Nobody is minding the store
The WSJ has a report demonstrating that neither political party is doing the fundamental job of protecting US sovereignty — for that matter, neither Democrats nor Republicans have explained clearly what the stakes are for this country if we continue to import 70% of our oil (as well as trillions in other merchandise) and in return continue to export trillions in dollars and government debt:
high energy prices hurt Americans in three ways. Only the first and most obvious one, the effect of high gas prices on voters’ economic health, gets much attention. The second way high oil prices hurt is by adding to the country’s lack of economic independence. In much the same way the country has been borrowing money from China to pay for more Chinese imports, it increasingly is borrowing money from oil producers to buy more of their oil.
A new report from UniCredit Markets & Investment Banking summarizes the problem nicely: “Due to soaring oil prices, the U.S. current account deficit” — that is, the broadest measure of the nation’s trade deficit — “has doubled since 2001. This excess consumption has been financed by huge capital inflows from Emerging Asia and oil-exporting countries.”
At the same time, oil producers are joining other foreigners in buying the U.S. Treasury bonds that finance the federal government’s budget deficit. Between 2004 and 2007, the report notes, foreigners bought 80% of all newly issued Treasury bills…
A new analysis by McKinsey Global Institute notes that Russia, which seems increasingly less in sync with American foreign-policy aims, has “emerged as a major global financial player” because of oil money; it had $811 billion in foreign investment assets available at the end of 2007.
But it isn’t just big Russia that has new money to invest around the globe, increasing its influence. The McKinsey report notes that the smaller exporting countries of Algeria, Iran, Libya, Nigeria and Venezuela also are gaining global financial clout…these five countries are emerging as significant investors in foreign markets. They accounted for nearly one-quarter of net capital outflows from oil exporters in 2007.
It is way past time for the US to get serious about the trillions of dollars that flow to the oil exporting countries (not to mention China as well). Boone Pickens has one suggestion that is interesting to ponder, and there are plenty of ideas out there. However, neither the current administration, nor its opposition, have adequately presented the seriousness of the current situation to the American people.