Debt Fears Rise

After the Japanese earthquake a few weeks ago, we wondered aloud on this blog whether Japan would start cashing in all the U.S. treasuries that it bought so they could start bringing the money back to Japan for the rebuilding that is going to be required.

Of course, if they did this, it could be problematic for the U.S. because we desperately need foreigners to continue buying our debt because of how hopeless our deficit situation is.

Proverbs 22:7 clearly warns us that the borrower WILL be slave to the lender. This warning is true for us personally and is true for governments as well.

Some lawmakers and market analysts are expressing rising concerns that a demand for capital by earthquake-ravaged Japan could lead it to sell off some of its huge holdings of U.S.-issued debt, leaving the federal government in an even tighter financial pinch.

Others say a major debt sell-off by Tokyo is unlikely, but noted that the mere fact that questions are being raised speaks volumes about the risks involved in relying so heavily on foreign investors to fund U.S. debt.

“This natural disaster in Japan concerns me that it could speed up what’s coming, because they are the second leading buyer of our debt,”Sen. Rand Paul, Kentucky Republican, told The Washington Times. “Small degrees of differences in how much they buy of our debt, I think, can make a big difference in interest rates that we have to pay people to buy our debt.”

“They have a lot of bonds,” former Sen. Pete V. Domenici told The Times this month after testifying before Congress about the country’s mounting debt woes. “Are they in such bad trouble that they are not going to buy anymore? If they don’t, who do we look to?”

Asked point-blank last week if he thought Japan’s troubles could affect the U.S. borrowing costs and interest rates, Treasury Secretary Timothy F. Geithner told a congressional hearing, “I do not.”

Japan, which held some $886 billion in U.S. debt in January, is “a very rich country, with a very high savings rate,” Mr. Geithner said.

See it here; http://www.washingtontimes.com/news/2011/mar/24/fears-rise-that-japan-could-sell-off-us-debt/

Funny....I wonder how long it has been since other countries looked at the U.S. and said, "a very rich country, with a very high savings rate."

We HAVE become slave to our debt. In our desperate attempt to HAVE things that we could not afford, we ate the lie that we could HAVE it all now and pay for it all in the future....because things are ALWAYS better in the future...right?