The increasing dependence of the United States on borrowing from foreign countries is alarming, and the speed with which it has accelerated during this decade is an even greater red flag. To understand the nature and depth of the problem, we need to do a little arithmetic.

At the turn of this decade, $3.6 trillion of Treasury securities were held by the public, and 35% of those were held by foreigners. Now there are $6.4 trillion in such securities outstanding and 51% of those are held by foreigners.

So foreigners have gone from owning $1.3 trillion at the beginning of the decade to now owning $3.3 trillion of such securities — a $2 trillion increase. More important and interesting than that, of the $2.8 trillion in net new issuances of Treasury securities during this decade, foreigners have bought $2.0 of the $2.8 trillion, a stunning 71%. (China alone appears to have bought over one third of the total of foreign purchases.) Who will purchase the debt to fund the upcoming $10 trillion in deficits is anyone’s guess, as the bond market seems to have figured out.

Foreigners increased their purchases of Treasuries by only $2 trillion during this decade — and yet we expect them to purchase perhaps as much as $7 trillion of new deficit debt over the next decade? That seems impossible.

Put it another way. The US government is grossly negligent in creating the conditions that necessitate America’s importing up to 70% of its oil, making the country dependent on countries that are strategic adversaries. Now we also import 70% of the financing of the US government’s budget deficits, again making America dependent on potential adversaries or enemies. This can’t end well. Where are the serious men to address these strategic vulnerabilities?

Simply put: the US cannot in any prudent way finance the Obama deficits — whether from domestic or foreign borrowing. There just isn’t $10 trillion available in the global marketplace to support this American spending binge — and there are plenty of governments lining up in front of the USA for their bailouts.

This entry was posted on Monday, June 1st, 2009 at 6:00 am and is filed under business, China, Democrats, Republicans, War. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.