course, it’s been in their best interest to maintain our consumerist lifestyle, since the US is a big export customer for Chinese goods. But if the Chinese ever decide it’s not in their best interest to continue buying (so much of) our debt, our fate is in their hands. It’s all a vicious cycle, and it cannot continue forever. This concern keeps me awake nights.

Categories: Politics