I.O.U.S.A. by Addison Wiggin, Kate Incontrera, Dorianne Perrucci Page A
Tags: United States, General, History, Business & Economics, Finance, Economic Conditions, Personal Finance, Forecasting, Public Finance, Economic forecasting - United States, Economic forecasting, Finance - United States - History, Debt, Debt - United States - History
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quantity and relied on the labor of others to provide things that are used quality of products every day. Because the country is so rich, this can continue for and services it a long time, and on a large scale — but not forever. ”
can buy.
Buffett likens it to a credit card. “ My credit ’ s pretty good at the moment, ” he says, which usually draws snickers from the audience. “ If I quit working and have no income coming in but keep spending, I can fi rst sell off my assets and then, after that, I can start borrowing on my credit card. And if I ’ ve got a good reputation, I can do that for quite a while. But at some point, I max out. At that point, I have to start producing a whole lot more than I consume in order to clean up my debts. ”
The trade defi cit aside, Buffett doesn ’ t believe that the economic situation in the United States is as dire as many of the other experts with whom we ’ ve spoken have made it out to be. While he warns to not “ bet against America ” because he believes that we have an overall healthy economy, what does keep the Oracle of Omaha up
at night is the imbalance between
imports and exports.
The rest of the world is buying
“ The rest of the world is buying more and more of our goods all more and more of our goods all the the time, but at an even greater rate, we ’ re buying more and more
time, but at an even greater rate, we ’ re of theirs. More trade, overall, is buying more and more of theirs. good — as long as it ’ s true trade.
More trade, overall, is good — as long If it ’ s pseudo trade, where we ’ re as it ’ s true trade. If it ’ s pseudo trade, buying, but not selling, I do not where we ’ re buying but not selling, I think that ’ s good over time.
do not think that ’ s good over time. ” — WARREN BUFFETT
c04.indd 63
8/26/08 8:59:53 PM
64 The
Mission
This is why the U.S. trade defi cit remains high. The United States is consuming more than we are producing. The country ’ s dependence on foreign oil, automotive parts, and cheap consumer products from China accounts for almost the entire defi cit.
Welcome to Thriftville
Although the United States is China ’ s largest export market, it is importing far more Chinese products than it is exporting to the Far East. In order to fuel America ’ s consumption, the Chinese are the second - largest holders of U.S. Treasury Securities after Japan. In less than 10 years, China ’ s ownership of U.S. securities has gone from around $ 50 billion to more than $ 500 billion. And the economic ties between the two countries are getting tighter every day. (See Figure 4.1. ) In the past few years, China has become the country to watch. In Jonathan Fenby ’ s book Modern China: The Fall and Rise of a Great Power, 1850 to Present (Harper Perennial, 2009), he points out that “ in 2007, for the fi rst time since the 1930s, another country contributed more to global growth than the United States. A Gallup poll in early 2008 reported that 40 percent of Americans considered the [Peoples ’ Republic of China] to be the world ’ s leading economic power, while only 33 percent chose their own country. ”
And who could blame them? China has been the world ’ s leading producer of commodities such as steel, copper, aluminum, and coal for years. The country has edged out Japan as the second - largest importer of petroleum — and this from a country whose vast majority, just a decade ago, didn ’ t even own cars!
The Chinese manufacturing sector is putting the United States to shame — and in 2007, the country had the largest trade surplus in the world (the United States ranked dead last).
Of course, the idea of China “ taking over the world ” has provided those in the fi nancial media with plenty of fodder over the past three years or so. One such writer is James Areddy, c04.indd 64
8/26/08 8:59:53 PM
rade Commission.
cit Chart
Trade Defi
4.1
U.S. International
can buy.
Buffett likens it to a credit card. “ My credit ’ s pretty good at the moment, ” he says, which usually draws snickers from the audience. “ If I quit working and have no income coming in but keep spending, I can fi rst sell off my assets and then, after that, I can start borrowing on my credit card. And if I ’ ve got a good reputation, I can do that for quite a while. But at some point, I max out. At that point, I have to start producing a whole lot more than I consume in order to clean up my debts. ”
The trade defi cit aside, Buffett doesn ’ t believe that the economic situation in the United States is as dire as many of the other experts with whom we ’ ve spoken have made it out to be. While he warns to not “ bet against America ” because he believes that we have an overall healthy economy, what does keep the Oracle of Omaha up
at night is the imbalance between
imports and exports.
The rest of the world is buying
“ The rest of the world is buying more and more of our goods all more and more of our goods all the the time, but at an even greater rate, we ’ re buying more and more
time, but at an even greater rate, we ’ re of theirs. More trade, overall, is buying more and more of theirs. good — as long as it ’ s true trade.
More trade, overall, is good — as long If it ’ s pseudo trade, where we ’ re as it ’ s true trade. If it ’ s pseudo trade, buying, but not selling, I do not where we ’ re buying but not selling, I think that ’ s good over time.
do not think that ’ s good over time. ” — WARREN BUFFETT
c04.indd 63
8/26/08 8:59:53 PM
64 The
Mission
This is why the U.S. trade defi cit remains high. The United States is consuming more than we are producing. The country ’ s dependence on foreign oil, automotive parts, and cheap consumer products from China accounts for almost the entire defi cit.
Welcome to Thriftville
Although the United States is China ’ s largest export market, it is importing far more Chinese products than it is exporting to the Far East. In order to fuel America ’ s consumption, the Chinese are the second - largest holders of U.S. Treasury Securities after Japan. In less than 10 years, China ’ s ownership of U.S. securities has gone from around $ 50 billion to more than $ 500 billion. And the economic ties between the two countries are getting tighter every day. (See Figure 4.1. ) In the past few years, China has become the country to watch. In Jonathan Fenby ’ s book Modern China: The Fall and Rise of a Great Power, 1850 to Present (Harper Perennial, 2009), he points out that “ in 2007, for the fi rst time since the 1930s, another country contributed more to global growth than the United States. A Gallup poll in early 2008 reported that 40 percent of Americans considered the [Peoples ’ Republic of China] to be the world ’ s leading economic power, while only 33 percent chose their own country. ”
And who could blame them? China has been the world ’ s leading producer of commodities such as steel, copper, aluminum, and coal for years. The country has edged out Japan as the second - largest importer of petroleum — and this from a country whose vast majority, just a decade ago, didn ’ t even own cars!
The Chinese manufacturing sector is putting the United States to shame — and in 2007, the country had the largest trade surplus in the world (the United States ranked dead last).
Of course, the idea of China “ taking over the world ” has provided those in the fi nancial media with plenty of fodder over the past three years or so. One such writer is James Areddy, c04.indd 64
8/26/08 8:59:53 PM
rade Commission.
cit Chart
Trade Defi
4.1
U.S. International
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